A fixed rule set over this filing's XBRL figures and the number of high-severity risks found in it — no model judgement.
Not investment advice and not a price target: it scores the quarter's fundamentals, not the stock. Full methodology →
AI Takeaway
Microsoft achieved $331.84B in revenue (up 17.8% YoY) and $133.75B in net income in FY2026, driven by 41% growth in Azure and strong Microsoft Cloud momentum despite compressed gross margins from AI infrastructure investments.
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
Microsoft (MSFT) reported FY2026 revenue of $331.84B, up 17.8% year over year. The company posted net income of $133.75B, up 31.3% from a year earlier, with diluted EPS of $17.95. Gross margin was 67.9%. Operating income was $155.24B, up 20.8% year over year. Operating cash flow was $182.94B, up 34.4% year over year. The company returned $22.27B of share repurchases to shareholders. MSFT's fiscal FY2026 corresponds to calendar FY 2026.
Microsoft delivered strong FY2026 performance with $331.84B in revenue (+17.8% YoY) and $133.75B in net income (+31.3% YoY), driven by Azure cloud expansion and OpenAI investment gains.
Last 4 quarters: 4 beats
Microsoft Cloud revenue rose 27% YoY to $214.4B in FY2026, propelled by a 41% surge in Azure and other cloud services, while commercial remaining performance obligation (RPO) jumped 84% to $678B.
Source: 10-K Item 7, p.34-39
GAAP net income benefited from $6.53B in net recognized gains from OpenAI investments, primarily due to a dilution gain from OpenAI's recapitalization, contributing $0.67 to diluted EPS.
Source: 10-K Item 7, p.37-41
Productivity and Business Processes revenue grew 16% to $139.99B, led by 17% growth in Microsoft 365 Commercial cloud revenue driven by higher average revenue per user from Microsoft 365 Copilot and E5 tier adoption.
Source: 10-K Item 7, p.38
More Personal Computing revenue declined 1% to $54.05B as XBOX content and services decreased 5% and console hardware revenue fell 29%, partially offset by 12% growth in Search advertising (ex-TAC).
Source: 10-K Item 7, p.39
Microsoft is executing massive capital investments in datacenters, GPUs, and power generation in advance of fully realized AI revenue streams. Misalignment between capacity expansion and actual customer adoption speed could result in asset underutilization or balance sheet impairments.
Source: 10-K Item 1A, p.15-16
Sophisticated nation-state and cybercriminal actors continue to target internal networks and customer data using AI-enhanced attack vectors. Breaches or zero-day vulnerabilities could disrupt cloud services, expose sensitive customer information, and lead to significant legal, financial, and reputational liability.
Source: 10-K Item 1A, p.17-18
The IRS issued Notices of Proposed Adjustment for tax years 2004 to 2013 requesting $28.9B plus penalties and interest regarding intercompany transfer pricing. While Microsoft believes its allowances are adequate and is vigorously appealing, an adverse final resolution could materially affect operating results.
Source: 10-K Item 1A / Item 8 Note 11, p.42
Unqualified
Source: 10-K Item 8, Report of Independent Registered Public Accounting Firm, p.86
This analysis does not extract a guidance section. Companies issue revenue and EPS outlook in the 8-K press release and on the earnings call rather than in the 10-K itself — though the filing's management discussion can contain forward-looking statements, which appear in the highlights above where they were material.
Microsoft (MSFT) is next expected to report on , when the following quarter's results and any updated outlook will be available.
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue | $331.84B | $281.72B | +17.79% |
Cost of Revenue | $106.37B | $87.83B | +21.11% |
Gross Profit | $225.47B | $193.89B | +16.28% |
Operating Income | $155.24B | $128.53B | +20.78% |
Net Income | $133.75B | $101.83B | +31.34% |
EPS (Basic) | $18.00 | $13.70 | +31.39% |
EPS (Diluted) | $17.95 | $13.64 | +31.60% |
R&D Expense | $35.56B | $32.49B | +9.46% |
Microsoft posted strong financial results for FY2026, generating $331.84B in revenue (+17.8% YoY) and $133.75B in net income (+31.3% YoY). Growth was anchored by Microsoft Cloud, which expanded 27% to $214.4B, and Azure's 41% revenue growth. Results were also bolstered by $6.53B in net recognized gains from OpenAI investments.
Azure and other cloud services revenue grew 41% YoY in FY2026, driven by sustained customer demand for cloud computing and AI workloads. Overall Microsoft Cloud revenue reached $214.4B (up 27% YoY), while commercial remaining performance obligations surged 84% to $678B.
Net investment gains from OpenAI added $6.53B to non-operating income in FY2026, primarily from dilution gains related to OpenAI's recapitalization. This increased Microsoft's GAAP net income by $5.0B and diluted EPS by $0.67, whereas prior-year investments had resulted in a $0.49 per share net reduction.
Microsoft cautioned that its accelerated investments in AI infrastructure, datacenters, and power generation involve high upfront costs ahead of fully developed revenue streams. The company noted that if customer adoption slows or if AI inference and training costs stay elevated, operating margins and asset valuations could be negatively impacted.
Microsoft (MSFT) is next expected to report earnings on Oct 27, 2026. The date comes from the analyst earnings calendar and can shift until the company confirms it.
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.
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