Computed from published fixed rules, not a model's judgement — though one input, the count of high-severity risks, comes from the AI analysis below.
Not investment advice and not a price target: it scores the quarter's fundamentals, not the stock. Full methodology →
AI Takeaway
Microsoft's fiscal year 2026 was defined by accelerating cloud momentum, with Azure revenue surging 41% and Microsoft Cloud revenue up 27%, driving overall revenue growth of 18%. The growth was primarily fueled by demand for AI services and strong commercial bookings, as evidenced by an 84% jump in commercial remaining performance obligations to $678 billion. However, gross margin contracted slightly to 68% as the company ramped up AI infrastructure investments, though efficiency gains partially offset the pressure. Net income rose 31% to $133.7 billion, significantly boosted by $6.5 billion in net gains from Microsoft's investment in OpenAI compared to a $4.8 billion net loss in the prior year.
Revenue
$331.84B
+17.79% YoY
EPS (Diluted)
$17.95
+31.60% YoY
Gross Margin
67.9%
-0.9 pts YoY
Operating Income
$155.24B
+20.78% YoY
Filed · Analysis updated · Source: SEC EDGAR 10-K filing · Audit Opinion: Unqualified (Source: Report of Independent Registered Public Accounting Firm)
Next MSFT earnings expected
Source: SEC XBRL
Microsoft (MSFT) reported FY2026 revenue of $331.84B, up 17.8% year over year. Operating margin was 46.8%, up 1.2 points from 45.6% a year earlier. Operating cash flow was $182.94B, up 34.4% year over year.
Last 4 quarters: 4 beats
| Quarter | Actual EPS (USD) | Consensus (USD) | Result |
|---|---|---|---|
| Jun 2026This filing | 4.74 | 4.33 | Beat +9.5% |
| Mar 2026 | 4.27 | 4.14 | Beat +3.1% |
| Dec 2025 | 4.14 | 4.03 | Beat +2.6% |
| Sep 2025 | 4.13 | 3.74 | Beat +10.5% |
Reported EPS of $4.74 versus the $4.33 analyst consensus — a +9.5% beat for Jun 2026.
3 reported segments · SEC XBRL
Segment revenue totals $331.84B, which is the $331.84B of consolidated revenue on the income statement. The profit column adds up to the consolidated figure as well.
Profit above is reported as operating income, the measure MSFT itself discloses in this filing. Each company chooses its own measure here, so these margins are not comparable with another company's.
Compiled by AI from 10-K Item 7 of this filing
Microsoft Cloud revenue increased 27% to $214.4 billion, with Azure and other cloud services surging 41%, fueled by AI workload demand. Commercial remaining performance obligations jumped 84% to $678 billion, signaling strong future revenue.
Source: 10-K Item 7 MD&A
Gross margin decreased slightly to 67.9% as the company continued significant investments in AI infrastructure and growing AI product usage, partially offset by efficiency gains in Azure and Microsoft 365 Commercial cloud.
Source: 10-K Item 7 MD&A
Revenue in this segment grew 16% to $140.0 billion, driven by Microsoft 365 Commercial cloud (up 17%) and LinkedIn (up 11%). Copilot and E5 suites boosted revenue per user.
Source: 10-K Item 7 MD&A
Revenue surged 30% to $137.8 billion, with Azure growth of 41% and a 44% spike in cost of revenue due to AI infrastructure scaling. Server products revenue rose only 1% as customers shift to cloud.
Source: 10-K Item 7 MD&A
Revenue dipped 1% to $54.1 billion, as XBOX content and services fell 5% and hardware declined 29%. Search advertising revenue grew 9%, providing a partial offset.
Source: 10-K Item 7 MD&A
Compiled by AI from 10-K Item 1A of this filing · 3 high, 2 medium, 0 low
Microsoft faces fierce competition from hyperscalers and new entrants in AI, which could lead to price reductions, lower margins, and loss of market share if the company fails to innovate and differentiate its offerings.
Source: 10-K Item 1A Risk Factors
The company remains a high-value target for sophisticated cyberattacks, including nation-state actors, which have previously exploited legacy accounts to access source code. Evolving threats and AI-assisted attacks increase the difficulty of defense and could cause reputational and financial harm.
Source: 10-K Item 1A Risk Factors
Microsoft's rapid datacenter expansion is subject to risks related to land availability, energy supply, component shortages (e.g., GPUs), and geopolitical challenges, which could delay capacity and increase costs.
Source: 10-K Item 1A Risk Factors
The financial success of AI investments depends on customer demand, pricing models, and adoption rates, which may not materialize in expected timeframes or at anticipated levels, potentially leading to underutilized infrastructure and impairment charges.
Source: 10-K Item 1A Risk Factors
Microsoft's AI strategy relies on strategic relationships with third parties like OpenAI. Changes in priorities, contractual terms, or access to technologies could adversely affect the competitiveness of its AI products and services and expected economic benefits.
Source: 10-K Item 1A Risk Factors
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue $B | 331.84 $B | 281.72 $B | +17.79% |
Cost of Revenue $B | 106.37 $B | 87.83 $B | +21.11% |
Gross Profit $B | 225.47 $B | 193.89 $B | +16.28% |
Operating Income $B | 155.24 $B | 128.53 $B | +20.78% |
Net Income $B | 133.75 $B | 101.83 $B | +31.34% |
EPS (Basic) $ | 18.00 $ | 13.70 $ | +31.39% |
EPS (Diluted) $ | 17.95 $ | 13.64 $ | +31.60% |
R&D Expense $B | 35.56 $B | 32.49 $B | +9.46% |
Answers draw on this SEC filing and the data on this page
In Q3 FY2026, Microsoft delivered strong 18% revenue growth to $82.9 billion and 23% net income growth to $31.8 billion, propelled by 40% Azure growth and a 99% surge in Commercial Remaining Performance Obligation to $627 billion, even as gross margin declined 1.1 percentage points due to continued AI infrastructure investment.
In Q2 FY2026, Microsoft reported strong financial performance with a 16.7% increase in revenue and a 59.5% rise in net income, driven by robust operating income growth and effective cost management.
Microsoft delivered strong Q1 FY2026 results with revenue rising 18% to $77.7B and operating income up 24% to $38.0B, driven by 40% growth in Azure and a 51% surge in commercial remaining performance obligation to $392B, though net income growth was tempered to 12% by $3.1B in net losses from its OpenAI investment.
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