Skip to main content

MICROSOFT CORP

For the period ended Mar 31, 2026. Filed Apr 29, 2026.

View on SEC.gov

About this filing

A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Mar 31, 2026 · Filed Apr 29, 2026

MSFT$530.61-1.0%Stored close · as of Nov 6, 2026

What changed in Management’s Discussion and Analysis?

Read the current filing

Previous report: 10-Q

Period ended 2025-12-31; filed 2026-01-28.

0001193125-26-027207

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Current report: 10-Q

Period ended 2026-03-31; filed 2026-04-29.

0001193125-26-191507

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.

Compared 189 previous paragraphs and 191 current paragraphs.

94 unchanged; 58 reworded; 36 added; 31 removed; 6 previous and 3 current paragraphs rearranged.

Tables are not compared: 11 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.

A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.

Added paragraphs (36)

Current report

Search advertising (formerly Search and news advertising) revenue excluding traffic acquisition costs increased 12%.

Current report

Cost of revenue increased $4.9 billion or 22% driven by growth in Microsoft Cloud.

Current report

Operating expenses increased $1.5 billion or 9% primarily driven by continued investments in research and development compute capacity, AI talent, and data to support product development across the portfolio. Total company headcount declined year-over-year.

Current report

Revenue, gross margin, and operating income included a favorable foreign currency impact of 3%, 3%, and 4%, respectively. Cost of revenue included an unfavorable foreign currency impact of 2%.

Current report

Cost of revenue increased $13.0 billion or 20% driven by growth in Microsoft Cloud.

Current report

Gross margin increased $23.5 billion or 17% with growth across each of our segments.

Current report

Operating expenses increased $3.1 billion or 7% driven by continued investments in research and development compute capacity, AI talent, and data to support product development across the portfolio, impairment and other related expenses in our Gaming business, and higher Copilot advertising expenses. Total company headcount declined year-over-year.

Current report

Operating income increased $20.4 billion or 22% driven by growth in Productivity and Business Processes and Intelligent Cloud.

Current report

LinkedIn revenue increased $521 million or 12% with growth across all lines of business.

Current report

Cost of revenue increased $680 million or 12% driven by investments in AI infrastructure to support Microsoft 365 Copilot seat and usage growth.

Current report

Operating expenses increased $795 million or 11% driven by continued investments in research and development compute capacity, AI talent, and data to support product development that benefits the entire portfolio, as well as higher Copilot advertising expenses.

Current report

Revenue, gross margin, and operating income included a favorable foreign currency impact of 4%, 5%, and 7%, respectively. Operating expenses included an unfavorable foreign currency impact of 2%.

Current report

Cost of revenue increased $4.8 billion or 47% driven by investments in AI infrastructure to support growing customer demand and increased GitHub Copilot usage.

Current report

Operating expenses increased $459 million or 9% primarily driven by continued investments in research and development compute capacity, AI talent, and data to support product development that benefits the entire portfolio.

Current report

Windows and Devices revenue decreased $103 million or 2%. Windows OEM and Devices revenue decreased 2% driven by a decline in Devices, offset in part by growth in Windows OEM as OEM partners continue to build inventory due to increasing memory pricing.

Current report

Operating expenses increased $259 million or 7% driven by impairment and other related expenses in our Gaming business and continued investments in research and development compute capacity, AI talent, and data to support product development that benefits the entire portfolio.

Current report

LinkedIn revenue increased $1.4 billion or 11% with growth across all lines of business.

Current report

Cost of revenue increased $1.6 billion or 10% driven by investments in AI infrastructure to support Microsoft 365 Copilot seat and usage growth.

Current report

Cost of revenue increased $12.7 billion or 45% driven by investments in AI infrastructure to support growing customer demand.

Current report

Operating expenses increased $856 million or 5% driven by continued investments in research and development compute capacity, AI talent, and data to support product development that benefits the entire portfolio.

Current report

Operating expenses increased $628 million or 6% driven by impairment and other related expenses in our Gaming business and continued investments in research and development compute capacity, AI talent, and data to support product development that benefits the entire portfolio.

Current report

Sales and marketing expenses increased $602 million or 10% primarily driven by higher Copilot advertising expenses, with headcount declining year-over-year. Sales and marketing included an unfavorable foreign currency impact of 3%.

Current report

Sales and marketing expenses increased $746 million or 4% driven by higher Copilot advertising expenses, with headcount declining year-over-year. Sales and marketing included an unfavorable foreign currency impact of 2%.
Removed paragraphs (31)

Previous report

Search and news advertising revenue excluding traffic acquisition costs increased 10%.

Previous report

Operating expenses increased $840 million or 5% driven by research and development investments in compute capacity and AI talent, as well as impairment charges in our Gaming business.

Previous report

Revenue, gross margin, and operating income each included a favorable foreign currency impact of 2%.

Previous report

Gross margin increased $15.6 billion or 17% with growth across each of our segments.

Previous report

Operating income increased $14.0 billion or 23% with growth across each of our segments.

Previous report

LinkedIn revenue increased $495 million or 11% driven by growth in Marketing Solutions.

Previous report

Cost of revenue increased $541 million or 10% driven by growth in Microsoft 365 Commercial cloud.

Previous report

Operating expenses increased $424 million or 6% driven by research and development investments in compute capacity and AI talent, as well as higher advertising expenses.

Previous report

Cost of revenue increased $4.2 billion or 44% driven by growth in Azure.

Previous report

Operating expenses increased $180 million or 3% driven by research and development investments in compute capacity and AI talent.

Previous report

Operating expenses increased $236 million or 6% driven by impairment charges in our Gaming business and research and development investments in compute capacity and AI talent.

Previous report

LinkedIn revenue increased $917 million or 10% driven by growth in Marketing Solutions.

Previous report

Operating expenses increased $809 million or 6% driven by research and development investments in compute capacity and AI talent, as well as higher advertising expenses.

Previous report

Operating expenses increased $397 million or 4% driven by research and development investments in compute capacity and AI talent.

Previous report

Operating expenses increased $369 million or 5% driven by impairment charges in our Gaming business and research and development investments in compute capacity and AI talent.

Previous report

Research and development expenses increased $587 million or 7% driven by investments in compute capacity and AI talent and impairment charges in our Gaming business.

Previous report

Sales and marketing expenses increased $144 million or 2% driven by higher advertising expenses.

Previous report

Sales and marketing expenses increased $144 million or 1% driven by higher advertising expenses.
Reworded paragraphs (58)

Previous wording

Highlights from the second quarter of fiscal year 2026 compared with the second quarter of fiscal year 2025 included:

Current wording

Highlights from the third quarter of fiscal year 2026 compared with the third quarter of fiscal year 2025 included:

Previous wording

Commercial remaining performance obligation increased 110% to $625 billion.

Current wording

Commercial remaining performance obligation increased 99% to $627 billion.

Previous wording

Windows and Devices revenue decreased slightly. Windows OEM and Devices revenue increased 1% driven by Windows OEM growth of 5% with continued benefit from Windows 10 end of support and inventory levels that remained elevated, offset in part by a decline in Devices.

Previous wording

We have a long-term strategic partnership with OpenAI which was originally established in 2019. In October 2025, we signed a new definitive agreement with OpenAI that extends this partnership and continues to build on our shared vision to advance artificial intelligence responsibly and make its benefits broadly accessible. Microsoft is a major investor in OpenAI, and the companies have reciprocal revenue-sharing arrangements. We hold rights to OpenAI’s intellectual property, including models and infrastructure, for integration into our products.

Current wording

We have a long-term strategic partnership with OpenAI which was originally established in 2019. In October 2025 and April 2026, we extended this partnership and continue to build on our shared vision to advance artificial intelligence responsibly and make its benefits broadly accessible. Microsoft is a major investor in OpenAI and will continue to receive revenue-sharing payments. We hold rights to OpenAI’s intellectual property, including models and infrastructure, for integration into our products.

Previous wording

Our international operations provide a significant portion of our total revenue and expenses. Many of these revenue and expenses are denominated in currencies other than the U.S. dollar. As a result, changes in foreign exchange rates may significantly affect revenue and expenses. Fluctuations in the U.S. dollar relative to certain foreign currencies increased reported revenue and did not have a material impact on reported expenses from our international operations for the three and six months ended December 31, 2025.

Current wording

Our international operations provide a significant portion of our total revenue and expenses. Many of these revenue and expenses are denominated in currencies other than the U.S. dollar. As a result, changes in foreign exchange rates may significantly affect revenue and expenses. Fluctuations in the U.S. dollar relative to certain foreign currencies increased reported revenue and expenses from our international operations for the three and nine months ended March 31, 2026.

Previous wording

Revenue increased $23.7 billion or 18% with growth across each of our segments. Intelligent Cloud revenue increased driven by Azure. Productivity and Business Processes revenue increased driven by Microsoft 365 Commercial cloud. More Personal Computing revenue increased driven by Search and news advertising and Windows OEM, offset in part by Gaming and Devices.

Current wording

Revenue increased $12.8 billion or 18% driven by growth in Microsoft Cloud. Intelligent Cloud revenue increased driven by Azure. Productivity and Business Processes revenue increased driven by Microsoft 365 Commercial cloud. More Personal Computing revenue decreased with lower hardware sales across Devices and Gaming, offset in part by growth in Search advertising.

Previous wording

Gross margin increased $7.5 billion or 16% with growth across each of our segments.

Current wording

Gross margin increased $7.9 billion or 16% with growth across each of our segments.

Previous wording

Gross margin percentage decreased slightly driven by continued investments in AI infrastructure and growing AI product usage, offset in part by efficiency gains across the Microsoft Cloud and sales mix shift to higher margin businesses.

Current wording

Gross margin percentage decreased driven by continued investments in AI infrastructure and growing AI product usage, offset in part by efficiency gains across the Microsoft Cloud.

Previous wording

Microsoft Cloud gross margin percentage decreased to 67% driven by continued investments in AI infrastructure and growing AI product usage, offset in part by efficiency gains in Azure and Microsoft 365 Commercial cloud.

Current wording

Microsoft Cloud gross margin percentage decreased to 66% driven by continued investments in AI infrastructure and growing AI product usage, offset in part by efficiency gains in Azure and Microsoft 365 Commercial cloud.

Previous wording

Operating income increased $6.6 billion or 21% driven by growth in Productivity and Business Processes and Intelligent Cloud.

Current wording

Operating income increased $6.4 billion or 20% driven by growth in Productivity and Business Processes and Intelligent Cloud.

Previous wording

Current year net income and diluted EPS were positively impacted by net gains from investments in OpenAI, which resulted in an increase in net income and diluted EPS of $7.6 billion and $1.02, respectively. Prior year net income and diluted EPS were negatively impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted EPS of $939 million and $0.12, respectively.

Current wording

Current year net income and diluted EPS were negatively impacted by net losses from investments in OpenAI, which resulted in a decrease in net income of $14 million. Prior year net income and diluted EPS were negatively impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted EPS of $583 million and $0.08, respectively.

Previous wording

Revenue increased $11.6 billion or 17% driven by Intelligent Cloud and Productivity and Business Processes, offset in part by More Personal Computing. Intelligent Cloud revenue increased driven by Azure. Productivity and Business Processes revenue increased driven by Microsoft 365 Commercial cloud. More Personal Computing revenue decreased driven by Gaming, offset in part by Search and news advertising as well as Windows OEM.

Current wording

Revenue increased $36.5 billion or 18% driven by growth in Microsoft Cloud. Intelligent Cloud revenue increased driven by Azure. Productivity and Business Processes revenue increased driven by Microsoft 365 Commercial cloud. More Personal Computing revenue was relatively unchanged with growth in Search advertising offset by a decline in Gaming.

Previous wording

Gross margin percentage decreased slightly driven by continued investments in AI infrastructure and growing AI product usage, offset in part by efficiency gains across the Microsoft Cloud and sales mix shift to higher margin businesses.

Current wording

Gross margin percentage decreased slightly primarily driven by continued investments in AI infrastructure and growing AI product usage, offset in part by efficiency gains across the Microsoft Cloud.

Previous wording

Current year net income and diluted EPS were positively impacted by net gains from investments in OpenAI, which resulted in an increase in net income and diluted EPS of $4.5 billion and $0.60, respectively. Prior year net income and diluted EPS were negatively impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted EPS of $1.5 billion and $0.20, respectively.

Current wording

Current year net income and diluted EPS were positively impacted by net gains from investments in OpenAI, which resulted in an increase in net income and diluted EPS of $4.5 billion and $0.60, respectively. Prior year net income and diluted EPS were negatively impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted EPS of $2.0 billion and $0.28, respectively.

Previous wording

Microsoft 365 Commercial products and cloud services revenue increased $3.4 billion or 16%. Microsoft 365 Commercial cloud revenue grew 17% with growth in revenue per user driven by Microsoft 365 E5 and Microsoft 365 Copilot. Microsoft 365 Commercial seats grew 6% driven by small and medium businesses and frontline worker offerings. Microsoft 365 Commercial products revenue grew 13% driven by Windows Commercial on-premises components of Microsoft 365 suite sales, as well as an increase in Office 2024 transactional purchasing.

Current wording

Microsoft 365 Commercial products and cloud services revenue increased $3.7 billion or 17%. Microsoft 365 Commercial cloud revenue grew 19% with growth in revenue per user driven by Microsoft 365 E5 and Microsoft 365 Copilot. Microsoft 365 Commercial seats grew 6% driven by small and medium businesses and frontline worker offerings. Microsoft 365 Commercial products revenue grew 1%.

Previous wording

Microsoft 365 Consumer products and cloud services revenue increased $484 million or 27%. Microsoft 365 Consumer cloud revenue grew 29% driven by growth in revenue per user and Microsoft 365 Consumer subscriber growth of 6%.

Current wording

Microsoft 365 Consumer products and cloud services revenue increased $476 million or 26%. Microsoft 365 Consumer cloud revenue grew 33% driven by growth in revenue per user and Microsoft 365 Consumer subscriber growth of 7%.

Previous wording

Dynamics products and cloud services revenue increased $291 million or 15% driven by growth in Dynamics 365. Dynamics 365 revenue grew 19% with growth across all workloads.

Current wording

Dynamics products and cloud services revenue increased $363 million or 19% driven by growth in Dynamics 365. Dynamics 365 revenue grew 22% with growth across all workloads.

Previous wording

Gross margin increased $8.4 billion or 18% driven by growth in Microsoft 365 Commercial cloud. Gross margin percentage increased driven by efficiency gains in Microsoft 365 Commercial cloud even with the impact of investments in AI infrastructure and growing AI product usage.

Current wording

Gross margin increased $4.4 billion or 18% driven by growth in Microsoft 365 Commercial cloud. Gross margin percentage increased slightly driven by efficiency gains in Microsoft 365 Commercial cloud even with continued investments in AI infrastructure and growing AI product usage.

Previous wording

Server products and cloud services revenue increased $13.9 billion or 30% driven by Azure and other cloud services. Azure and other cloud services revenue grew 40% driven by demand for our portfolio of services with continued growth across all workloads. Server products revenue increased 2% driven by higher transactional purchasing and demand for our hybrid solutions, with benefit from the launch of SQL Server 2025.

Current wording

Server products and cloud services revenue increased $7.8 billion or 32% driven by Azure and other cloud services. Azure and other cloud services revenue grew 40% driven by demand for services across the platform with continued growth across all workloads. Server products revenue increased slightly, primarily driven by higher purchases of licenses running in multi-cloud environments, offset in part by renewals with lower in-period revenue recognition from the mix of contracts and continued customer shift to cloud.

Previous wording

Enterprise and partner services revenue increased $146 million or 8% driven by growth in Enterprise Support Services.

Current wording

Enterprise and partner services revenue increased $141 million or 7% driven by growth in Enterprise Support Services.

Previous wording

Gross margin increased $6.3 billion or 20% driven by growth in Azure. Gross margin percentage decreased driven by the continued investments in AI infrastructure and sales mix shift to Azure, offset in part by efficiency gains in Azure.

Current wording

Gross margin increased $3.1 billion or 19% driven by growth in Azure. Gross margin percentage decreased driven by the continued investments in AI infrastructure, offset in part by efficiency gains in Azure.

Previous wording

Revenue included a favorable foreign currency impact of 2%. Cost of revenue included an unfavorable foreign currency impact of 2%.

Current wording

Revenue included a favorable foreign currency impact of 2%. Cost of revenue and operating expenses included an unfavorable foreign currency impact of 3% and 2%, respectively.

Previous wording

Gaming revenue decreased $623 million or 9% driven by declines in Xbox hardware and Xbox content and services. Xbox hardware revenue decreased 32% driven by lower volume of consoles sold. Xbox content and services revenue decreased 5% on a prior year comparable that benefited from strong first-party content performance.

Current wording

Gaming revenue decreased $380 million or 7% driven by declines in Xbox content and services and Xbox hardware. Xbox content and services revenue decreased 5% on a prior year comparable that benefited from strong first-party content performance. Xbox hardware revenue decreased 33% driven by lower volume of consoles sold.

Previous wording

Search and news advertising revenue increased $254 million or 7%. Search and news advertising revenue excluding traffic acquisition costs increased 10% driven by higher search volume and continued benefit from third-party partnerships.

Current wording

Search advertising revenue increased $304 million or 9%. Search advertising revenue excluding traffic acquisition costs increased 12% driven by higher search volume and revenue per search, as well as continued benefit from third-party partnerships.

Previous wording

Cost of revenue decreased $523 million or 8% driven by lower hardware sales.

Current wording

Cost of revenue decreased $584 million or 10% primarily driven by lower hardware sales.

Previous wording

Gross margin increased $122 million or 2% driven by growth in Search and news advertising and Windows OEM, offset in part by Gaming. Gross margin percentage increased driven by sales mix shift to higher margin businesses.

Current wording

Gross margin increased $405 million or 6% driven by growth in Search advertising and Gaming. Gross margin percentage increased driven by sales mix shift to higher margin businesses.

Previous wording

Microsoft 365 Commercial products and cloud services revenue increased $6.9 billion or 17%. Microsoft 365 Commercial cloud revenue grew 17% with growth in revenue per user driven by Microsoft 365 E5 and Microsoft 365 Copilot, and continued Microsoft 365 Commercial seat growth. Microsoft 365 Commercial products revenue grew 15% driven by Windows Commercial on-premises components of Microsoft 365 suite sales, as well as an increase in Office 2024 transactional purchasing.

Current wording

Microsoft 365 Commercial products and cloud services revenue increased $10.6 billion or 17%. Microsoft 365 Commercial cloud revenue grew 18% with growth in revenue per user driven by Microsoft 365 E5 and Microsoft 365 Copilot, and continued Microsoft 365 Commercial seat growth. Microsoft 365 Commercial products revenue grew 10% driven by an increase in Office 2024 transactional purchasing, as well as growth in the Windows Commercial on-premises components of Microsoft 365 suite sales.

Previous wording

Microsoft 365 Consumer products and cloud services revenue increased $961 million or 27%. Microsoft 365 Consumer cloud revenue grew 27% driven by growth in revenue per user and continued growth in Microsoft 365 Consumer subscribers.

Current wording

Microsoft 365 Consumer products and cloud services revenue increased $1.4 billion or 27%. Microsoft 365 Consumer cloud revenue grew 29% driven by growth in revenue per user and continued growth in Microsoft 365 Consumer subscribers.

Previous wording

Dynamics products and cloud services revenue increased $578 million or 15% driven by growth in Dynamics 365. Dynamics 365 revenue grew 19% with growth across all workloads.

Current wording

Dynamics products and cloud services revenue increased $941 million or 17% driven by growth in Dynamics 365. Dynamics 365 revenue grew 20% with growth across all workloads.

Previous wording

Gross margin increased $4.1 billion or 17% driven by growth in Microsoft 365 Commercial cloud. Gross margin percentage increased primarily driven by efficiency gains in Microsoft 365 Commercial cloud even with continued investments in AI infrastructure and growing AI product usage.

Current wording

Gross margin increased $12.8 billion or 18% driven by growth in Microsoft 365 Commercial cloud. Gross margin percentage increased driven by efficiency gains in Microsoft 365 Commercial cloud even with continued investments in AI infrastructure and growing AI product usage.

Previous wording

Operating expenses increased $1.6 billion or 5% driven by research and development investments in compute capacity and AI talent, as well as impairment charges in our Gaming business.

Current wording

Operating expenses increased $1.6 billion or 8% driven by continued investments in research and development compute capacity, AI talent, and data to support product development that benefits the entire portfolio, as well as higher Copilot advertising expenses.

Previous wording

Revenue, gross margin, and operating income included a favorable foreign currency impact of 2%, 3%, and 3%, respectively.

Current wording

Revenue, gross margin, and operating income included a favorable foreign currency impact of 2%, 3%, and 4%, respectively.

Previous wording

Server products and cloud services revenue increased $7.2 billion or 31% driven by Azure and other cloud services. Azure and other cloud services revenue grew 39% driven by demand for our portfolio of services with continued growth across all workloads. Server products revenue increased 2% driven by demand for our hybrid solutions, with benefit from the launch of SQL Server 2025, and higher transactional purchasing.

Current wording

Server products and cloud services revenue increased $21.8 billion or 31% driven by Azure and other cloud services. Azure and other cloud services revenue grew 40% driven by demand for services across the platform with continued growth across all workloads. Server products revenue increased 1% primarily driven by higher purchases of licenses running in multi-cloud environments.

Previous wording

Enterprise and partner services revenue increased $240 million or 6% driven by growth in Enterprise Support Services.

Current wording

Enterprise and partner services revenue increased $381 million or 7% driven by growth in Enterprise Support Services.

Previous wording

Gross margin increased $3.2 billion or 20% driven by growth in Azure. Gross margin percentage decreased driven by the continued investments in AI infrastructure and sales mix shift to Azure, offset in part by efficiency gains in Azure.

Current wording

Gross margin increased $9.4 billion or 20% driven by growth in Azure. Gross margin percentage decreased driven by the continued investments in AI infrastructure, offset in part by efficiency gains in Azure.

Previous wording

Windows and Devices revenue increased $189 million or 2%. Windows OEM and Devices revenue increased 3% driven by Windows OEM growth of 11% with benefit from Windows 10 end of support and inventory levels that remained elevated, offset in part by a decline in Devices.

Current wording

Windows and Devices revenue increased slightly. Windows OEM and Devices revenue increased 2% driven by Windows OEM growth of 8% with inventory levels that remained elevated, offset in part by a decline in Devices.

Showing the first 40 of 58 pairs. Open the source sections for the rest.

Rearranged current paragraphs (3)

Current report — wording carried from elsewhere

Revenue, gross margin, and operating income included a favorable foreign currency impact of 2%, 3%, and 3%, respectively. Operating expenses included an unfavorable foreign currency impact of 2%.

Current report — wording carried from elsewhere

Operating income increased $146 million or 4%.

Current report — wording carried from elsewhere

Operating income included a favorable foreign currency impact of 2%.
Rearranged previous paragraphs (6)

Previous report — wording carried elsewhere

Windows OEM and Devices revenue increased 1%.

Previous report — wording carried elsewhere

Cost of revenue increased $4.2 billion or 19% driven by growth in Microsoft Cloud.

Previous report — wording carried elsewhere

Cost of revenue increased $8.1 billion or 19% driven by growth in Microsoft Cloud.

Previous report — wording carried elsewhere

Operating income increased $3.7 billion or 22%.

Previous report — wording carried elsewhere

Revenue, gross margin, and operating income included a favorable foreign currency impact of 2%, 2%, and 3%, respectively.

Previous report — wording carried elsewhere

Revenue increased $9.4 billion or 16%.