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Microsoft Q3 2026 Earnings Analysis · Beta Finch - Microsoft - MSFT - EN

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  Speaker 1: Welcome to Beta Finch, your AI powered earnings breakdown. I'm
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  Speaker 1: Alex and joining me as always is Jordan. Today we're
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  Speaker 1: diving into Microsoft's absolutely explosive third quarter twenty twenty six
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  Speaker 1: earnings report that just dropped Jordan. Before we get started,
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  Speaker 1: I need to remind our listeners that this podcast is
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  Speaker 1: AI generated content for educational and entertainment purposes only. Nothing
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  Speaker 1: we discuss should be considered investment advice. Always do your
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  Speaker 1: own research and consult a qualified financial advisor before making
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  Speaker 1: any investment decisions.
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  Speaker 2: Thanks Alex, and wow, where do we even begin with
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  Speaker 2: these Microsoft numbers? They just reported record results across the board.
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  Speaker 2: Revenue hit eighty two point nine billion dollars of eighteen
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  Speaker 2: percent year over year, and earnings per share came in
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  Speaker 2: at four dollars and twenty seven cents. But the real
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  Speaker 2: headline here is their AI business. It's now at a
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  Speaker 2: thirty seven billion dollar annual run rate, growing one hundred
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  Speaker 2: and twenty three percent year over year.
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  Speaker 1: That AI growth rate is just staggering. But let's put
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  Speaker 1: this in perspective. Microsoft Cloud overall generated fifty four billion
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  Speaker 1: dollars in revenue, up twenty nine percent. So AI is
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  Speaker 1: becoming a massive piece of their puzzle. What really caught
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  Speaker 1: my attention was Satya Nadella talking about how we're at
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  Speaker 1: the beginning of one of the most consequential platform shifts
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  Speaker 1: as agents become the dominant workload.
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  Speaker 2: Absolutely, and you can see this playing out in their
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  Speaker 2: copilot numbers. Microsoft three sixty five Copilot now has over
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  Speaker 2: twenty million paid seats. That's two hundred and fifty percent
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  Speaker 2: growth year over year. Even more impressive, they're seeing weekly
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  Speaker 2: engagement levels that match outlook. Think about that people are
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  Speaker 2: using copilot as much as they use email.
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  Speaker 1: That's a great point about user engagement. And they shared
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  Speaker 1: some fascinating customer wins. Accenture alone has over seven hundred
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  Speaker 1: and forty thousand seats, which is their largest copilot deal
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  Speaker 1: to date. Companies like Bear, Johnson and Johnson and Mercedes
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  Speaker 1: are all committing to ninety thousand plus seats. But Jordan,
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  Speaker 1: what I found really interesting was this shift in business
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  Speaker 1: model that Amy Hood kept emphasizing.
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  Speaker 2: Yes, the transition from traditional per seat pricing to what
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  Speaker 2: they're calling seats plus consumption. It's happening across their portfolio,
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  Speaker 2: from productivity to coding to security, GitHub Copilot actually announced
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  Speaker 2: their moving to usage based pricing starting June first. This
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  Speaker 2: is huge because it means as customers use these AI
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  Speaker 2: tools more intensively, Microsoft's revenue can scale accordingly, and they're seeing.
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  Speaker 1: That intensity increase dramatically. Copilot queries per user were up
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  Speaker 1: nearly twenty percent just quarter over quarter. Usage of their
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  Speaker 1: first party agents is up six x year to date.
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  Speaker 1: Amy Hood mentioned that in customer service nearly sixty percent
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  Speaker 1: of their customers are already purchasing usage based credits.
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  Speaker 2: The infrastructure side of this story is equally compelling. They
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  Speaker 2: added another gigawatt of capacity this quarter and are on
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  Speaker 2: track to double their overall footprint in two years. But
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  Speaker 2: here's the kicker. There's still capacity constrained and expect to
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  Speaker 2: remain so through at least twenty twenty six. That's both
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  Speaker 2: a challenge and an opportunity.
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  Speaker 1: Speaking of infrastructure, their CAPEX guidance is eye popping. They're
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  Speaker 1: expecting over forty billion dollars in fourth quarter alone, and
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  Speaker 1: for calendar twenty twenty six, they're projecting roughly one hundred
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  Speaker 1: and ninety billion dollars in capital expenditures. That includes about
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  Speaker 1: twenty five billion dollars from higher component pricing. When an
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  Speaker 1: analyst asked about investor concerns over CAPEX growing faster than revenue,
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  Speaker 1: Amy Hood made a compelling case right.
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  Speaker 2: She pointed to their six hundred and twenty seven billion
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  Speaker 2: dollars in remaining performance obligations. That's contracted revenue they still
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  Speaker 2: need to deliver. With demand consistently exceeding supply and usage
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  Speaker 2: intensity growing, they feel confident about the ROI on these investments.
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  Speaker 2: Satya added that they want to be ready when model
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  Speaker 2: capabilities hit those exponential moments like when agent mode in
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  Speaker 2: Excel suddenly started working.
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  Speaker 1: Let's talk about the segment performance. Productivity and business Processes
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  Speaker 1: hit thirty five billion dollars in revenue, up seventeen percent.
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  Speaker 1: Intelligent Cloud was thirty four point seven billion dollars, up
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  Speaker 1: thirty percent. Azure specifically grew forty percent in constant currency.
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  Speaker 1: The only soft spot was more personal computing at thirteen
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  Speaker 1: point two billion dollars, down slightly, mainly due to gaming
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  Speaker 1: revenue declining seven point nine percent.
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  Speaker 2: The gaming decline was expected, though they were up against
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  Speaker 2: tough comparables from strong first party content last year. What's
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  Speaker 2: more interesting is their consumer strategy pivot. Satya mentioned they're
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  Speaker 2: doing foundational work to win back fans across Windows, Xbox,
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  Speaker 2: Bing and Edge, focusing on quality and serving core users better.
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  Speaker 1: Looking ahead, their fourth quarter guidance is strong. They're expecting
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  Speaker 1: total revenue between eighty six dollars and seventy cents and
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  Speaker 1: eighty seven point eight billion dollars, representing thirteen percent to
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  Speaker 1: fifteen percent growth. Azure growth is projected at thirty nine
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  Speaker 1: to forty percent in constant currency, and they're expecting modest
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  Speaker 1: acceleration in the second half of calendar twenty twenty six.
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  Speaker 2: One thing that stood out in the Q and A
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  Speaker 2: was the discussion about margins. Analysts keep asking how AI
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  Speaker 2: can be profitable given them massive infrastructure costs, but Microsoft
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  Speaker 2: is actually showing that AI margins are better than what
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  Speaker 2: they saw during the cloud transition. Amyhood emphasized that when
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  Speaker 2: you move to consumption based models that deliver high value
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  Speaker 2: to customers, the margins can be quite attractive.
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  Speaker 1: There was also interesting commentary about the OpenAI partnership. Satia
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  Speaker 1: seemed very confident about their position, mentioning they have frontier
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  Speaker 1: model IP royalty free through twenty thirty two, plus OpenAI
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  Speaker 1: remains a large customer. The partnership is evolving as both
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  Speaker 1: companies have grown.
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  Speaker 2: What really comes through is Microsoft's conviction that they're positioned
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  Speaker 2: at the center of three massive tams, knowledge, work, coding,
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  Speaker 2: and security. The combination of their structural position in these markets,
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  Speaker 2: the right business model evolution, and the exponential improvements in
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  Speaker 2: AI capabilities creates a compelling growth story for investors.
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  Speaker 1: The key tension seems to be the massive capex spending
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  Speaker 1: versus revenue growth timing. But with over twenty million copilot
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  Speaker 1: seats growing rapidly, thirty seven billion dollar AIAR growing one
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  Speaker 1: hundred twenty three percent, and this transition to consumption models,
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  Speaker 1: Microsoft appear to be successfully monetizing the AI wave.
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  Speaker 2: Before we wrap up, I need to remind everyone that
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  Speaker 2: everything we've discussed today is AI generated analysis for educational purposes.
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  Speaker 2: Past performance doesn't guarantee future results. Please do your own
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  Speaker 2: due diligence.
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  Speaker 1: Thanks for tuning in to Beta Finch. Microsoft's results show
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  Speaker 1: a company that's not just writing the AI wave, but
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  Speaker 1: actively shaping it. With their massive infrastructure investments and evolving
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  Speaker 1: business models, They're positioning themselves for what could be a
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  Speaker 1: multi year growth cycle. We'll be back next time with
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  Speaker 1: more AI powered earnings analysis. Until then, stay.
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  Speaker 2: Curious, See you next time.
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  Speaker 1: That's all for today's earnings analysis. If you found this helpful,
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  Speaker 1: Thanks for listening the building to the building