April 30, 2026
BlogMicrosoft’s Q3 FY26 Take-Aways: Consumption Pricing Is Coming Sooner Rather Than Later
Microsoft officials have said repeatedly that they believe customers one day will license software agents the same way they do humans. But during Microsoft’s Q3 FY26 earnings call on April 29, Microsoft’s leaders made it clear that consumption-based pricing isn’t a distant goal; it’s on the near-term horizon.
“Any per-user business of ours, whether it’s productivity, coding, security, will become a per-user and usage business,” CEO Satya Nadella told analysts on the call. That means Microsoft expects companies to continue to license many of its products per seat/user, but supplement that with per-agent and/or metered usage fees.
Microsoft already announced earlier this week that GitHub Copilot is moving to usage-based pricing as of June 1. Additionally, Microsoft already is seeing 60 percent of its customer service customers in the business-app segment purchasing usage-based credits, execs said. And its Agent 365 control plane, which will be generally available on May 1, will likely add some kind of consumption-based pricing to its current per user licensing, based on Microsoft’s A365 Frequently Asked Question document.
Microsoft reported revenues of $82.9 billion and net income of $31.8 billion for Q3 FY26. With its solid Azure growth at 40 percent in Q3 FY26, Microsoft largely appeased investors who’ve been watching closely the growth of Microsoft’s cloud services. Microsoft expects Azure growth to continue at that pace in the coming quarter. They acknowledged that their planned capacity break-even date, which was supposed to be the end of fiscal 2026 in June, is now looking more like the end of this calendar year.
The company’s capex spending will continue to grow at a rapid clip to fuel continued cloud and AI demand. In Q4 FY26, Microsoft is projecting capex to hit $40 billion, and its total for calendar 2026 to reach $190 billion. Of that latter figure, $25 billion will be attributable to higher component pricing, officials said.
Microsoft officials said there are now 20 million paid Microsoft 365 Copilot seats (up from 15 million last quarter). Unsurprisingly, Microsoft officials did not mention the substantial discounting that is now the norm with M365 Copilot; many customers are paying 20 to 40 percent off the $30 per user per month retail price.
What About That OpenAI Deal?
During the earnings call, there was only a single analyst question about Microsoft’s updated relationship terms with OpenAI. As of April 27, the exclusivity clause between Microsoft and OpenAI is no more; OpenAI now has Microsoft’s official permission to provide all of its services to customers across any cloud provider.
Nadella noted that Microsoft continues to have access to OpenAI’s IP rights and its frontier model, royalty free (since Microsoft no longer has to pay a revenue share to OpenAI), through 2032. OpenAI also remains an Azure compute customer, and Microsoft still has equity in OpenAI, he said. He also maintained that Microsoft doesn’t want all its eggs in one basket.
“Our customers also have different expectations in terms of their model diversity” these days, he said.
During last quarter’s earnings, Microsoft officials disclosed that its backlog of cloud orders more than doubled in Q2, to a whopping $625 billion. Of this total, 45 percent was attributable to OpenAI’s Azure commitments over multiple years. The Q3 backlog is now $627 billion, but there was no talk of OpenAI’s share.
Meanwhile, Microsoft continues to look for ways to cut costs to pump money back into datacenter spending. Officials emphasized the various efficiency gains it has achieved using its own silicon, like its Maia 200 chip.
Microsoft announced its first-ever voluntary employee retirement program earlier this month. Currently, overall headcount at the company is down, year-over-year, officials said, without specifying a new total. In Q4 FY26, Microsoft is predicting it will pay $900 million in one-time costs for the program. An estimated seven percent of the 125,000-person U.S. workforce, totaling roughly 8,750 employees, are eligible based on the number of years they’ve been employed by Microsoft and their ages.
