Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Microsoft Q2 FY2026 Earnings Summary
Microsoft delivered exceptional results for its fiscal second quarter ending December 31, 2025, demonstrating that its massive investments in artificial intelligence infrastructure are paying off. The technology giant reported revenue of $81.3 billion, representing a 17% increase from the same period last year and exceeding analyst expectations.
The company’s cloud business continues to be the primary growth engine. Microsoft Cloud revenue crossed the $50 billion quarterly milestone for the first time, reaching $51.5 billion with 26% year over year growth. Azure, Microsoft’s cloud computing platform that competes with Amazon Web Services, grew an impressive 39%, accelerating from 31% growth in the same quarter last year. This acceleration reflects strong demand for AI computing services as businesses increasingly adopt generative AI tools.
| Product/Service | Y/Y Growth (Reported) | Y/Y Growth (Constant Currency) |
| Microsoft Cloud | 26% | 24% |
| Azure and other cloud services | 39% | 38% |
| Microsoft 365 Commercial cloud | 17% | 14% |
| Microsoft 365 Consumer cloud | 29% | 27% |
| Dynamics 365 | 19% | 17% |
| 11% | 10% | |
| Commercial remaining performance obligation | 110% | 110% |
Profitability improved significantly. Operating income reached $38.3 billion, up 21% from last year, while operating margin expanded by approximately 2 percentage points to 47.1%. This margin improvement came despite heavy investments in data centers and AI infrastructure, demonstrating Microsoft’s ability to control costs while scaling its cloud operations.
Earnings per share told two different stories depending on accounting treatment. On a standard accounting basis, earnings per share surged 60% to $5.16, but this figure includes a $7.6 billion gain from Microsoft’s investment in OpenAI. When excluding this one time benefit, adjusted earnings per share rose 24% to $4.14, which better reflects the company’s underlying business performance.
The Productivity and Business Processes segment, which includes Office 365 and LinkedIn, generated $34.1 billion in revenue with 16% growth. Microsoft 365 commercial subscriptions increased 17%, while consumer subscriptions jumped 29%, indicating strong adoption across both enterprise and individual customers.
One area of weakness was the More Personal Computing segment, which includes Windows, Xbox, and Surface devices. This segment declined 3% to $14.3 billion as gaming revenue dropped 5% year over year.
Looking ahead, Microsoft’s commercial backlog, which represents contracted future revenue, more than doubled to $625 billion. This metric signals strong demand visibility and provides confidence in the company’s growth trajectory. The company also returned $12.7 billion to shareholders through dividends and stock buybacks, a 32% increase from last year.
Capital spending reached $37.5 billion as Microsoft continues building AI capacity, though analysts note this investment level may moderate in coming quarters. For investors, these results confirm Microsoft’s position as a leading beneficiary of the AI revolution while maintaining financial discipline.
