Microsoft Financial Results FY26 Q2


Microsoft Financial Results for Q2 FY26

Revenue = $81.3 billion (up 17%)

Net Income = $38.5 billion (up 60%)

Microsoft Cloud = $51.5 billion

As it has been every quarter for many years now, more big increases across the board as Microsoft continues to grow. They have RPO (Remaining Performance Obligation) of $625 billion, an increase of 110%, which indicates a lot of multi-year agreements have been signed. This huge backlog of guaranteed revenue likely means that Microsoft aren’t as bothered about your order/renewal as you might like them to be…making discounts harder to come by for many customers.

Is AI still a hot topic?

Yes!

Satya Nadella, Microsoft CEO said:

“We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises”

“We are pushing the frontier across our entire AI stack to drive new value for our customers and partners.”

And devoted the majority of his time on the earnings call to discussing AI, both software and hardware.

Additionally, Q2 saw commercial booking increase 230%, “driven by Azure commitments from OpenAI and Anthropic”. Further more, Perplexity have also signed a $750 million deal with Azure – https://www.msn.com/en-us/money/other/perplexity-inks-microsoft-ai-cloud-deal-amid-dispute-with-amazon/

Productivity & Business Processes

Revenue = $51.5 billion, an increase of 26%

Dynamics 365 revenue increased 19%

Microsoft 365 Commercial cloud revenue increased 17% with ARPU (Average Revenue Per User) driven by E5 and M365 Copilot.

Microsoft 365 Copilot seats added increased 160% year on year in FY26 Q2 (Oct – Dec 2025) taking them to 15 million paid seats. Of course, how many of those are being used – and being used well – is a different question entirely. 

Tracking and understanding ROI of AI investments isn’t as high a priority for most organisations as it should be. This really is an areas where ITAM & FinOps professionals can help organisations take a deeper, more data driven approach to AI procurement and value. I wrote this over 2.5 years ago – https://cloudywithachanceoflicensing.com/2023/07/21/microsoft-365-copilot-pricing-and-licensing-strategy/ – and I don’t think much has changed tbh.

Intelligent Cloud

Revenue = $32.9 billion, an increase of 29%

Azure increased by 39% (down from 40% in the previous quarter) but gross margin on cloud declined slightly. Market analysts were hoping for higher Azure growth so this perceived miss was partially responsible for a drop in Microsoft’s stock after the announcement.

They are also concerned that the huge amount of money Microsoft are spending on CAPEX related to AI datacentres etc. isn’t generating ROI fast enough.

Conclusion

Microsoft’s results underscore that licence management, cloud cost control, and financial governance are now inseparable, particularly as AI accelerates both consumption and complexity. 

For ITAM and FinOps leaders, Q2 FY26 is less about Microsoft’s growth and more about the operational response it demands: proactive review of AI and cloud commitments, tighter contract scrutiny, and implementation of usage intelligence. 

Organisations that align ITAM and FinOps processes to anticipate consumption variability and optimise spend can mitigate financial risk while maximising value from licences, cloud services, and emerging AI capabilities. Success will increasingly depend on granular monitoring, AI-informed analytics, and governance tools that bridge licensing, cloud, and financial metrics.

See more here – FY26 Q2 – Press Releases – Investor Relations – Microsoft

Microsoft Financial Results: Q1 FY26


Satya Nadella now refers to Microsoft “building a planet-scale cloud and AI factory” which, with the recent agreement with Open AI, including $250 billion of Azure services (these don’t impact the Q1 results), and Copilot, shows they’re not changing direction any time soon.

Is Microsoft Copilot successful?

Lots of talk in the earnings call about Copilot growth and success with 90% of the Fortune 500 using M365 Copilot and various organisations purchasing 15,000+ seats in Q1 and PWC purchasing 155,000 seats. One should always be carefully sceptical of numbers like this from software publishers – what exactly is “using” and how many people within an org are “using” the software for example?

Copilot functionality is being added into almost every facet of Microsoft’s product portfolio, making it ubiquitous whether users really want it or not!

What are Microsoft’s Financial Results for Q1 FY26?

Revenue = $77.7 billion, an 18% increase

Net Income = $27.7 billion, a 12% increase

Microsoft Cloud = $49.1 billion, a 26% increase

What are Microsoft spending?

  • Capital Expenditure (CAPEX) was up 74% in Q1 FY26 “to support customer demand for…cloud and AI offerings.” Approximately half of that spend was on “short-lived assets” such as GPUs and CPUs for Azure and AI growth.
  • Long-lived assets spend was up 71%, driven by lease commencements for “large datacenter sites”.

You can see here the huge amount of money that Microsoft are spending on building datacentres, primarily to handle AI growth.

Productivity & Business Processes

  • Revenue = $33 billion, a 17% increase
  • Microsoft 365 Commercial Revenue = 17% increase
  • Dynamics 365 revenue = 18% increase

Operating Expenses increased 6% driven by investments in “compute capacity and AI talent”.

The M365 growth was driven by E5 and Copilot. 

Intelligent Cloud

  • Revenue = $30.9 billion, a 28% increase
  • Azure = 40% increase

Operating Expenses increased 4% driven by investments in “compute capacity and AI talent”. 

Earnings Call highlights

  • Microsoft plan to increase their total AI capacity by 80% through FY26 and double their datacentre footprint by 2028. They plan to launch the “world’s most powerful AI datacentre” in 2026 which will hit 2 gigawatts itself.
  • Fabric revenue increased 60% and now has 28,000 paying customers.
  • Cosmos DB revenue increased 50%.
  • Microsoft Sentinel has 40,000 customers.

Microsoft Financial Results: FY25 Q2


Microsoft have announced their Q2 results for FY25 and, not surprisingly at all, they’ve earned a LOT of money and are talking a lot about AI!

Overall results

Revenue was up 125 to $69.6 billion and Net Income was up 10% to $24.1 billion. The over-arching “Microsoft Cloud” segment increased 21% to $40.9 billion while the AI business was approx. $3.25 billion as it had an annual run rate of $13 billion, which is 175% up year on year.

Satya Nadella sad:

“We are innovating across our tech stack and helping customers unlock the full ROI of AI to capture the massive opportunity ahead,”

Productivity & Business Processes

Revenue = $24.9 billion, up 14%

This was driven by a 16% increase in M365 Commercial cloud revenue and 19% revenue growth for Dynamics 365.

Microsoft saw “better-than-expected performance in E5 and M365 Copilot, both of which drove Average Revenue Per User (ARPU).

Intelligent Cloud

Revenue = $25.5 billion, up 19%

31% growth in Azure (and other cloud services)

Earnings Call

  • There were 54 mentions of AI throughout the call.
  • Over 19.000 paying customers for Microsoft Fabric.
  • 30 million+ monthly active users (MAU) for Power BI, which is 40% up year on year.
  • 200,000 MAU for Azure AI Foundry.
  • Over 400,000 custom agents created with Copilot Studio across 160,000 orgs in the last 3 months.
  • Continued growth in the number of $100 million+ contracts for Azure and M365.

More changes to the partner channel?

CFO Amy Hood stated:

“Growth in our non-AI services was slightly lower than expected due to go-to-market execution challenges, particularly with our customers that we primarily reach through our scale motions, as we balance driving near-term non-AI consumption with AI growth.”

She described the “scale motion” as “customers we reach through partners and through more indirect methods of selling” and alluded to changes around where investments, marketing spend, and internal resources would be positioned to help drive sales through the partner channel.

Nadella also said “How do you really tweak the incentives go to market? At a time of platform shifts, you want to make sure you lean into even the new design wins, and you just don’t keep doing the stuff that you did in the previous generation.

This could be partly behind Microsoft’s increasing drive to take more customers direct, that it gives them more control over what’s happening to drive organisations towards new platforms and products.

Check it out here https://www.microsoft.com/en-us/Investor/earnings/FY-2025-Q2/press-release-webcast

Microsoft Financial Results: FY 24


It’s that time of year again – Microsoft have announced their Q4 and full financial year results…so let’s take a look.

Full Year FY24 Results

Revenue = $245.1 billion, a 16% increase

Net Income = $88.1 billion, a 22% increase

Microsoft Cloud = $135 billion +, a 23% increase.

Q4 FY 24 Results

Q4 Revenue = $64.7 billion, a 15% increase

Q4 Net Income = $22 billion, a 10% increase

Microsoft Cloud

This isn’t a Business Unit but rather a group of related products across the organisation including:

  • Azure
  • O365 Commercial
  • Dynamics 365
  • Parts of LinkedIn
  • “Other cloud properties”

Revenue was $36.8 billion, an increase of 21% Year on Year (YoY).

Microsoft note that gross margin decreased YoY to 69%. This is driven by “sales mix shift to Azure” but was partially offset by Microsoft making Azure improvements including scaling their AI Infrastructure.

Now let’s look at some of the individual Business Units and how they performed in Q4 FY24.

Productivity and Business Processes

Revenue = $20.3 billion, an 11% increase

Office 365 Commercial = 13% increase. Seat growth was again driven by SMB and Frontline Worker growth while Average Revenue Per User (ARPU) growth was driven by E5 and Copilot for M365.

LinkedIn = 10% increase

Dynamics 365 = 19% increase <– This is now almost 90% of all Dynamics revenue.

This gives a good overview of growth over the last 5 quarters:

Intelligent Cloud

Revenue = $28.5 billion, a 19% increase

Azure (and other cloud services) growth was 29% for this quarter, a little drop from the percentage point increase of the last 2 quarters but, as it’s Q4, likely increasing from a higher base. Microsoft highlight that 8 points of this growth was from AI services.

Amy Hood (CFO) states that AI demand is higher than Microsoft’s currently available capacity but they expect availability to increase in H2 FY25 aka Jan 2025 onwards.

Server Products grew by 2% this quarter, again driven by hybrid BYOL use with Azure Hybrid Benefit.

Overall growth over the last 5 quarters looks like this:

Overall business and FY25

In terms of how Microsoft are spending money, Amy Hood, CFO, stated that:

“Cloud and AI related spend represents nearly all of total capital expenditures [CAPEX]. Within that, roughly half is for infrastructure needs where we continue to build and lease datacenters that will support monetization over the next 15 years and beyond. The remaining cloud and AI related spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals.”

Amy Hood gave her expectations for Q1 FY25 (and beyond) and they are:

Productivity and Business Processes

Expected revenue growth of between 10% and 11% in constant currency (or $20.3 to $20.6 billion), with O365 driven by E5 and Copilot for M365.

Intelligent Cloud

Expected revenue growth of 18 – 20% (or $28.6 to $28.9 billion) with Azure expected to be 28% – 29% up.

Earnings Call highlights

  • 42 mentions of Copilot.
  • Number of customers with 10,000+ licenses of Copilot for Microsoft 365 doubled quarter over quarter,
  • Industry specific Copilots are here. DAX Copilot for Healthcare (over on the Nuance side of the portfolio) has over 400 customers currently.
  • Over 1,000 paying customers of Copilot for Security. Satya Nadella also states they have “1.2 million security customers” <– that indicates a lot of potential growth for Copilot there!
  • 60,000+ Open AI customers – with average spend per customer increasing.
  • GitHub Copilot accounts for over 40% of GitHub’s revenue and is bigger than GitHub was when Microsoft acquired it.
  • 36,000 Azure Arc customers, a 90% YoY increase.
  • 14,000+ paying Microsoft Fabric customers.
  • 48 million Monthly Active Users of Power Platform, a 40% YoY increase.
  • Over 40,000 organisations using Dynamics 365 Business Central.
  • Over 3 million users of Teams Premium.
  • More large-scale SAP workloads being migrated to Azure.
  • There was further growth in the “number of 10-million-dollar-plus and 100-million-dollar-plus contracts for both Azure and Microsoft 365

Microsoft Financial Results: Q3 FY24


Let’s take a look at Microsoft’s financial results for Q3 FY24 (Jan – Mar 24) and, in a not surprising move at all – they’re pretty good!

Headline Numbers

Revenue = $61.9 billion (17% increase)

Net income = $21.9 billion (20% increase)

Within that, “Microsoft Cloud” was $35.1 billion, an increase of 23% year on year.

Productivity & Business Processes

Revenue = $19.6 billion (up 12%)

  • Office 365 Commercial revenue increased 15%
    • Commercial seats grew 8% driven by SMB and Frontline SKUs again
  • LinkedIn increase 10%
  • Dynamics 365 grew 19%

Intelligent Cloud

Revenue = $26.7 billion (up 21%)

Azure grew 31% – yet again the growth percentage increases for another quarter. Interestingly, server licenses were up 6% due to hybrid and BYOL licensing.

Earnings Call Highlights

  • “Copilot” features 47 times in the transcript
  • Office 365 ARPU (Average Revenue Per User) grew thanks to E5 and Copilot
  • Enterprise Mobility & Security (EMS) now has 274 million seats, up 10%
  • Azure Arc now has 33,000 customers
  • The average size and length of Azure deals has increased
  • The number of 100 million dollar-plus Azure deals increased over 80% year-over-year (YoY) while the number of 10 million dollar-plus deals more than doubled
  • Over 11,000 customers for Microsoft Fabric <– How many of those are simply Power BI Premium users who have moved over early?
  • 30,000 organisations using Copilot for Studio to customize Copilot for Microsoft 365 and/or make their own
  • PowerApps users are now at 25 million per month, a 40% increase YoY

Microsoft Financial Results: Q1 FY24


Microsoft have announced their financial results for Q1 FY24 (July – Sept 2023) so let’s dive in and take a look.

Overall revenue was $56.5 billion, a 13% increase Year on Year (YoY), while net income was up 27% to $22.3 billion. The “Microsoft Cloud” revenue hit $31.8 billion which was a 24% increase.

Productivity & Business Processes

  • Revenue = $18.6 billion, up 13%
  • Office 365 Commercial = up 13%
  • Dynamics 365 = up 29%

Office 365 growth is primarily driven by SMB and Frontline SKUs.

Intelligent Cloud

Revenue = $24.3 billion, up 19%

Azure growth was 29% which is the first time for 2 year that the rate of growth has increased quarter on quarter. Q4 FY23 was 26% and now it’s at 29% which shows that spend in Azure is picking up at a newly increased speed.

Earnings call highlights

  • Azure Arc up to 21,000 customers – a 140% increase YoY. <– How much of this is driven by the new PAYG ESUs and Microsoft’s push?
  • 16,000+ customers using Microsoft Fabric.
  • 20 million Monthly Active Users (MAU) for Power Apps.
  • Total headcount is 7% lower than 1 year ago.
  • Satya Nadella gives a shoutout to the newly announced Oracle@Azure program as a driver of cloud growth:

“Once we announced that the Oracle databases are going to be available on Azure, we saw a bunch of unlock from new customers who have a significant Oracle estate that have not yet moved to the cloud, because they needed to rendezvous with the rest of the app estate in one single cloud”

Interesting to see Oracle contributing to Microsoft’s growth!

  • Lots of talk of AI throughout, looking ahead to the launch of M365 Copilot on November 1st.

It’s clear that Microsoft are in a strong position and it looks like growth will continue for the foreseeable. Yes there’s a lot of volatility in the world, both economically and politically, but Microsoft have first mover advantage on per-user generative AI for business users with Copilot as well as several other growing products.

See more info on the Microsoft site here.

Microsoft Financial Results: Q3 FY23


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Microsoft announced their Q3 FY23 (Jan – Mar 23) results recently – let’s take a look at the numbers.

Overall revenue for the quarter was $52.9 billion – an increase of 7% while net income was up 9% to $18.3 billion. The latter something of a turnaround from the 12% decrease the previous quarter.

Productivity & Business Processes

Revenue = $17.5 billion…up 11%

  • Office 365 Commercial up 14%
  • LinkedIn up 8%
  • Dynamics up 25%

A little higher than Q2 but still lower than we’ve been seeing for the last couple of years.

Intelligent Cloud

Revenue = $22.1 billion…up 16%

Azure growth was 27% again, a decent increase but continuing the ongoing shrinking of the percentage increase each quarter.

Earnings Call

Satya Nadella stated that Microsoft continue to focus on 3 priorities:

  • Helping customers to get the most value out of their digital spend
  • Investing in AI to increase their Total Addressable Market (TAM) and be the leader
  • Aligning their cost structure with their revenue growth

We are now in the era of ChatGPT and AI – an area where Microsoft are expected to do very well in the coming months and years – and Nadella stated in the earnings call that they have over 2,500 Open AI Azure customers which is a 10x quarter on quarter increase. He also mentioned that ChatGPT runs on top of Microsoft’s CosmosDB.

Further updates include:

  • Azure Arc is up to 15,000+ customers which is 150% up year on year (YoY).
  • Power Platform is up to 33 million Monthly Active Users (MAU) – almost 50% up YoY.
  • Teams has broken the 300 million MAU mark.
  • Almost 60% of Enterprise customers are buying Teams Phone, Teams Rooms, and/or Teams Premium.
  • Almost 600,000 customers have deployed at least 4 Microsoft security workloads – a 35% YoY increase.
  • Amy Hood stated that, at the end of April 23, total headcount was 9% more than a year prior.

Satya mentioned Copilot several times and, in response to an analyst question, stated that:

“We do plan to monetize a separate set of meters across all of the tech stack, whether they’re consumption meters or per-user subscriptions. The copilot that’s priced, and it is there, is GitHub Copilot. That’s a good example of incrementally how we monetize the price lists out there, and others are to be priced, because we are in preview mode. But you can expect us to do what we’ve done with GitHub Copilot pretty much across the board”

Satya Nadella, Q3 FY23 earnings call

and that gives a good idea of what Copilot licensing may look like. I think my expectation of add-ons to E3 and E5 is pretty accurate.

While Microsoft’s revenue and profits are looking great, and they’re excited about all the growth ahead of them, the shine is dimmed somewhat by 2 things: the memory of the layoffs of circa 10,000 staff in January and the recent news that there are to be no pay raises across Microsoft. Give the increases in cost of living, energy, and inflation – wages staying flat can be seen as a pay cut in many ways.

You can see all the details here.

Microsoft Financial Results: Q1 FY23


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Let’s take a look at Microsoft’s financial results for the first quarter of FY23.

  • Overall revenue was $50.1 billion, an increase of 11%.
  • Operating income was $21.5 billion, up 6%…
  • but Net income was down 14% to $17.6 billion
  • Operating expenses were up 15% to $13.2 billion.

Looking at the individual divisions we see:

Productivity & Business Processes

Overall revenue up 9% to $16.5 billion and within that:

  • Office 365 Commercial revenue up 11%
  • LinkedIn revenue up 17%
  • Dynamics 365 revenue up 24%

Intelligent Cloud

Overall revenue was up 20% to $20.3 billion and within that:

  • Azure growth of 35%

Still a good increase but noticeably slowing down from previous quarters. Microsoft note that cloud margins are down primarily due to increased energy bills.

More Personal Computing

Overall revenue decreased slightly to $13.3 billion and within that:

  • Windows OEM revenue decreased 15%
  • Devices revenue increased 2%

Earnings Call

  • Satya Nadella was quick to point out the hybrid/multi-vendor approaches possible with Azure – talking about SAP & Oracle in the first couple of paragraphs.
  • PowerApps has almost 15 million monthly active users (MAU), a 50% year on year increase, and Power Automate has reached 7 million MAU.
  • Nadella also talked about Teams and how chat has overtaken email as where the average user spends their time. He also said:

“Teams is becoming a ubiquitous platform for business process.”

and shared that the number of enterprise users running 3rd party/custom apps has increased 60% year over year.

  • Microsoft Viva already has 20 million MAU – just the start of things for this line-up I’m sure.
  • Amy Hood spoke about strong E5 momentum being driven by security, compliance, and voice products and an increase in Average Revenue Per User (ARPU) too.
  • Nadella also stated:

we are going to optimize for long-term customer loyalty by proactively helping them optimize [Azure] spend

This follows on from what he said last quarter (and also matches what AWS recently said) that helping customers waste less will ultimately help them spend more.

Further Reading

See all the info, slides, and transcripts here.

Microsoft Financial Results: Q3 FY22


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Microsoft’s financial results for Q3 FY22 (Jan – Mar 22) are in and, once again, they’re showing strong growth in all their key focus areas. They also listed several big name customers that they’re working with including:

  • Bridgestone
  • Lufthansa
  • Fujitsu
  • Woolworths
  • Cracker Barrel
  • Heineken

and called out Boeing, Heinz, and Westpac among customers making “strategic” Azure commitments.

Satya Nadella always hits us with a good quote during the earnings call and this quarter’s was:

“The last two years have proven that every organization needs a digital fabric that connects the entire organization”

Let’s take a look at some of the numbers:

Overall

Revenue = $49.4 billion – up 18%

Operating income = $20.4 billion – up 19%

Really strong top line numbers as always – remember, this is for just 3 months!

Productivity & Business Processes

Revenue = $15.8 billion – up 17%

  • Office 365 Commercial up 17%
  • Dynamics 365 up 35%
  • LinkedIn up 35%

Microsoft saw growth in SMB and frontline SKUs as well as increase in Revenue Per User – a key SaaS metric.

Office on-prem revenue was down 28%, continuing the downwards trend that we’ve been seeing for a couple of years now. It was noted as well that the end of Open Licensing has caused a drop in transactional license sales during the last quarter.

Intelligent Cloud

Revenue = $19.1 billion – up 26%

  • Azure (and other cloud services) up 46%
  • Server products up 5%

Another strong showing from Azure…with the number of $100 million Azure deals more than doubling over the previous year.

The server products increase includes Window Server & SQL Server in hybrid use cases (as well as Nuance) and again Microsoft mentioned the impact of Open Licensing’s end.

What else did we learn?

  • Satya Nadella once again called out the performance of Cosmos DB, with 100%+ YoY growth for 3 quarters in a row.
  • Power Platform, as a family, was up 72% year on year.
  • Microsoft Viva has over 10 million monthly active users.

Overall this is another great performance from Microsoft, giving them good momentum as they move into their Q4 (April – June) which is always a busy time of year. It will be interesting to see the full FY results in July for sure!

Microsoft financial results: Q2 FY22


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Microsoft’s financial results are, once again, fantastic. For Q2 FY22 (Oct – Dec 21) their headline results are:

  • Revenue = $51.7 billion, an increase of 20%
  • Operating Income = $22.2 billion, an increase of 24%
  • Net Income = $18.8 billion, an increase of 21%

That’s over $51 billion in 3 months – a single quarter bigger than recent annual revenues for companies like Oracle, Nike, and Coca Cola.

Looking at the separate business units we see the following…

Productivity & Business Processes

  • Revenue = $15.9 billion, up 19%
  • Office 365 Commercial up 19%
    • “Continued momentum” for E5
  • LinkedIn up 37%
  • Dynamics 365 up 45%
  • Power Apps up 161%
  • Office Commercial (i.e on-premises) down 17%

Intelligent Cloud

  • Revenue = $18.3 billion
  • Azure up 46%
    • “Significant growth” in long-term contracts (again)
  • Enterprise Mobility up to 209 million+ seats

Yet more strong double digit growth across all these product divisions, as we’ve seen so many times before over the last few years. Although the growth is still very strong with Azure, it’s perhaps worth noting that the % increase is dropping slightly over time…from 50 in Q1 to now 46…although this makes sense – as the base grows, maintaining the same % increase becomes more difficult.

We also saw that the security business surpassed $15 billion in revenue, up almost 45% YoY.

“Digital technology is the most malleable resource at the world’s disposal to overcome constraints and reimagine everyday work and life.”

Earnings Call

There is always plenty of great info in the earnings call and this quarter was no different.

  • Azure Arc has tripled its user base YoY as organisations expand hybrid environments.
  • New Azure customers include:
    • CVS Health
    • Johnson & Johnson Medical Devices
    • Kyndryl
    • Wells Fargo
  • Cosmos DB transactions increased 100% YoY
  • Industry Clouds are driving “significant usage” across Microsoft Cloud
  • Teams has 270 million+ monthly active users
  • Microsoft Viva has over 1,000 paying customers already
  • Microsoft Sentinel has over 15,000 customers – a 70% increase YoY

Satya Nadella also discussed “Dynamics 365 Connected Spaces” (currently in preview) which is focused on automating and managing physical processes. This is part of their “Metaverse” play for business.

Note that many of the new “exotic” products are being name checked here:

  • Azure Arc
  • Cosmos DB
  • Industry Clouds
  • Power Apps
  • Microsoft Sentinel

This really helps to highlight Microsoft’s future plans and the successful growth they’re seeing there already. It also seems that there’s plenty of room for growth over the next few years so it doesn’t seem that Microsoft’s growth will be slowing any time soon.

Further Reading

Microsoft Earnings Press Release & documents