Microsoft Q4 FY26 Earnings: Azure Passes $100 Billion, Copilot Hits 30 Million Seats
Microsoft closed its financial year on 29th July with a real milestone. Azure passed $100 billion in annual revenue for the first time. Copilot went past 30 million paid seats. And the contracted backlog reached $678 billion, roughly twice the company’s annual revenue, already committed.
Here’s what mattered for anyone on the Microsoft stack in Australia or New Zealand.
All figures are in US dollars unless stated otherwise, in line with Microsoft’s reporting.
Key Takeaways
- Azure passed $100 billion in annual revenue for the first time, up 43% in the quarter, and still short of capacity
- Q4 revenue was $90 billion, up 18%. Full-year revenue hit $331.8 billion
- Copilot passed 30 million paid seats, with net adds more than doubling on the quarter
- Commercial backlog grew 84% to $678 billion. Enterprise AI spend is being committed years out, not bought quarter to quarter
- Agent 365 registered nearly 40 million agents across tens of thousands of companies in two months
- Pricing across Copilot, Dynamics 365 and GitHub is moving from per-seat to per-seat-plus-consumption
- Capex hit $41 billion for the quarter, and Microsoft still expects to run short of capacity
Azure Passes $100 Billion, and Still Can’t Keep Up
Azure crossed $100 billion in annual revenue for the first time, growing 43% in the quarter against a comparable period that was already growing fast.
Demand is still outrunning supply. Microsoft brought capacity online faster this year, cut the time to get new GPUs live in its biggest regions by nearly half, and sold the extra capacity almost as fast as it appeared. Still not enough.
That constraint is easing. Microsoft added 31 datacentres across five continents this quarter and expects to roughly double total capacity over two years. The A$25 billion Australian commitment from earlier this year is a regional slice of that build, which means more local headroom and fewer queues for ANZ workloads.
Copilot Hits 30 Million Seats
Copilot passed 30 million paid seats, up from 20 million in April, with net adds more than doubling on the quarter.
The usage number is the one that counts. Weekly engagement now matches Outlook and Teams, the two applications people open without deciding to.
The customer list isn’t early adopters. HSBC committed to 200,000 seats. Wells Fargo bought more than 60,000. NHS England is deploying to over 500,000 staff after a trial found it saved people 43 minutes a day.
The $678 Billion Backlog
Read one number from this quarter and make it this one. Commercial remaining performance obligation, the contracted work Microsoft hasn’t yet delivered, grew 84% to $678 billion. That’s a forward book about twice the size of the company’s annual revenue, and most of the growth came from ordinary enterprises rather than the big AI labs.
Enterprise AI spend has shifted from something tested quarter by quarter to something committed for years. Your competitors aren’t trialling any more. They’ve picked a direction and signed up for it, and that head start compounds while slower movers are still forming a view.
Agents Are in Production
A year ago the question was whether agents would work. That’s settled.
Agent 365, the control plane that extends your existing identity, security and governance to agents, registered nearly 40 million of them in two months. Foundry, where those agents get built and run, now has 100,000 customers and revenue that more than doubled year on year.
Dynamics 365 is being rebuilt around this, with more than 650,000 actions exposed across sales, finance, supply chain and customer service. Agents act inside the business under the same rules, permissions and audit trails as any human user. Customer service is furthest along, with usage-based consumption up fourfold on the quarter.
For a regulated business, that governance layer is the part that matters. Agents you can’t see or audit were never viable. Agents that inherit your identity and audit framework are a different conversation.
The Pricing Model Is Changing
Microsoft is moving from per-seat to per-seat-plus-consumption across the portfolio. Cowork added usage-based billing this quarter. Dynamics 365 customer service is well into the shift. GitHub Copilot switched in June, and consumption revenue jumped straight after.
Under the old model you sized licences on day one and hoped usage matched. The new one flexes with how you work, which is fairer, but your AI costs stop being a fixed line and start tracking adoption. Budget for it. The organisations caught out will be the ones that treated consumption as a rounding error.
Three More Worth Knowing
Microsoft’s own models are carrying load
The first-party MAI models now cover image, voice, transcription, coding and reasoning, and they’re displacing pricier frontier models inside Microsoft’s own products. One delivered an 89% cut in GPU costs in Dynamics 365. The OpenAI and Anthropic relationships still matter, but Microsoft is building its own bench.
Sovereignty got concrete
Microsoft will bring Mistral’s models to its Sovereign Cloud, across public, customer-controlled and fully disconnected environments. For banks, insurers and government in ANZ, where data residency can stall a project for months, that’s a useful option to have.
If you’re weighing Microsoft up
The case is straightforward. Infrastructure depth, mature agents, a serious local commitment, and pricing that flexes with use rather than locking you into guesses. For regulated industries, the governance tooling and sovereign options are hard to match elsewhere.
The Quarter in One Line
For two years the question was whether enterprise AI would deliver. This quarter answered it in contract value, seat counts and production agents. It’s paid off for the companies that moved early. What’s left is how fast everyone else catches up.
To talk through what any of this means for your business, your AI roadmap or your Microsoft investment, get in touch with the 365 Mechanix team. We work with organisations across Australia and New Zealand to turn quarters like this one into work you can act on.
FAQs
What was Microsoft’s revenue in Q4 FY26?
$90 billion, up 18%. Full-year revenue reached $331.8 billion. Microsoft Cloud revenue for the quarter was $59.3 billion, up 27%.
Why is Azure passing $100 billion significant?
It’s the first time Azure has crossed $100 billion in annual revenue, and it kept growing 43% in the quarter to get there. A business that size still growing that fast says demand for cloud and AI infrastructure hasn’t flattened.
How many people use Copilot now?
Over 30 million paid seats, up from 20 million in April, with net adds more than doubling on the quarter. Weekly engagement now matches Outlook and Teams.
What is Agent 365?
Microsoft’s control plane for managing AI agents at enterprise scale. It extends the identity, security and governance already wrapping your users and devices to cover agents too. It registered nearly 40 million agents in its first two months.
What is the $678 billion backlog?
Commercial remaining performance obligation: contracts customers have committed to but Microsoft hasn’t yet delivered and recognised as revenue. It grew 84%, which shows enterprise AI spend being locked in years out rather than bought quarter to quarter.
Why is Microsoft’s pricing changing?
It’s moving from per-seat to per-seat-plus-consumption across Copilot, Dynamics 365 and GitHub. You pay for licences and for usage. Fairer, but AI costs now track adoption instead of sitting as a fixed line item.
How does this connect to Microsoft’s Australian investment?
The A$25 billion Australian commitment is part of the same global build these numbers reflect. The capacity constraints Microsoft keeps flagging explain the scale of it, and why more of that build is landing on Australian soil.
How does 365 Mechanix help?
We work with organisations across ANZ to turn Microsoft’s capabilities into working implementations across Dynamics 365, Power Platform, Copilot and agents. If any of this is on your radar, get in touch and we’ll walk you through what’s relevant to your business.