Microsoft cloud growth accelerates as ServiceNow bookings outlook softens
Microsoft’s Azure and broader cloud businesses accelerated in the September quarter, while ServiceNow’s solid results were offset by a softer forward bookings signal.
Focal Brief
Microsoft and ServiceNow reported results on October 28 for quarters ending September 30, showing continued enterprise demand for cloud and AI products but differing signals about the pace of future software commitments.
Focal Facts
- Microsoft reported fiscal first-quarter revenue of $92.3 billion, up 19%, while Azure revenue rose 48% year over year.
- ServiceNow’s third-quarter subscription revenue increased 21% to $3.99 billion. Its fourth-quarter subscription revenue forecast was $4.245 billion to $4.255 billion.
- ServiceNow raised its 2026 AI annual contract value target to $1.7 billion, from $1 billion at the beginning of the year.
Focal Point
ServiceNow expects fourth-quarter current remaining performance obligations to grow 18.5%, below the 21% constant-currency increase recorded in the third quarter. That deceleration is the clearest next-quarter demand signal.
Microsoft said Microsoft Cloud revenue reached $63.9 billion, rising 30% year over year, while commercial remaining performance obligations climbed 73% to $677 billion. The company also reported 18% adjusted growth in Microsoft 365 commercial cloud revenue, which it normalized for a prior-year accounting benefit.
ServiceNow reported $4.11 billion in total revenue and $13.65 billion in current remaining performance obligations. Its fourth-quarter subscription forecast was broadly aligned with analysts’ estimates, Bloomberg reported, but the projected 18.5% growth in current remaining performance obligations was slightly below consensus.
The contrast separates strong demand for cloud infrastructure and productivity services from investors’ scrutiny of forward commitments at application-software providers. ServiceNow said production consumption of its agentic AI products increased more than thirteenfold year over year, but that company-reported usage measure does not by itself establish how quickly AI adoption will translate into sustained bookings growth. The consequential question is whether ServiceNow’s AI expansion can reverse the expected slowdown in near-term contracted revenue.