Microsoft reports $10B OpenAI gain, 26% cloud growth, but AI costs compress margins to 67%

Filed January 28, 2026 · Period ending December 31, 2025 · Compared to 10-Q Jan 29, 2025 · ~2 min read

Key Changes

• high

  Microsoft recorded a $10.0 billion dilution gain from OpenAI's recapitalization in Q2, boosting reported EPS to $5.16 versus $4.14 adjusted. The company introduced new non-GAAP measures to exclude volatile OpenAI investment results from operating performance.

  MD&A: Other Income verify on EDGAR →
• high

  Microsoft Cloud gross margin fell from 70% to 67% as AI infrastructure investments and growing AI product usage outpaced efficiency gains. Azure revenue growth accelerated to 39%, but monetization is not yet fully offsetting infrastructure costs.

  MD&A: Cloud Margins verify on EDGAR →
• high

  Commercial remaining performance obligation more than doubled to $625 billion (110% growth), signaling strong multi-year contract momentum across cloud and AI services despite near-term margin pressure.

  MD&A: Backlog verify on EDGAR →