Annual context: Azure and other cloud services revenue grew 41% in fiscal year 2026; Microsoft Cloud revenue reached $214.4 billion (up 27%); commercial remaining performance obligation increased 84% to $678 billion with a weighted average duration of approximately 2.3 years, of which roughly 30% is expected to be recognized within 12 months.
Annual context: Microsoft extended its strategic partnership with OpenAI in October 2025 and again in April 2026. Fiscal-year revenue from commercial arrangements with OpenAI, inclusive of revenue-sharing payments, was $24.1 billion. OpenAI completed a recapitalization in October 2025 under which Microsoft's proportionate ownership decreased, generating dilution gains of $6.5 billion in other income. Total funding commitments stood at $13.0 billion, with $11.9 billion funded as of June 30, 2026.
Annual context: Additions to property and equipment were $115.9 billion for fiscal year 2026 (versus $64.6 billion in fiscal 2025), driven by AI infrastructure buildout. Microsoft disclosed $329.1 billion in uncommenced datacenter leases (commencing between fiscal 2027 and 2033) and $34.6 billion in construction commitments. Cost of revenue rose 21% year over year, attributed to continued AI infrastructure investments to support growing customer demand.
Annual context: Microsoft 365 Commercial cloud revenue grew 17%, with revenue per user expansion driven by Microsoft 365 Copilot and Microsoft 365 E5; commercial seats grew 6% led by small and medium business and frontline-worker offerings. Search advertising revenue excluding traffic acquisition costs grew 12% on higher search volume, revenue per search, and third-party partnerships.
Annual context: XBOX revenue declined 7% for fiscal year 2026, with hardware revenue down 29% on lower console volumes and content and services down 5% against a prior-year comparable that benefited from strong first-party content. Operating expenses included impairment and other related charges in the XBOX business. The filing does not provide a separate Q4-only revenue or operating breakdown; it notes that Q4 revenue is generally higher than other quarters due to a higher volume of multi-year contracts executed in that period.
Annual context (legal/regulatory): The Irish Data Protection Commission's 2024 GDPR fine against LinkedIn remains on appeal; a preliminary hearing was held in December 2025 and the court subsequently issued a ruling on the standard of appeal, which the IDPC may further appeal. Separately, the IRS has proposed adjustments (NOPAs) for tax years 2004-2013 seeking an additional $28.9 billion plus penalties and interest on intercompany transfer pricing; Microsoft states it will contest the NOPAs administratively and, if necessary, in judicial proceedings.
(Filed on April 29, 2026)
+18.3%
67.6%
$32.1B
Microsoft extended its strategic partnership with OpenAI in October 2025 and again in April 2026. OpenAI formed a public benefit corporation and completed a recapitalization during the nine-month period, generating a dilution gain for Microsoft, which holds approximately 27% of OpenAI on an as-converted basis (equity method). Total funding commitments stand at $13 billion, of which $11.8 billion had been funded as of March 31, 2026.
Azure and other cloud services revenue grew 40% year-over-year to $32.6 billion (within Server products and cloud services of $32.6B); Microsoft Cloud revenue reached $54.5 billion (+29%). Commercial remaining performance obligations nearly doubled, up 99% to $627 billion, signaling substantial contracted future cloud and AI demand.
Capital expenditure on property and equipment surged to $30.9 billion in Q3 (vs. $16.7 billion a year earlier) and $80.1 billion for the nine months (vs. $47.5 billion). Net servers, network equipment, and software assets rose to $190.9 billion from $132.8 billion. Microsoft disclosed $196.6 billion in uncommenced datacenter leases with terms of 1–21 years, set to commence between fiscal 2026 and 2031. Gross margin percentage declined as AI infrastructure investment and growing AI product usage outpaced efficiency gains; Microsoft Cloud gross margin fell to 66% in Q3.
Microsoft 365 Commercial cloud revenue grew 19%, with revenue-per-user expansion driven by Microsoft 365 E5 and Microsoft 365 Copilot; commercial seat count grew 6%. Higher Copilot advertising expenses were a notable driver of increased sales-and-marketing and R&D spending across the segment.
In Gaming, operating expenses included impairment and other related charges; Xbox hardware revenue fell 33% on lower console volumes, and Xbox content and services revenue declined 5% against a prior-year quarter that benefited from strong first-party content. Search advertising revenue excluding traffic acquisition costs rose 12% on higher search volume, revenue per search, and continued benefit from third-party partnerships.
Supply-chain and component procurement pressures are evident: receivables tied to facilitating server-component purchases nearly doubled to $17.8 billion (from $8.2 billion at June 30, 2025), and Microsoft held $11.5 billion in restricted investments under a supplier agreement. Windows OEM revenue grew as partners built inventory in response to increasing memory pricing, while Devices revenue declined.
(Filed on January 28, 2026)
+16.7%
68.0%
$24.3B
In October 2025, Microsoft signed a new definitive agreement extending its strategic partnership with OpenAI; OpenAI formed a public benefit corporation and completed a recapitalization. Microsoft holds approximately 27% of OpenAI on an as-converted basis (equity method). Total funding commitments stand at $13 billion, with $11.7 billion funded as of December 31, 2025. The recapitalization produced a dilution gain for Microsoft, recorded in other income (expense), net.
Azure and other cloud services revenue grew 39% in Q2 FY26; Microsoft Cloud revenue rose 26% to $51.5 billion. Commercial remaining performance obligations increased 110% year-over-year to $625 billion (weighted-average duration ~2.5 years, with ~25% expected to be recognized over the next 12 months). Server products revenue benefited from the launch of SQL Server 2025.
Capital investment in AI and datacenter infrastructure accelerated sharply: Q2 additions to property and equipment were $29.9 billion (vs. $15.8 billion in Q2 FY25), and the six-month total reached $49.3 billion. Net property and equipment rose to $261.1 billion from $205.0 billion; receivables tied to server-component purchases more than doubled to $15.1 billion from $8.2 billion; P&E purchases in accounts payable hit $23.1 billion. Uncommenced datacenter leases totaled $155.1 billion (commencing FY26 through FY31). Microsoft Cloud gross margin declined to 67%, attributed to continued AI infrastructure investment and growing AI product usage partially offset by efficiency gains.
The Gaming segment saw Xbox hardware revenue fall 32% on lower console volumes and Xbox content and services revenue decline 5% against a prior-year period that benefited from strong first-party titles. The quarter included impairment charges in the Gaming business within research-and-development and operating expenses.
In Productivity and Business Processes, Microsoft 365 Commercial cloud revenue grew 17% (revenue-per-user growth driven by Microsoft 365 E5 and Microsoft 365 Copilot) and commercial seats grew 6%, led by small-and-medium-business and frontline-worker offerings. Dynamics 365 revenue grew 19% across all workloads; LinkedIn revenue grew 11% driven by Marketing Solutions. Windows OEM revenue grew 5% with continued benefit from Windows 10 end-of-support.
(Filed on October 29, 2025)
+18.4%
69.0%
$28.8B
On October 28, 2025 (subsequent event), Microsoft signed a new definitive agreement with OpenAI extending their partnership; OpenAI formed a public benefit corporation and completed a recapitalization giving Microsoft approximately 27% ownership on an as-converted diluted basis. Under the new terms, OpenAI contracted to purchase an incremental $250 billion of Azure services, and Microsoft relinquished its right of first refusal as OpenAI's compute provider.
Microsoft scaled AI infrastructure aggressively: property and equipment additions reached $19.4 billion (vs. $14.9 billion a year earlier), other receivables to facilitate server component purchases rose to $14.4 billion from $8.2 billion at June 30, and new datacenter leases not yet commenced totaled $106.2 billion (commencing FY2026–FY2031). Microsoft Cloud gross margin declined to 68%, which the company attributed to scaling AI infrastructure and growing customer usage of AI product features, partially offset by efficiency gains in Azure and Microsoft 365 Commercial cloud.
Core commercial metrics showed broad acceleration: Azure and other cloud services revenue grew 40%, Microsoft Cloud revenue grew 26% to $49.1 billion, commercial remaining performance obligations grew 51% to $392 billion, Microsoft 365 Commercial seats grew 6%, Dynamics 365 revenue grew 18%, and LinkedIn revenue grew 10%. Windows OEM revenue grew 18%, which the company linked to demand ahead of Windows 10 end of support.
Xbox hardware revenue declined 29% on lower console volume, while Xbox content and services revenue grew 1%; search and news advertising revenue excluding traffic acquisition costs grew 16% on higher search volume and continued benefit from third-party partnerships.
Microsoft recognized $4.1 billion in net losses from its equity-method investment in OpenAI during the quarter (vs. $688 million in the prior-year quarter), reducing GAAP net income and diluted EPS by $3.1 billion and $0.41, respectively. As of September 30, 2025, $11.6 billion of the company's total $13 billion in OpenAI funding commitments had been deployed.
