Shares of Microsoft (MSFT) rallied 3.43% in after-hours trading to $549.20 following the release of the company's third-quarter fiscal 2026 earnings report. The stock gained $18.19 after closing the regular session at $531.01, down 0.06%. Strong revenue growth, rising cloud demand, and accelerating Azure sales supported the post-market advance.

The quarterly report showed revenue climbing across the company's cloud, productivity, and AI businesses, while the More Personal Computing segment slipped from a year earlier.

Revenue and Earnings Rise as Quarterly Results Exceed Expectations

Microsoft, based in Redmond, Washington, reported revenue of $82.9 billion for the quarter ended March 31, 2026, representing an 18% year-over-year increase. The period is the company's fiscal third quarter, corresponding to the January-March calendar window under Microsoft's June 30 fiscal year-end. Growth reached 15% after adjusting for currency movements, a constant-currency measure that strips out exchange-rate effects to show underlying performance, reflecting continued demand across the company's major business segments. Operating income climbed 20% to $38.4 billion, or 16% on a currency-adjusted basis.

Net income increased 23% to $31.8 billion on a generally accepted accounting principles (GAAP) basis. Diluted earnings per share rose 23% to $4.27, compared with $3.46 in the corresponding quarter last year. Excluding the impact of its OpenAI investments, Microsoft reported non-GAAP earnings growth of 21%.

The results exceeded management's expectations for revenue, operating income, and earnings per share. Non-GAAP net income reached $31.79 billion, up from $26.41 billion a year earlier, while adjusted earnings per share increased to $4.27 from $3.54, demonstrating stronger profitability across the reporting period.

Azure Growth Hits 40% as Microsoft Cloud Revenue Reaches $54.5 Billion

Microsoft Cloud remained a major contributor to quarterly performance, generating $54.5 billion in revenue. The figure increased 29% year over year, or 25% after currency adjustments, as businesses continued adopting cloud services. Commercial remaining performance obligations surged 99% to $627 billion, indicating substantial contracted demand for future services. The metric reflects revenue under contract that has not yet been recognized and is closely watched as a gauge of committed business still to come.

Azure and other cloud services revenue increased 40% year over year, or 39% in constant currency. The growth highlighted Microsoft's expanding cloud business and its role in meeting demand for artificial intelligence infrastructure, in a market where the company competes with rivals including Amazon Web Services and Google Cloud. The Intelligent Cloud segment generated $34.7 billion in revenue, marking a 30% annual increase.

Productivity and Business Processes generated $35 billion in revenue, up 17% from the previous year. Microsoft 365 Commercial cloud revenue increased 19%, while the company's consumer cloud business recorded 33% growth. LinkedIn revenue climbed 12%, and Dynamics 365 revenue advanced 22%, extending growth across Microsoft's productivity and business software portfolio.

AI Revenue Run Rate Surpasses $37 Billion

Microsoft's artificial intelligence business surpassed an annual revenue run rate of $37 billion, increasing 123% year over year. A run rate projects current-period sales across a full year, offering a snapshot of how quickly a business line is scaling. The company continues expanding its infrastructure and software offerings to support growing demand for AI-powered business applications. These developments complement Azure's growth and strengthen Microsoft's position across enterprise cloud services.

More Personal Computing Declines as Search Advertising Grows

More Personal Computing recorded $13.2 billion in revenue, representing a 1% annual decline. Windows OEM and Devices revenue fell 2%, while Xbox content and services revenue decreased 5% during the quarter. In contrast, search advertising revenue excluding traffic acquisition costs increased 12%, providing some support within the segment. The segment's performance contrasted with the double-digit growth posted across Microsoft's cloud-driven businesses.

Shareholder Returns and Upcoming Guidance

Microsoft returned $10.2 billion to shareholders through dividends and share repurchases during the third quarter. The company plans to provide forward-looking guidance during its earnings conference call and webcast, where management's outlook will frame expectations for the coming quarters.

The after-hours share price of $549.20 reflected a positive market response to the stronger earnings and sustained cloud growth reported for the quarter.

Source: Blockonomi