Microsoft Corporation (MSFT) Earnings

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Dec 2026upcoming

Next quarter

Expected to report Jan 27, 2027 — estimated from last year’s reporting date.

Consensus is $4.85 EPS for Dec 2026 across 14 estimates, ranging $4.76 to $4.97.

MSFT Sep 2026

Reported Oct 28, 2026 · after the close

: 3.82%
: -0.16%

: $4.71
: $4.89
: —
: $92.28B

Reported results

: $92.28B; from $77.67B
: 67.79%; from 69.05%
: $45.91B; from $37.96B
: 49.76%; from 48.87%
: $36.63B; from $27.75B
: $4.92; from $3.72

Highlights

Earnings beat: Q1 FY2027 EPS was $4.89 versus consensus of $4.71, a 3.8% surprise; revenue of $92.28 billion was up 19% year over year.
Cloud accelerated: Microsoft Cloud revenue reached $63.9 billion, up 30% year over year, with Azure revenue up 48%.
Commercial commitments: Commercial remaining performance obligations rose 73% to $677 billion; about 30% is expected to be recognized in the next 12 months, up 29%.
AI products gained traction: Foundry had more than 120,000 customers and revenue more than tripled year over year; Copilot customers consuming usage-based credits increased more than 75% during the quarter.
Margins and profit: Operating income increased 21% to $45.91 billion, while operating margin rose slightly year over year to 50%; Microsoft Cloud gross margin was 66%.
Infrastructure spending: Capital expenditures were $45.2 billion, including $7.4 billion of finance leases; free cash flow was $18.6 billion.
Consumer weakness: Devices and Consumer revenue declined 3% to $15.5 billion, including a 27% decline in Windows OEM revenue; Search and advertising revenue ex-TAC rose 12%.
Q2 outlook: Microsoft expects revenue of $96.0 billion to $97.1 billion, Azure growth of 49% to 50% in constant currency, and capex above $50 billion.

Analysis

Microsoft started FY2027 with a broad cloud and AI-led beat: revenue of $92.28 billion rose 19% year over year, and EPS of $4.89 exceeded the $4.71 consensus by 3.8%. Operating income increased 21% to $45.91 billion. Against the latest earlier quarter supplied, Q3 FY2026, revenue was $82.89 billion and operating income was $38.40 billion; Q4 FY2026 figures were not provided, so that is not a direct sequential-quarter comparison.

The defining feature was accelerating cloud demand alongside rapid investment to serve it. Microsoft Cloud revenue grew 30% to $63.9 billion, Azure grew 48%, and commercial RPO reached $677 billion, up 73%. Foundry revenue more than tripled, while Copilot usage-based credit adoption broadened. Spending remained substantial: capex was $45.2 billion, and management expects more than $50 billion in Q2. Operating margin nevertheless edged up to 50%, supported by revenue growth and platform efficiencies. Performance outside the cloud was mixed: Devices and Consumer revenue fell 3%, with Windows OEM revenue down 27%, partly offset by 12% growth in Search and advertising ex-TAC. For Q2, Microsoft guided to revenue of $96.0 billion to $97.1 billion and Azure growth of 49% to 50% in constant currency.

Cloud and AI demand

Microsoft Cloud: Revenue was $63.9 billion, up 30% year over year and 31% in constant currency, with strong demand across Azure and Microsoft 365 commercial cloud.
Azure: Revenue grew 48%, ahead of expectations, as Foundry demand and improved monetization of existing CPU capacity helped offset delayed third-party capacity deliveries. Management said demand continued to exceed available supply.
Copilot and Foundry: Foundry had more than 120,000 customers and revenue more than tripled year over year. Copilot daily users rose nearly 50% sequentially and more than fivefold year over year; customers actively using usage-based Copilot credits increased more than 75% during the quarter.
Commercial productivity: Microsoft 365 commercial cloud grew 17% as reported, or 18% excluding a prior-year revenue-recognition benefit. Growth reflected higher revenue per user, including premium offerings, and paid commercial seats increased 5%; management cited weaker execution in E3 and standalone SKUs.

Commitments and visibility

Commercial RPO: Remaining performance obligations increased 73% to $677 billion, with a weighted average duration of 2.3 years. About 30% is expected to convert to revenue over the next 12 months, up 29% year over year; the balance due later grew 98%.
Bookings context: Commercial bookings declined 12%, reflecting a tough comparison with large Azure commitments signed in the prior year. A large Azure commitment this quarter contributed to a smaller-than-usual sequential decline in RPO.

Investment and margins

Profitability: Gross margin dollars rose 17% and gross margin percentage was 68%. Operating income grew 21%, while operating margin increased slightly year over year to 50%, helped by revenue growth and efficiency gains and partly offset by a sales mix shift toward Azure.
Cloud economics: Microsoft Cloud gross margin percentage was 66%, down year over year as Azure mix weighed on the measure; product-level margin improvements partly offset that pressure.
Infrastructure outlay: Capex was $45.2 billion; roughly three-quarters went to short-lived assets, primarily CPUs and GPUs. Cash paid for property and equipment was $39.4 billion. Operating cash flow rose 29% to $58 billion, free cash flow was $18.6 billion, and Microsoft returned $10.2 billion through dividends and repurchases.

Devices and Consumer

Segment performance: Revenue declined 3% to $15.5 billion. Search and advertising ex-TAC grew 12%, supported by rate and volume across LinkedIn, Edge, and Bing.
Windows: Windows OEM and devices revenue fell 22%; Windows OEM alone declined 27%, with management citing the prior-year Windows 10 end-of-support demand, OEM and channel inventory drawdowns, and weaker PC demand. Inventory remained elevated.
Gaming: Xbox revenue declined 2% and Xbox content and services revenue also fell 2%, as declines in third-party content and Game Pass more than offset first-party content growth.

Second-quarter outlook

Revenue and Azure: Microsoft guided to total revenue of $96.0 billion to $97.1 billion, growth of 18% to 19%, and Agents and Infra revenue of $80.1 billion to $80.7 billion. Azure growth is expected at 49% to 50% in constant currency.
Other business lines: Microsoft 365 commercial cloud growth is expected to be about 19% in constant currency. Search and advertising ex-TAC should grow at a low-double-digit rate; Xbox content and services is expected to grow at a mid-to-high-single-digit rate, while Windows OEM and devices revenue is expected to decline in the mid-30s.
Spending: Q2 capex is expected to exceed $50 billion, and calendar-year spending is forecast at about $170 billion as some third-party capacity deliveries shift into the second half. Management expects to remain free-cash-flow positive in FY2027.

Microsoft Corporation

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