Microsoft reports record Q3 with Microsoft Cloud revenue exceeding $54 billion and AI business at $37 billion annual revenue run rate, while guiding Q4 CapEx to over $40 billion.

Microsoft Cloud revenue exceeded $54 billion in Q3, up 29% year-over-year, and the company's AI business surpassed a $37 billion annual revenue run rate, up 123%. Microsoft 365 Copilot paid seats exceeded 20 million with seat additions up 250% year-over-year.

Microsoft reduced 'dock-to-live times for new GPUs' in its largest regions by nearly 20% since the beginning of the year and delivered a 40% improvement in inference throughput (the step where an AI produces answers) for its most used models. The company's Maia 200 AI accelerators offer 'over 30% improved tokens per dollar' compared to the latest silicon in Microsoft's fleet.

For Q4, Microsoft guided total company revenue of $86.7 billion to $87.8 billion, implying 13% to 15% growth. Capital expenditures are expected to increase to 'over $40 billion' as Microsoft brings more data center capacity online, with roughly two-thirds of CapEx directed to short-lived assets such as GPUs and CPUs.