10-Q · April 29, 2026
Microsoft's Q3 FY2026 results demonstrated robust performance with a revenue of $82.9 billion, exceeding estimates by $1.48 billion, and a diluted EPS of $4.27, surpassing the consensus estimate of $4.07. Cloud-related…
Earnings analysis · 10-K
MSFT earnings analysis
Filed July 29, 2026 · Our reading of the company's report
The latest report
Microsoft’s FY26 10-K shows a cloud-and-AI-led acceleration: revenue rose 18% to $331.839B and Intelligent Cloud grew 30%, led by 41% Azure growth. The strategic positioning centers on its broad platform ecosystem,…
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Microsoft’s FY26 10-K shows a cloud-and-AI-led acceleration: revenue rose 18% to $331.839B and Intelligent Cloud grew 30%, led by 41% Azure growth. The strategic positioning centers on its broad platform ecosystem, distribution through Microsoft 365 and Azure, and extending AI capabilities—including OpenAI technology—throughout the portfolio. The trade-off is a sharp capital-intensity inflection: property-and-equipment additions increased to $115.948B and noncommenced datacenter lease commitments reached $329.1B, pressuring near-term free cash flow and raising execution risk. More Personal Computing remained a weak spot, with segment revenue down 1% as XBOX revenue declined 7%.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $17.95
What stood out
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Cloud-led revenue and profit acceleration
FY26 revenue rose 18% to $331.839B, operating income increased 21% to $155.237B, and operating margin expanded to 46.8% from 45.6%. The three-year revenue trajectory was $245.122B in FY24, $281.724B in FY25, and $331.839B in FY26.
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Azure growth and backlog strengthen visibility
Intelligent Cloud was the principal growth engine: revenue rose 30% to $137.791B, while Azure and other cloud services grew 41%. Commercial remaining performance obligations increased 84% to $678B, with an approximately 2.3-year weighted-average duration.
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Platform ecosystem and AI roadmap
Microsoft describes its moat as platform ecosystems that create network effects among users, application developers, and the platform provider. It is embedding AI across its offerings, holds rights to OpenAI intellectual property for product integration, and extended its OpenAI partnership in October 2025 and April 2026.
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Copilot monetization supports productivity suite
Productivity and Business Processes revenue rose 16% to $139.996B. Microsoft 365 Commercial cloud revenue grew 17%, with revenue per user aided by Microsoft 365 Copilot and E5; commercial seats increased 6%.
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Operating cash flow surged despite AI buildout
Cash from operations increased $46.773B to $182.935B. Even after $115.948B of property-and-equipment additions, free cash flow was approximately $66.987B, versus approximately $71.611B in FY25, marking a capex-driven FCF inflection.
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Underlying EPS growth outpaces reported noise
Reported diluted EPS rose from $11.80 in FY24 to $13.64 in FY25 and $17.95 in FY26. Underlying adjusted EPS rose 18% to $14.13 in FY25 and 22% to $17.28 in FY26; FY26 GAAP EPS included a $0.67 benefit from OpenAI investment gains.
What to watch
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AI infrastructure commitments raise return risk
AI/cloud investment is scaling ahead of fully developed revenue streams: FY26 property-and-equipment additions rose 80% to $115.948B, finance-lease liabilities reached $66.594B, and additional datacenter leases not yet commenced totaled $329.1B. The filing warns that slower AI adoption, lower Azure workload consumption, or higher inference, component, and energy costs could impair returns and margins.
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Power and supply constraints may cap cloud growth
Datacenter expansion now faces explicit power, permitting, and local-opposition constraints. Microsoft has $34.566B of construction commitments and $194.060B of purchase commitments, principally for datacenters; inability to secure power, GPUs, networking, cooling, land, or permits could delay capacity and reduce sales.
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Large unresolved IRS transfer-pricing exposure
The IRS is seeking an additional $28.9B in tax for 2004–2013 transfer-pricing issues, plus penalties and interest. Microsoft is contesting the notices; separately, gross unrecognized tax benefits rose to $25.831B from $24.729B.
Management's outlook
The 10-K provides no quantitative fiscal 2027 revenue or EPS outlook. Management says it expects cash, investments, operating cash flow, and capital-market access to fund operations, capital expenditures, dividends, repurchases, debt maturities, and other commitments for at least the next 12 months.
Earlier filings 4
10-Q · January 28, 2026
Microsoft reported revenue of $81.273 billion in Q2 FY2026, up 17% year-over-year, with diluted EPS of $5.16, up 60% Y/Y (benefitting from net gains on OpenAI investments). Growth was led by Microsoft Cloud (revenue…
10-Q · October 29, 2025
Microsoft reported quarterly revenue of $77,673 million, up $12,088 million or 18% year-over-year, driven by strong Cloud and Microsoft 365 performance. GAAP diluted EPS was $3.72 (up 13%) and adjusted diluted EPS…
10-K · July 30, 2025
Microsoft delivered a strong fiscal 2025 with total revenue up 15% to $281,724 million and diluted EPS up 16% to $13.64, driven by 23% growth in Microsoft Cloud to $168.9 billion and broad-based segment growth. The…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.