Microsoft cloud growth fails to ease investors’ AI concerns

Published Thu, Apr 30, 2026 · 07:08 AM

[SAN FRANCISCO] Microsoft’s cloud business reported growth that narrowly beat analysts’ estimates, disappointing investors concerned that the company is not fully capitalising on demand for artificial intelligence services.

The Azure unit posted a 39 per cent revenue gain during the fiscal third quarter when adjusting for currency fluctuations, the company said on Wednesday (Apr 29) in a statement. That barely beat the average analyst estimate of 38 per cent growth. Twenty million customers are now paying for Copilot, the company’s flagship AI application, up from 15 million in the prior quarter.

The world’s largest software maker has been rushing to bake AI into its cloud services and applications such as the Copilot assistant. But Microsoft may be missing out on customer growth because it’s struggling to get data centre capacity online quickly enough to keep up with demand.

Separately on Wednesday, Microsoft’s cloud rivals Amazon.com and Alphabet’s Google each reported stronger acceleration in their cloud infrastructure businesses, which “does not create a favourable picture for AI momentum” at Microsoft, wrote Barclays analyst Raimo Lenschow.

Capital expenditures, watched as a metric of data centre spending, were US$31.9 billion in the quarter, less than the average analyst estimate of US$35.3 billion, which includes leases.

The shares dipped in extended trading. Microsoft’s stock was down about 12 per cent this year to Wednesday’s close. That decline owes primarily to concerns about the weak adoption of Copilot and the durability of Microsoft’s Office software business, Jefferies analyst Brent Thill wrote ahead of earnings.

In the statement, CEO Satya Nadella said that the company had passed an annual revenue run rate of US$37 billion for its AI business, which had more than doubled compared to the prior year. This includes revenue from AI apps built on Azure, offering models on the platform and Microsoft’s own AI applications, investor relations chief Jonathan Neilson said.

Last quarter, Microsoft received an icy reception from Wall Street for disclosing that only about 3 per cent of the company’s corporate user base were paying for Copilot. Since then, Microsoft has focused on driving sales, rather than free adoption, of the tool. Revenue for Microsoft’s office software grew 17 per cent to US$35 billion, narrowly exceeding Wall Street’s estimate of US$34.5 billion. BLOOMBERG