MSFT · Forward model · Intelligent Cloud · Bull case
What has to happen in Intelligent Cloud
Model as of
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Intelligent Cloud
The largest segment for the first time this quarter, and the reason the capital expenditure line has doubled. $39.3B of revenue, up 32%, with Azure and other cloud services up 43% and Azure passing $100B of annual revenue for the first time. Server products, Enterprise Services and GitHub sit alongside it. The operating margin is 40.6% against Productivity's 57.9%, and the gap IS the AI build: this segment consumes most of the $35.8B Microsoft spent on property and equipment in a single quarter, and the depreciation on it lands here first.
Latest: $112.50B (2031Q2E)
| Period | Value |
|---|---|
| 2024Q3 | $24.09B |
| 2024Q4 | $25.54B |
| 2025Q1 | $26.75B |
| 2025Q2 | $29.88B |
| 2025Q3 | $30.90B |
| 2025Q4 | $32.91B |
| 2026Q1 | $34.68B |
| 2026Q2 | $39.31B |
| 2026Q3E | $42.29B |
| 2026Q4E | $45.32B |
| 2027Q1E | $48.40B |
| 2027Q2E | $51.52B |
| 2027Q3E | $54.70B |
| 2027Q4E | $57.93B |
| 2028Q1E | $61.23B |
| 2028Q2E | $64.59B |
| 2028Q3E | $68.02B |
| 2028Q4E | $71.53B |
| 2029Q1E | $75.13B |
| 2029Q2E | $78.82B |
| 2029Q3E | $82.60B |
| 2029Q4E | $86.49B |
| 2030Q1E | $90.50B |
| 2030Q2E | $94.63B |
| 2030Q3E | $98.88B |
| 2030Q4E | $103.27B |
| 2031Q1E | $107.81B |
| 2031Q2E | $112.50B |
Assumptions & reasoning
- Azure passed $100B of revenue in fiscal 2026 and grew 43% in the quarter against a segment growing 32%, so the non-Azure parts of this segment - server products, Enterprise Services - are growing far more slowly and are being diluted out of it.
- Microsoft gives no capacity, megawatt or utilisation figure for Azure. It says demand exceeds supply and reports a growth rate, so this line is a growth driver by necessity rather than by choice.
- This segment carries an assumed 70% of company capital expenditure, which is 63.8% of its own revenue in the basis quarter. Microsoft does not disclose capex by segment; the share is a judgement about where the datacenters are being built.
- Commercial remaining performance obligation of $678B, up 84%, with a weighted average duration of 2.3 years and about 30% expected within twelve months, is mostly this segment. It is the strongest forward signal Microsoft publishes and it sits outside this model's drivers.