Tag: Microsoft consumption billing

As I say every few months, it’s another bumper quarter for Microsoft with all the numbers getting bigger.

• Revenue = $82.9 billion (up 18%)
• Net Income = $31.8 billion (up 23%)
• Microsoft Cloud = $54.5 billion (up 29%)

Microsoft had Operating Expenses of $17.7 billion this quarter and say they were “primarily driven by continued investments in R&D compute capacity, AI talent, and data“.

Productivity & Business Processes

• Revenue = $35 billion, up 17%
• Microsoft 365 Commercial cloud revenue increased 19%
• Dynamics 365 revenue increased 22%

M365 Copilot is now over 20 million paid seats. That’s a 33% increase over Q2 (where it was 15 million) but still a fraction of the overall customer base.

Paid M365 Commercial seats grew 6% YoY and ARPU increased driven by E5 & M365 Copilot.

Intelligent Cloud

• Revenue = $34.7 billion, up 30%
• Azure increased 40%

Earnings Call

Satya Nadella started by saying “We are at the beginning of one of the most consequential platform shifts that will change the entire tech stack as agents proliferate and become the dominant workload.”

• He says there are “Tens of thousands of companies are already managing tens of millions of agents in Agent 365” – frankly, that surprises me.
• Cosmos DB had 50% YoY revenue growth
• Microsoft Fabric up to 35,000 paid customers, a 60% YoY increase
• Copilot Credit spend almost doubled quarter over quarter
• Nearly 60% of “service customers” are buying consumption credits

I’ve been banging on about consumption billion (aka Pay as You Go) billing for a few years now and it’s definitely where Microsoft (and a lot of the software industry) is going. Amy Hood, MS CFO, said;

“I start to think about it as a license business plus a consumption business, and really applying far more broadly than I think people have thought about that. And so, it starts to mean that over time, bookings will actually also look a little different. It’ll still have that per-seat license logic, but it’ll also have a meter, just like you see in Azure.”

and Satya said:

“seat-based pricing is just entitlement to some consumption”

While I think he means that seat based licenses are effectively a bundle of some consumption packaged up, that certainly sounds like it being a gateway to more consumption charges…which of course it is in many cases.

See more info here – FY26 Q3 – Press Releases – Investor Relations – Microsoft