Revenue up 18% to $331.8B, Microsoft Cloud up 27%, and the segment, expense, and estimate drivers behind fiscal year 2026.
| Metric | FY2026 | FY2025 | % Change |
|---|---|---|---|
| Revenue | $331,839 | $281,724 | 18% |
| Gross margin | $225,465 | $193,893 | 16% |
| Operating income | $155,237 | $128,528 | 21% |
| Net income | $133,749 | $101,832 | 31% |
| Diluted earnings per share | $17.95 | $13.64 | 32% |
| Adjusted net income (non-GAAP) | $128,786 | $105,452 | 22% |
| Adjusted diluted EPS (non-GAAP) | $17.28 | $14.13 | 22% |
Microsoft's fiscal 2026 highlights: Microsoft Cloud revenue up 27% to $214.4 billion; commercial remaining performance obligation up 84% to $678 billion; continued expansion of the OpenAI partnership (extended October 2025 and April 2026).
Revenue $331,839M (+18%). Gross margin $225,465M (+16%). Operating income $155,237M (+21%). Net income $133,749M (+31%). Diluted EPS $17.95 (+32%). OpenAI investment gains added $5.0B / $0.67 EPS to fiscal 2026 (vs. a $3.6B / $0.49 EPS drag in fiscal 2025).
| Segment | Revenue FY2026 | Revenue FY2025 | Rev. % Chg | Op. Income FY2026 | Op. Income FY2025 | Op. Inc. % Chg |
|---|---|---|---|---|---|---|
| Productivity and Business Processes | $139,996 | $120,810 | 16% | $83,879 | $69,773 | 20% |
| Intelligent Cloud | $137,791 | $106,265 | 30% | $56,972 | $44,589 | 28% |
| More Personal Computing | $54,052 | $54,649 | (1)% | $14,386 | $14,166 | 2% |
| Total | $331,839 | $281,724 | 18% | $155,237 | $128,528 | 21% |
Revenue $139,996M (+16%), operating income $83,879M (+20%). Growth led by Microsoft 365 Commercial cloud (+17%, Copilot & E5 driven), Microsoft 365 Consumer cloud (+28%), LinkedIn (+11%), and Dynamics 365 (+18%).
Revenue $137,791M (+30%), operating income $56,972M (+28%). Azure and other cloud services revenue grew 41%; cost of revenue rose 44% on AI infrastructure investment, compressing gross margin percentage despite Azure efficiency gains.
Revenue $54,052M (−1%), operating income $14,386M (+2%). XBOX revenue fell 7% (hardware down 29%) offset by Search advertising growth of 9% (ex-TAC +12%); Windows OEM grew 5%.
| Category | FY2026 | FY2025 | % Change | % of Revenue FY2026 | % of Revenue FY2025 |
|---|---|---|---|---|---|
| Research and development | $35,562 | $32,488 | 9% | 11% | 12% |
| Sales and marketing | $26,710 | $25,654 | 4% | 8% | 9% |
| General and administrative | $7,956 | $7,223 | 10% | 2% | 3% |
$35,562M, +9% (11% of revenue). Driven by continued investment in compute capacity, AI talent and data, plus XBOX impairment and other related expenses.
$26,710M, +4% (8% of revenue). Driven by investments in commercial sales and higher Copilot advertising expenses.
$7,956M, +10% (2% of revenue). Driven by higher legal expenses and gains on divestitures recorded in the prior period.
| Component | FY2026 | FY2025 |
|---|---|---|
| Interest and dividends income | $3,301 | $2,647 |
| Interest expense | $(3,051) | $(2,385) |
| Net recognized gains (losses) on investments | $4,385 | $(349) |
| Net gains (losses) on derivatives | $1,867 | $(260) |
| Net gains (losses) on foreign currency remeasurements | $(527) | $171 |
| Other, net | $4,722 | $(4,725) |
| Total | $10,697 | $(4,901) |
| Jurisdiction | FY2026 | FY2025 |
|---|---|---|
| United States | $103.6 | $69.2 |
| Foreign | $62.3 | $54.4 |
$10,697M (vs. $(4,901)M in FY2025), including $6.5B of net gains from OpenAI investments (vs. $4.8B of net losses in FY2025), primarily the dilution gain from the OpenAI Recapitalization.
19% in FY2026 vs. 18% in FY2025; the increase reflects the mix of earnings between the U.S. and foreign jurisdictions, remaining below the U.S. federal statutory rate due to Ireland-sourced foreign earnings.
Ongoing IRS audit (tax years 2014–2017) and a 2023 Notice of Proposed Adjustment for tax years 2004–2013 relating to transfer pricing, with the IRS seeking $28.9B plus penalties and interest; management is contesting the NOPAs.
| Metric | FY2026 | FY2025 | % Change |
|---|---|---|---|
| Other income (expense), net (GAAP) | $10,697 | $(4,901) | 318% |
| Net (gains) losses from OpenAI investments | $(6,530) | $4,763 | (237)% |
| Adjusted other income (expense), net (non-GAAP) | $4,167 | $(138) | 3,120% |
| Net income (GAAP) | $133,749 | $101,832 | 31% |
| Net (gains) losses from OpenAI, net of tax | $(4,963) | $3,620 | (237)% |
| Adjusted net income (non-GAAP) | $128,786 | $105,452 | 22% |
| Diluted earnings per share (GAAP) | $17.95 | $13.64 | 32% |
| Adjusted diluted EPS (non-GAAP) | $17.28 | $14.13 | 22% |
Adjusted net income (non-GAAP) $128,786M (+22%) and adjusted diluted EPS $17.28 (+22%), excluding net gains/losses from OpenAI investments from GAAP net income of $133,749M and diluted EPS of $17.95.
| Period | Amount |
|---|---|
| Three months ending September 30, 2026 | $28,589 |
| Three months ending December 31, 2026 | $22,556 |
| Three months ending March 31, 2027 | $15,457 |
| Three months ending June 30, 2027 | $6,363 |
| Thereafter | $2,747 |
| Total | $75,712 |
| Obligation | 2027 | Thereafter | Total |
|---|---|---|---|
| Long-term debt — principal payments | $9,250 | $36,886 | $46,136 |
| Long-term debt — interest payments | $1,405 | $24,148 | $25,553 |
| Construction commitments | $29,848 | $4,718 | $34,566 |
| Operating and finance leases (incl. imputed interest) | $32,411 | $411,095 | $443,506 |
| Purchase commitments | $169,008 | $25,052 | $194,060 |
| Total | $241,922 | $501,899 | $743,821 |
$76.8B in cash, cash equivalents, and short-term investments as of June 30, 2026 (vs. $94.6B in 2025); equity and other investments grew to $36.3B.
Cash from operations $182.9B (+$46.8B). Cash used in investing $139.5B (+$66.9B, driven by a $51.4B increase in capex). Cash used in financing $52.5B (+$847M).
$75,712M expected to be recognized as of June 30, 2026, front-loaded into the next two fiscal quarters ($28,589M and $22,556M respectively).
$743,821M total, including $443,506M in operating/finance leases (largely datacenter-related) and $194,060M in purchase commitments.
36 million shares repurchased for $16.7B in FY2026; $40.6B remains available under the $60B repurchase program.
$27.0B in dividends declared in FY2026, up from $24.7B in FY2025.
Judgment in identifying distinct performance obligations, standalone selling price, and bundled offerings such as Office 365 (accounted for as one performance obligation, recognized ratably).
Quarterly credit-loss and impairment review of debt investments; periodic qualitative impairment assessment for equity investments without readily determinable fair values.
Annual (May 1) reporting-unit impairment testing via discounted cash flow methodology, requiring judgment on future cash flows, growth rates, and weighted average cost of capital.
Software development costs expensed until technological feasibility is established, then capitalized until general release.
Losses accrued when probable and reasonably estimable, based on the degree of probability of an unfavorable outcome.
Uncertain tax positions recognized only when more-likely-than-not to be sustained on examination, measured at the largest benefit with >50% likelihood of realization.
Consolidated financial statements are prepared by management in conformity with GAAP, audited by Deloitte & Touche LLP, and overseen by the Board's Audit Committee. Signed by Satya Nadella (CEO), Amy E. Hood (CFO), and Alice L. Jolla (CAO).
Microsoft reported total revenue of $331,839 million for fiscal year 2026, an increase of 18% over fiscal year 2025's $281,724 million, driven primarily by growth in Microsoft Cloud.
Microsoft Cloud revenue increased 27% to $214.4 billion in fiscal year 2026.
Intelligent Cloud operating income increased $12.4 billion or 28%, driven by 30% revenue growth (led by Azure and other cloud services growing 41%) and 21% gross margin growth, though gross margin percentage decreased due to continued AI infrastructure investment and sales mix shift to Azure.
The effective tax rate increased from 18% in fiscal 2025 to 19% in fiscal 2026, primarily due to changes in the mix of earnings and tax expenses between the U.S. and foreign countries.
Management excludes net gains and losses from investments in OpenAI from adjusted (non-GAAP) net income and adjusted diluted EPS because it believes doing so provides additional insight into financial performance and helps clarify underlying business trends, since these amounts primarily reflect equity-method investment gains and losses rather than core operations.
Productivity and Business Processes revenue increased $19.2 billion or 16% to $139,996 million, and operating income increased $14.1 billion or 20% to $83,879 million, driven by Microsoft 365 Commercial cloud, LinkedIn, and Dynamics 365 growth.
More Personal Computing revenue decreased $597 million or 1% to $54,052 million, driven by a 7% decline in XBOX revenue (including a 29% drop in XBOX hardware revenue), offset in part by 9% growth in Search advertising revenue.
Research and development expenses increased $3.1 billion or 9% to $35,562 million, driven by continued investments in compute capacity, AI talent, and data supporting product development, as well as impairment and other related expenses in the XBOX business.
Management exercises significant judgment in determining distinct performance obligations, standalone selling price, and the treatment of bundled offerings such as Office 365, where desktop applications and cloud services are accounted for together as one performance obligation recognized ratably.
Goodwill is tested for impairment at the reporting unit level annually on May 1, and between annual tests if triggering events occur, primarily using a discounted cash flow methodology requiring judgment about future cash flows, long-term growth rates, and weighted average cost of capital.
As of June 30, 2026, cash, cash equivalents, and short-term investments totaled $76.8 billion, and equity and other investments were $36.3 billion. Cash from operations was $182.9 billion for the fiscal year.
Cash from operations increased $46.8 billion to $182.9 billion for fiscal year 2026, primarily due to higher cash received from customers and lower cash used to pay income taxes, offset in part by higher cash paid to suppliers.
Microsoft received Notices of Proposed Adjustment from the IRS for tax years 2004 to 2013 relating primarily to intercompany transfer pricing, with the IRS seeking an additional tax payment of $28.9 billion plus penalties and interest. Management believes its allowances for income tax contingencies are adequate, disagrees with the proposed adjustments, and will contest them through IRS administrative appeals and, if necessary, judicial proceedings.
As of June 30, 2026, total outstanding contractual obligations were $743,821 million, comprising long-term debt principal and interest, construction commitments, operating and finance leases, and purchase commitments (primarily for datacenters).
Management, including Chief Executive Officer Satya Nadella, Chief Financial Officer Amy E. Hood, and Chief Accounting Officer Alice L. Jolla, is responsible for preparing the consolidated financial statements in conformity with GAAP; Deloitte & Touche LLP was engaged to audit and render an opinion on the financial statements and internal control over financial reporting.
Financial-statement line items in this analysis, aligned to the exact FASB US-GAAP XBRL taxonomy concepts Microsoft used to tag them in its own XBRL instance document for this filing — verified against the filing's accompanying msft-20260630_htm.xml, not assumed from memory.
FASB US-GAAP XBRL taxonomy concept for revenue from contracts with customers, excluding assessed tax — the element Microsoft tags its total revenue with in this filing's XBRL instance.
FASB US-GAAP XBRL taxonomy concept for gross profit (revenue less cost of revenue).
FASB US-GAAP XBRL taxonomy concept for income or loss from operations before other income/expense and income taxes.
FASB US-GAAP XBRL taxonomy concept for consolidated net income or loss attributable to the reporting entity.
FASB US-GAAP XBRL taxonomy concept for diluted net income per share, reflecting potential dilution of common stock equivalents.
FASB US-GAAP XBRL taxonomy concept for net investment income.
FASB US-GAAP XBRL taxonomy concept for nonoperating interest expense.
FASB US-GAAP XBRL taxonomy concept for net realized and unrealized gains or losses on investments.
FASB US-GAAP XBRL taxonomy concept for the net pretax gain or loss on derivative instruments.
FASB US-GAAP XBRL taxonomy concept for the pretax gain or loss from foreign currency transaction remeasurement.
FASB US-GAAP XBRL taxonomy concept for other nonoperating income and expense not separately classified, including equity-method investment gains/losses such as Microsoft's OpenAI investment.
FASB US-GAAP XBRL taxonomy concept for total nonoperating income and expense, net.
FASB US-GAAP XBRL taxonomy concept for research and development expense.
FASB US-GAAP XBRL taxonomy concept for selling and marketing expense.
FASB US-GAAP XBRL taxonomy concept for general and administrative expense.
FASB US-GAAP XBRL taxonomy concept for the contract liability recognized for consideration received in advance of satisfying performance obligations.
FASB US-GAAP XBRL taxonomy concept for the effective income tax rate from continuing operations.
Management's Discussion and Analysis of Financial Condition and Results of Operations — the section of a Form 10-K in which management explains the results of operations and financial condition of the
Revenue from Microsoft 365 Commercial cloud, Azure and other cloud services, the commercial portion of LinkedIn, and Dynamics 365.
The commercial portion of revenue allocated to remaining performance obligations, including unearned revenue and amounts that will be invoiced and recognized as revenue in future periods.
Financial measures, such as adjusted net income and adjusted diluted EPS, that exclude net gains and losses from investments in OpenAI; used by management alongside GAAP results but not a substitute f
GAAP net income adjusted to exclude net gains and losses, net of tax, from investments in OpenAI.
The price at which a distinct product or service would be sold separately to a customer, used to allocate revenue across multiple performance obligations in a contract.
Amounts invoiced or collected in advance of revenue recognition, comprising mainly volume licensing programs including cloud services and Software Assurance, recognized ratably over the coverage perio
An estimate involving a significant level of estimation uncertainty that could have a material impact on financial condition or results of operations.
An annual (and event-driven) assessment of whether a reporting unit's carrying value exceeds its estimated fair value, typically determined using a discounted cash flow methodology.
Total income tax expense divided by income before income taxes, reflecting the blended impact of statutory rates across the jurisdictions in which a company earns income.
A component of a business for which discrete financial information is reviewed by the chief operating decision maker and disclosed separately in financial reporting; Microsoft reports Productivity and
A paid user covered by a Microsoft 365 Commercial subscription at the end of a reporting period, used as a leading indicator of Microsoft 365 Commercial cloud revenue growth.
Interactive graph visualization derived from the companion RDF. Click nodes to resolve, drag to explore. Graph data embedded from companion RDF at generation time.
Run the canonical entity-type summary query below against the companion RDF, loaded into URIBurner as a named graph. Copy it into your own SPARQL client, or run it live.
PREFIX rdf: <http://www.w3.org/1999/02/22-rdf-syntax-ns#> PREFIX rdfs: <http://www.w3.org/2000/01/rdf-schema#> SELECT ?type (SAMPLE(?s) AS ?sampleEntity) (SAMPLE(?label) AS ?sampleLabel) (COUNT(?s) AS ?entityCount) WHERE { GRAPH <https://linkeddata.uriburner.com/DAV/demos/daas/msft-mda-fy2026-claude_code-1.ttl> { ?s rdf:type ?type . OPTIONAL { ?s rdfs:label ?label } } } GROUP BY ?type ORDER BY DESC(?entityCount)