Microsoft $MSFT MSFT is riding strong enterprise AI momentum, with third-quarter fiscal 2026 results underscoring how deeply generative AI has embedded itself in customer workflows. For the quarter ended March 31, 2026, revenues came in at $82.9 billion, up 18% year over year, while the company's AI business surpassed a $37 billion annualized revenue run rate, climbing 123% from the prior-year period.
Azure and other cloud services revenues grew 40% (up 39% in constant currency), reaccelerating as new capacity came online to meet AI workload demand. Intelligent Cloud revenues rose 30% to $34.7 billion. Microsoft 365 Copilot is scaling rapidly, with paid seats crossing 20 million, seat additions up 250% year over year, and customers with more than 50,000 seats quadrupling. Accenture $ACN committed to 740,000 Copilot seats, while Bayer, Johnson & Johnson $JNJ, Mercedes and Roche each signed for 90,000 or more.
Commercial remaining performance obligation reached $627 billion, up 99%, providing multi-year revenue visibility. Cosmos DB revenues grew 50%, and paid Fabric customers rose 60% to 35,000. Recent April 2026 wins, including CBIZ's expanded deployment of Microsoft Foundry, Copilot Studio and Microsoft 365 Copilot, alongside the $10 billion Japan AI infrastructure commitment through 2029, reinforce the trend.
Counterbalancing these gains, capital intensity remains elevated. Third-quarter capital expenditures totaled $31.9 billion, with management guiding to more than $40 billion in the fiscal fourth quarter and roughly $190 billion for 2026, including $25 billion tied to higher component pricing. Microsoft Cloud gross margin compressed to 66%, with fourth quarter guided to about 64%, pressured by AI infrastructure spend and rising GitHub Copilot usage. Capacity is expected to remain constrained through 2026.
For the fiscal fourth quarter, Microsoft guided revenues of $86.7-$87.8 billion and Azure growth between 39% and 40% in constant currency, signaling continued AI-led momentum.
Rival Watch: Oracle and Amazon Step Up Enterprise AI Push
Oracle $ORCL ORCL and Amazon $AMZN AMZN are competing aggressively for enterprise AI workloads. Oracle's second-quarter fiscal 2026 results showed Oracle Cloud Infrastructure (“OCI”) revenues rising 68% to $4.1 billion, with remaining performance obligations climbing to $523 billion. Oracle is guiding total cloud revenue growth of 40-44% for third-quarter fiscal 2026, alongside roughly $50 billion in fiscal 2026 capex to expand GPU capacity. Amazon's AWS posted first-quarter 2026 revenues of $37.6 billion, up 28% — its fastest pace in 15 quarters — while Amazon's AI business surpassed a $15 billion annualized run rate. Amazon Bedrock customer spend grew 170% sequentially, and Amazon's chips business crossed a $20 billion run rate.
MSFT’s Share Price Performance, Valuation & Estimates
MSFT shares have lost 13.3% in the past six-month period compared with the Zacks Computer – Software industry’s decline of 14.6% and the Zacks Computer and Technology sector's growth of 19.8%, respectively.
MSFT’s 6-Month Price Performance
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From a valuation standpoint, MSFT stock is currently trading at a forward 12-month Price/Sales ratio of 8.35X compared with the industry’s 7.09X. MSFT has a Value Score of C.
MSFT’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MSFT’s fiscal 2026 earnings is pegged at $17.33 per share. The estimate indicates 27.05% year-over-year growth.
Microsoft currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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