Latest quarter
Microsoft reported Q4 FY2026 revenue of $90.0 billion, up 17.7% from $76.4 billion a year earlier. Revenue exceeded the consensus of $87.4 billion, while adjusted EPS of $4.74 exceeded the consensus of $4.21; reported diluted EPS was $4.81, up 31.8% from $3.65.
Amy Hood said results reflected demand across Azure and Microsoft’s first-party AI applications and services. She said Productivity and Business Processes revenue rose 14% to $37.8 billion, while More Personal Computing revenue declined 4% to $12.9 billion. The filing said Azure and other cloud services revenue increased 41% in FY2026, while XBOX revenue declined 7%.
Microsoft reported a 67.2% gross margin, down 1.4 percentage points year over year, and a 45.1% operating margin, up 0.2 percentage points. Operating cash flow was $55.4 billion, up 30.0%, while free cash flow was $19.6 billion, down 23.2%, reflecting higher capital expenditures. Hood said quarterly revenue, operating income and earnings per share exceeded the company’s expectations.
| Q4 FY2026 | Q4 FY2025 | Change | |
|---|---|---|---|
| Revenue | $90.0 billion | $76.4 billion | 17.7% |
| Diluted EPS | $4.81 | $3.65 | 31.8% |
| Gross margin | 67.2% | 68.6% | −1.4 percentage points |
| Operating margin | 45.1% | 44.9% | 0.2 percentage points |
| Free cash flow | $19.6 billion | $25.6 billion | −23.2% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $4.74 | $4.21 | Beat by 12.6% |
| Revenue | $90.0 billion | $87.4 billion | Beat by 2.93% |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
What management said on the call
Amy Hood said customer demand continued to exceed available supply, and she said capacity constraints remained in the system. She said efficiency improvements in Microsoft’s CPU and GPU fleets, together with faster deployment processes, made additional Azure capacity available during the quarter and that the capacity was quickly monetized.
Hood said the company is focusing on efficiency across its infrastructure and applications as it expands capacity. She said more recent contracts can reflect pricing, while Microsoft seeks to preserve customer value as component prices change. In response to questions about whether investment could be adjusted if demand changes, Hood said processors and graphics-processing units represent a large component of spending and can be slowed, while data-center build timing can also be staggered. Hood did not provide a numerical timetable for resolving supply constraints.
Hood said company gross margin declined year over year because of a greater Azure mix, AI-infrastructure investment and increased product use, partly offset by efficiency gains. She said Microsoft changed the estimated useful life of data centers and office buildings from 15 to 25 years at the start of FY2027, with a minimal expected benefit to FY2027 operating income. She said the shift of some leases from finance leases to operating leases changed the company’s calendar 2026 capital-expenditure expectation to approximately $175 billion.
Satya Nadella said customers increasingly want choice among models and that Microsoft’s platform supports multiple model providers. He said Microsoft is combining Copilot experiences with business-process data, security and governance, and is adding usage-based billing alongside per-seat licensing. Nadella also said Microsoft expects XBOX to return to growth in fiscal 2027 after decisions across its content portfolio, platform and operations.
Guidance
Microsoft said its latest call did not identify any target as changed or withdrawn from previous guidance. The company expects FY2027 double-digit revenue and operating-income growth, operating-expense growth in the mid- to high-single digits, and an effective tax rate of approximately 20%. Microsoft also expects capital expenditures to grow year over year, full-year operating margin to decline by less than one point, and free cash flow to remain positive.
| Metric | For | Guide | Previous guide | Change |
|---|---|---|---|---|
| Tax rate | FY2027 | 20.0% | — | New |
| Free cash flow | FY2027 | Microsoft expects to remain free-cash-flow positive in FY2027. | — | — |
| Operating margin | FY2027 | Microsoft expects full-year operating margins to be down less than one point in FY2027. | — | — |
| Capex | FY2027 | Microsoft expects capital expenditures to grow year over year in FY2027. | — | — |
| Operating expenses | FY2027 | Microsoft expects operating expenses to grow in the mid- to high-single digits in FY2027. | — | — |
| Revenue | FY2027 | Microsoft expects double-digit revenue growth in FY2027. | — | — |
| Revenue, Windows Oem and Devices | FY2027 | Microsoft expects Windows OEM and devices revenue to decline in the high teens for FY2027. | — | — |
| Revenue, M365 Commercial Products | FY2027 | Microsoft expects M365 commercial products revenue to decline in the mid-single digits for FY2027. | — | — |
| Revenue, Windows Oem and Devices | Q1 FY2027 | Microsoft expects Windows OEM and devices revenue to decline in the low 20s in Q1 FY2027. | — | — |
| Revenue, On Premises Server Business | Q1 FY2027 | Microsoft expects on-premises server revenue to decline in the low- to mid-single digits in Q1 FY2027. | — | — |
| Revenue, Intelligent Cloud | Q1 FY2027 | $41.0 billion–$41.3 billion | — | New |
| Revenue, Dynamics 365 | Q1 FY2027 | Microsoft expects Dynamics 365 revenue growth in the low teens in Q1 FY2027. | — | — |
| Revenue, Linkedin | Q1 FY2027 | Microsoft expects LinkedIn revenue growth in the high single digits in Q1 FY2027. | — | — |
| Revenue, M365 Consumer Cloud | Q1 FY2027 | Microsoft expects M365 consumer cloud revenue to grow in the mid-teens in Q1 FY2027. | — | — |
| Revenue, M365 Commercial Products | Q1 FY2027 | Microsoft expects M365 commercial products revenue to grow in the mid-single digits in Q1 FY2027. | — | — |
| Revenue, Productivity and Business Processes | Q1 FY2027 | $36.7 billion–$37.0 billion | — | New |
| Revenue, Xbox | FY2027 | Microsoft expects Xbox to return to growth in FY2027. | — | — |