Happy Thursday. Microsoft just posted the strongest cloud quarter in its history, and Azure's 48% growth is the number every software executive should be sitting with this morning.
Google is moving fast in parallel, dropping Gemini 4 Carbon two weeks after Argon and claiming the top spot on the leading AI benchmark. Meanwhile, ServiceNow's 18% after-hours drop is a reminder that strong AI revenue growth does not insulate you from Wall Street if your guidance math looks soft.
ENTERPRISE SOFTWARE
Azure Is Now Microsoft's Biggest Business, and It's Still Accelerating
Azure grew 48% to $33.17 billion in Microsoft's fiscal first quarter, beating its own guidance of 44% to 45% and accounting for nearly three-quarters of the company's net new revenue. CFO Amy Hood guided Q2 Azure growth at 49% to 50%, well above the 45.1% analyst consensus, and said demand still exceeds supply despite capacity constraints from third-party providers.
The forward guidance is the more important number. Hood projected roughly $170 billion in calendar-year capital expenditures, with more than $50 billion in the current quarter alone. For software companies pricing and building on Azure, supply constraints are easing but infrastructure spending is still accelerating. The Copilot seat numbers, including an eightfold year-over-year increase in customers with more than 50,000 seats, suggest enterprise AI adoption is moving from pilot to standard deployment faster than most expected.
ENTERPRISE SOFTWARE
ServiceNow Beats on Revenue, Misses on Guidance, and Pays for It
ServiceNow's Q3 subscription revenue rose 21% year over year to $3.988 billion, and the company raised its full-year AI net new ACV target to $1.7 billion, up 70% from the start of the year. The stock still dropped 18% after hours because Q4 cRPO guidance of 18.5% came in more than a point below the analyst estimate of 19.8%.
CFO Gina Mastantuono attributed the gap to deal timing, a higher on-premises mix driven by public sector, and an accounting reclassification that moved revenue from subscription to professional services. Those are real factors, but the market read them as a signal of deceleration. For SaaS founders watching this: strong AI consumption metrics and a raised annual target did not offset a single guidance miss on a single metric. Your investors watch cRPO as a leading indicator, and the gap between your business momentum and how it shows up in that number is a communication problem worth solving before earnings.
ARTIFICIAL INTELLIGENCE
Google Drops Gemini 4 Carbon Two Weeks After Argon, Tops Benchmark Index
Google DeepMind released Gemini 4 Carbon on October 28, scoring 59 on the Artificial Analysis Intelligence Index v5.0 to rank first ahead of Claude Opus 5.5 at 58 and GPT-6 Astra at 57. The model posted 88.2% on SEC-bench Pro and 54.8% on ExploitGym, both state-of-the-art results, and Google says Carbon generates secure code at more than twice the rate of its predecessor.
The two-week cadence between Argon and Carbon is the signal worth watching. Sundar Pichai said plainly that additional models will follow at a similar pace. For software companies that have standardized on a particular frontier model for security or coding workflows, the evaluation cycle is now shorter than many procurement cycles. Carbon is still in preview with no broad availability announced, so the benchmark lead matters less than the underlying focus: Google built this model specifically for cybersecurity tasks, and the results on autonomous vulnerability discovery are ahead of anything else publicly reported.
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