Technology · NASDAQ: MSFT
Microsoft: how the business works
Microsoft sells cloud computing, Microsoft 365 software, ads, games and Windows, with revenue of $331.8 billion in FY2026.
By Hardik Bhandare · Checked against filings:
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Microsoft Corporation · Redmond, Washington · Founded 1975
Last updated
- Revenue, FY2026
- $331.8B
- Operating income, FY2026
- $155.2B
- Net income, FY2026 (incl. OpenAI gain)
- $133.7B
- Azure revenue, Q1 FY2027
- $33.2B
- Full-time employees, Jun 30, 2026
- About 223,000
The short version
Microsoft in 5 points
1 · What it sells
Microsoft rents cloud computing through Azure and sells Microsoft 365 software, ads, XBOX games and Windows, with $331.8 billion of revenue in FY2026.
2 · Who pays it
By offering in FY2026, Azure customers paid 30.7% of revenue, Microsoft 365 cloud subscribers 30.2%, license buyers 11.2%, advertisers 7.5%, gamers 6.6%, Industry solutions customers 6.1%, PC makers and device buyers 5.1%, and support customers 2.5%.
3 · What it keeps from $100
Of every $100 that came in during FY2026, Microsoft kept $39.0 as net income, including a net gain on its OpenAI investment, while its operating income was $46.8 per $100 of revenue.
4 · Where the operating profit comes from
Agents and Infra, the segment holding Azure and Microsoft 365, brought in 80.8% of FY2026 revenue and 87.8% of operating profit, as recast by Microsoft in 2026.
5 · The one thing to watch
In Q1 FY2027, OpenAI supplied $10.0 billion of Microsoft's $92.3 billion revenue, and additions to property and equipment took $39.4 billion against $58.0 billion of cash from operations.
Sources: From Microsoft's FY2026 10-K, its Oct 28, 2026 recast 8-K and its Q1 FY2027 10-Q · checked
See the full receipt and the management scorecard below
01Where the money goes · FY2026
Where does $100 of Microsoft's money go?
Microsoft · FY2026
Receipt for every $100
| Cost of revenue | $31.1 |
|---|---|
| Research and development | $10.4 |
| Sales and marketing | $7.8 |
| General and administrative | $2.3 |
| Income tax | $9.4 |
| Kept as net income | $39.0 |
| Total | $100 |
Each line = amount ÷ total money in × 100. Lines may not add to exactly $100 because of rounding.
How this is worked out
Cityfort calculation from FY2026 10-K. Of every $100 that came in during FY2026 (revenue of $331.8 billion plus net other income of $10.7 billion), each line = line ÷ $342.5 billion × 100. The profit line includes a $6.5 billion pre-tax net gain on OpenAI. Staff pay and wear and tear on equipment sit inside the cost lines.
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02The business in one line
What does Microsoft do?
Businesses pay Microsoft for cloud computing and software, and people and advertisers pay for games, Windows and ads; its most significant costs include staff and data center operations, and $46.8 of each $100 of FY2026 revenue was left as operating income.
- In FY2026, Azure was 30.7% of revenue and Microsoft 365 cloud 30.2%; licenses, ads, XBOX, Industry solutions, Windows and support made up the rest.
- The Agents and Infra segment, as recast by Microsoft in 2026, earned 87.8% of FY2026 operating income on 80.8% of revenue.
03Who pays it
Who pays Microsoft?
Azure customers
31%
of revenue
Organizations renting computing, storage, data and AI services, charged by use. OpenAI is one: it contracted in October 2025 to buy an incremental $250 billion of Azure.
Microsoft 365 cloud subscribers
30%
of revenue
Organizations and households paying for Office, security and Copilot, and developers paying for GitHub cloud.
License buyers
11%
of revenue
Organizations and consumers buying software installed on their own machines.
Advertisers
8%
of revenue
Brands paying for ads on Bing, MSN and LinkedIn; this line also holds LinkedIn Premium subscriptions.
Gamers
7%
of revenue
People buying games, Game Pass and consoles; this line also holds XBOX ads.
Industry solutions customers
6%
of revenue
Organizations paying for Dynamics 365, LinkedIn recruiting and sales tools, and healthcare cloud services.
PC makers and device buyers
5%
of revenue
PC makers licensing Windows to pre-install, and buyers of Surface devices.
Support and training customers
3%
of revenue
Organizations paying for product support, consulting and training.
- Azure customers31%
- Microsoft 365 cloud subscribers30%
- License buyers11%
- Advertisers8%
- Gamers7%
- Industry solutions customers6%
- PC makers and device buyers5%
- Support and training customers3%
How spread out the customers are
Microsoft does not report revenue by customer type; the shares above are by offering. Revenue from OpenAI, including revenue-sharing payments, was $24.1 billion in FY2026 (7.3%, Cityfort calculation from FY2026 10-K) and $10.0 billion in Q1 FY2027 (10.8%). The FY2026 filing said no individual customer or country other than the US exceeded 10% of revenue. The Q1 FY2027 10-Q sentence names only a country. The CFO said on Jan 28, 2026 that about 45% of commercial remaining performance obligationSigned contracts with customers that have not been billed yet. (revenue contracted but not yet recognized) at Dec 31, 2025 was from OpenAI; no later share has been stated.
04Why it makes money
Why does Microsoft make money?
Microsoft sells software and cloud services at a scale that left $46.8 of each $100 of FY2026 revenue as operating income.
Microsoft's filing names three scale advantages in its cloud. Big data centers cost less per unit, pooled demand uses them more fully, and shared servers lower labor costs. Gross margin, revenue minus cost of revenue, was $67.9 per $100 of FY2026 revenue, down from $69.8 in FY2024.
Operating income per $100 of revenue
$42.1$46.8
FY2022 to FY2026
- Organizations sign cloud and software contracts
- Subscriptions and usage bring in revenue
- Cash pays for data centers, chips and research
- More capacity lets Azure serve more demand
- Larger scale lowers cost per unit, Microsoft says
- Operating income funds the next round of building
↺ Step 6 feeds back into step 1.
05Business segments · FY2026, recast to the two FY2027 segments
Which businesses make up Microsoft?
Agents and Infra
81%Azure, Microsoft 365 cloud, software licenses, Industry solutions and support. It earned 87.8% of FY2026 operating income and $50.9 per $100 of its revenue. In Q1 FY2027 revenue was $76.8 billion and operating income $40.6 billion. Microsoft recast FY2024–FY2026 onto these two segments, without changing company totals. FY2023 exists only on three older segments, so this chart starts at FY2024.
Revenue $268.1B · Operating profit $136.4B
Devices and Consumer
19%Search and advertising, XBOX, and Windows OEM and devices. It earned 12.2% of FY2026 operating income and $29.6 per $100 of its revenue. In Q1 FY2027 revenue was $15.5 billion and operating income $5.4 billion.
Revenue $63.7B · Operating profit $18.9B
How the mix changed
- Agents and Infra
- Devices and Consumer
Revenue by segment, FY2024 to FY2026.
US$
See the numbers
06The numbers · Consolidated · US$
How has Microsoft done?
Revenue
$331.8BFY2026
Revenue rose every year, from $198.3 billion in FY2022 to $331.8 billion in FY2026; Q4 is usually the highest quarter because of multi-year contracts.
US$
See the numbers
Net profit
$133.7BFY2026
Operating income rose from $83.4 billion in FY2022 to $155.2 billion in FY2026; EBITDA for FY2022 and FY2023 uses older depreciation figures that Microsoft did not recast.
US$
See the numbers
Profit kept per $100 of revenue
$40.3FY2026
Net income per $100 of revenue rose to $40.3 in FY2026 from $36.1 in FY2025, helped by a net OpenAI gain; operating income per $100 rose to $46.8 from $45.6.
$ of profit per $100 of revenue (net margin)
See the numbers
Free cash flow
$67.0BFY2026
Free cash flow fell from $74.1 billion in FY2024 to $67.0 billion in FY2026, as additions to property and equipment rose from $44.5 billion to $115.9 billion.
US$ · cash from operations minus spending on plants and equipment
See the numbers
See all yearly numbers
EBITDA here = operating income plus depreciation and amortization (from the cash flow statement). Fiscal years are the company's own (June 30; FY2026 ended Jun 30, 2026, and Q1 FY2027 is July to September 2026). Net profit is the share belonging to the company's owners.
Learn: Fiscal years that don't end in December: Nvidia's FY2027 explained · Stock-based compensation and dilution: pay that becomes shares
07Who runs it
Who runs Microsoft, and did they deliver?
Satya Nadella
Chairman and Chief Executive Officer · since 2014
CEO since February 2014, chairman since June 2021. FY2026 pay was $90.6 million, including $77.6 million of stock awards, 421 times the median employee's.
Amy E. Hood
Executive Vice President and Chief Financial Officer · since 2013
Bradford L. Smith
Vice Chair and President · since 2021
Judson B. Althoff
Chief Executive Officer, Microsoft Commercial Business · since 2025
Sandra E. Peterson
Lead Independent Director
11 of the 12 director nominees for the Dec 8, 2026 meeting are independent.
What they said, and what happened
4 delivered · 1 missed · 3 too early to tell
Said on Jan 28, 2026
The CFO guided Q3 FY2026 revenue of $80.65–81.75 billion.
DeliveredWhat happened
Reported revenue of $82.9 billion, above the range.
Said on Apr 29, 2026
The CFO guided Q4 FY2026 revenue of $86.7–87.8 billion.
DeliveredWhat happened
Reported revenue of $90.0 billion, above the range.
Said on Jul 29, 2026
The CFO guided Q1 FY2027 revenue of $89.85–90.95 billion.
DeliveredWhat happened
Reported revenue of $92.3 billion, above the range.
Said on Sep 2, 2026
Microsoft adjusted its Q1 FY2027 Azure outlook for the new definition: 44–45% growth at constant currency.
DeliveredWhat happened
Reported Azure growth of 48%, also 48% at constant currency.
Said on Jul 29, 2026
The CFO said Q1 FY2027 capital expenditures would be over $50 billion.
MissedWhat happened
The CFO gave $45.2 billion on Oct 28, 2026; cash additions to property and equipment were $39.4 billion. She said some third-party capacity deliveries were delayed.
Said on Apr 29, 2026
The CFO said Microsoft expected to invest roughly $190 billion in capital expenditures in calendar 2026.
Too early to tellWhat happened
On Jul 29, 2026 she said about $175 billion, because a useful-life change moves more future leases out of this measure. On Oct 28, 2026 she said about $170 billion, citing third-party delays.
Said on Oct 28, 2026
The CFO guided Q2 FY2027 revenue of $96.0–97.1 billion and Azure growth of 49–50% at constant currency.
Too early to tellWhat happened
Q2 FY2027 results are not out yet.
Said on Oct 28, 2026
The CFO said Microsoft expected "to continue to remain free cash flowCash from operations minus spending on buildings and equipment. Learn more positive in FY27".
Too early to tellWhat happened
Free cash flow was $18.6 billion in Q1 FY2027.
08What could go wrong
What could go wrong for Microsoft?
- Concentration
Large exposure to one AI company, OpenAI
OpenAI supplied $10.0 billion of Q1 FY2027 revenue, including revenue-sharing payments: 10.8% of revenue (Cityfort calculation from Q1 FY2027 10-Q). It owed Microsoft $7.2 billion at Sep 30, 2026. The CFO said on Jan 28, 2026 that about 45% of commercial remaining performance obligation at Dec 31, 2025 was from OpenAI, the latest share stated. Microsoft is also an investor in OpenAI.
Watch The OpenAI paragraph in each 10-Q: revenue, amounts owed and the stake.
- Execution
Building data centers takes much of the cash
In the 12 months to Sep 30, 2026, additions to property and equipment were $135.9 billion against $195.9 billion of cash from operations. Another $26.5 billion of purchases sat unpaid at Sep 30, 2026. Microsoft's 10-K says revenue from this spending may not arrive in the expected time or amount.
Watch Additions to property and equipment and free cash flow each quarter.
- Debt
Leases and commitments are larger than debt
At Sep 30, 2026 debt was $35.5 billion, finance leases $71.0 billion and operating leases $27.5 billion. Leases not yet started were $364.6 billion. Purchase commitments were $194.1 billion at Jun 30, 2026. The CFO said on Jul 29, 2026 that longer data center lives shift more future leases to operating leases, which capital expenditures do not count.
Watch The lease note in each 10-Q and the commitments table in each 10-K.
- Other
OpenAI gains and losses swing net income
Other income included a $10.0 billion pre-tax OpenAI net gain in Q2 FY2026 and a $4.1 billion net loss in Q1 FY2026. That loss is why Q1 FY2027 net income rose 32% while operating income rose 21%. Microsoft's interest fell to about 24% as-converted at Sep 30, 2026, from about 27% at Mar 31, 2026.
Watch Other income, net, beside operating income each quarter.
- Execution
Limits on chips, power and data center supply
Microsoft says its data centers depend on land, energy, networking supplies and servers, and some components have very few qualified suppliers. The CFO said on Oct 28, 2026 that some third-party capacity deliveries were delayed.
Watch CFO comments on capacity, and Azure growth, each quarter.
- Competition
Competition, including from partners
Microsoft's 10-K calls AI highly competitive and fast-moving. It says its AI products compete with those of very large cloud companies and others, many of which are also current or potential partners. In October 2025 Microsoft gave up its right of first refusal to be OpenAI's compute provider.
Watch Azure growth and gross margin each quarter.
- Demand
Windows and XBOX revenue fell
Windows OEM and devices revenue fell 22% in Q1 FY2027; Microsoft cited last year's Windows 10 end-of-support demand, inventory drawdowns and weaker PC demand. The CFO said on Oct 28, 2026 she expected a decline in the mid-thirties percent for Q2 FY2027. XBOX revenue fell to $21.8 billion in FY2026 from $23.5 billion.
Watch Devices and Consumer revenue each quarter.
- Legal
Tax and legal disputes
The IRS proposed an additional tax payment of $28.9 billion plus penalties and interest for 2004 to 2013; Microsoft disagrees and will contest it. Accrued legal liabilities were $582 million at Sep 30, 2026. Microsoft estimates about $400 million more in adverse outcomes is reasonably possible.
Watch The income tax and contingencies notes in each 10-Q and 10-K.
09Both sides
What do supporters and critics point to?
What supporters point to
- Azure revenue rose 48% to $33.2 billion in Q1 FY2027.
- Operating income rose from $83.4 billion in FY2022 to $155.2 billion in FY2026, and from $42.1 to $46.8 per $100 of revenue.
- Commercial remaining performance obligation reached $677 billion at Sep 30, 2026, up 73% in a year.
- Cash from operations was $195.9 billion in the 12 months to Sep 30, 2026.
- Revenue came in above the CFO's guided range in each of the three quarters to Q1 FY2027.
What critics point to
- Additions to property and equipment rose from $44.5 billion in FY2024 to $115.9 billion in FY2026, while free cash flow fell from $74.1 billion to $67.0 billion.
- The CFO said on Jan 28, 2026 that about 45% of commercial remaining performance obligation at Dec 31, 2025 was from OpenAI, and Microsoft is also an OpenAI investor.
- Leases not yet started were $364.6 billion at Sep 30, 2026, against debt of $35.5 billion.
- Q1 FY2027 net income growth of 32% compares with a quarter that held a $4.1 billion OpenAI loss; operating income rose 21%.
- Windows OEM and devices revenue fell 22% in Q1 FY2027, and XBOX content and services revenue fell 2%.
10What to watch next
What should you watch next at Microsoft?
Next event
Q2 FY2027 results
Date not announced yet.
Azure growth against the CFO's statement
Azure grew 48% in Q1 FY2027. The CFO said on Oct 28, 2026 she expected 49–50% at constant currency in Q2 FY2027.
OpenAI's share of revenue
OpenAI supplied $10.0 billion of $92.3 billion revenue in Q1 FY2027 and owed $7.2 billion at Sep 30, 2026. The next 10-Q will update both.
Capital spending against cash
In Q1 FY2027 additions to property and equipment were $39.4 billion and cash from operations $58.0 billion. The CFO said on Oct 28, 2026 she expected Q2 capital expenditures over $50 billion, a measure that includes finance leases.
11Key dates
What are the key dates for Microsoft?
| Event | Date | Source |
|---|---|---|
| Record date for the $0.98 dividend | Form 10-Q for Q1 FY2027 (quarter ended Sep 30, 2026) | |
| Annual shareholder meeting (online) | 2026 Proxy Statement (DEF 14A), annual meeting Dec 8, 2026 | |
| Payment date for the $0.98 dividend | Form 10-Q for Q1 FY2027 (quarter ended Sep 30, 2026) |
Learn: IPO lock-up agreements: what they are and when they end
12Key facts
Key facts about Microsoft
- What is Microsoft's business model?
- Microsoft sells cloud computing, software subscriptions and licenses, online ads, video games and Windows to businesses, PC makers and consumers. Microsoft's revenue was $331.8 billion in FY2026 (year ended Jun 30, 2026). Its most significant costs include staff and data center operations.
- How does Microsoft make money?
- In FY2026 Microsoft's revenue came from Azure cloud computing (30.7%), Microsoft 365 cloud subscriptions (30.2%), productivity and server licenses (11.2%), search and advertising (7.5%), XBOX (6.6%), Industry solutions such as Dynamics 365 and LinkedIn recruiting tools (6.1%), Windows and devices (5.1%) and support services (2.5%).
- Is Microsoft profitable?
- Yes. Microsoft had operating income of $155.2 billion and net income of $133.7 billion in FY2026. FY2026 other income included a $6.5 billion pre-tax net gain on its OpenAI investment; in FY2025 OpenAI was a $4.8 billion pre-tax net loss.
- What is Microsoft's revenue by segment?
- In FY2026, recast to the two segments Microsoft adopted for FY2027, Agents and Infra had revenue of $268.1 billion and operating income of $136.4 billion. Devices and Consumer had revenue of $63.7 billion and operating income of $18.9 billion.
- Who are Microsoft's customers?
- Microsoft's customers include businesses, PC makers, advertisers and consumers, and it does not report revenue by customer type. Microsoft recorded $10.0 billion of Q1 FY2027 revenue from OpenAI, including revenue-sharing payments, and held an approximate 24% as-converted interest in OpenAI at Sep 30, 2026.
- Who owns Microsoft?
- Microsoft has one class of common stock with one vote per share. Its 2026 proxy lists Vanguard Capital Management with 7.48% (Schedule 13GA filing by anyone who owns more than 5% of a company's shares and does not seek control. Learn more filed Apr 30, 2026) and BlackRock with 7.30% (filing from Feb 13, 2024). Its 18 directors and executive officers together held under 1% at Sep 30, 2026.
- How much revenue does Microsoft's Azure bring in?
- Microsoft's Azure cloud business had revenue of $101.9 billion in FY2026, up 40% from $72.6 billion in FY2025, and $33.2 billion in Q1 FY2027, up 48%. These figures use the narrower Azure definition Microsoft adopted in September 2026.
- How much does Microsoft earn from Microsoft 365 and Office?
- Microsoft 365 cloud, which includes Office subscriptions, Microsoft 365 Copilot and GitHub cloud, had revenue of $100.3 billion in FY2026, up from $84.6 billion in FY2025. Microsoft's licenses for software installed on customers' own machines, including Office and Windows Server, added $37.3 billion in FY2026.
- How much does Microsoft earn from LinkedIn and search ads?
- Microsoft no longer reports LinkedIn as one line. On the old basis LinkedIn revenue was $19.8 billion in FY2026. From FY2027 LinkedIn's Talent and Sales tools sit in Industry solutions ($20.3 billion in FY2026) and its marketing and Premium products in Search and advertising ($24.8 billion).
- How much do XBOX and Windows bring in for Microsoft?
- Microsoft's XBOX revenue was $21.8 billion in FY2026, down from $23.5 billion in FY2025. Microsoft's Windows OEM and devices revenue was $17.1 billion in FY2026, down from $17.3 billion in FY2025.
Go deeper
More detail from the same filings. Open any section.
13What it sells
13What it sells
What does Microsoft sell?
Azure ($101.9B in FY2026)
Cloud computing charged by use: computing, data, storage, networking and AI services, run from Microsoft's data centers.
Microsoft 365 cloud ($100.3B)
Online subscriptions to Office, Windows, security tools and Microsoft 365 Copilot for organizations and households, plus GitHub cloud for developers.
Productivity and server licensing ($37.3B)
Licenses for software installed on a customer's own machines, such as Office, Windows Server and SQL Server.
Search and advertising ($24.8B)
Ads on Bing, Edge and MSN, plus LinkedIn Marketing Solutions and LinkedIn Premium subscriptions.
XBOX ($21.8B)
Games and in-game content, Game Pass subscriptions, cloud gaming, ads and consoles.
Industry solutions ($20.3B)
Dynamics 365 business software, LinkedIn Talent and Sales Solutions, and healthcare cloud services.
Windows OEM and devices ($17.1B)
Windows licenses that PC makers (OEMs) buy to pre-install, plus Surface devices and PC accessories.
Frontier and support services ($8.3B)
Help for customers deploying and managing Microsoft products, plus training and certification.
What it does
- Does: Rents cloud computing to organizations, charged by use
- Does: Sells software as subscriptions and as licenses
- Does: Sells ads, games, consoles and Surface devices
- Does: Holds an approximate 24% interest in OpenAI at Sep 30, 2026, measured as if its holdings were converted into shares ("as-converted"), and earns revenue from OpenAI
What it does not do
- Does not: Does not report LinkedIn or Dynamics as their own revenue lines since September 2026
- Does not: Does not add OpenAI's results into its own revenue: it uses the equity method, so its share lands in other income, below operating income
- Does not: Does not make most of its devices itself: third-party contract manufacturers primarily build them
14How the money flows
14How the money flows · FY2026
How does money flow through Microsoft?
Money in
- Service and other revenue (cloud, subscriptions, ads)$267.1B
- Product revenue (licenses, consoles, devices)$64.7B
- Other income, net (mainly OpenAI and Anthropic gains)$10.7B
The company
Microsoft
$342.5B came in
Money out
- Cost of revenue (including running the cloud)$106.4B
- Research and development$35.6B
- Sales and marketing$26.7B
- General and administrative$8.0B
- Income tax$32.2B
- Net income$133.7B
- Businesses, PC makers, advertisers and consumers paid Microsoft $331.8 billion in FY2026.
- Cost of revenue, including running the cloud, took $106.4 billion.
- Research, sales and administration took another $70.2 billion.
- That left $155.2 billion of operating income; other income, mainly OpenAI and Anthropic gains, added $10.7 billion.
- After $32.2 billion of income tax, $133.7 billion was left as net income.
15What it needs to run
15What it needs to run
What does Microsoft need to run?
Data centers and servers
Property and equipment (net) was $346.8 billion at Sep 30, 2026, up from $230.9 billion a year earlier.
Leased capacity
Leases not yet started, primarily for data centers, were $364.6 billion at Sep 30, 2026. They start between FY2027 and FY2034, and some depend on conditions being met.
Chips, land and power
Microsoft says its data centers depend on buildable land, predictable energy, networking supplies and servers including GPUs. Some components have very few qualified suppliers.
People
About 223,000 full-time employees at Jun 30, 2026, of whom 121,000 were in the US and 77,000 in research and development.
Buildings
112 million square feet at Jun 30, 2026: 58 million owned and 54 million leased.
16Where it sells
16Where it sells · FY2026
Where does Microsoft sell?
- United States (includes billings to PC makers and certain multinationals)52%
- Other countries49%
17Where growth could come from
17Where growth could come from
Where could Microsoft's growth come from?
CFO Amy Hood said on the Oct 28, 2026 earnings call that Microsoft expected Q2 FY2027 revenue of $96.0–97.1 billion, up 18–19%. She also expected Azure growth of 49–50% at constant currency (ignoring exchange-rate moves) and capital expenditures over $50 billion. She said Microsoft expected "to continue to remain free cash flow positive in FY27".
Azure
Working+48% in Q1 FY2027
Azure revenue was $33.2 billion in Q1 FY2027, up from $22.4 billion a year earlier, on the definition adopted in September 2026. On the old definition FY2026 growth was 41%, against 40% on the new one.
Status: Working, on track against what the company said.
Microsoft 365 commercial cloud and Copilot
Working+17% in Q1 FY2027
Microsoft said on Jul 29, 2026 that Microsoft 365 Copilot had over 30 million paid seats. Its Oct 28, 2026 call gave no new count.
Status: Working, on track against what the company said.
Signed contracts, including OpenAI
Early$677B at Sep 30, 2026
Commercial remaining performance obligation (revenue contracted but not yet recognized) rose 73% in a year. OpenAI contracted in October 2025 to buy an incremental $250 billion of Azure. The CFO said on Oct 28, 2026 that about 30% of the total will be recognized within 12 months.
Status: Early, too early to judge.
New data center capacity
Mixed$45.2B vs over $50B said
Q1 FY2027 capital expenditures, as the CFO measures them, came in under her statement because some third-party capacity deliveries were delayed. She said on Oct 28, 2026 that "customer demand continues to exceed available supply". Cash additions to property and equipment were $39.4 billion.
Status: Mixed, partly on track.
Search and advertising
Working+12% in Q1 FY2027
Revenue excluding traffic acquisition costs (payments to partners who send users) rose 12%. The line was $6.6 billion including LinkedIn's marketing and Premium products.
Status: Working, on track against what the company said.
Status compares progress with what the company itself said it would do: Working = on track against what the company said; Mixed = partly on track; Behind = behind the company's own plan; New = recently announced; Early = too early to judge.
18The company's own measures (non-GAAP)
18The company's own measures · FY2026 and Q1 FY2027
What do Microsoft's own measures show?
Official (GAAP): Net income, FY2026
$133.7B
Company's own measure: Adjusted net income, FY2026
$128.8B
Microsoft leaves out net gains and losses from its OpenAI investment. The figure still includes a $3.2 billion gain on Anthropic in Q4 FY2026, the CFO said on Jul 29, 2026.
Official (GAAP): Diluted EPS, FY2026
$17.95
Company's own measure: Adjusted diluted EPS, FY2026
$17.28
Same exclusion as adjusted net income.
Official (GAAP): Net income, Q1 FY2027
$36.6B
Company's own measure: Adjusted net income, Q1 FY2027
$36.4B
Leaves out a $207 million net-of-tax OpenAI gain. On this measure growth was 18%, against 32% for net income.
Official (GAAP): Net income, Q1 FY2026
$27.7B
Company's own measure: Adjusted net income, Q1 FY2026
$30.8B
Leaves out a $3.1 billion net-of-tax OpenAI loss, which lowered the quarter Q1 FY2027 is compared with.
Official (GAAP): Diluted EPS, 12 months to Sep 30, 2026
$19.16
Company's own measure: Adjusted diluted EPS, 12 months to Sep 30, 2026
$18.04
Sum of four quarters (Cityfort calculation from the Q2 FY2026 to Q1 FY2027 earnings releases). The gap is mainly the Q2 FY2026 OpenAI gain.
Official (GAAP): Total remaining performance obligation, Sep 30, 2026
$683.0B
Company's own measure: Commercial remaining performance obligation, Sep 30, 2026
$677.0B
The commercial part of revenue contracted but not yet recognized: unearned revenue plus amounts invoiced later. It fell from $678 billion at Jun 30, 2026; the CFO said on Oct 28, 2026 the decline was smaller than usual for the season.
Official (GAAP): Additions to property and equipment (cash), Q1 FY2027
$39.4B
Company's own measure: Capital expenditures as the CFO measures them, Q1 FY2027
$45.2B
A figure from the Oct 28, 2026 call that includes $7.4 billion of finance leases, counted in full when a lease starts. The filings give no reconciliation. Free cash flow on this page uses cash additions.
Official (GAAP): Total revenue, Q1 FY2027
$92.3B
Company's own measure: Microsoft Cloud revenue, Q1 FY2027
$63.9B
Revenue from Azure, Microsoft 365 commercial cloud and Industry solutions cloud, as defined in September 2026. It grew 30%.
Official (GAAP): Company gross margin, Q1 FY2027 (Cityfort calculation from Q1 FY2027 10-Q)
67.8%
Company's own measure: Microsoft Cloud gross margin, Q1 FY2027
66.0%
Gross margin on Microsoft Cloud revenue, down from 68% a year earlier as reported then, before the September 2026 redefinition. The CFO cited a shift in mix toward Azure on Oct 28, 2026.
These are the company's own measures, defined by the company. They are not comparable across companies, and they are not added together. Each sits beside the nearest official (GAAP) figure.
Sources
Form 10-K for fiscal year 2026 (year ended Jun 30, 2026); Q4 FY2026 earnings call transcript; Form 10-Q for Q1 FY2027 (quarter ended Sep 30, 2026) and 8 more
Learn: Non-GAAP measures: what a company's "adjusted" numbers leave out
19Financial strength and debt
19Financial strength · Sep 30, 2026
How much debt does Microsoft have?
- Total debt$35.5B
- Cash and investments$64.5B
- Net cash (cash minus debt)$29.0B
- Net worth (shareholders' money)$470.5B
- Debt to equity
- 0.08×
- $ of debt for every $1 of shareholders' money
- Debt is the carrying value ($35.5 billion); face value is $41.3 billion. Net figures are a Cityfort calculation from Q1 FY2027 10-Q.
- Lease liabilities are separate and not counted as debt here: finance leases $71.0 billion, operating leases $27.5 billion.
- Leases not yet started were $364.6 billion at Sep 30, 2026, up from $329.1 billion at Jun 30, 2026.
- Purchase commitments, mainly for data centers, were $194.1 billion and construction commitments $34.6 billion at Jun 30, 2026.
- Cash and short-term investments fell to $64.5 billion from $102.0 billion a year earlier.
20Who owns it
20Who owns it · ownership as of Sep 30, 2026
Who owns Microsoft?
- Officers and directors (as a group), shares
- 0.0%
Share classes
Holders of 5% or more
From the company's proxy statement (DEF 14A), later Schedule 13G filings and the share counts on its latest annual or quarterly report. Each holder row shows the date of its own filing.
Sources
Form 10-Q for Q1 FY2027 (quarter ended Sep 30, 2026); 2026 Proxy Statement (DEF 14A), annual meeting Dec 8, 2026; Schedule 13G: Vanguard Capital Management LLC, event Mar 31, 2026 and 1 more
Learn: How to read a proxy statement (DEF 14A): Nvidia's 2026 proxy · Form 4 insider filings: who files, the codes and the footnotes
21What it does with profit
21What it does with profit
What does Microsoft do with its profit?
Dividend per share
$3.64FY2026
Dividend paid for each share, by financial year.
$ per share
See the numbers
Buyback · Sep 16, 2024
The board approved a share repurchase program of up to $60.0 billion, which began in April 2025; $37.7 billion remained at Sep 30, 2026.
$60.0B
22Governance signals
22Governance signals
What do Microsoft's governance filings show?
- Auditor
- Deloitte & Touche LLP, since 1986
- Auditor changes
- None in the period covered
- Audit qualifications
- None reported
- Related-party dealings
- The 2026 proxy reports only ordinary-course transactions in FY2026, none needing committee approval. OpenAI is a related party under accounting rules because Microsoft uses the equity method. OpenAI owed Microsoft $7.2 billion at Sep 30, 2026. Microsoft has committed $13.0 billion of funding, of which $12.0 billion was funded.
- Credit rating
- No public credit rating found
Flags to know about
disclosure
Segments and measures changed in FY2027
Microsoft moved from three segments to two and redefined Azure and other measures in September 2026. On Oct 28, 2026 it recast FY2024–FY2026 and said this is not a restatement. Older years are not on the new basis.
disclosure
OpenAI details not in the filings
The filings used for this page do not describe the terms of the April 2026 partnership change, and do not give the carrying value of the OpenAI investment.
regulatory
IRS proposed tax adjustments
In September 2023 the IRS proposed an additional tax payment of $28.9 billion plus penalties and interest for tax years 2004 to 2013. Microsoft says it disagrees and will contest the proposal. Tax years 2014 to 2017 remain under audit.
regulatory
Irish data regulator and LinkedIn
In October 2024 Ireland's Data Protection Commission gave LinkedIn a final decision alleging violations of EU data rules (GDPR) and assessing a fine. LinkedIn appealed in November 2024. The filing does not state the amount.
other
Pre-arranged executive share sales
Satya Nadella sold 86,525 shares on Sep 1, 2026 under a Rule 10b5-1 planAn insider's trading plan, set up in advance, that buys or sells shares on a schedule. Learn more adopted Mar 8, 2026. Amy Hood sold 7,305 shares on Oct 13, 2026 under a plan adopted Jun 10, 2026.
other
Board changes
Carmine Di Sibio joined the board on May 13, 2026. Reid Hoffman and Hugh Johnston are not seeking re-election on Dec 8, 2026, and John Collison is a new nominee.
23What the market paid
23What the market paid · price as of Oct 30, 2026
What did the market pay for Microsoft on Oct 30, 2026?
Price as of Oct 30, 2026 (shown for education; prices change daily).
Price as of Oct 30, 2026: Microsoft closed at $521.91 on Nasdaq. Times 7,426.2 million shares (Oct 22, 2026) that is a market value of about $3,875.8 billion (Cityfort calculation from the Oct 30, 2026 Nasdaq closing price and the Q1 FY2027 10-Q cover). P/E is price ÷ earnings per share: 27.2 on diluted EPS of $19.16 for the 12 months to Sep 30, 2026, which includes the Q2 FY2026 OpenAI gain.
- Share price
- $521.91
- Market value (market cap)
- $3.88T
- P/E
- 27.2×
Source: MSFT historical daily prices, October 2026 (close of Oct 30, 2026); Form 10-Q for Q1 FY2027 (quarter ended Sep 30, 2026); Earnings release Q1 FY2027 (Form 8-K Item 2.02, Ex. 99.1) and 3 more
24How it got here
24How it got here
How did Microsoft get here?
1975
Milestone
Founded
Microsoft was founded in 1975.
2014
Milestone
New CEO
Satya Nadella, at Microsoft since 1992, became CEO in February 2014 and chairman in June 2021.
2019
Business-model change
OpenAI partnership begins
Microsoft says its long-term partnership with OpenAI was originally established in 2019.
2022
Milestone
Servers depreciated over longer lives
From FY2023, Microsoft raised the useful lives of server and network equipment from 4 to 6 years, which lowered depreciation.
2023
Business-model change
Activision Blizzard bought
The $75.4 billion purchase of the game developer closed on Oct 13, 2023.
2025
Business-model change
OpenAI recapitalization
In October 2025 OpenAI recapitalized, cutting Microsoft's interest to about 27% as-converted, with a dilution gain booked in other income. OpenAI contracted for an incremental $250 billion of Azure.
2026
Milestone
OpenAI partnership extended again
Microsoft extended the partnership again in April 2026. The filings used for this page do not describe the terms. Its interest was about 25% at Jun 30 and about 24% at Sep 30, 2026, as-converted.
2026
Milestone
Voluntary retirement program
Microsoft guided on Apr 29, 2026 about $900 million of one-time costs for the program in Q4 FY2026. Full-time employees were about 223,000 at Jun 30, 2026, down from 228,000.
2026
Business-model change
Two new segments
From FY2027 Microsoft reports Agents and Infra and Devices and Consumer, replacing three segments. The CFO said on Jul 29, 2026 that data center lives lengthen from 15 to 25 years from the start of FY2027.
25Sources and changes
Where every number on this page comes from
Sources (34 documents)
- S1Form 10-K for fiscal year 2026 (year ended Jun 30, 2026) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jul 29, 2026
- S2Form 10-K for fiscal year 2025 · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jul 30, 2025
- S3Form 10-K for fiscal year 2024 · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jul 30, 2024
- S4Form 10-K for fiscal year 2023 · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jul 27, 2023
- S5Form 10-K for fiscal year 2022 · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jul 28, 2022
- S6Form 10-Q for Q1 FY2027 (quarter ended Sep 30, 2026) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Oct 28, 2026
- S7Form 10-Q for Q3 FY2026 (quarter ended Mar 31, 2026) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Apr 29, 2026
- S8Form 10-Q for Q2 FY2026 (quarter ended Dec 31, 2025) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jan 28, 2026
- S9Form 10-Q for Q1 FY2026 (quarter ended Sep 30, 2025) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Oct 29, 2025
- S12Earnings release Q1 FY2027 (Form 8-K Item 2.02, Ex. 99.1) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Oct 28, 2026
- S13Earnings release Q4 FY2026 (Form 8-K Item 2.02, Ex. 99.1) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jul 29, 2026
- S14Earnings release Q3 FY2026 (Form 8-K Item 2.02, Ex. 99.1) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Apr 29, 2026
- S15Earnings release Q2 FY2026 (Form 8-K Item 2.02, Ex. 99.1) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jan 28, 2026
- S16Earnings release Q1 FY2026 (Form 8-K Item 2.02, Ex. 99.1) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Oct 29, 2025
- S17Earnings release Q4 FY2025 (Form 8-K Item 2.02, Ex. 99.1) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jul 30, 2025
- S18Earnings release Q3 FY2025 (Form 8-K Item 2.02, Ex. 99.1) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Apr 30, 2025
- S19Earnings release Q2 FY2025 (Form 8-K Item 2.02, Ex. 99.1) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jan 29, 2025
- S20Earnings release Q1 FY2025 (Form 8-K Item 2.02, Ex. 99.1) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Oct 30, 2024
- S212026 Proxy Statement (DEF 14A), annual meeting Dec 8, 2026 · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Oct 21, 2026
- S22Form 8-K Item 8.01, Ex. 99.1: FY2026 10-K items recast to the two FY2027 segments · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Oct 28, 2026
- S23Form 8-K Item 7.01, Ex. 99.1: FY27 Segments and Investor Metrics (deck, Sep 2026) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Sep 2, 2026
- S24Form 8-K Oct 28, 2025, Ex. 99.2: The next chapter of the Microsoft-OpenAI partnership · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Oct 29, 2025
- S25Form 8-K Item 5.02: Carmine Di Sibio appointed director · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · May 14, 2026
- S26Form 8-K Item 5.02: Reid Hoffman not standing for re-election · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Jun 5, 2026
- S29Schedule 13G: Vanguard Capital Management LLC, event Mar 31, 2026 · Vanguard Capital Management LLC (SEC EDGAR) · Tier 1: company or exchange filing · Apr 30, 2026
- S30Schedule 13G/A: The Vanguard Group, Inc., event Mar 13, 2026 · The Vanguard Group, Inc. (SEC EDGAR) · Tier 1: company or exchange filing · Mar 27, 2026
- S31Form 4: Amy Hood, sale of Oct 13, 2026 · SEC EDGAR · Tier 1: company or exchange filing · Oct 14, 2026
- S32Form 4: Satya Nadella, sale of Sep 1, 2026 · SEC EDGAR · Tier 1: company or exchange filing · Sep 2, 2026
- S33Q1 FY2027 earnings call transcript · Microsoft Corporation (Investor Relations) · Tier 1: company or exchange filing · Oct 28, 2026
- S34Q4 FY2026 earnings call transcript · Microsoft Corporation (Investor Relations) · Tier 1: company or exchange filing · Jul 29, 2026
- S35Q3 FY2026 earnings call transcript · Microsoft Corporation (Investor Relations) · Tier 1: company or exchange filing · Apr 29, 2026
- S36Q2 FY2026 earnings call transcript · Microsoft Corporation (Investor Relations) · Tier 1: company or exchange filing · Jan 28, 2026
- S38MSFT historical daily prices, October 2026 (close of Oct 30, 2026) · Nasdaq, Inc. · Tier 1: company or exchange filing · Oct 30, 2026
- S39Form 8-K Item 7.01, Ex. 99.1: FY25 segment changes (Aug 2024 recast) · Microsoft Corporation (SEC EDGAR) · Tier 1: company or exchange filing · Aug 21, 2024
Changes to this page (v2 · Nov 1, 2026)
- v2 · Nov 1, 2026Standardized calculation labels to name the filing they come from; no figures changed. (editorial update, Q1 FY2027)
- v1 · Nov 1, 2026First version, through Q1 FY2027 (quarter ended Sep 30, 2026). Segment and offering figures use Microsoft's Oct 28, 2026 recast. (first version)
Numbers come only from tier 1 and tier 2 sources. Read how we research.
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