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Microsoft posts record FY26 results as cloud and AI businesses power 18 per cent growth
Azure tops $100 billion in annual revenue as AI investments lift profits and cash flow
CALIFORNIA: Microsoft has certainly found its silver lining in the cloud. The technology giant closed fiscal 2026 with record revenue and profit as booming demand for cloud computing and artificial intelligence services continued to drive growth across its business.
For the financial year ended 30 June 2026, Microsoft reported revenue of $331.8 billion, up 18 per cent year on year, or 16 per cent in constant currency. Operating income climbed 21 per cent to $155.2 billion, while GAAP net income surged 31 per cent to $133.7 billion. Diluted earnings per share reached $17.95.
The fourth quarter capped off the year on a strong note. Revenue increased 18 per cent to $90.0 billion, or 17 per cent in constant currency. Operating income rose 18 per cent to $40.6 billion, while GAAP net income jumped 31 per cent to $35.8 billion, translating into diluted earnings per share of $4.81. On a non-GAAP basis, net income stood at $35.3 billion, up 22 per cent, with diluted earnings per share of $4.74.
The company’s Intelligent Cloud division remained the biggest growth engine, generating $39.3 billion in quarterly revenue, an increase of 32 per cent. Within the segment, Azure and other cloud services revenue surged 43 per cent, underscoring sustained enterprise demand for AI-powered cloud infrastructure.
Meanwhile, the Productivity and Business Processes segment recorded quarterly revenue of $37.8 billion, up 14 per cent. Consumer cloud services revenue increased 24 per cent, while LinkedIn revenue grew 12 per cent during the quarter.
The More Personal Computing business was the only segment to decline. Revenue fell 4 per cent to $12.9 billion, as Windows OEM and Devices revenue dropped 7 per cent and Xbox content and services revenue declined 10 per cent.
The company’s broader Microsoft Cloud business generated $59.3 billion in quarterly revenue, representing 27 per cent growth. Commercial remaining performance obligations rose 84 per cent to $678 billion, highlighting a robust future revenue pipeline.
Artificial intelligence continued to play a central role in Microsoft’s performance. Microsoft, chief executive officer, Satya Nadella said annual revenue from Azure had crossed the $100 billion mark for the first time, while Microsoft 365 Copilot surpassed 30 million paid seats, reflecting strong enterprise adoption of AI tools.
The quarter also benefited from several one-time financial gains that added $0.27 per share to earnings. These included a $3.2 billion gain on Microsoft’s investment in Anthropic and lower-than-expected costs related to its voluntary retirement programme. These gains more than offset impairment charges linked to Xbox and severance expenses.
Microsoft also reported a positive swing from its investments in OpenAI. During the fourth quarter, investment gains contributed $480 million, or $0.07 per share, to GAAP net income. For the full fiscal year, OpenAI-related investments generated net gains of $4.96 billion, adding $0.67 per share to earnings. This marked a sharp turnaround from fiscal 2025, when the company recorded net investment losses of $3.62 billion from the same investments.
Cash generation remained exceptionally strong throughout the year. Net cash provided by operating activities rose to $182.9 billion, up from $136.2 billion in fiscal 2025. Capital expenditure on property and equipment nearly doubled to $115.9 billion, compared with $64.6 billion a year earlier, reflecting Microsoft’s aggressive investment in AI infrastructure and data centres.
The company also continued to reward shareholders. During the fourth quarter, Microsoft returned $10.2 billion through dividends and share repurchases. For the full financial year, shareholder returns totalled $48.7 billion.
Microsoft ended fiscal 2026 with total assets of $758.4 billion, providing a solid foundation for the year ahead. With Azure now generating more than $100 billion annually, Copilot rapidly expanding across enterprises, record cash flows and continued investment in AI infrastructure, the company enters fiscal 2027 with considerable momentum and an even stronger position in the global technology race.
