Microsoft

NASDAQ: MSFT

Revenue

$331.84B

+17.8% YoY

Gross margin

67.9%

−88 bps YoY

Microsoft Cloud revenue

$214.4B

+26.9% YoY

Free Cash Flow to Firm

$31.63B

−59.7% YoY

Last twelve months to June 30, 2026^†

From the Q2 fiscal 2026 10-Q, Microsoft recasts earlier cash flows, moving amounts out of depreciation, amortization, and other into net recognized losses (gains) on investments and derivatives (fiscal 2025: $34,153 million as first reported, $29,433 million recast). Each figure comes from the newest filing that prints it, so quarters start in fiscal 2025, the first quarter every later filing reprints on the recast basis, and fiscal 2023 and earlier years are on the earlier basis.

Business overview

Company overview

Microsoft develops and supports software, cloud services, devices, and AI products for people and businesses. It reports three segments: Productivity and Business Processes (Microsoft 365, LinkedIn, Dynamics), Intelligent Cloud (Azure, server products, and enterprise services), and More Personal Computing (Windows, devices, Xbox gaming, and search advertising). Its fiscal year ends June 30.

How Microsoft makes money

Microsoft earns revenue from cloud-based services and subscriptions, from licensing and supporting software, from online advertising, and from selling devices. Microsoft Cloud, which combines Microsoft 365 Commercial cloud, Azure and other cloud services, Dynamics 365, and commercial LinkedIn, was $214.4 billion in fiscal 2026. Results follow enterprise cloud consumption and seat growth, AI demand on Azure, and PC and gaming cycles.

Bull case

Azure and other cloud services revenue grew 41% in fiscal 2026, and commercial remaining performance obligation rose 84% to $678 billion, a large contracted backlog. AI features across Microsoft 365, Azure, and developer tools could raise revenue per customer on an installed base that already runs Microsoft software.

Bear case

Capital expenditures reached $115.9 billion in fiscal 2026, far above depreciation, and the 10-K warns that revenue from these AI and datacenter investments may not arrive in the expected timeframes or at expected levels. Competition is intense, barriers to entry in many of its businesses are low, and the cost of capital could rise with interest rates or credit conditions.