Cloud revenue rises 30 percent as Microsoft reports growing demand for Copilot, AI development tools and the infrastructure supporting them
Microsoft Cloud revenue reached $63.9 billion as Copilot usage increased and demand grew for AI development tools.
Microsoft Cloud revenue reached $63.9 billion in the three months ended September 30, 2026, up 30 percent from a year earlier, as the company reported rising Copilot usage and growing demand for AI agents.
Microsoft’s total quarterly revenue increased 19 percent to $92.3 billion. Operating income rose 21 percent to $45.9 billion, while revenue from Azure, its cloud computing platform, increased 48 percent.
Reported net income reached $36.6 billion, up 32 percent. Adjusted net income, which removes the impact of Microsoft’s investments in OpenAI, increased 18 percent to $36.4 billion.
Microsoft Chairman and CEO Satya Nadella discussed the results on LinkedIn: “And we are extending our vision of Copilot as the new OS for work, bringing the business logic and capabilities of D365 directly into Copilot, helping every organization stand up their own infinite SaaS factory.”
Copilot usage grows as Microsoft brings its tools together
Nadella reported that Copilot’s daily users increased nearly 50 percent from the previous quarter and more than fivefold compared with a year earlier.
The number of customers with more than 50,000 Copilot seats, meaning licensed users, increased eightfold year over year. Nadella also reported a nearly 20 percent quarterly improvement in user satisfaction, although the post did not explain how that measure was calculated.
Microsoft’s latest Copilot update brings Chat, Cowork, Autopilot and Code into one experience. The tools cover conversational assistance, delegated tasks, ongoing automated work and software creation.
The company is also bringing capabilities from Dynamics 365, its business applications suite, into Copilot. The aim is to let employees access business processes through the assistant, extending its role beyond answering questions or drafting documents.
For developers, Nadella highlighted GitHub Copilot Fusion, which coordinates multiple AI models to help produce software. He wrote that it delivers “frontier level quality, at up to 77% lower cost.”
Foundry growth increases demand for data and agent controls
Revenue from Foundry, Microsoft’s platform for building and running AI applications, more than tripled compared with a year earlier.
The number of customers building with multiple AI models increased fivefold, while revenue from open source models grew tenfold. Those figures point to customers using a broader mix of models rather than relying on a single provider.
Microsoft is bringing Foundry closer to Fabric, its data and analytics platform, so customers can build agents alongside the organizational information they need to use.
Microsoft IQ connects context across Microsoft 365, Foundry and Fabric, helping AI systems work with relevant business information. Nearly 60,000 customers were accessing context through Microsoft IQ, up 25 percent from the previous quarter, according to Nadella.
Managing those agents is becoming a larger part of Microsoft’s business. More than 50 million agents were registered in Agent 365, its management platform, up 30 percent quarter over quarter.
Microsoft is also linking Windows and Agent 365 through Microsoft Execution Containers, known as MXC. The technology is designed to give agents a controlled environment in which to operate on devices. Nadella named OpenAI Codex, Anthropic Claude Code and Meta Muse among the agents adopting it.
Alongside that work, Microsoft’s Perception security tools manage identity, permissions and monitoring outside the AI model itself. This allows organizations to control which actions an agent is authorized to take, rather than depending entirely on the model to observe those boundaries.
Cloud expansion requires substantial infrastructure spending
Microsoft’s quarterly capital expenditure reached $45.2 billion as it continued investing in computing capacity. Cash generated by its operations increased 29 percent to $58 billion, while free cash flow, after spending on property and equipment, was $18.6 billion.
Nadella said Azure growth covered both large enterprises and small and medium-sized businesses, spanning conventional cloud services and AI infrastructure.
Microsoft is adding capacity while also trying to get more work from the infrastructure it already operates. That includes allocating computing resources across its cloud services, data platforms and Copilot products as demand changes.
For the following quarter, Microsoft expects total revenue of between $96 billion and $97.1 billion. It forecasts Azure revenue growth of 49 to 50 percent excluding the effects of currency movements, with customer demand continuing to exceed available supply.
Nadella’s LinkedIn post identified cost and performance as priorities for the next phase of AI adoption. He wrote: “The next frontier is maximizing intelligence per task while continuously optimizing for cost and performance.”
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