Supply
← Earnings Calls
01
02
03
04 05 06
Tone
AI
Capex
A1 A2 A3 A4 A5 A6
MSFT
FY2026 Q2
Improving
Microsoft Corporation earnings call
Buzzberg read
Demand still exceeds Microsoft’s AI supply
Microsoft reported a strong Q2 FY26, with revenue up 17% and Azure growth accelerating to 39% as AI demand outstrips supply. The company guided for Azure growth to remain in the high-30% range in the next quarter and raised its full-year operating margin outlook, despite a slightly lower Microsoft Cloud gross margin guidance. Quarterly revenue was $81.3B (+17% YoY), EPS was $4.14 (+24% YoY).
Buzzberg read Demand still exceeds Microsoft’s AI supply Microsoft reported a strong Q2 FY26, with revenue up 17% and Azure growth accelerating to 39% as AI demand outstrips supply. The company guided for Azure growth to remain in the high-30% range in the next quarter and raised its full-year operating margin outlook, despite a slightly lower Microsoft Cloud gross margin guidance. Quarterly revenue was $81.3B (+17% YoY), EPS was $4.14 (+24% YoY). Read full analysisCollapse analysis
Microsoft reported a strong Q2 FY26, with revenue up 17% and Azure growth accelerating to 39% as AI demand outstrips supply. The company guided for Azure growth to remain in the high-30% range in the next quarter and raised its full-year operating margin outlook, despite a slightly lower Microsoft Cloud gross margin guidance. Quarterly revenue was $81.3B (+17% YoY), EPS was $4.14 (+24% YoY).
- Azure growth was 39%, driven by AI demand which continues to exceed supply.
- Total commercial RPO is $625B, with 45% coming from a single customer (OpenAI).
- Capex was $37.5B, but management raised FY26 operating margin outlook to 'up slightly'.
AZURE Revenue growth39%Reported
Revenue$81.273BReported
EPS$4.14Reported
Gross margin68.04%Reported
6 grounded callouts
What matters now
The highest-signal changes from the call.
Azure
Azure growth would top 40% if all new GPUs went to Azure
Capex/ROI
GPU capacity largely sold for its entire useful life
Show 3 more callouts
OpenAI
OpenAI accounts for 45% of commercial RPO balance
Copilot
Microsoft 365 Copilot reaches 15 million paid seats
Agents
Over 80% of Fortune 500 use low-code agent tools
Reported period
Actuals
| Metric | Reported | Change |
|---|---|---|
| AZURE Revenue growth | 39% | Reported |
| Revenue | $81.273B | Reported |
| EPS | $4.14 | Reported |
| Gross margin | 68.04% | Reported |
| Operating margin | 47.09% | Reported |
| Free cash flow | $5.882B | Reported |
Forward-looking
Forward guidance
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| Gross marginCLOUD | FY2026 Q3 | 65% | 65% | Guided |
| RevenueAZURE | FY2026 Q3 | 37%–38% | 37.5% | Guided |
| Revenue | FY2026 Q3 | $80.65B–$81.75B | $81.2B | Guided |
AI, capex & demand read
Management read
Confident
Executives repeatedly emphasized record demand, multi-year contracted capacity, and accelerating AI adoption, while framing supply constraints as a pacing issue rather than a demand problem.
Management AI read
Management framed AI as still in the early innings of diffusion, noting Microsoft has already built an AI business larger than some franchises that took decades. They highlighted broad adoption across Copilot, Foundry, Fabric, and GitHub, and positioned agents as the next app platform, with over 80% of the Fortune 500 already using low-code/no-code agent tools.
Investment and capacity
Capex remains heavy at $37.5 billion in Q2, with roughly one gigawatt of capacity added in the quarter and demand still exceeding supply. Management guided Q3 capex down sequentially due to build-out variability, while stressing that much GPU capacity is already contracted for its useful life and flagging memory prices as a future cost factor.
all 9 named companies below
Companiesreturns since call
Partners
ANTHROPIC
Partners
Amy Hood
Anthropic is another major Azure customer, contributing to the record bookings and long-duration contracts.
Evidence
“well as the previously announced Anthropic commitment from November”
Partners
Satya Nadella
PayPal is one of several payment partners enabling Microsoft's e-commerce push in the consumer Copilot app.
Evidence
“with Copilot Checkout, we are partnered with PayPal, Shopify, and Stripe so customers can make purchases directly within the app.”
MISTRAL
Partners
Satya Nadella
Mistral is benefiting from growing demand for sovereign AI models, gaining traction on Microsoft's Azure Foundry platform.
Evidence
“We are seeing increasing demand for region-specific models, including Mistral and Cohere, as more customers look for sovereign AI choices.”
DATABRICKS
Partners
Satya Nadella
Databricks is an early partner integrating with Microsoft's new Agent 365 control plane, indicating a cooperative relationship in the agent ecosystem.
Evidence
“And partners like Adobe, Databricks, GenSpark, Glean, NVIDIA, SAP, ServiceNow, and Workday are already integrating Agent 365.”
Suppliers
Suppliers
Satya Nadella
AMD is a key silicon supplier alongside NVIDIA, benefiting from Microsoft's multi-vendor strategy for its data-center fleet.
Evidence
“At the silicon layer, we have NVIDIA and AMD and our own Maya chips delivering the best all-up fleet performance”
Supply chain
Supply chain
Satya Nadella
Microsoft added nearly one gigawatt of capacity in a single quarter, signaling the pace of build-out is accelerating. — This is a massive supply-side signal, implying heavy infrastructure investment and higher demand for memory, storage, and networking components.
Evidence
“All up, we added nearly one gigawatt of total capacity this quarter alone.”
External signals
Supply-chain alpha · 6returns since call
Microsoft's 'AI business' is now larger than some of its biggest franchises that took decades to build.
Evidence
“even in these early innings, we have built an AI business that is larger than some of our biggest franchises”
Microsoft added nearly one gigawatt of capacity in a single quarter, signaling the pace of build-out is accelerating.
Microsoft's first-party Maya 200 chip delivers >30% TCO improvement vs prior gen and is being scaled.
Microsoft's commercial bookings grew 230%, driven entirely by two huge deals (OpenAI, Anthropic).
The 6-year depreciation for servers versus a 2.5-year average RPO duration represents a mismatch but is derisked by multi-year GPU contracts.
High memory prices are a new risk to the PC market recovery, impacting Windows OEM revenue.
Methodology & coverage
Management-only analysis. All 9 validated company mentions are shown. Reported actuals and forward guidance are kept separate. Public evidence is limited to eight short attributed quotes. AI-generated analysis can be incomplete or wrong; verify important claims against the original source.