Microsoft Q2 2026 earnings: cloud growth strong, OpenAI stake lifts profit
Microsoft's revenue rose 17% on strong Azure and AI demand, while heavy AI infrastructure spending and a one-time OpenAI accounting gain shaped the profit picture.
| Q2 2026 | Reported |
|---|---|
| EPS | $5.16 |
| Revenue | $81.27B |
Figures as reported by the company to the SEC for the quarter ended December 31, 2025. Analyst estimates are not part of a filing, so no comparison to expectations is shown.
Key takeaways
- Revenue came in at $81.3 billion for the quarter ended December 31, 2025, up 17% from a year earlier, powered mainly by strong demand for cloud and AI services.
- Azure, Microsoft’s cloud computing platform, grew roughly 39% year-over-year. Management said customer demand for AI and cloud capacity continues to outpace how fast the company can build new data centers.
- Of Microsoft’s three business segments, Intelligent Cloud (Azure and server products) grew about 29%, Productivity and Business Processes (Office, LinkedIn) grew about 16%, while More Personal Computing (Windows, Xbox, devices) declined about 3%.
- Reported profit jumped to $38.5 billion in net income, up from $24.1 billion a year earlier, but roughly $7.6 billion of that increase came from a one-time, non-cash accounting gain tied to Microsoft’s investment in OpenAI, after OpenAI reorganized its ownership structure in October 2025.
- The company spent $37.5 billion on capital expenditures, up 66% from a year ago, mostly on short-lived equipment like AI chips and servers needed to keep up with cloud demand. Executives said spending should ease somewhat next quarter.
- Profitability metrics stayed strong but showed some pressure from AI-related spending: gross margin over the trailing year was around 68%, down slightly, and management guided that operating margin should dip modestly year-over-year in the current quarter because of continued AI infrastructure investment.
- CEO Satya Nadella said Microsoft added nearly one gigawatt of new data-center capacity in the quarter alone, illustrating the scale of its AI buildout, while CFO Amy Hood reiterated that customer demand for capacity continues to exceed available supply.
- Return on equity of about 33% and a net profit margin above 40% over the trailing twelve months indicate the company continues to convert a large share of its revenue into profit, even as AI investment ramps up.
Q2 2026 in context
| Metric | Dec 2025 | Dec 2024 | Change |
|---|---|---|---|
| Revenue | $81.3B | $69.6B | +16.7% |
| Net income | $38.5B | $24.1B | +59.5% |
| Free cash flow | $5.9B | $6.5B | -9.3% |
| Diluted EPS | $5.16 | $3.23 | +59.8% |
| Gross margin | 68.0% | 68.7% | -0.7 pts |
| Operating margin | 47.1% | 45.5% | +1.6 pts |
| Net margin | 47.3% | 34.6% | +12.7 pts |
Figures for the quarter ended Dec 2025 and the quarter ended Dec 2024, as reported to the SEC.
Each company's quarter ending in calendar Q4 '25, as reported to the SEC. A peer that reported no revenue figure for that quarter is left out.
How the stock took it
Microsoft Corporation closed at $480.58 on Jan 27, 2026, the last session before the report, and at $433.50 on Jan 29, 2026, the first session after it — -9.8% across the report.
| Earlier report | Close before | Close after | Change |
|---|---|---|---|
| Oct 29, 2025 | $542.07 | $525.76 | -3.0% |
Closes from the market's daily record. Each figure spans the report date — from the last session that closed before it to the first that closed after — because a company may report before the open or after the close.
Sources: company report · Futurum Group · om.co · CNBC