Microsoft Azure revenue jumps 40% as AI demand holds

Microsoft said on April 29 that Azure revenue rose 40% in the January-March quarter and matched analyst estimates as AI demand stayed firm.

The result may ease concerns about slower adoption of Copilot for Microsoft 365 and heavy data center spending as Google and Amazon step up AI offerings.

Microsoft has added Anthropic models to its cloud products and expanded a Copilot rollout at Accenture to about 743,000 employees.

It also revised its OpenAI deal to keep a 20% revenue share through 2030 while giving up exclusive rights to resell OpenAI products on Azure.

🔗 Source: Reuters

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Implications, context, and why it matters.

Azure’s 40% growth runs into a multibillion-dollar capacity crunch

Microsoft is spending at a huge clip on capital expenditures, with fiscal 2026 on pace to top $100 billion 1.
Even that outlay is not enough. Management said data center capacity limits should last through at least the end of fiscal 2026 1.
Those limits are already slowing Azure. Microsoft said revenue would have risen 40% in the quarter with enough capacity, instead of 38% 2.
At the same time, Microsoft reset its OpenAI deal to get better terms. It will stop paying OpenAI a revenue share, while OpenAI will keep paying Microsoft through 2030 under a total cap 3.

The end of AI exclusivity rattles cloud and software as a service (SaaS)

Microsoft gave up exclusive rights, which lets OpenAI sell through any cloud, including Amazon and Google. Microsoft still remains OpenAI’s primary cloud provider, and OpenAI products will launch first on Azure unless Microsoft chooses otherwise 3.
That quickly raised the stakes. Amazon agreed to invest up to $50 billion in OpenAI, and OpenAI said it would expand its AWS agreement by $100 billion over eight years 3.
The move is also feeding fears of a “SaaS-pocalypse,” shorthand for concern that AI companies such as OpenAI could build business software that takes share from Salesforce and ServiceNow 2.
With top AI models now available across the largest clouds, the race centers on infrastructure price and performance.