Azure Crosses $100 Billion Mark as Microsoft Eyes $190 Billion Capex by 2026
Azure's annual revenue surpassed $100 billion for the first time, with a 43% jump in the quarter. Amy Hood guided the market to an estimated capex of approximately $190 billion for the calendar year.
Microsoft closed its fiscal fourth quarter with $90 billion in revenue, an 18% increase compared to the previous year, and crossed the $100 billion annual revenue mark for Azure for the first time. The announcement, made after the market closed on Wednesday (July 29), triggered an over 8% rise in after-hours trading, despite quarterly capex of $35.8 billion, double the amount reported in the same period last year.
Azure and other cloud services grew by 43% in the quarter, accelerating from the 39% projected by CFO Amy Hood in the previous report. The contracted and unrecognized revenue (RPO) jumped 84% year-over-year, reaching $678 billion. For Satya Nadella, this figure reflects a simple pattern: customers are purchasing capacity before it exists, and Microsoft is building faster than any competitor.
Capex Doubles and Then Doubles Again
The FY26 capex closed at $115.9 billion, compared to $64.55 billion in FY25, an 80% increase. Amy Hood indicated in the earnings call that spending in the calendar year 2026 is expected to reach around $190 billion, implying a new acceleration of approximately 64% over the already doubled base. Two-thirds of the expenditure will go toward short-lived assets, particularly CPUs and GPUs, which have shorter replacement cycles. Approximately $5.6 billion came from financial leases of data centers.
The composition is important for the CFOs of consulting firms and banks that purchase Azure: if demand cools, Hood can freeze silicon purchases without halting construction of land and buildings. This is the opposite of the rigidity of a long-term contract with a colocation provider.
Copilot Gains Paid Scale, GitHub Adopts Consumption
M365 Copilot surpassed 30 million paid seats, with net additions for the quarter more than doubling sequentially. GitHub Copilot reached 50 million users, and the product's revenue grew by 60% sequentially after shifting to a consumption-based billing model. This was the first quarter in which the fixed subscription model fell behind in the company's official statistics.
This point deserves attention from IT leaders who still regard Copilot as a fixed cost per license. As pricing begins to align with API calls, the engineering team’s budget will no longer be predictable; it will depend on actual adoption. This isn’t bad; it’s different, and it compels the CIO to monitor consumption before committing to additional seats.
Thirty-One Data Centers in Three Months
Microsoft added 31 new data centers across five continents in the quarter and reduced the time between rack arrival and server readiness by approximately 50%. This type of operational detail influences multi-year contracts: for a consultancy routing client workloads between the US, India, and the European Union, Microsoft is offering capacity in regions that are still on standby in Google Cloud and AWS.
In India, where Accenture, TCS, Infosys, and Wipro host delivery centers for global clients, Azure India expanded regions in Pune and Hyderabad during this cycle. For the Big 4 partner pricing a core modernization project in Frankfurt, the existence of a sovereign region in Berlin and another in Zurich changes both the architecture and final pricing. Each new data center is one less variable in the business proposal.
What Nadella Left Out
The CEO emphasized the strategy of "diversification of models" throughout the call, mentioning OpenAI, Anthropic, and Microsoft's own MAI family as options for corporate clients. Nadella did not cite the exact amount paid to OpenAI in the quarter, but the non-GAAP EPS adjustment of $0.07 provides a hint of the investment's impact on the bottom line.
The point for the corporate buyer is different: for the first time, a customer of the Azure OpenAI Service can migrate workloads to Claude Opus 5, also running on Azure, without changing infrastructure providers. This unlocks business conversations that were stalled due to exclusive contracts. At the same time, it compels Microsoft to compete on price with Anthropic itself, which also sells Claude directly and through AWS's Bedrock. No other hyperscaler is in this position.