Microsoft's cloud business Azure crossed the $100 billion revenue mark in fiscal year 2026, according to an internal memo from CFO Amy Hood. The milestone comes as the company's heavy investments in artificial intelligence begin to show returns. Hood also disclosed that paid seats for Microsoft's AI assistant, Copilot, have exceeded 30 million.
Azure's $100 Billion Milestone
Hood's memo, sent to employees, highlighted that Azure revenue surpassed $100 billion for the full fiscal year. That figure includes both the Azure platform and related cloud services. The achievement underscores Microsoft's dominance in the cloud computing market, where it competes with Amazon Web Services and Google Cloud. The company has been aggressively expanding its data center footprint to meet growing demand from enterprises migrating workloads to the cloud.
Fiscal 2026 ended in June for Microsoft. The $100 billion mark is a significant jump from previous years, though the company does not break out Azure revenue separately in its public filings. Instead, it reports revenue for the "Intelligent Cloud" segment, which includes Azure, enterprise services, and other cloud products. In the most recent quarter, Intelligent Cloud revenue was $28.5 billion, with Azure contributing the bulk of that growth.
AI Investments Pay Off
Hood attributed part of Azure's growth to the company's AI push. Microsoft has integrated its Copilot AI assistant into products like Office 365, GitHub, and Azure itself. The paid seats for Copilot have now topped 30 million, a figure that includes both consumer and business subscriptions. That number has more than doubled since the start of the fiscal year, according to the memo.
The company has been investing heavily in AI infrastructure, including building out its own large language models and partnering with OpenAI. Microsoft has also embedded AI features into its Bing search engine and Edge browser, though those products are not yet major revenue drivers. The Copilot numbers suggest that businesses are willing to pay for AI tools that boost productivity.
Capital Expenditure Surge
To support its cloud and AI ambitions, Microsoft spent more than $41 billion on capital expenditures in the fourth quarter alone. That's a record for the company and reflects the cost of building new data centers, purchasing GPUs, and expanding network capacity. Hood noted in the memo that the spending is necessary to meet customer demand and maintain competitive advantage.
The $41 billion Q4 capex figure is a sharp increase from previous quarters. In the same period last year, Microsoft spent about $28 billion. The company has signaled that it expects capital expenditures to continue rising as it scales its AI infrastructure. Some analysts have questioned whether the returns will justify the spending, but Hood's memo expressed confidence in the strategy.
Microsoft's total capital expenditures for fiscal 2026 are expected to exceed $120 billion, making it one of the biggest corporate spenders on infrastructure globally. The company is betting that AI and cloud growth will continue to accelerate, driving revenue for years to come.
Hood's memo did not provide specific guidance for fiscal 2027, but she emphasized that the company remains focused on execution. The next quarterly earnings report, due in October, will give investors a clearer picture of how these investments are paying off.
