How AI’s record revenues, Azure’s 40% growth, and Microsoft’s (MSFT) massive capex have changed the investment story

• In late April 2026, Microsoft reported third quarter financial results showing revenue of US$82.89 billion and net income of US$31.78 billion. Additionally, the annual revenue run rate for the AI ​​business is now over USD 37 billion, with Azure growing at 40%.
• At the same time, Microsoft raised its 2026 capital spending outlook to USD 190 billion and amended the OpenAI agreement to restructure the relationship between capital and AI models by trading exclusivity for long-term, royalty-free IP access and ongoing revenue sharing.
• Here, we examine how the combination of extremely high AI-driven growth and rapidly increasing capital spending will reshape Microsoft’s existing investment story.

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Microsoft investment story summary

To own Microsoft today, you have to believe that its AI and cloud engine can grow fast enough to justify unprecedented capital expenditures while remaining profitable. The latest results, with AI revenue run rates of over USD 37 billion and Azure growth of 40%, support that view, but the raised 2026 capex outlook to USD 190 billion further exacerbates the key near-term tensions: impressive AI-driven momentum and the risk that cash flows and margins will remain under pressure for longer than many shareholders would like.

Against this background, the revised OpenAI Agreement seems particularly important. Microsoft will relinquish exclusivity but will maintain non-exclusive, royalty-free access to OpenAI IP through 2032 and continue to earn revenue share through 2030. This tilts the near-term narrative slightly away from access to “proprietary” models to “scale and breadth” of AI offerings, strengthening the core catalyst of embedding AI across Azure and Microsoft 365, but leaving the focus and revenue on vast AI infrastructure as key open questions.

But even with recent strong numbers, investors should also consider how quickly free cash flow could be squeezed by increased capital spending if demand and pricing power for AI weakens.

Read the full story at Microsoft (it’s free!)

The Microsoft story projects revenue of $504.4 billion and revenue of $192.9 billion by 2029. This would require annual revenue growth of 16.6%, or an increase in revenue of approximately $67.7 billion from the current $125.2 billion.

Find out how Microsoft’s projections resulted in a fair value of $561.93, which is 33% higher than the current price.

explore other perspectives

While the consensus is for solid growth, the most pessimistic analysts were only assuming about US$456 billion in revenue and US$164 billion in revenue by 2029, so this jump in capital spending and OpenAI reset could either confirm their caution or boost expectations, depending on how they think Microsoft’s AI investments and profit margins will evolve going forward.

Check out the other 95 fair value estimates for Microsoft – Find out why the stock is 14% below its current price.

decide for yourself

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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.

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