Microsoft forecast on Wednesday that sales for its Azure cloud business will exceed Wall Street expectations this year. The software giant also unveiled a $190 billion capital expenditure plan for 2026, which also exceeded expectations. Microsoft said it expects revenue from its Azure and other cloud services businesses to grow 39% to 40% in the fiscal fourth quarter (on a constant currency basis), higher than Visible Alpha's previous forecast of 36.7%.
The segment's revenue rose 40% in the fiscal third quarter, up from 39% in the previous three months but in line with consensus estimates.
Microsoft forecast fiscal fourth-quarter revenue of between $86.7 billion and $87.8 billion, roughly in line with the average forecast of analysts surveyed by LSEG.
Microsoft said it expects capital spending to reach $190 billion this year, far exceeding analysts' previous forecasts of more than $150 billion, according to Visible Alpha.
Jonathan Nelson, Microsoft's vice president of investor relations, said the number of users of its $30-per-month M365 Copilot artificial intelligence assistant has grown to 20 million, up from the 15 million it disclosed in January.
"We added 5 million new users in one quarter, which is certainly very exciting news," Nielsen said.
Microsoft also said that its artificial intelligence business has expected annualized revenue of $37 billion, which includes expected revenue over the next year from selling infrastructure to third parties such as OpenAI and selling its own artificial intelligence products.
Microsoft said capital expenditures in the third fiscal quarter increased 49% year-on-year to $31.9 billion, but were lower than the $37.5 billion in the second quarter. Wall Street had expected Microsoft's third-quarter capital expenditures to be $34.9 billion, according to data from Visible Alpha.
Microsoft's spending on financial leases, typically used for large data centers, fell to $4.7 billion in the third quarter from $6.7 billion in the previous quarter.
Nielsen said the number does not reflect a slowdown in demand for AI, but rather reflects the specific dates when specific leases begin, and Microsoft recognizes the full cost of those leases in its financial reports.