Microsoft reports Azure growth of 48% but cuts capex forecast on data center delays

Microsoft reported 48% Azure revenue growth to $33.2 billion for the quarter ending September 30, 2026, beating Wall Street estimates. However, construction delays, power constraints, and neocloud supplier bottlenecks forced Microsoft to trim its 2026 capital expenditure forecast from $175 billion to $170 billion, posting quarterly spending of $45.2 billion against expectations. Amid these cloud infrastructure bottlenecks, Microsoft offered voluntary buyouts to up to 60,000 workers on October 26, 2026.

Microsoft quarterly financial results

• ▪Microsoft reported Azure cloud revenue increased 48% year-over-year to $33.2 billion for the quarter ending September 30, 2026, surpassing analyst expectations
• ▪Microsoft reported net income rose 32% year-over-year to $36.6 billion for the quarter ending September 30, 2026
• ▪Microsoft recorded total revenue of $92.3 billion for the quarter ending September 30, 2026, representing a 19% year-over-year increase
• ▪Microsoft generated $10 billion from commercial arrangements with OpenAI during the quarter ending September 30, 2026, accounting for approximately 11% of total sales

Microsoft capital expenditure guidance and results

• ▪Microsoft CFO Amy Hood stated capital spending will accelerate in the second half of fiscal year as delayed data center capacity comes online
• ▪Microsoft posted capital expenditure of $45.2 billion for the quarter ending September 30, 2026, falling below Wall Street analyst estimates of $50.7 billion to $51.7 billion
• ▪Microsoft lowered its 2026 calendar year capital expenditure forecast from $175 billion to $170 billion due to third-party data center construction delays

Data center capacity and power constraints

• ▪Microsoft withdrew from a computing capacity lease agreement with UK startup Nscale due to power constraints at Nscale's site
• ▪Nebius experienced slower-than-expected construction progress at its 300-megawatt data center facility in Vineland, New Jersey
• ▪Microsoft experienced data center capacity delays driven by electricity shortages, local opposition, and delayed third-party supplier deliveries

Neocloud provider commitments and market outlook

• ▪Microsoft has committed over $80 billion in total contracts to neocloud operators including CoreWeave, Nebius, and Nscale since 2023
• ▪Gartner analysts predicted on 19 October 2026 that 80% of neocloud companies such as CoreWeave will be absorbed or cease operations by 2030
• ▪Shares of neocloud providers CoreWeave and Nebius dropped nearly 5% in extended trading on October 28, 2026 following Microsoft's quarterly capital expenditure report

Microsoft voluntary buyouts and workforce reduction

• ▪Microsoft overall workforce headcount fell 2% year-over-year during the quarter ending September 30, 2026
• ▪Microsoft spokesperson stated the company expects 5% or fewer eligible employees to accept its voluntary buyout offer
• ▪Microsoft offered voluntary buyout packages to up to 60,000 employees in the US, Canada, UK, and India on October 26, 2026