Microsoft earnings top Q3 estimates, says AI business up 123% year over year

Microsoft beat Q3 expectations, reporting EPS of $4.27 on revenue of $82.89 billion, driven in part by a rapidly growing AI business now at a $37 billion annual run rate (up 123% year-over-year) and Copilot surpassing 20 million paid seats. Shares initially rose but slipped about 1% in premarket trading as investors weighed positives — strong revenue, a $627 billion remaining performance obligation backlog (up 99% YoY) — against negatives including the loss of exclusive access to OpenAI models and heavy capital spending. Microsoft spent $31.9 billion in Q3 and guided to $40 billion of capex for Q4 and $190 billion for fiscal 2026, signaling continued investment in data-center capacity and GPUs/CPUs. Overall, the report underscores robust AI-driven revenue momentum but also highlights execution and partnership risks and large near-term spending that could temper investor enthusiasm.