Microsoft FY2026 MD&A Management Analysis Ontology
A small bridge ontology for a management-centric analysis of Microsoft Form 10-K Item 7. It reuses schema.org for CreativeWork and PropertyValue modeling, records FASB/SEC XBRL taxonomies as the appropriate shared reporting vocabularies for financial facts, and cross-references FIBO as a broader finance-domain ontology rather than replacing SEC reporting concepts.
Local terms are restricted to interpretation and presentation relationships not directly supplied by schema.org or XBRL in this generated analysis. Annotation properties used by this ontology include rdfs:label, rdfs:comment, schema:name, schema:description, schema:identifier, rdfs:seeAlso, and rdfs:isDefinedBy.
Annotation property catalog for Microsoft FY2026 MD&A management analysis ontology
Catalog of annotation properties used to describe the ontology and its custom terms. This resource is linked from the ontology IRI so a description of the ontology exposes the annotation-property vocabulary rather than hiding it in prose.
label
Human-readable label annotation used for ontology terms.
comment
Human-readable explanatory annotation used for ontology terms.
see also
Cross-reference annotation used to point from local ontology terms to shared vocabularies and related specifications.
is defined by
Annotation used to connect custom ontology terms to the local ontology resource that defines them.
name
Schema.org name annotation used for ontology, document, section, metric, and entity labels.
description
Schema.org description annotation used for ontology, document, section, metric, and entity explanatory text.
identifier
Schema.org identifier annotation used to state the canonical IRI for the local ontology.
USD millions
USD
USD per share
Fiscal year 2026
Fiscal year 2025
Microsoft FY2026 Form 10-K MD&A source filing
SEC EDGAR filing used as source material for a management-centric RDF and HTML analysis of Item 7, Management Discussion and Analysis of Financial Condition and Results of Operations.
Microsoft FY2026 MD&A management-centric analysis bundle
Generated RDF and HTML bundle focused on management explanation of Microsoft financial condition, results of operations, liquidity, capital allocation, segment performance, non-GAAP adjustments, and critical accounting estimates.
Management-centric analysis of Microsoft FY2026 MD&A
Management frames fiscal 2026 as cloud and AI-led growth, with expanding commercial backlog and strong operating cash flow balanced by AI infrastructure investment, datacenter commitments, tax disputes, and accounting judgment.
Management analysis theme
A management-facing interpretive theme extracted from Microsoft MD&A.
Financial metric
A reported fiscal metric or operating indicator used by management in MD&A, modeled as a specialization of schema:PropertyValue while cross-referencing XBRL reporting vocabularies for standardized financial fact definitions.
has management theme
Connects a financial metric or analysis entity to a management interpretation theme. Broader schema.org properties were checked; schema:about is the closest superproperty but this term narrows the object to an explicit management-analysis theme.
Overview
Microsoft describes itself as an AI-powered technology company generating revenue from cloud services, software licensing, advertising, devices, and content.
Summary Results of Operations
Management highlights revenue growth, operating leverage, Microsoft Cloud growth, commercial RPO, and OpenAI-related effects on GAAP comparability.
Segment Results of Operations
The three-segment view shows Productivity and Business Processes and Intelligent Cloud as growth engines, with More Personal Computing roughly flat.
Liquidity and Capital Resources
Management states available liquidity and cash generation are sufficient for operations, investing, financing, capital expenditures, dividends, repurchases, and debt maturities.
Critical Accounting Estimates
Management identifies the estimates and judgments that can materially affect financial condition and results.
Statement of Management Responsibility
Management accepts responsibility for financial statement preparation, internal controls, estimates, and judgments.
AI and cloud demand
Management presents AI-powered cloud services as the main revenue growth vector, led by Microsoft Cloud, Azure, Microsoft 365 Commercial cloud, and Copilot-related monetization.
Capacity investment and margin pressure
Management links cloud and AI infrastructure investment, datacenter capacity, GPUs, energy, networking supplies, and AI usage to higher operating costs and lower cloud gross margin percentage.
Commercial backlog visibility
Commercial remaining performance obligation increased 84% to $678 billion, creating a management signal about future contracted revenue recognition.
Capital flexibility
Management says cash, investments, operating cash flow, and capital market access are expected to fund operations, capital expenditure, debt maturities, dividends, and repurchases.
OpenAI investment effects
Management separates GAAP and adjusted results because net gains and losses from OpenAI investments affected other income, net income, and EPS comparability.
Accounting estimates and judgment
Management identifies revenue recognition, investment measurement and impairment, goodwill, R&D costs, legal contingencies, and income taxes as critical estimate areas.
Revenue
Growth was driven by Microsoft Cloud.
Revenue FY2025 comparison value
FY2025
Revenue year-over-year change percent
percent
Gross margin
Gross margin increased with growth across all segments while gross margin percentage decreased slightly.
Gross margin FY2025 comparison value
Gross margin year-over-year change percent
Operating income
Operating income grew on Productivity and Business Processes and Intelligent Cloud strength.
Operating income FY2025 comparison value
Operating income year-over-year change percent
Net income
Net income was positively affected by OpenAI investment gains.
Net income FY2025 comparison value
Net income year-over-year change percent
Diluted earnings per share
EPS rose with operating growth and OpenAI-related gains.
Diluted earnings per share FY2025 comparison value
Diluted earnings per share year-over-year change percent
Adjusted net income
Non-GAAP measure excludes net gains and losses from OpenAI investments.
Adjusted net income FY2025 comparison value
Adjusted net income year-over-year change percent
Microsoft Cloud revenue
Cloud scale remained the central growth engine.
Microsoft Cloud revenue year-over-year change percent
Commercial remaining performance obligation
Contracted commercial backlog points to future revenue recognition.
Commercial remaining performance obligation year-over-year change percent
Microsoft Cloud gross margin percentage
Margin pressure reflects AI infrastructure investment and growing AI product usage.
Cash, cash equivalents, and short-term investments
Liquidity remained large but lower year over year.
Cash, cash equivalents, and short-term investments FY2025 comparison value
Cash from operations
Cash from operations increased by $46.8 billion.
Contractual obligations total
Obligations include debt, leases, construction, and purchase commitments.
Purchase commitments
Purchase commitments primarily relate to datacenters.
Share repurchases
Repurchases rose to $16.7 billion in fiscal 2026.
Share repurchases FY2025 comparison value
Dividends declared
Management intends to continue dividends subject to Board declaration.
Dividends declared FY2025 comparison value
Productivity and Business Processes
Microsoft 365 Commercial cloud, Microsoft 365 Consumer, LinkedIn, and Dynamics 365 drove growth.
Productivity and Business Processes revenue FY2026
FY2026
Productivity and Business Processes revenue FY2025
Productivity and Business Processes revenue year-over-year change percent
Productivity and Business Processes operating income FY2026
Productivity and Business Processes operating income FY2025
Productivity and Business Processes operating income year-over-year change percent
Intelligent Cloud
Azure and other cloud services were the principal driver.
Intelligent Cloud revenue FY2026
Intelligent Cloud revenue FY2025
Intelligent Cloud revenue year-over-year change percent
Intelligent Cloud operating income FY2026
Intelligent Cloud operating income FY2025
Intelligent Cloud operating income year-over-year change percent
More Personal Computing
XBOX weakness offset Search advertising and Windows OEM contributions.
More Personal Computing revenue FY2026
More Personal Computing revenue FY2025
More Personal Computing revenue year-over-year change percent
More Personal Computing operating income FY2026
More Personal Computing operating income FY2025
More Personal Computing operating income year-over-year change percent
Competitive technology markets
Software, device, AI, and cloud markets are dynamic and highly competitive.
Datacenter supply constraints
Datacenters depend on permitted land, energy, networking supplies, servers, GPUs, and other components.
Talent competition
Success depends on attracting and retaining qualified employees globally.
Currency, macroeconomic, and trade policy exposure
International operations and global trade policies can affect revenue, expenses, supply chains, cost volatility, and demand.
Tax audit exposure
The IRS seeks additional tax payment in NOPAs concerning intercompany transfer pricing, which Microsoft disputes.
Revenue recognition
Judgment is required for distinct performance obligations, cloud-service integration with software licenses, standalone selling price, variable consideration, and remaining performance obligations.
Measurement and impairment of investment securities
Management evaluates credit losses, impairments, fair value, observable price changes, and orderly transactions.
Goodwill
The impairment test requires judgment about reporting units, asset and liability assignment, and reporting-unit fair value.
Research and development costs
Software development costs are expensed until technological feasibility and capitalized only after that point until release.
Legal and other contingencies
Management accrues estimated losses when impairment or liability is probable and estimable.
Income taxes
Deferred tax assets, liabilities, uncertain positions, and jurisdictional earnings mix require management judgment.
Management analysis glossary
Satya Nadella
Chief Executive Officer
Amy E. Hood
Executive Vice President and Chief Financial Officer
Alice L. Jolla
Corporate Vice President and Chief Accounting Officer
Microsoft FY2026 MD&A -- FAQ
Frequently asked management-analysis questions derived from Microsoft FY2026 Form 10-K Item 7 and backed by schema:Question entities in this companion RDF.
What is management's central explanation for fiscal 2026 growth?
Management attributes growth primarily to Microsoft Cloud, with Azure, Microsoft 365 Commercial cloud, Copilot-related revenue per user, LinkedIn, Dynamics 365, and Search advertising contributing.
Why did Microsoft Cloud gross margin percentage decrease?
Management says continued investments in AI infrastructure and growing AI product usage reduced cloud gross margin percentage, partly offset by efficiency gains in Azure and Microsoft 365 Commercial cloud.
How does management describe liquidity?
Management expects cash, short-term investments, operating cash flow, and capital market access to fund operating, investing, and financing needs for at least the next 12 months and thereafter for the foreseeable future.
Why are OpenAI investments separated in non-GAAP measures?
Management excludes net gains and losses from OpenAI investments to clarify business performance trends and improve comparability with GAAP results.
Which accounting estimates require the most management judgment?
Management highlights revenue recognition, investment securities, goodwill, R&D costs, legal and other contingencies, and income taxes.
Which business lines does management identify as cloud and AI demand drivers?
Management points to Azure and other cloud services, Microsoft 365 Commercial cloud, Microsoft 365 Consumer, LinkedIn, Dynamics 365, Search advertising, and Copilot-related monetization as demand drivers.
What management signal comes from commercial remaining performance obligation?
Commercial remaining performance obligation rose to $678 billion, which management presents as contracted backlog and a visibility signal for future revenue recognition.
Why do datacenter and AI infrastructure commitments matter to management's analysis?
They show that growth depends on capacity investment, including datacenters, GPUs, servers, networking, energy, construction commitments, and purchase commitments that affect margins and liquidity planning.
How do the three reportable segments differ in management's fiscal 2026 narrative?
Productivity and Business Processes and Intelligent Cloud are the primary growth engines, while More Personal Computing is comparatively flat because Xbox weakness offset Search advertising and Windows OEM contributions.
How does operating cash flow support management's capital allocation story?
Cash from operations increased strongly, helping fund capital expenditure, debt maturities, dividends, share repurchases, and other operating and investing needs.
What tax exposure does management highlight?
Management highlights IRS Notices of Proposed Adjustment related to transfer pricing and states that Microsoft disputes the proposed additional tax payments.
How does management responsibility connect to the MD&A analysis?
The responsibility statement links management's discussion to accountability for financial statements, internal control, estimates, judgments, and fair presentation.