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Lots of Progress and Big Numbers in FY26 Q4 as Microsoft 365 Copilot Reaches 30 Million Paid Seats
On July 29, Microsoft released their FY26 Q4 and overall FY26 results. Microsoft earned $331 billion in revenue in FY26, including $90 billion coming in the last quarter, with “growth accelerating to 18%.” The big headline number from Satya Nadella was Azure surpassing $100 billion for the year.
Microsoft spent $41 billion in capital expenditures during Q4. Roughly two-thirds of the expense was for “short-lived assets” like the CPUs and GPUs used to handle customer demand for non-AI and AI workloads. Microsoft added 31 new datacenters across five continents in Q4, bringing the total of new datacenters added in FY26 to 88.
In the analysts’ call following the announcement of the results, there was some discussion about efficiency gains in terms of GPU cost reduction for different AI workloads like Copilot in PowerPoint. I guess with all the money that they’ve thrown at AI, it’s a good time for Microsoft to seek efficiencies in how they consume AI resources. After all, it’s what they now do to customers by charging for token usage.
Microsoft 365 Results
Microsoft Cloud revenues set a new record of $214 billion for the year ($59.3 billion for the quarter equates to an annualized run rate of $237.2 billion). Microsoft 365 commercial products revenue was up 19% for the year, but apart from saying that seat growth for the year was 6% (the same percentage cited for the last few quarters), Microsoft didn’t give any new number for Microsoft 365 paid seats. Applying a 3% (half-year) increase to the “over 450 million” seats reported in January 2026, suggests that Microsoft 365 now has roughly 464 million paid seats.
CFO Amy Hood noted that gross margin for the Microsoft Cloud was better than expected at 65%. Microsoft said that they are encouraged at the take-up of the Microsoft 365 E7 license and reported purchases of “millions of seats” without giving a more precise figure.
Once again, Microsoft failed to provide a number for monthly active users of Teams. The last number given in a quarterly results report was 320 million in FY24 Q1, 11 quarters ago.
Progress for Microsoft 365 Copilot
Microsoft reported “over 30 million paid Microsoft 365 Copilot seats” with “net set adds more than doubling quarter-over-quarter.” In their FY26 Q2 results, Microsoft reported 15 million paid Copilot seats. The figure reached 20 million last quarter and increased by another 10 million seats during Q4, while the number of customers with more than 50,000 seats grew seven-fold over the last year.
Accelerating from 10 million to 30 million paid seats over two quarters sounds great, and I am sure that there are plenty of relieved people in Microsoft to see that progress. However, large deals tend to close in the last quarter of a year to allow customers to benefit from whatever discounts are going for products that companies want to push, like Copilot. In addition, 30 million is still only 6.47% of the 464 million Microsoft 365 paid seats (see above).
One way to look at this is that Copilot has a lot of headroom available for growth. Another way to view the number is that Microsoft has achieved less than 7% penetration despite three years of heavy promotion and aggressive integration of Copilot in as many places in Microsoft 365 as possible.
Microsoft also highlighted that “Purview has audited over 50 billion Copilot interactions to meet compliance obligations, up nearly 360% year-over-year.” The number sounds impressive but reveals little about customer value. Auditing simply means that Purview records Copilot interactions, many of which are automated and offer limited insight into how effectively customers are using Copilot. The number is of similar worth to the Q3 claim that the number of audited interactions had increased seven-fold year-over-year. Equally useless as a measure of any value.
So Many Numbers
All Microsoft quarterly results come with many different types of numbers designed to impress and obfuscate. Two other numbers caught my attention. Microsoft said that 40 million agents have been registered with Agent 365 across “tens of thousands of companies.” The obvious question is how many of those agents are performing useful work rather than serving as experiments or proofs of concept.
Finally, 50 million of GitHub’s 225 million users now use GitHub Copilot, a figure that arguably demonstrates clearer and broader adoption than many of Microsoft’s other AI metrics.
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