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Get filing alertsMicrosoft Q3 FY26: Revenue +18.3% to $82.9B, net income +23.1% to $31.8B on cloud strength
Filed April 29, 2026 · Period ending March 31, 2026 · Compared to 10-Q Apr 30, 2025 · ~2 min read
Key Financials
SEC XBRL| Metric | PriorMar 31, 2025 | CurrentMar 31, 2026 | Δ |
|---|---|---|---|
| Revenue | $70.1B | $82.9B | ▲ +18.3% |
| Net income | $25.8B | $31.8B | ▲ +23.1% |
| Diluted EPS | $3.46 | $4.27 | ▲ +23.4% |
| Operating income | $32.0B | $38.4B | ▲ +20.0% |
| Cash & equivalents | $28.8B | $32.1B | ▲ +11.4% |
| Long-term debt (noncurrent) | $39.9B | $31.4B | ▼ -21.2% |
| Total assets | $562.6B | $694.2B | ▲ +23.4% |
As reported in XBRL by the filer · 10-Q vs 10-Q. Income figures cover the fiscal quarter (not year-to-date); cash & assets are period-end balances. n/m = not meaningful (sign change; a % would mislead). about this table · verify on EDGAR →
Key Number Changes
Prior filing · verify on EDGAR →
As of March 31, 2025, we accrued aggregate legal liabilities of $530 million.
Current filing · verify on EDGAR →
As of March 31, 2026, we accrued aggregate legal liabilities of $647 million.
Prior filing · verify on EDGAR →
While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $800 million in aggregate beyond recorded amounts are reasonably possible.
Current filing · verify on EDGAR →
While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $400 million in aggregate beyond recorded amounts are reasonably possible.
Prior filing · verify on EDGAR →
Azure and other cloud services revenue grew 33% driven by demand for our portfolio of services, including 16 points from our AI services.
Current filing · verify on EDGAR →
Azure and other cloud services revenue increased 40%.
Prior filing · verify on EDGAR →
Microsoft 365 Commercial cloud revenue grew 12% with Microsoft 365 Commercial seat growth of 7% driven by small and medium business and frontline worker offerings, as well as growth in revenue per user.
Current filing · verify on EDGAR →
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.
Prior filing · verify on EDGAR →
Microsoft 365 Consumer cloud revenue grew 10% driven by Microsoft 365 Consumer subscriber growth of 9% to 87.7 million, as well as growth in revenue per user from the price increase announced in January 2025, offset in part by continued mix shift to Microsoft 365 Basic.
Current filing · verify on EDGAR →
Microsoft 365 Consumer cloud revenue grew 33% driven by growth in revenue per user and Microsoft 365 Consumer subscriber growth of 7%.
Prior filing · verify on EDGAR →
Windows OEM and Devices revenue increased 3%.
Current filing · verify on EDGAR →
Windows OEM and Devices revenue decreased 2%.
Prior filing · verify on EDGAR →
Xbox content and services revenue increased 8% driven by growth in Xbox Game Pass, Call of Duty, and Minecraft.
Current filing · verify on EDGAR →
Xbox content and services revenue decreased 5% on a prior year comparable that benefited from strong first-party content performance.
Prior filing · verify on EDGAR →
Microsoft Cloud gross margin percentage decreased to 69% driven by the impact of scaling our AI infrastructure.
Current filing · verify on EDGAR →
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.
Prior filing · verify on EDGAR →
Operating income increased $4.4 billion or 16% with growth across each of our segments.
Current filing · verify on EDGAR →
Operating income increased $6.4 billion or 20% driven by growth in Productivity and Business Processes and Intelligent Cloud.
Prior filing · verify on EDGAR →
For the nine months ended March 31, 2025 and 2024, we repurchased 23 million shares and 25 million shares of our common stock for $9.8 billion and $9.2 billion, respectively, through our share repurchase program. ... As of March 31, 2025, $549 million remained of our $60 billion share repurchase program.
Current filing · verify on EDGAR →
For the nine months ended March 31, 2026 and 2025, we repurchased 27 million shares and 23 million shares of our common stock for $13.3 billion and $9.8 billion, respectively, through our share repurchase program. ... As of March 31, 2026, $44.0 billion remained of our $60 billion share repurchase program.
Prior filing · verify on EDGAR →
For the nine months ended March 31, 2025 and 2024, our Board of Directors declared dividends totaling $18.5 billion and $16.7 billion, respectively.
Current filing · verify on EDGAR →
For the nine months ended March 31, 2026 and 2025, our Board of Directors declared dividends totaling $20.3 billion and $18.5 billion, respectively.
Prior filing · verify on EDGAR →
Cash from operations increased $12.2 billion to $93.5 billion for the nine months ended March 31, 2025, primarily due to an increase in cash received from customers, offset in part by an increase in cash paid to suppliers and employees and cash used to pay income taxes.
Current filing · verify on EDGAR →
Cash from operations increased $34.0 billion to $127.5 billion for the nine months ended March 31, 2026, primarily due to an increase in cash received from customers and a decrease in cash used to pay income taxes, offset in part by an increase in cash paid to suppliers.
Prior filing · verify on EDGAR →
Cash used in investing decreased $40.1 billion to $42.0 billion for the nine months ended March 31, 2025, primarily due to a $63.6 billion decrease in cash used for acquisitions of companies, net of cash acquired and divestitures, and purchases of intangible and other assets, offset in part by a $16.9 billion increase in additions to property and equipment and a $7.2 billion decrease in cash from net investment purchases, sales, and maturities.
Current filing · verify on EDGAR →
Cash used in investing increased $42.6 billion to $84.7 billion for the nine months ended March 31, 2026, primarily due to a $32.7 billion increase in additions to property and equipment, a $9.1 billion increase in other investing primarily to facilitate the purchase of components, and a $3.8 billion decrease in cash from net investment purchases, sales, and maturities.
Prior filing · verify on EDGAR →
As of March 31, 2025 and June 30, 2024, other receivables related to activities to facilitate the purchase of server components were $10.8 billion and $10.5 billion, respectively, and are included in other current assets in our consolidated balance sheets.
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As of March 31, 2026 and June 30, 2025, other receivables related to activities to facilitate the purchase of server components were $17.8 billion and $8.2 billion, respectively, and are included in other current assets in our consolidated balance sheets.
Prior filing · verify on EDGAR →
As of March 31, 2025, we had additional operating and finance leases, primarily for datacenters, that had not yet commenced of $4.4 billion and $94.8 billion, respectively. These operating and finance leases will commence between fiscal year 2025 and fiscal year 2030 with lease terms of 1 year to 20 years.
Current filing · verify on EDGAR →
As of March 31, 2026, we had additional leases, primarily for datacenters, that had not yet commenced of $196.6 billion. These leases will commence between fiscal year 2026 and fiscal year 2031 with lease terms of 1 year to 21 years.
Prior filing · verify on EDGAR →
Total finance lease liabilities | $ 39,214
Current filing · verify on EDGAR →
Total finance lease liabilities | $ 62,932
Prior filing · verify on EDGAR →
As of March 31, 2025 and June 30, 2024, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $2.9 billion and $3.9 billion, respectively, and equity investments measured using the equity method were $6.8 billion and $6.0 billion, respectively.
Current filing · verify on EDGAR →
As of March 31, 2026 and June 30, 2025, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $9.3 billion and $2.9 billion, respectively, and equity investments measured using the equity method were $11.1 billion and $6.0 billion, respectively.
Prior filing · verify on EDGAR →
Revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods, was $321 billion as of March 31, 2025, of which $315 billion is related to the commercial portion of revenue. We expect to recognize approximately 40% of our total company remaining performance obligation revenue over the next 12 months and the remainder thereafter.
Current filing · verify on EDGAR →
Revenue allocated to remaining performance obligations, which includes unearned revenue and amounts expected to be invoiced and recognized as revenue in future periods, was $633 billion as of March 31, 2026. Estimating revenue that will be allocated to remaining performance obligations can involve significant judgments, including identifying and assessing variable consideration and potential renegotiation of commitments. We consider factors such as the nature of the terms and duration of the contract across our portfolio of contracts. Revenue allocated to remaining performance obligations related to the commercial portion of revenue was $627 billion as of March 31, 2026, with a weighted average duration of approximately 2.5 years. We expect to recognize approximately 30% of our total company remaining performance obligation revenue and 25% of our commercial remaining performance obligation revenue over the next 12 months and the remainder thereafter.
Prior filing · verify on EDGAR →
As of March 31, 2025, we accrued aggregate legal liabilities of $530 million. While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $800 million in aggregate beyond recorded amounts are reasonably possible.
Current filing · verify on EDGAR →
As of March 31, 2026, we accrued aggregate legal liabilities of $647 million. While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $400 million in aggregate beyond recorded amounts are reasonably possible.
Key Changes
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high
Microsoft Cloud revenue grew 29% to $54.5B, with Azure accelerating to 40% growth (vs. 33% prior year). Commercial remaining performance obligations nearly doubled to $627B, signaling robust multi-year contract bookings.
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high
OpenAI partnership extended in Oct 2025 and Apr 2026, with Microsoft holding ~27% equity on an as-converted basis. A recapitalization triggered a $5.9B dilution gain in the nine-month period, materially boosting reported income.
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high
Uncommenced datacenter lease commitments surged from $99.2B to $196.6B year-over-year, reflecting massive forward capacity commitments for AI infrastructure. Capital expenditures rose $32.7B in the nine-month period.
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high
Microsoft Cloud gross margin compressed 300 basis points to 66%, driven by AI infrastructure investment and growing AI product usage, partially offset by efficiency gains in Azure and Microsoft 365.
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medium
Trade-policy volatility and AI export-control shifts added to risk disclosures, with Microsoft citing U.S. tariff uncertainty, the rescinded AI Diffusion Rule, and potential supply-chain cost increases as material operational risks.
Summary
Microsoft delivered strong Q3 FY26 results, with revenue up 18.3% to $82.9B and net income up 23.1% to $31.8B. The quarter's standout was Microsoft Cloud, which grew 29% to $54.5B, driven by Azure's 40% growth (accelerating from 33% in the prior year) and Microsoft 365 Commercial's 19% expansion (up from 12%).
Commercial remaining performance obligations nearly doubled to $627B, reflecting robust multi-year contract signings and strong forward revenue visibility. Operating income rose 20% to $38.4B, though Microsoft Cloud gross margin compressed 300 basis points to 66% as AI infrastructure investment and growing AI product usage outpaced efficiency gains.
The OpenAI partnership was extended twice (October 2025 and April 2026), with Microsoft now holding approximately 27% of OpenAI on an as-converted basis. A recapitalization during the nine-month period triggered a $5.9B dilution gain, which materially boosted reported income but sits below the operating line. Microsoft introduced non-GAAP adjusted EPS to exclude OpenAI investment gains and losses, providing a normalized view of operating performance. The company returned $13.3B to shareholders through buybacks in the nine-month period (vs. $9.8B prior year), with $44.0B remaining under the $60B authorization. Microsoft's AI infrastructure buildout is accelerating: uncommenced datacenter lease commitments surged from $99.2B to $196.6B year-over-year, and capital expenditures rose $32.7B in the nine-month period. The company also disclosed $11.5B of restricted investments tied to a supplier agreement and $17.8B of receivables related to server-component purchases, both reflecting the scale of the datacenter expansion. Risk disclosures were updated to address AI regulation (frontier model safety, transparency, digital replicas), trade-policy volatility (U.S. tariff uncertainty, AI export-control shifts), and sustainability challenges (AI energy use making carbon-negative goals harder to meet). Watch next quarter for Azure growth sustainability, margin trajectory as AI infrastructure scales, and any updates on the OpenAI partnership's revenue-sharing structure.
Section-by-Section Diff
Legal Proceedings
Cell phone litigation removed; IDPC matter updated with Dec 2025 hearing; accrued liabilities up $117M, possible adverse outcomes down $400M.
Previous filing · verify on EDGAR →
In November 2024, LinkedIn appealed the final decision to the Irish courts, and the next hearing is scheduled for May 2025.
Current filing · verify on EDGAR →
In November 2024, LinkedIn appealed the final decision to the Irish courts. A preliminary hearing was held in December 2025.
The IDPC matter disclosure has been updated to reflect that a preliminary hearing occurred in December 2025, replacing the prior statement that the next hearing was scheduled for May 2025. This indicates the appeal process has progressed through at least one hearing stage.
Previous filing · verify on EDGAR →
As of March 31, 2025, we accrued aggregate legal liabilities of $530 million.
Current filing · verify on EDGAR →
As of March 31, 2026, we accrued aggregate legal liabilities of $647 million.
Accrued legal liabilities increased from $530 million to $647 million year-over-year, a $117 million (22%) increase. This reflects higher reserves for known legal matters as of the current quarter-end.
Previous filing · verify on EDGAR →
While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $800 million in aggregate beyond recorded amounts are reasonably possible.
Current filing · verify on EDGAR →
While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $400 million in aggregate beyond recorded amounts are reasonably possible.
The company's estimate of reasonably possible adverse outcomes beyond accrued amounts decreased from $800 million to $400 million, a 50% reduction. This suggests either resolution of certain matters, improved litigation positions, or reassessment of exposure ranges.
Show 1 minor / wording change
Removed from previous filing · verify on EDGAR →
Microsoft Mobile Oy, a subsidiary of Microsoft, along with other handset manufacturers and network operators, is a defendant in 45 lawsuits filed in the Superior Court for the District of Columbia by individual plaintiffs who allege that radio emissions from cellular handsets caused their brain tumors and other adverse health effects. We assumed responsibility for these claims in our agreement to acquire Nokia’s Devices and Services business and have been substituted for the Nokia defendants. Twelve of these cases were consolidated for certain pre-trial proceedings; the remaining cases are stayed. In a separate 2009 decision, the Court of Appeals for the District of Columbia held that adverse health effect claims arising from the use of cellular handsets that operate within the U.S. Federal Communications Commission radio frequency emission guidelines (“FCC Guidelines”) are pre-empted by federal law. The plaintiffs allege that their handsets either operated outside the FCC Guidelines or were manufactured before the FCC Guidelines went into effect. The lawsuits also allege an industry-wide conspiracy to manipulate the science and testing around emission guidelines. In 2013, the defendants in the consolidated cases moved to exclude the plaintiffs’ expert evidence of general causation on the basis of flawed scientific methodologies. In 2014, the trial court granted in part and denied in part the defendants’ motion to exclude the plaintiffs’ general causation experts. The defendants filed an interlocutory appeal to the District of Columbia Court of Appeals challenging the standard for evaluating expert scientific evidence. In October 2016, the Court of Appeals issued its decision adopting the standard advocated by the defendants and remanding the cases to the trial court for further proceedings under that standard. The plaintiffs have filed supplemental expert evidence, portions of which were stricken by the court. A hearing on general causation took place in September of 2022. In April of 2023, the court granted defendants’ motion to strike the testimony of plaintiffs’ experts that cell phones cause brain cancer and entered an order excluding all of plaintiffs’ experts from testifying. The parties agreed to a stipulated dismissal of the consolidated cases to allow plaintiffs to appeal the expert testimony order. Plaintiffs appealed the court’s order in August of 2023, and the appeal was argued in January of 2025. A hearing on the status of the stayed cases occurred in December of 2023. In July 2024, the court entered summary judgment in nine of the stayed cases on the grounds that plaintiffs had agreed to be bound by the general causation outcome in the consolidated cases.
The entire U.S. Cell Phone Litigation disclosure (45 lawsuits alleging brain tumors from cellular handset emissions, inherited from Nokia acquisition) has been removed from the current filing. The baseline described ongoing appeals and summary judgments through July 2024; the current filing contains no reference to this matter.
MD&A
Q3 FY26 revenue +18% to $82.9B; Microsoft Cloud +29% to $54.5B; operating income +20%; OpenAI partnership extended Oct 2025 & Apr 2026; commercial RPO +99% to $627B.
Added in current filing · verify on EDGAR →
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.
Microsoft disclosed two extensions of its OpenAI partnership (October 2025 and April 2026), confirming continued investment, revenue-sharing arrangements, and IP rights for product integration. The baseline mentioned the partnership's 2019 origin but did not disclose these recent extensions or the revenue-sharing and IP-rights structure.
Previous filing · verify on EDGAR →
Microsoft Cloud revenue increased 20% to $42.4 billion.
Current filing · verify on EDGAR →
Microsoft Cloud revenue increased 29% to $54.5 billion.
Microsoft Cloud revenue grew 29% YoY to $54.5 billion in Q3 FY26, up from 20% growth to $42.4 billion in Q3 FY25. The acceleration reflects stronger demand across Azure, Microsoft 365 Commercial, and Dynamics 365, with AI services contributing materially to Azure's 40% growth.
Added in current filing · verify on EDGAR →
Commercial remaining performance obligation increased 99% to $627 billion.
Microsoft disclosed that commercial RPO nearly doubled YoY to $627 billion, a new highlight metric not reported in the prior-year Q3. This reflects strong multi-year contract bookings and deferred revenue growth, signaling robust forward revenue visibility.
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Azure and other cloud services revenue grew 33% driven by demand for our portfolio of services, including 16 points from our AI services.
Current filing · verify on EDGAR →
Azure and other cloud services revenue increased 40%.
Azure growth accelerated from 33% in Q3 FY25 to 40% in Q3 FY26, driven by continued demand across all workloads. The prior year disclosed 16 points of AI contribution; the current filing does not break out AI's contribution, but the overall acceleration suggests sustained AI-driven momentum.
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Microsoft 365 Commercial cloud revenue grew 12% with Microsoft 365 Commercial seat growth of 7% driven by small and medium business and frontline worker offerings, as well as growth in revenue per user.
Current filing · verify on EDGAR →
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 cloud revenue growth accelerated from 12% to 19% YoY, with seat growth moderating from 7% to 6% but revenue per user expanding faster due to E5 and Copilot adoption. This reflects pricing power and product mix shift toward higher-value SKUs.
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Microsoft 365 Consumer cloud revenue grew 10% driven by Microsoft 365 Consumer subscriber growth of 9% to 87.7 million, as well as growth in revenue per user from the price increase announced in January 2025, offset in part by continued mix shift to Microsoft 365 Basic.
Current filing · verify on EDGAR →
Microsoft 365 Consumer cloud revenue grew 33% driven by growth in revenue per user and Microsoft 365 Consumer subscriber growth of 7%.
Microsoft 365 Consumer cloud revenue growth accelerated sharply from 10% to 33% YoY, with subscriber growth moderating from 9% to 7%. The acceleration reflects the full-period impact of the January 2025 price increase and continued revenue-per-user expansion, offsetting the mix shift to Basic.
Removed from previous filing · verify on EDGAR →
Microsoft 365 Consumer subscriber growth of 9% to 87.7 million
Microsoft no longer discloses the absolute number of Microsoft 365 Consumer subscribers (previously 87.7 million). The current filing notes that "Microsoft 365 Consumer subscribers was removed as a metric" in Q1 FY26, reporting only YoY subscriber growth percentage (7%). This reduces transparency into the consumer subscription base size.
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Search and news advertising revenue excluding traffic acquisition costs increased 21%.
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Search advertising (formerly Search and news advertising) revenue excluding traffic acquisition costs increased 12%.
Microsoft renamed "Search and news advertising" to "Search advertising" and growth decelerated from 21% to 12% YoY. The renaming may reflect a narrower scope (excluding news) or a presentational change; the deceleration suggests moderating search-volume or revenue-per-search trends.
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Windows OEM and Devices revenue increased 3%.
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Windows OEM and Devices revenue decreased 2%.
Windows OEM and Devices revenue declined 2% YoY in Q3 FY26 after growing 3% in Q3 FY25. The current filing attributes the decline to lower Devices sales, offset in part by Windows OEM growth as OEM partners built inventory due to increasing memory pricing. The prior year cited elevated inventory due to tariff uncertainty.
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Xbox content and services revenue increased 8% driven by growth in Xbox Game Pass, Call of Duty, and Minecraft.
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Xbox content and services revenue decreased 5% on a prior year comparable that benefited from strong first-party content performance.
Xbox content and services revenue declined 5% YoY in Q3 FY26 after growing 8% in Q3 FY25. The current filing attributes the decline to a tough prior-year comp with strong first-party content performance (Call of Duty, Minecraft). This reflects the lapping of the Activision Blizzard acquisition's initial contribution.
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Microsoft Cloud gross margin percentage decreased to 69% driven by the impact of scaling our AI infrastructure.
Current filing · verify on EDGAR →
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.
Microsoft Cloud gross margin declined from 69% in Q3 FY25 to 66% in Q3 FY26, a 300-basis-point compression. Both periods cite AI infrastructure investment as the driver, but the current filing adds "growing AI product usage" as a margin headwind, partially offset by efficiency gains. This reflects the ongoing cost of scaling AI capacity ahead of revenue realization.
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Operating income increased $4.4 billion or 16% with growth across each of our segments.
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Operating income increased $6.4 billion or 20% driven by growth in Productivity and Business Processes and Intelligent Cloud.
Operating income growth accelerated from 16% ($4.4B) in Q3 FY25 to 20% ($6.4B) in Q3 FY26, driven by Productivity and Business Processes and Intelligent Cloud. The current filing no longer cites More Personal Computing as a growth contributor, consistent with that segment's flat revenue.
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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.
Microsoft disclosed Q3 FY26 net losses from OpenAI investments of $14 million (vs. $583 million in Q3 FY25), and for the nine-month period, net gains of $4.5 billion (vs. net losses of $2.0 billion in the prior year). The nine-month gain primarily relates to a dilution gain from the OpenAI Recapitalization. This is a new disclosure category not broken out in the prior-year Q3 filing.
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Adjusted net income (non-GAAP) 31,792 ... Adjusted diluted earnings per share (non-GAAP) 4.27 ... These non-GAAP financial measures exclude net gains and losses from investments in OpenAI.
Microsoft introduced non-GAAP adjusted net income and adjusted diluted EPS metrics that exclude OpenAI investment gains and losses. For Q3 FY26, adjusted EPS was $4.27 (vs. GAAP $4.27, as the OpenAI loss was immaterial); for the nine-month period, adjusted EPS was $12.54 (vs. GAAP $13.14, excluding the $4.5B OpenAI gain). This provides a normalized view of operating performance.
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For the nine months ended March 31, 2025 and 2024, we repurchased 23 million shares and 25 million shares of our common stock for $9.8 billion and $9.2 billion, respectively, through our share repurchase program. ... As of March 31, 2025, $549 million remained of our $60 billion share repurchase program.
Current filing · verify on EDGAR →
For the nine months ended March 31, 2026 and 2025, we repurchased 27 million shares and 23 million shares of our common stock for $13.3 billion and $9.8 billion, respectively, through our share repurchase program. ... As of March 31, 2026, $44.0 billion remained of our $60 billion share repurchase program.
Microsoft repurchased $13.3 billion of stock in the nine months ended March 31, 2026 (vs. $9.8 billion in the prior year), with $44.0 billion remaining under the $60 billion authorization. The prior-year filing showed only $549 million remaining, indicating a new authorization was granted during FY26 (likely in the June 2025 quarter, not disclosed in this Q3 filing).
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For the nine months ended March 31, 2025 and 2024, our Board of Directors declared dividends totaling $18.5 billion and $16.7 billion, respectively.
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For the nine months ended March 31, 2026 and 2025, our Board of Directors declared dividends totaling $20.3 billion and $18.5 billion, respectively.
Dividends declared increased from $18.5 billion in the nine months ended March 31, 2025 to $20.3 billion in the nine months ended March 31, 2026, a $1.8 billion or 10% increase. This reflects the company's continued commitment to returning capital to shareholders.
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Cash from operations increased $12.2 billion to $93.5 billion for the nine months ended March 31, 2025, primarily due to an increase in cash received from customers, offset in part by an increase in cash paid to suppliers and employees and cash used to pay income taxes.
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Cash from operations increased $34.0 billion to $127.5 billion for the nine months ended March 31, 2026, primarily due to an increase in cash received from customers and a decrease in cash used to pay income taxes, offset in part by an increase in cash paid to suppliers.
Operating cash flow grew $34.0 billion YoY to $127.5 billion in the nine months ended March 31, 2026 (vs. $12.2 billion growth to $93.5 billion in the prior year). The acceleration reflects stronger customer collections and lower tax payments, partially offset by higher supplier payments. This demonstrates robust cash generation supporting AI infrastructure investment.
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Cash used in investing decreased $40.1 billion to $42.0 billion for the nine months ended March 31, 2025, primarily due to a $63.6 billion decrease in cash used for acquisitions of companies, net of cash acquired and divestitures, and purchases of intangible and other assets, offset in part by a $16.9 billion increase in additions to property and equipment and a $7.2 billion decrease in cash from net investment purchases, sales, and maturities.
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Cash used in investing increased $42.6 billion to $84.7 billion for the nine months ended March 31, 2026, primarily due to a $32.7 billion increase in additions to property and equipment, a $9.1 billion increase in other investing primarily to facilitate the purchase of components, and a $3.8 billion decrease in cash from net investment purchases, sales, and maturities.
Capital expenditures (property and equipment additions) increased $32.7 billion YoY in the nine months ended March 31, 2026, with an additional $9.1 billion in component purchases. Total investing cash outflow was $84.7 billion (vs. $42.0 billion in the prior year, which benefited from the absence of large acquisitions). This reflects the company's aggressive AI datacenter buildout.
Show 2 minor / wording changes
Removed from previous filing · verify on EDGAR →
As a result of the TCJA, we are required to pay a one-time transition tax on deferred foreign income not previously subject to U.S. income tax. Under the TCJA, the transition tax is payable in interest-free installments over eight years, with 8% due in each of the first five years, 15% in year six, 20% in year seven, and 25% in year eight. As of March 31, 2025, our eighth transition tax installment of $4.4 billion is short-term and payable in the first quarter of fiscal year 2026.
The current filing no longer discloses the TCJA transition tax installment schedule or the $4.4 billion eighth installment due in Q1 FY26. This is a lifecycle removal — the eighth and final installment was paid in Q1 FY26 (July–September 2025), so the obligation is no longer outstanding and the disclosure is no longer current.
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Business Combinations – Valuation of Intangible Assets ... Accounting for business combinations requires significant judgments when allocating the purchase price to the estimated fair values of assets acquired and liabilities assumed at the acquisition date. Determination of fair value involves estimates and assumptions which can be complex, most notably with respect to intangible assets. Critical estimates used in the valuation of intangible assets include, but are not limited to, the amount and timing of projected cash flows, useful lives, and discount rates. While management’s estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain as they pertain to forward-looking views of our business and market conditions. The judgments made in this valuation process could materially impact our consolidated financial statements.
The current filing no longer lists "Business Combinations – Valuation of Intangible Assets" as a critical accounting estimate. This is a lifecycle removal — the Activision Blizzard acquisition closed in October 2023, and by Q3 FY26 the purchase-price allocation and intangible-asset valuation are complete and no longer a forward-looking estimate requiring disclosure.
Notes
OpenAI recapitalization drove $5.9B dilution gain; new supplier agreement added $11.5B restricted investments; lease commitments surged to $196.6B.
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We have a long-term strategic partnership with OpenAI. In October 2025, we signed a new definitive agreement with OpenAI that extends this partnership. Additionally, OpenAI formed a public benefit corporation and completed a recapitalization (“OpenAI Recapitalization”). We have an investment of approximately 27 percent of OpenAI on an as-converted basis accounted for under the equity method of accounting. As a result of the OpenAI Recapitalization, we had a decrease in our proportionate ownership of OpenAI and recorded a dilution gain in other income (expense), net.
Microsoft disclosed a new definitive agreement with OpenAI signed in October 2025, extending the partnership. OpenAI completed a recapitalization and formed a public benefit corporation. Microsoft's ownership decreased to approximately 27% on an as-converted basis, triggering a dilution gain. The notes disclose that Other income (expense), net included $5.9 billion of net gains for the nine months ended March 31, 2026, primarily from this dilution gain. This is a major non-operating gain that materially boosted reported income.
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We calculate our equity method income or loss using the hypothetical liquidation at book value (“HLBV”) method because our liquidation rights and priorities differ from our underlying ownership interest. Under the HLBV method, we recognize income or loss based on the change in the amount we would receive if the net assets of the investee were distributed at book value.
Microsoft now uses the HLBV method to account for its OpenAI investment, reflecting that liquidation rights differ from ownership percentage. This is a technical accounting change that can produce income or loss recognition patterns that diverge from the underlying ownership stake, adding complexity to how OpenAI's performance flows through Microsoft's results.
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Additionally, as of March 31, 2026, restricted investments pursuant to a supplier agreement were $11.5 billion, with $2.8 billion included in short-term investments and $8.7 billion included in equity and other investments in our consolidated balance sheet.
Microsoft disclosed $11.5 billion of restricted investments tied to a supplier agreement, split between short-term and long-term classifications. This is a new balance-sheet item not present in the prior period, indicating a significant contractual commitment or collateral arrangement with a supplier (likely related to datacenter or AI infrastructure procurement).
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As of March 31, 2025 and June 30, 2024, other receivables related to activities to facilitate the purchase of server components were $10.8 billion and $10.5 billion, respectively, and are included in other current assets in our consolidated balance sheets.
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As of March 31, 2026 and June 30, 2025, other receivables related to activities to facilitate the purchase of server components were $17.8 billion and $8.2 billion, respectively, and are included in other current assets in our consolidated balance sheets.
Other receivables for server-component purchases increased from $10.8 billion (March 2025) to $17.8 billion (March 2026), a 65% year-over-year jump. This reflects Microsoft's expanding role in facilitating or financing datacenter hardware procurement, consistent with the aggressive AI infrastructure buildout.
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As of March 31, 2025, we had additional operating and finance leases, primarily for datacenters, that had not yet commenced of $4.4 billion and $94.8 billion, respectively. These operating and finance leases will commence between fiscal year 2025 and fiscal year 2030 with lease terms of 1 year to 20 years.
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As of March 31, 2026, we had additional leases, primarily for datacenters, that had not yet commenced of $196.6 billion. These leases will commence between fiscal year 2026 and fiscal year 2031 with lease terms of 1 year to 21 years.
Uncommenced lease commitments surged from $99.2 billion (March 2025) to $196.6 billion (March 2026), nearly doubling. This reflects Microsoft's massive forward datacenter capacity commitments to support AI workloads. The current disclosure no longer breaks out operating vs. finance leases, but the aggregate figure signals a multi-year, capital-intensive expansion.
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Total finance lease liabilities | $ 39,214
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Total finance lease liabilities | $ 62,932
Finance lease liabilities increased from $39.2 billion (March 2025) to $62.9 billion (March 2026), a 60% year-over-year increase. This reflects the commencement of previously uncommenced datacenter leases and continued expansion of leased infrastructure to support cloud and AI services.
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As of March 31, 2025 and June 30, 2024, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $2.9 billion and $3.9 billion, respectively, and equity investments measured using the equity method were $6.8 billion and $6.0 billion, respectively.
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As of March 31, 2026 and June 30, 2025, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $9.3 billion and $2.9 billion, respectively, and equity investments measured using the equity method were $11.1 billion and $6.0 billion, respectively.
Equity method investments increased from $6.8 billion (March 2025) to $11.1 billion (March 2026), driven by the OpenAI recapitalization and increased funding. Investments measured at cost also rose from $2.9 billion to $9.3 billion, indicating expanded strategic investment activity.
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Revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods, was $321 billion as of March 31, 2025, of which $315 billion is related to the commercial portion of revenue. We expect to recognize approximately 40% of our total company remaining performance obligation revenue over the next 12 months and the remainder thereafter.
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Revenue allocated to remaining performance obligations, which includes unearned revenue and amounts expected to be invoiced and recognized as revenue in future periods, was $633 billion as of March 31, 2026. Estimating revenue that will be allocated to remaining performance obligations can involve significant judgments, including identifying and assessing variable consideration and potential renegotiation of commitments. We consider factors such as the nature of the terms and duration of the contract across our portfolio of contracts. Revenue allocated to remaining performance obligations related to the commercial portion of revenue was $627 billion as of March 31, 2026, with a weighted average duration of approximately 2.5 years. We expect to recognize approximately 30% of our total company remaining performance obligation revenue and 25% of our commercial remaining performance obligation revenue over the next 12 months and the remainder thereafter.
Remaining performance obligations nearly doubled from $321 billion (March 2025) to $633 billion (March 2026), reflecting strong multi-year contract signings, particularly in Azure and Microsoft 365. The commercial portion increased from $315 billion to $627 billion. Microsoft now discloses a weighted average duration of 2.5 years and expects to recognize 30% (total) and 25% (commercial) over the next 12 months, down from 40% previously, indicating longer-duration contracts.
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As of March 31, 2025, we accrued aggregate legal liabilities of $530 million. While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $800 million in aggregate beyond recorded amounts are reasonably possible.
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As of March 31, 2026, we accrued aggregate legal liabilities of $647 million. While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $400 million in aggregate beyond recorded amounts are reasonably possible.
Accrued legal liabilities increased from $530 million (March 2025) to $647 million (March 2026), but the reasonably possible adverse outcomes beyond recorded amounts decreased from $800 million to $400 million. This suggests resolution or favorable developments in certain matters, partially offset by new accruals.
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Equity investments with readily determinable fair values are measured at fair value. Equity investments without readily determinable fair values are measured using the equity method or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative). We perform a qualitative assessment on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value.
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Equity investments with readily determinable fair values are generally measured at fair value. Equity investments that are not recorded at fair value are measured using the equity method of accounting when required or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative). For equity investments recorded at fair value, we perform a qualitative assessment on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value.
Microsoft clarified that equity investments with readily determinable fair values are "generally" measured at fair value (not always), and that equity method accounting is used "when required" (not as an elective alternative). The impairment assessment language was also refined to specify it applies to fair-value-recorded investments. These are technical clarifications that better align the policy with the OpenAI accounting treatment.
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In October 2024, the IDPC provided LinkedIn with a final decision alleging GDPR violations and assessing a fine. In November 2024, LinkedIn appealed the final decision to the Irish courts, and the next hearing is scheduled for May 2025.
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In October 2024, the IDPC provided LinkedIn with a final decision alleging GDPR violations and assessing a fine. In November 2024, LinkedIn appealed the final decision to the Irish courts. A preliminary hearing was held in December 2025.
The Irish Data Protection Commission matter progressed: a preliminary hearing was held in December 2025, updating the prior disclosure that the next hearing was scheduled for May 2025. The matter remains in litigation, with no resolution or change in the fine amount disclosed.
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Microsoft Mobile Oy, a subsidiary of Microsoft, along with other handset manufacturers and network operators, is a defendant in 45 lawsuits filed in the Superior Court for the District of Columbia by individual plaintiffs who allege that radio emissions from cellular handsets caused their brain tumors and other adverse health effects. We assumed responsibility for these claims in our agreement to acquire Nokia’s Devices and Services business and have been substituted for the Nokia defendants. Twelve of these cases were consolidated for certain pre-trial proceedings; the remaining cases are stayed. In a separate 2009 decision, the Court of Appeals for the District of Columbia held that adverse health effect claims arising from the use of cellular handsets that operate within the U.S. Federal Communications Commission radio frequency emission guidelines (“FCC Guidelines”) are pre-empted by federal law. The plaintiffs allege that their handsets either operated outside the FCC Guidelines or were manufactured before the FCC Guidelines went into effect. The lawsuits also allege an industry-wide conspiracy to manipulate the science and testing around emission guidelines. In 2013, the defendants in the consolidated cases moved to exclude the plaintiffs’ expert evidence of general causation on the basis of flawed scientific methodologies. In 2014, the trial court granted in part and denied in part the defendants’ motion to exclude the plaintiffs’ general causation experts. The defendants filed an interlocutory appeal to the District of Columbia Court of Appeals challenging the standard for evaluating expert scientific evidence. In October 2016, the Court of Appeals issued its decision adopting the standard advocated by the defendants and remanding the cases to the trial court for further proceedings under that standard. The plaintiffs have filed supplemental expert evidence, portions of which were stricken by the court. A hearing on general causation took place in September of 2022. In April of 2023, the court granted defendants’ motion to strike the testimony of plaintiffs’ experts that cell phones cause brain cancer and entered an order excluding all of plaintiffs’ experts from testifying. The parties agreed to a stipulated dismissal of the consolidated cases to allow plaintiffs to appeal the expert testimony order. Plaintiffs appealed the court’s order in August of 2023, and the appeal was argued in January of 2025. A hearing on the status of the stayed cases occurred in December of 2023. In July 2024, the court entered summary judgment in nine of the stayed cases on the grounds that plaintiffs had agreed to be bound by the general causation outcome in the consolidated cases.
The U.S. Cell Phone Litigation disclosure was removed from the current filing. The baseline disclosed 45 lawsuits related to Nokia handsets, with consolidated cases dismissed and under appeal as of January 2025, and summary judgment entered in nine stayed cases in July 2024. The removal suggests the matter has been resolved, settled, or is no longer deemed material enough to warrant separate disclosure. No explanation for the removal is provided in the current filing.
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Income Taxes – Improvements to Income Tax Disclosures: In December 2023, the FASB issued a new standard to improve income tax disclosures. The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The standard will be effective for us beginning with our annual reporting for fiscal year 2026, with early adoption permitted. We are currently evaluating the impact of this standard on our income tax disclosures.
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Income Taxes – Improvements to Income Tax Disclosures: In December 2023, the Financial Accounting Standards Board ("FASB") issued a new standard to improve income tax disclosures. The guidance requires additional disclosure of disaggregated income taxes paid and prescribes standardized categories for the components of the effective tax rate reconciliation. We will adopt the standard prospectively on the effective date in our annual reporting for fiscal year 2026.
Microsoft updated the income tax disclosure standard language from "will be effective" and "currently evaluating" to "will adopt the standard prospectively on the effective date," indicating the evaluation is complete and the company will adopt as required in fiscal year 2026 (no early adoption). This is a routine accounting-standard update with no financial impact.
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Related Party Transactions: In March 2024, we entered into an agreement with Inflection AI, Inc. ("Inflection"), pursuant to which we obtained a non-exclusive license to Inflection's intellectual property. Reid Hoffman, a member of our Board of Directors, is a co-founder of and serves on the board of directors of Inflection. As of the date of the agreement with Inflection, Reprogrammed Interchange LLC ("Reprogrammed") and entities affiliated with Greylock Ventures ("Greylock") each held less than a 10% equity interest in Inflection. Mr. Hoffman may be deemed to beneficially own the shares held by Reprogrammed and Greylock by virtue of his relationship with such entities. Mr. Hoffman did not participate in any portions of the meetings of our Board of Directors or any committee thereof to review and approve the transaction with Inflection.
The related-party transaction disclosure regarding the March 2024 Inflection AI agreement was removed from the current filing. This was a one-time transaction disclosure tied to the agreement date; its removal reflects that the transaction is no longer current news and does not require ongoing disclosure in subsequent periods. This is a lifecycle removal, not a material change in the underlying relationship.
Risk Factors
Microsoft updated risk disclosures on AI regulation, trade policy volatility, cybersecurity requirements, and sustainability goals.
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Legislative and regulatory action is emerging in the areas of AI and content moderation, which could increase costs or restrict opportunity. For example, the EU’s AI Act may increase costs or impact the provision or operation of our AI models and services in the European market.
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AI: Legislative and regulatory action is evolving with respect to AI, which could increase costs or restrict opportunity. For example, the EU’s AI Act may increase costs or impact the provision or operation of our AI models and services in the European market. AI regulatory areas include model and system development and deployment, frontier model safety, transparency, content provenance, digital replicas, and AI companions.
Microsoft expanded its AI regulatory risk disclosure to enumerate specific regulatory areas: frontier model safety, transparency, content provenance, digital replicas, and AI companions. The baseline mentioned AI regulation generically; the current filing details the specific compliance domains that may increase costs or restrict operations.
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Periods of intense diplomatic or armed conflict, such as the ongoing conflict in Ukraine, may result in (1) new and rapidly evolving sanctions and trade restrictions, which may impair trade with sanctioned individuals and countries, and (2) negative impacts to regional trade ecosystems among our customers, partners, and us.
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Increased geopolitical instabilities and changing U.S. Administration priorities create an unpredictable trade landscape. U.S. tariff, shifting AI export controls policies, and disagreements among governments on sanctions policies toward third countries, could increase operational costs, create uncertainty in the continuity of our products, and accelerate sovereignty initiatives among international partners and customers. The volatility of U.S. tariffs has triggered economic uncertainty and could impact cloud and devices supply chain cost competitiveness. The potential replacement of the rescinded AI Diffusion Rule, expanded export license conditions, and other potential AI-related rulemakings could adversely affect Microsoft’s business, strategy, and operations.
Microsoft added detailed language on U.S. Administration trade-policy volatility, tariff uncertainty, AI export-control shifts (including the rescinded AI Diffusion Rule), and the risk that these changes could increase supply-chain costs and accelerate customer sovereignty initiatives. The baseline focused on sanctions from armed conflict; the current filing broadens to structural trade-policy unpredictability and AI-specific export rules.
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Cybersecurity: Legislative and regulatory actions related to cybersecurity may increase the costs associated with developing, implementing, or securing our products and services. The legal and regulatory environment in this area is complex and continues to evolve across multiple jurisdictions. As a result, there is considerable uncertainty regarding both current and future compliance obligations. This uncertainty increases the risk that we may incur additional operational costs, face regulatory enforcement actions, or encounter challenges in the development and deployment of our products.
Microsoft elevated cybersecurity regulatory risk from a single-sentence mention in the baseline to a standalone bullet with detailed language on multi-jurisdictional complexity, compliance uncertainty, and the risk of enforcement actions. This reflects heightened regulatory scrutiny and the company's assessment that cybersecurity compliance is a material cost and operational risk.
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We are subject to evolving sustainability regulatory requirements and expectations, which exposes us to increased costs and legal and reputational risks. Laws, regulations, and policies relating to environmental, social, and governance matters are being developed and formalized in Europe, the U.S., and elsewhere, which may include specific, target-driven frameworks and disclosure requirements. In addition, we have established and publicly announced goals and commitments to become carbon negative, water positive, zero waste, and protect more land than we use. Any failure or perceived failure to pursue or fulfill our sustainability goals and commitments or to satisfy various sustainability reporting standards or regulatory requirements within the timelines we announce, or at all, could result in claims and lawsuits, regulatory actions, or damage to our reputation, each of which may adversely affect our business, operations, financial condition, and results of operations.
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Environmental, Social, and Governance: Laws, regulations, and policies relating to environmental, social, and governance matters are being developed and formalized in Europe, the U.S., and elsewhere, which may include greenhouse gas emissions and energy usage caps, as well as specific, target-driven environmental, social, and governance frameworks and disclosure requirements. In addition, in 2020 we announced goals to become carbon negative, water positive, and zero waste by 2030. AI development and deployment has and may continue to raise energy use and emissions, making it harder to meet these goals. Any failure or perceived failure to meet our sustainability goals, or to meet various sustainability regulatory requirements, could result in claims and lawsuits, regulatory actions, penalties, or damage to our reputation, each of which could adversely affect our business, operations, financial condition, and results of operations.
Microsoft added explicit language that AI development and deployment increases energy use and emissions, making it harder to meet 2030 carbon-negative and zero-waste goals. The baseline discussed sustainability goals generically; the current filing directly links AI workloads to goal-achievement risk and adds the possibility of regulatory penalties.
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Threat actors may also utilize emerging technologies, such as AI and machine learning.
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Threat actors also utilize emerging technologies such as AI and machine learning to, among other things, increase the speed and scale of attacks by generating and refining malicious content and code, automate reconnaissance and targeting, and rapidly iterate on attack techniques, which can broaden the scope, intensity, and sophistication of campaigns and reduce the time we have to identify and mitigate emerging threats.
Microsoft expanded its disclosure on adversary use of AI from a single-sentence mention to detailed language on how AI accelerates attack speed, scale, and sophistication—generating malicious code, automating reconnaissance, and reducing detection windows. This reflects the company's assessment that AI-enhanced threats are a material and evolving risk to its infrastructure and customer environments.
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For example, the Federal Trade Commission continues to challenge our Activision Blizzard acquisition and could, if successful, alter or unwind the transaction.
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Acquisitions, joint ventures, and strategic alliances could have an adverse effect on our business. We expect to continue making acquisitions and entering into joint ventures and strategic alliances as part of our long-term business strategy. For example, in October 2023 we completed our acquisition of Activision Blizzard, Inc.
The Activision Blizzard FTC challenge risk factor language was retained and updated (reorganized/edited, not rescinded).
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Periods of intense diplomatic or armed conflict, such as the ongoing conflict in Ukraine, may result in (1) new and rapidly evolving sanctions and trade restrictions, which may impair trade with sanctioned individuals and countries, and (2) negative impacts to regional trade ecosystems among our customers, partners, and us.
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Periods of intense diplomatic or armed conflict, such as the conflicts in Ukraine and the Middle East could continue to result in (1) new and rapidly evolving sanctions and trade restrictions, which may impair trade with sanctioned individuals and countries, and (2) negative impacts to regional trade ecosystems among our customers, partners, and us.
Microsoft added "the Middle East" to the list of armed conflicts that pose sanctions and trade-ecosystem risks, and changed "ongoing conflict in Ukraine" to "conflicts in Ukraine and the Middle East." This reflects the company's assessment that Middle East geopolitical developments now present material trade and operational risks comparable to the Ukraine conflict.
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Increasing use of generative AI models in our internal systems may create new attack surfaces or methods for adversaries.
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Increasing use of AI, including models, algorithms, copilots, and autonomous or semi-autonomous agents, in our internal or third-party systems may create new attack surfaces or methods for adversaries.
Microsoft expanded the internal-AI-risk language to cover "models, algorithms, copilots, and autonomous or semi-autonomous agents" (not just generative AI models) and added "third-party systems" to the scope. This reflects the company's broader deployment of AI tooling internally and the recognition that third-party AI systems also introduce attack surfaces.
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Restrictions on data flows and outbound investment and customer sensitivities may limit our ability to leverage parts of our global engineering footprint to provide services in certain jurisdictions.
Microsoft added new language on data-flow restrictions, outbound-investment controls, and customer sensitivities that may limit the company's ability to use its global engineering footprint to serve certain jurisdictions. This reflects heightened regulatory and customer concerns about data sovereignty and cross-border engineering operations.
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In January 2023 we announced the third phase of our OpenAI strategic partnership.
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Additionally, we have a long-term strategic partnership with OpenAI.
Microsoft removed the specific date and phase reference ("January 2023", "third phase") and recharacterized the OpenAI relationship as a "long-term strategic partnership" without timeline detail. This is a presentational update—the partnership persists, but the company no longer frames it as a discrete multi-phase announcement.
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If our goodwill or amortizable intangible assets become impaired, we may be required to record a significant charge to earnings. We acquire other companies and intangible assets and may not realize all the economic benefit from those acquisitions, which could cause an impairment of goodwill or intangibles. We review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. We test goodwill for impairment at least annually. Factors that may be a change in circumstances, indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable, include a decline in our stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in industry segments in which we participate. We have recorded, and may in the future be required to record, a significant charge in our consolidated financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, negatively affecting our results of operations.
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We have recorded, and may in the future be required to record, a significant charge in our consolidated financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, negatively affecting our results of operations. In addition, these transactions and arrangements have been and may be subject to legal and regulatory challenge. These events could adversely affect our business, operations, financial condition, and results of operations.
Microsoft consolidated the goodwill-impairment risk factor into the acquisitions risk factor, removing the standalone section that detailed impairment-testing methodology and specific triggers (stock-price decline, cash-flow estimates, segment growth). The current filing retains the core disclosure that impairment charges could occur but omits the operational detail on how impairment is assessed.
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We are investing in artificial intelligence (“AI”) across the entire company and infusing generative AI capabilities into our consumer and commercial offerings.
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We are investing in artificial intelligence (“AI”) across the entire company and infusing AI capabilities into our consumer and commercial offerings.
Microsoft removed the word "generative" before "AI capabilities," broadening the language to cover all AI capabilities (not just generative models). This reflects the company's expanding AI product portfolio beyond generative-only features.
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Government agencies closely scrutinize us under U.S. and foreign competition laws. Governments are actively enforcing competition laws and regulations and enacting new regulations to intervene in digital markets, and this includes markets such as the EU, the United Kingdom, the U.S., and China. Some jurisdictions also allow competitors or consumers to assert claims of anti-competitive conduct. U.S. and foreign antitrust authorities have previously brought enforcement actions and continue to scrutinize our business. We also face legal and regulatory risks from arguments under their competition laws that exert downward pressure on royalties for our intellectual property. Competition law enforcement actions and court decisions along with new market regulations may result in fines or hinder our ability to provide the benefits of our software to consumers and businesses, reducing the attractiveness of our products and the revenue that comes from them. New competition law actions or obligations under market regulation schemes could be initiated, potentially using previous actions as precedent. The outcome of such actions, or steps taken to avoid them, could adversely affect us in a variety of ways, including causing us to withdraw products from or modify products for certain markets, decreasing the value of our assets, adversely affecting our ability to monetize our products, or inhibiting our ability to consummate acquisition or impose conditions on acquisitions that may reduce their value, which may adversely affect our business, financial condition, and results of operations.
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Competition laws and new market regulation: Government agencies closely scrutinize us under U.S. and foreign competition laws. Governments are actively enforcing competition laws and regulations and enacting new regulations to intervene in digital markets, and this includes markets such as the EU, the United Kingdom, the U.S., and China. Some jurisdictions also allow competitors or consumers to assert claims of anti-competitive conduct. U.S. and foreign antitrust authorities have previously brought enforcement actions and continue to scrutinize our business. Competition law enforcement actions and court decisions along with new market regulations may result in fines or hinder our ability to provide the benefits of our software to consumers and businesses, reducing the attractiveness of our products and the revenue that comes from them. New competition law actions or obligations under market regulation schemes could be initiated, potentially using previous actions as precedent.
Microsoft removed the sentence about competition-law arguments exerting downward pressure on IP royalties and trimmed the detailed list of potential adverse outcomes (product withdrawals, asset-value decreases, acquisition conditions). The core competition-law risk remains, but the current filing omits specific examples of how enforcement could affect operations.
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Laws and regulations relating to anti-corruption and trade could result in increased costs, fines, criminal penalties, or reputational damage. The Foreign Corrupt Practices Act (“FCPA”) and other anti-corruption laws and regulations (“Anti-Corruption Laws”) prohibit corrupt payments by our employees, vendors, or agents, and the accounting provisions of the FCPA require us to maintain accurate books and records and adequate internal controls. From time to time, we receive inquiries from authorities in the U.S. and elsewhere which may be based on reports from employees and others about our business activities outside the U.S. and our compliance with Anti-Corruption Laws. Periodically, we receive such reports directly and investigate them, and also cooperate with investigations by U.S. and foreign law enforcement authorities. Most countries in which we operate also have competition laws that prohibit competitors from colluding or otherwise attempting to reduce competition between themselves. While we devote substantial resources to our U.S. and international compliance programs and have implemented policies, training, and internal controls designed to reduce the risk of corrupt payments and collusive activity, our employees, partners, vendors, or agents may violate our policies. Our failure to comply with Anti-Corruption Laws or competition laws could result in significant fines and penalties, criminal sanctions against us, our officers, or our employees, prohibitions on the conduct of our business, and damage to our reputation, which could adversely affect our business, financial condition, and results of operations.
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Anti-corruption: The Foreign Corrupt Practices Act (“FCPA”) and other anti-corruption laws and regulations (“Anti-Corruption Laws”) prohibit corrupt payments by our employees, vendors, or agents, and the accounting provisions of the FCPA require us to maintain accurate books and records and adequate internal controls. From time to time, we receive inquiries from authorities in the U.S. and elsewhere which may be based on reports from employees and others about our business activities and our compliance with Anti-Corruption Laws. Periodically, we receive such reports directly and investigate them and also cooperate with investigations by U.S. and foreign law enforcement authorities.
Microsoft removed detailed language on competition-law collusion risk, compliance-program resources, and the specific consequences of non-compliance (fines, criminal sanctions, business prohibitions). The current filing retains the core FCPA disclosure but omits the broader anti-corruption and competition-law compliance narrative.
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Laws and regulations relating to the handling of personal data may impede the adoption of our services or result in increased costs, legal claims, fines against us, or reputational damage. The growth of our Internet- and cloud-based services internationally relies increasingly on the movement of data across national boundaries. Legal requirements relating to the collection, storage, handling, and transfer of personal data continue to evolve. For example, while the EU-U.S. Data Privacy Framework (“DPF”) has been recognized as adequate under EU law to allow transfers of personal data from the EU to certified companies in the U.S., the DPF is subject to further legal challenge which could cause the legal requirements for data transfers from the EU to be uncertain. EU data protection authorities have and may again block the use of certain U.S.-based services that involve the transfer of data to the U.S. In the EU and other markets, potential new rules and restrictions on the flow of data across borders could increase the cost and complexity of delivering our products and services. In addition, the EU General Data Protection Regulation (“GDPR”), which applies to all of our activities conducted from an establishment in the EU or related to products and services offered in the EU, imposes a range of compliance obligations regarding the handling of personal data. More recently, the EU has been developing new requirements related to the use of data, including in the Digital Markets Act, the Digital Services Act, and the Data Act, that add additional rules and restriction on the use of data in our products and services. Engineering efforts to build and maintain capabilities to facilitate compliance with these laws involve substantial expense and the diversion of engineering resources from other projects. We might experience reduced demand for our offerings if we are unable to engineer products that meet our legal duties or help our customers meet their obligations under these and other data regulations, or if our implementation to comply makes our offerings less attractive. Compliance with these obligations depends in part on how particular regulators interpret and apply them. If we fail to comply, or if regulators assert we have failed to comply (including in response to complaints made by customers), it may lead to regulatory enforcement actions, which can result in significant monetary penalties, private lawsuits, reputational damage, blockage of product offerings or of international data transfers, and loss of customers. The highest fines assessed under GDPR have recently been increasing, especially against large technology companies, and European data protection authorities have taken action to block or remove services from their markets. Jurisdictions around the world, such as China, India, and states in the U.S. have adopted, or are considering adopting or expanding, laws and regulations imposing obligations regarding the collection, handling, and transfer of personal data. Our investment in gaining insights from data is becoming central to the value of the services we deliver to customers, including AI services, to operational efficiency and key opportunities in monetization, and to customer perceptions of quality. Our ability to use data in this way may be constrained by regulatory developments that impede realizing the expected return from this investment. Ongoing legal analyses, reviews, and inquiries by regulators of Microsoft practices, or relevant practices of other organizations, may result in burdensome or inconsistent requirements, including data sovereignty and localization requirements, affecting the location, movement, collection, and use of our customer and internal employee data as well as the management of that data. Compliance with applicable laws and regulations regarding personal data may require changes in services, business practices, or internal systems that result in increased costs, lower revenue, reduced efficiency, or greater difficulty in competing with foreign-based firms. Compliance with data regulations might limit our ability to innovate or offer certain features and functionality in some jurisdictions where we operate. Failure to comply with existing or new rules may result in significant penalties or orders to stop the alleged noncompliant activity, negative publicity, and diversion of management time and effort.
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Handling of personal data: Legal requirements relating to the collection, storage, handling, and transfer of personal data globally continue to evolve. The growth of our Internet- and cloud-based services internationally relies on the movement of data across national boundaries. Data protection authorities and governments in the EU and other markets have and may again restrict and/or block the use of services that involve the transfer of data across borders. New and evolving rules and restrictions on the flow of data across borders could increase the cost and complexity of delivering our products and services. In addition, the EU General Data Protection Regulation and other similar regulations impose a range of compliance obligations regarding the handling of personal data. New requirements related to the use of data, including the Data Act, add additional rules and restrictions on the use of data in our products and services.
Microsoft removed extensive detail on the EU-U.S. Data Privacy Framework legal challenge, GDPR enforcement trends ("highest fines...increasing"), specific EU regulations (Digital Markets Act, Digital Services Act), engineering-resource diversion, and the risk that data-use restrictions could impede AI-service monetization. The current filing retains the core data-privacy risk but omits the granular compliance and enforcement narrative.
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There may be vulnerabilities in open source software that may make our products susceptible to cyberattacks as we increasingly incorporate open source software into our products. Additionally, features that rely on generative AI may be susceptible to unanticipated security threats from adversaries as we add new generative AI features to our services while continuously developing our understanding of security risks and protection methods in the new field of generative AI.
Current filing · verify on EDGAR →
Open-source software can also contain vulnerabilities that may make our products susceptible to cyberattacks as we increasingly incorporate open-source software into our products. Additionally, software, including features that rely on or were generated by AI can be susceptible to cyberattacks.
Microsoft broadened the AI-vulnerability language from "features that rely on generative AI" to "software, including features that rely on or were generated by AI," and removed the phrase "unanticipated security threats...in the new field of generative AI." The current filing treats AI-related vulnerabilities as a known, ongoing risk rather than an emerging, unanticipated one.
Previous filing · verify on EDGAR →
For example, system administrators may fail to timely remove employee account access when no longer appropriate.
Current filing · verify on EDGAR →
For example, passwords may not be rotated and employee access may not be updated or removed on a timely basis.
Microsoft broadened the access-management risk from "system administrators may fail to timely remove employee account access" to "passwords may not be rotated and employee access may not be updated or removed on a timely basis." The current filing adds password-rotation failures as a specific example of inadequate security practices.
Previous filing · verify on EDGAR →
The success of these transactions and arrangements depend in part on our ability to leverage them to enhance our existing products and services or develop compelling new ones, as well as the acquired companies’ ability to meet our policies and processes in areas such as data governance, privacy, and cybersecurity.
Current filing · verify on EDGAR →
The success of these transactions and arrangements depend in part on our ability to leverage them to enhance our existing products and services or develop compelling new ones, as well as the acquired companies’ ability to meet our policies and processes in areas such as data governance, privacy, digital safety, responsible AI, and cybersecurity.
Microsoft added "digital safety" and "responsible AI" to the list of policy areas that acquired companies must meet. This reflects the company's expanded governance framework for AI and content-moderation practices.
Previous filing · verify on EDGAR →
Establishing significant scale in the marketplace is necessary to achieve and maintain attractive margins.
Current filing · verify on EDGAR →
Establishing significant scale in the marketplace is necessary to meet consumer demand and to achieve and maintain attractive margins.
Microsoft added "to meet consumer demand" as a reason why marketplace scale is necessary. The baseline focused solely on margin achievement; the current filing adds demand-fulfillment as a scale driver.
Financial Statements
Primary statements as printed on the EDGAR filing (iXBRL face). Companyfacts is used only when a statement is not on the HTML face. Not generated by the model.
Income Statement
(In millions, except per share amounts)
| Description | Three months ended March 31, 2026 | Three months ended March 31, 2025 | Nine months ended March 31, 2026 | Nine months ended March 31, 2025 |
|---|---|---|---|---|
| Revenue: | ||||
| Product | 15,089 | 15,319 | 47,462 | 46,810 |
| Service and other | 67,797 | 54,747 | 194,370 | 158,473 |
| Total revenue | 82,886 | 70,066 | 241,832 | 205,283 |
| Cost of revenue: | ||||
| Product | 2,733 | 3,037 | 9,160 | 10,187 |
| Service and other | 24,095 | 18,882 | 67,689 | 53,630 |
| Total cost of revenue | 26,828 | 21,919 | 76,849 | 63,817 |
| Gross margin | 56,058 | 48,147 | 164,983 | 141,466 |
| Research and development | 8,915 | 8,198 | 25,565 | 23,659 |
| Sales and marketing | 6,814 | 6,212 | 19,115 | 18,369 |
| General and administrative | 1,931 | 1,737 | 5,669 | 5,233 |
| Operating income | 38,398 | 32,000 | 114,634 | 94,205 |
| Other income (expense), net | 942 | (623) | 7,253 | (3,194) |
| Income before income taxes | 39,340 | 31,377 | 121,887 | 91,011 |
| Provision for income taxes | 7,562 | 5,553 | 23,904 | 16,412 |
| Net income | 31,778 | 25,824 | 97,983 | 74,599 |
| Earnings per share: | ||||
| Basic | 4.28 | 3.47 | 13.19 | 10.03 |
| Diluted | 4.27 | 3.46 | 13.14 | 9.99 |
| Weighted average shares outstanding: | ||||
| Basic | 7,426 | 7,434 | 7,430 | 7,434 |
| Diluted | 7,445 | 7,461 | 7,457 | 7,466 |
Balance Sheets
(In millions)
| Description | March 31, 2026 | June 30, 2025 |
|---|---|---|
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | 32,105 | 30,242 |
| Short-term investments | 46,167 | 64,323 |
| Total cash, cash equivalents, and short-term investments | 78,272 | 94,565 |
| Accounts receivable, net of allowance for doubtful accounts of $794 and $944 | 60,041 | 69,905 |
| Inventories | 1,219 | 938 |
| Other current assets | 35,797 | 25,723 |
| Total current assets | 175,329 | 191,131 |
| Property and equipment, net of accumulated depreciation of $111,723 and $93,653 | 283,228 | 204,966 |
| Operating lease right-of-use assets | 24,403 | 24,823 |
| Equity and other investments | 33,683 | 15,405 |
| Goodwill | 119,661 | 119,509 |
| Intangible assets, net | 19,325 | 22,604 |
| Other long-term assets | 38,599 | 40,565 |
| Total assets | 694,228 | 619,003 |
| Liabilities and stockholders’ equity | ||
| Current liabilities: | ||
| Accounts payable | 37,513 | 27,724 |
| Current portion of long-term debt | 8,839 | 2,999 |
| Accrued compensation | 11,270 | 13,709 |
| Short-term income taxes | 3,563 | 7,211 |
| Short-term unearned revenue | 50,924 | 64,555 |
| Other current liabilities | 24,552 | 25,020 |
| Total current liabilities | 136,661 | 141,218 |
| Long-term debt | 31,423 | 40,152 |
| Long-term income taxes | 27,941 | 25,986 |
| Long-term unearned revenue | 2,753 | 2,710 |
| Deferred income taxes | 2,899 | 2,835 |
| Operating lease liabilities | 16,703 | 17,437 |
| Other long-term liabilities | 61,481 | 45,186 |
| Total liabilities | 279,861 | 275,524 |
| Commitments and contingencies | ||
| Stockholders’ equity: | ||
| Common stock and paid-in capital shares authorized 24,000; outstanding 7,429 and 7,434 | 115,069 | 109,095 |
| Retained earnings | 302,526 | 237,731 |
| Accumulated other comprehensive loss | (3,228) | (3,347) |
| Total stockholders’ equity | 414,367 | 343,479 |
| Total liabilities and stockholders’ equity | 694,228 | 619,003 |
Consolidated Statements of Cash Flows (Unaudited)
| Description | Q3 ended Mar 31, 2026 | Q3 ended Mar 31, 2025 |
|---|---|---|
| Operating Activities: | ||
| Net cash from operating activities | 46,679 | 37,044 |
| Investing Activities: | ||
| Net cash from investing activities | (27,405) | (12,714) |
| Financing Activities: | ||
| Net cash from financing activities | (11,351) | (13,036) |
| Effect of exchange rate changes | (114.0) | 52.0 |
| Net increase/(decrease) in cash | 7,809 | 11,346 |
Face scale: (In millions, except per share amounts); (In millions). Amounts in millions USD; EPS as reported. Statements found on the EDGAR/iXBRL face print as filed; the rest are presentation-friendly mappings of filer XBRL tags. Use EDGAR for interactive notes and detail. Interactive statements & notes on EDGAR ↗
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Figures/quotes linked to EDGAR · Narrative written by AI · Aug 29, 2026 · How we verify