Microsoft's AI spending surges to $190 billion for calendar 2026 as OpenAI agreement shifts and Copilot adoption accelerates.

Microsoft reported fiscal Q3 2026 results on April 29 with AI revenue surpassing an annual run rate of $37 billion (a 123% increase), Azure and cloud services revenue up 40%, and expects capital expenditures to exceed $40 billion in Q4 fiscal 2026. For calendar 2026, Microsoft plans $190 billion in capex, compared with $64.5 billion for fiscal 2025.

Microsoft's agreement with OpenAI changed so that OpenAI can now use other cloud providers. Under the revised terms, Microsoft gained royalty-free access to OpenAI's intellectual property through 2032 and sustained revenue sharing through 2030, plus its existing equity stake. Meanwhile, commercial bookings fell 46% on a constant-currency basis due to lower commitments from OpenAI.

Microsoft 365 Copilot paid seats increased 250% year over year, and GitHub Copilot enterprise adoption tripled year over year. However, Microsoft's free cash flow fell 22.2% year over year to $15.8 billion in the latest quarter, even as operating margin reached a 20-year high of 45.6% in fiscal 2025.