A maker of the software and services behind everyday computing, Microsoft builds Windows, Microsoft 365 with its AI helper Copilot, the Azure cloud, Surface devices, Xbox games, LinkedIn, and Dynamics. Founded in 1975 by childhood friends Bill Gates and Paul Allen, its name was coined by Allen as a mash-up of "microcomputer" and "software," originally written with a hyphen as "Micro-Soft." Its first big break came from building a version of the BASIC language for the Altair 8800 hobby computer.
10-K · Fiscal year ended Jun 30, 2026 · SEC filing ↗
Microsoft Cloud revenue rose 27% to $214.4B, driving FY2026 revenue up 18% to $331.8B.
became the clear center of the business, reaching $214.4B in . Total revenue rose 18% to $331.8B and rose 31.6% to $17.95 as and other cloud services grew 41%, while fell 0.9 points to 67.9% from AI infrastructure spending. The company is larger and more cloud-dependent than a year ago, with down as it builds out AI capacity.
Key takeaways
grew 27% to $214.4B in FY2026, driving total revenue up 18% to $331.8B, with and other cloud services up 41%.
rose 31.3% to $133.7B and rose 31.6% to $17.95, including a $6.5B net gain from investment, primarily a non-cash gain from OpenAI's recapitalization.
percentage fell 0.9 points to 67.9% as AI infrastructure investments and sales mix shift to pressured margins, partially offset by efficiency gains.
Section summaries
Business
Microsoft operates three segments—Productivity and Business Processes, Intelligent Cloud, and More Personal Computing—delivering AI-infused software, cloud, and devices globally.
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Productivity and Business Processes includes Microsoft 365 Commercial and Consumer, , and Dynamics, with growth driven by AI tools like Copilot and shift to cloud subscriptions.
rose 20.8% to $155.2B while operating expenses rose 7% on R&D compute, AI talent, and charges; dipped 1% to $54.1B as Xbox content and services fell 5% and hardware fell 29%.
rose 34.4% to $182.9B, but fell 6.5% to $67.0B as rose 80% to $115.9B for datacenters, and cash and equivalents fell 30.8% to $20.9B.
Commercial reached $684B and grew to $75.7B, signaling future visibility; fell 22.6% to $31.1B, continuing multi-year deleveraging.
What changed
and other cloud services growth was flagged at 34% for FY2025; it rose to 41% in FY2026, accelerating AI infrastructure scaling.
was flagged as a watch item as the useful-life benefit lapped and rose; gross margin percentage fell 0.9 points to 67.9% as AI build-out pressured it.
was flagged after a 5.9% decline to $40.2B in FY2025; it fell further 22.6% to $31.1B in FY2026, with no AI-build-out-driven increase.
The IRS $28.9B transfer-pricing dispute carried from prior years into FY2026 risk factors as an unresolved contingent liability; no settlement was reported.
Net losses from were $4.1B in Q1 FY2026 and a $7.6B gain in Q2; FY2026 included a $6.5B net OpenAI gain, reversing prior-period losses.
What to watch
and other cloud services growth rate next quarter against the 41% recorded for FY2026 as AI infrastructure scaling continues.
trend as of $115.9B for datacenters flow through results.
trajectory after the 6.5% FY2026 decline to $67.0B with up 80% for AI and cloud.
Any movement on the IRS $28.9B proposed adjustment for tax years 2004–2013.
Intelligent Cloud is anchored by Azure, offering AI, infrastructure, and platform services, plus server products and enterprise services, competing on and global scale.
More Personal Computing covers Windows licensing, devices, Xbox gaming content and subscriptions, and search advertising via Bing and Edge.
The company employs ~223,000 people, with 77,000 in R&D, and invests heavily in AI across all segments, leveraging internal development and a global datacenter footprint.
Microsoft distributes through direct sales, a broad partner network, and pre-installs, while navigating evolving global regulations on privacy, AI, and digital markets.
Microsoft faces material risks from intense AI and cloud competition, massive infrastructure investments, evolving cybersecurity threats, and complex global regulations.
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Intense competition across AI, cloud, and platform ecosystems could reduce margins and market share, especially from vertically-integrated rivals and low-cost alternatives.
Significant, accelerated investments in AI and cloud infrastructure may not yield expected returns if customer adoption, pricing, or AI workload growth falls short.
Sophisticated cyberattacks, including a recent nation-state breach, threaten customer trust, operational integrity, and could lead to financial and reputational harm.
Evolving global regulations on AI, antitrust, trade, and data privacy may increase costs, restrict operations, and expose Microsoft to fines or forced business changes.
Supply chain constraints for datacenter components and energy, along with infrastructure expansion challenges, could delay AI/cloud capacity and increase costs.
An ongoing IRS dispute over seeks $28.9 billion plus penalties, creating material tax liability uncertainty.
Our corporate headquarters are located in Redmond, Washington. We have approximately 14 million square feet of space located in King County, Washington that is used for engineering, sales, marketing, and operations, among other general and administrative purposes. These faciliti…
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Our corporate headquarters are located in Redmond, Washington. We have approximately 14 million square feet of space located in King County, Washington that is used for engineering, sales, marketing, and operations, among other general and administrative purposes. These facilities include approximately 12 million square feet of owned space situated on approximately 520 acres of land we own at our corporate headquarters, and approximately 2 million square feet of space we lease.
We own and lease other facilities domestically and internationally, primarily for offices, datacenters, and research and development. The largest owned international properties include space in the following locations: China, India, Ireland, the Netherlands, and Sweden. The largest leased international properties include space in the following locations: Australia, Canada, China, France, Germany, India, Ireland, Japan, the Netherlands, and the United Kingdom.
The table below shows a summary of the square footage of our properties owned and leased domestically and internationally as of June 30, 2026:
(Square feet in millions)
Location Owned Leased Total
U.S. 41 24 65
International 17 30 47
Total 58 54 112
Refer to Note 14 – Contingencies of the Notes to Financial Statements (Part II, Item 8 of this Form 10-K) for information regarding legal proceedings in which we are involved.
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Refer to Note 14 – Contingencies of the Notes to Financial Statements (Part II, Item 8 of this Form 10-K) for information regarding legal proceedings in which we are involved.
Microsoft Cloud revenue grew 27% to $214.4B, driving total revenue up 18% to $331.8B in FY2026.
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Total rose 18% to $331.8B, led by revenue up 27% to $214.4B, with and other cloud services surging 41%.
Productivity and Business Processes grew 16% to $140.0B, driven by cloud up 17% and up 18%.
Intelligent Cloud jumped 30% to $137.8B, but fell due to AI infrastructure investments and sales mix shift to .
More Personal Computing dipped 1% to $54.1B, as content and services declined 5% and hardware fell 29%, partly offset by Search advertising ex-TAC up 12%.
increased 21% to $155.2B, while operating expenses rose 7% on R&D compute, AI talent, and charges.
surged to $182.9B, but soared, with $139.5B used in investing, including a $51.4B increase in property and equipment additions.