Microsoft Profits Jump 31% as Azure Cloud Sales Surpass $100 Billion -- 3rd Update

By Anissa Gardizy

Microsoft reported robust cloud growth and a boost in the number of paid AI subscribers, as investors remain fixated on whether the tech giant's data-center spending will pay off.

Microsoft's revenue grew 18% to $90 billion in the quarter ended in June, a sign that the company's AI revenue growth is accelerating and it will continue to spend on data centers.

Net income increased 31% to $35.8 billion. The result beat Wall Street's expectations, according to an average of dozens of analysts polled by FactSet.

"Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation, " Chief Executive Satya Nadella said in a statement.

Growth in the company's Intelligent Cloud segment, which includes its Azure cloud business and other products, generated revenue of $39.3 billion. The growth rate for Azure specifically was 43%, higher than last quarter's 40% growth rate.

Azure remains one of the numbers investors watch most closely as a read on general AI demand. It grew 40% in the prior quarter, when Microsoft said supply still couldn't keep up with demand for its cloud services.

Microsoft's capital expenditures reached $41 billion for the quarter, in line with the firm's guidance last quarter. In April, the company said it expected to spend about $190 billion on capex in calendar 2026 -- up 61% from 2025 -- a figure inflated by roughly $25 billion in higher memory and component costs amid an industrywide crunch.

The scale of that spending, funneled into data centers and chip purchases, has unsettled some investors who worry the AI payoff hasn't yet materialized. Critically, Microsoft stayed cash-flow positive, unlike other hyperscalers, including Google-parent Alphabet, which recently reported negative cash flows.

Shares of Microsoft, which are down about 18% so far this year, rose 4% in after-hours trading.

Microsoft said Copilot, which includes AI features embedded in its Office suite of applications, now has 30 million paid users, up from 20 million last quarter. Microsoft has struggled to convert its massive user base into paying AI customers, and Stifel analyst Brad Reback had expected Microsoft to report 26 million users.

Investors have been closely monitoring Copilot growth as a proxy for whether Microsoft can parlay its capital expenditure into revenue-generating products for business customers. Google, Anthropic, OpenAI and other rivals are competing hard for the same enterprise AI budgets Microsoft is chasing.

Microsoft also said it recorded a $3.2 billion gain from its Anthropic investment, and that it had lower-than-expected expenses related to its voluntary retirement program.

Write to Anissa Gardizy at anissa.gardizy@wsj.com

(END) Dow Jones Newswires

July 29, 2026 16:41 ET (20:41 GMT)