[Microsoft Q3 Earnings Call: Cloud Business Growth Expected to Exceed Market Expectations, Positive Free Cash Flow Expected This Quarter] BlockBeats reports that on October 29th, Microsoft held a conference call following the release of its Q3 2026 earnings report. The company reported revenue of $92.3 billion, a 19% year-over-year increase, and adjusted earnings per share of $4.89, both exceeding market expectations. Microsoft Cloud revenue reached $63.9 billion, a 30% year-over-year increase, while Azure revenue reached $33.17 billion, a 48% year-over-year increase. Following the earnings release, the stock price rose approximately 4% in after-hours trading. During the conference call, CEO Satya Nadella stated that this quarter was a strong start to the fiscal year. He pointed out that the company is focusing on three things: designing AI to empower people, ensuring that every organization has sovereignty over its learning, and building trust and control to ensure the security of agents. Nadella also introduced a major update to Copilot, integrating Chat, Cowork, Autopilot, and Code into a unified experience, and mentioned the company's continued progress in developing its own models. Chief Financial Officer Amy Hood stated on the conference call that results exceeded expectations in revenue, operating profit, and earnings per share, primarily driven by strong demand for Microsoft Cloud. Capital expenditures for the quarter were $45.2 billion, partly due to delays in expected delivery of third-party computing power this quarter. Approximately three-quarters of capital expenditures were allocated to short-term assets, primarily CPUs and GPUs, as well as higher memory and storage costs. Commercial residual compliance obligations increased by 73% to $677 billion. Looking ahead, management provided revenue guidance of $96 billion to $97.1 billion for the next quarter and expects Azure growth (at constant exchange rates) to reach 49% to 50%, exceeding market expectations. Hood stated that customer demand continues to outpace supply. Capital expenditures are projected to exceed $50 billion in the next quarter; however, due to delays in third-party computing power delivery, capital expenditures for calendar year 2026 are expected to reach approximately $170 billion, accelerating further in the second half of the fiscal year. The company also expects Microsoft Cloud gross margins to be around 65%, pressured by the increased share of Azure business. Unlike some peers, Microsoft maintained positive free cash flow this quarter (approximately $18.6 billion), although this was a year-over-year decrease. Director Hood stated that the company is confident in the return on capital expenditures and has various financing flexibility options. The market reacted positively to the quarterly results. Investors believe that Azure's accelerated growth and upward revision of guidance, despite significant AI investment, have alleviated concerns about the pace of capital expenditure returns to some extent. However, management also acknowledged that computing power supply remains tight, and capital expenditures will continue to increase in the second half of the year. The impact of these investments on gross margins and cash flow remains a key focus for future monitoring.