Microsoft Corporation (MSFT) Earnings

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Sep 2026upcoming

Next quarter

Expected to report Oct 28, 2026 — estimated from last year’s reporting date.

Consensus is $4.67 EPS for Sep 2026 across 13 estimates, ranging $4.46 to $4.84.

MSFT Jun 2026

Reported Jul 29, 2026

: 12.59%
: +15.51%

: $4.21
: $4.74
: —
: —

Highlights

Cloud and AI: Microsoft Cloud revenue rose 27% year over year to $59.3 billion, while Azure and other cloud services revenue increased 43%.
Quarterly beat: Non-GAAP diluted EPS was $4.74 versus the $4.21 consensus, a 12.59% surprise; revenue was $90.0 billion, up 18% year over year.
Commercial visibility: Commercial remaining performance obligation increased 84% to $678 billion, with a weighted average duration of approximately 2.3 years.
Profit growth: GAAP operating income increased 18% to $40.6 billion and GAAP net income rose 31% to $35.8 billion; GAAP diluted EPS was $4.81, up 32%.
Copilot adoption: Microsoft 365 Copilot surpassed 30 million paid seats, while Microsoft 365 Commercial cloud revenue increased 14% in the quarter.
Segment mix: Intelligent Cloud revenue grew 32% to $39.3 billion, Productivity and Business Processes revenue rose 14% to $37.8 billion, and More Personal Computing revenue fell 4% to $12.9 billion.
Investment intensity: Capital expenditures were $35.8 billion in the quarter and $115.9 billion for fiscal 2026, versus $17.1 billion and $64.6 billion, respectively, a year earlier.
Cash returns: Microsoft returned $10.2 billion to shareholders in the quarter through dividends and share repurchases.

Analysis

Microsoft closed fiscal 2026 with a strong, cloud-led quarter that exceeded the earnings benchmark. Non-GAAP diluted EPS of $4.74 was $0.53, or 12.59%, above the $4.21 consensus, while revenue reached $90.0 billion, up 18% year over year and 8.6% from $82.9 billion in the March quarter. GAAP operating income rose 18% year over year to $40.6 billion, and GAAP net income increased 31% to $35.8 billion, compared with $31.8 billion in the prior quarter and $27.2 billion a year earlier.

The defining feature was accelerating cloud and AI demand. Intelligent Cloud revenue grew 32% to $39.3 billion, led by 43% Azure growth, and Microsoft Cloud revenue increased 27% to $59.3 billion. Commercial remaining performance obligation rose 84% to $678 billion, supporting forward revenue visibility, while Microsoft 365 Copilot passed 30 million paid seats. The print also showed the cost of that expansion: quarterly capital expenditures more than doubled year over year to $35.8 billion, and fiscal-year capex reached $115.9 billion. The EPS outperformance was not entirely operational, as management cited a $0.27 per-share benefit from discrete items, including a $3.2 billion Anthropic investment gain, lower retirement-program expenses, and offsets from Xbox severance and impairment charges.

Cloud and AI demand

Azure and Microsoft Cloud remained the center of gravity for the quarter. Intelligent Cloud revenue rose 32% year over year to $39.3 billion, with Azure and other cloud services up 43%. Microsoft Cloud revenue reached $59.3 billion, up 27%, while commercial remaining performance obligation increased 84% to $678 billion. Management said Azure revenue exceeded $100 billion for the first time in fiscal 2026, indicating that AI-related consumption is now operating at substantial scale.

Microsoft 365 Copilot: Paid seats exceeded 30 million, while Microsoft 365 Commercial cloud revenue increased 14% on a reported basis; management said the comparable-period revenue recognition benefit reduced the underlying comparison by two percentage points.
Profitability trade-off: Intelligent Cloud cost of revenue increased 42% in the quarter to $16.9 billion, reflecting continued investment in AI infrastructure and rising usage. For fiscal 2026, Microsoft Cloud gross margin percentage declined to 66%.
Forward demand: Commercial remaining performance obligation of $678 billion had an approximate 2.3-year weighted average duration; roughly 30% of the balance is expected to be recognized over the next 12 months.

Quarterly financial performance

Revenue, operating income, and earnings all improved from both the year-ago quarter and the March quarter. Revenue rose from $82.9 billion in Q3 FY2026 to $90.0 billion, operating income increased from $38.4 billion to $40.6 billion, and GAAP net income grew from $31.8 billion to $35.8 billion. GAAP diluted EPS rose from $4.27 to $4.81, although the prior-quarter comparison includes different investment-related effects.

Year-over-year growth: Revenue increased 18% from $76.4 billion, operating income rose 18% from $34.3 billion, and GAAP net income increased 31% from $27.2 billion.
Adjusted earnings: Non-GAAP net income was $35.3 billion and non-GAAP diluted EPS was $4.74, up 22% and 23%, respectively, excluding the impact of OpenAI investments.
Expectation bridge: Management said discrete items benefited diluted EPS by $0.27 versus its April guidance. The main positive was a $3.2 billion gain from the Anthropic investment, partly offset by Xbox severance and impairment charges.

Segment performance

The quarter widened the gap between Microsoft’s commercial cloud and its consumer businesses. Productivity and Business Processes remained a large, profitable growth engine, while More Personal Computing contracted as Xbox and Windows-related businesses weakened.

Productivity and Business Processes: Revenue increased 14% to $37.8 billion and operating income rose 15% to $21.9 billion. Microsoft 365 Consumer cloud revenue grew 24%, LinkedIn revenue increased 12%, and Dynamics 365 revenue rose 13%.
Intelligent Cloud: Revenue increased 32% to $39.3 billion and operating income rose 31% to $16.0 billion, with Azure and other cloud services up 43%.
More Personal Computing: Revenue declined 4% to $12.9 billion and operating income fell 14% to $2.7 billion. Xbox content and services revenue decreased 10%, Windows OEM and Devices revenue fell 7%, and search advertising excluding traffic acquisition costs grew 10%.

AI infrastructure spending

Microsoft is funding the cloud and AI expansion with an unusually heavy infrastructure buildout. Capital expenditures totaled $35.8 billion in the quarter, more than double the $17.1 billion recorded a year earlier. For fiscal 2026, additions to property and equipment reached $115.9 billion, compared with $64.6 billion in fiscal 2025, taking net property and equipment to $313.1 billion from $205.0 billion.

Cash generation: Fiscal-year operating cash flow increased 34% to $182.9 billion from $136.2 billion, providing substantial internal funding for the infrastructure program.
Balance-sheet commitments: Microsoft had $34.6 billion of construction commitments, primarily for datacenters, and $194.1 billion of purchase commitments, primarily related to datacenters and take-or-pay contracts.
Margin risk: Management cautioned that continued AI infrastructure investment and product usage can pressure gross margin, even as Azure and Microsoft 365 efficiency gains partly offset those costs.

Capital returns and liquidity

Microsoft continued to return capital while prioritizing infrastructure investment. The company returned $10.2 billion through dividends and repurchases in the quarter, including $6.8 billion of dividends and $4.6 billion of share repurchases in the cash-flow statement. Fiscal-year dividends and repurchases totaled $48.7 billion.

Liquidity: Cash, cash equivalents, and short-term investments totaled $76.8 billion at June 30, down from $94.6 billion a year earlier, while equity and other investments increased to $36.3 billion from $15.4 billion.
Share count: Diluted weighted-average shares declined to 7.443 billion in the quarter from 7.461 billion a year earlier.
Funding capacity: Microsoft generated $182.9 billion of operating cash flow against $115.9 billion of fiscal-year capital expenditures, while management said existing liquidity, cash flow, and capital-market access should fund commitments for the foreseeable future.

Microsoft Corporation

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