More detailed outlook slides will be available on the Microsoft Investor Relations website when we provide outlook commentary on today's call. All growth comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted. We will also provide growth rates in constant currency when available, as a framework for assessing how our underlying businesses performed, excluding the effect of foreign currency rate fluctuations. Where growth rates are the same in constant currency, we will refer to the growth rate only.
This quarter, the Microsoft Cloud surpassed $50 billion in revenue for the first time, up 26% year-over-year, reflecting the strength of our platform and accelerating demand. We are building this infrastructure out for the heterogeneous and distributed nature of these workloads, ensuring the right fit with the geographic and segment-specific needs for all customers, including the long tail. The key metric we are optimizing for is tokens per watt per dollar, which comes down to increasing utilization and decreasing TCO using silicon systems and software. A good example of this is the 50% increase in throughput we were able to achieve in one of our highest volume workloads, OpenAI inferencing, powering our copilots.
We are seeing increasing demand for region-specific models, including Mistral and Cohere, as more customers look for sovereign AI choices. That means connecting their agents to systems of record and operational data, analytical data, as well as semi-structured and unstructured productivity and communications data. All up, the number of customers spending $1 million plus per quarter on Foundry grew nearly 80%, driven by strong growth in every industry. As agents proliferate, every customer will need new ways to deploy, manage, and protect them.
| Metric | Period | Current guidance |
|---|---|---|
| Total company revenue | Q3 FY2026 | $80.65B-$81.75B, or 15%-17% growth, with strong commercial growth partially offset by consumer businesses |
| FX impact on total revenue growth | Q3 FY2026 | +3 points to total revenue growth |
| FX impact by segment | Q3 FY2026 | +4 points in Productivity and Business Processes, +2 points in Intelligent Cloud and More Personal Computing |
| FX impact on COGS and operating expense growth | Q3 FY2026 | +2 points |
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +17% (+15% cc) to $81.3B | Growing demand with focused sales execution while investing for long-term growth. |
| Microsoft Cloud revenue | +26% (+24% cc) to $51.5B | Surpassed $50 billion for the first time on platform strength and accelerating demand. |
| Productivity and Business Processes revenue | +16% (+14% cc) to $34.1B | Consistent core execution plus increasing Copilot contribution; operating margin rose to 60%. |
| Intelligent Cloud revenue | +29% (+28% cc) to $32.9B | Driven by Azure and improved on-premises server results. |
| Azure and other cloud services | +39% (+38% cc) | Efficiency gains across the fungible fleet allowed reallocation of capacity to Azure; demand continued to exceed supply. |
| More Personal Computing revenue | -3% to $14.3B | Gaming decline and normalization of the search third-party partnership benefit, partly offset by Windows OEM strength. |
| M365 commercial cloud | +17% (+14% cc) | Consistent core execution and strong Copilot results; ARPU led by E5 and M365 Copilot, seats +6% to over 450 million. |
| M365 commercial products | +13% (+10% cc) | Higher-than-expected Office 2024 transactional purchasing. |
| M365 consumer cloud | +29% (+27% cc) | ARPU growth; subscriptions grew 6%. |
| LinkedIn revenue | +11% (+10% cc) | Driven by marketing solutions. |
| Dynamics 365 revenue | +19% (+17% cc) | Continued growth across all workloads. |
| On-premises server business | +2% (+1% cc) | Demand for hybrid solutions including SQL Server 2025 launch and higher transactional purchasing ahead of memory price increases. |
| Windows OEM and devices | +1% (unchanged cc) | Windows OEM grew 5% on strong execution and continued Windows 10 end-of-support benefit; inventory levels remained elevated. |
| Search and news advertising ex-TAC | +10% (+9% cc) | Below expectations on execution challenges as the third-party partnership benefit normalized. |
| Gaming revenue | -9% (-10% cc) | First-party content weakness; Xbox content and services down 5% and 6% in constant currency. |
| Earnings per share | +24% (+21% cc) to $4.14 (adjusted) | Revenue outperformance and operating margin expansion to 47%. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Commercial RPO scale | $392B in Q1 FY2026 (weighted duration ~2 years) | $625 billion, up 110% year-over-year, with weighted average duration extended to about 2.5 years; ~45% from OpenAI | — |
| OpenAI backlog concentration | Prior quarter OpenAI share of RPO | Approximately 45% of commercial RPO from OpenAI; the remaining ~55% (~$350B) grew 28% on broad demand | — |
| Custom silicon | Earlier Maia and Cobalt generations | Maia 200 accelerator (over 30% improved TCO) and Cobalt 200 CPU (over 50% higher performance) brought online, alongside NVIDIA and AMD | — |
| Fairwater AI super factory | Single Fairwater sites announced prior quarter | Atlanta and Wisconsin sites connected via an AI WAN into a first-of-its-kind AI super factory | — |
| Microsoft 365 Copilot seats | Prior-quarter seat base | Record seat adds up over 160% year-over-year to 15 million paid seats; daily active users up 10x year-over-year | — |
| Foundry customer scale | Prior-year $1M+/quarter customer base | Customers spending $1M+ per quarter on Foundry grew nearly 80%; over 250 customers on track to process 1 trillion-plus tokens this year | — |
| CapEx short-lived asset mix | ~half short-lived in Q1 FY2026 | Roughly two-thirds of CapEx on short-lived assets (primarily GPUs and CPUs) this quarter | — |
| OpenAI accounting | Equity method based on share of operating losses (Q1: $4.1B loss) | Post-recapitalization, gains/losses now based on share of change in net assets, driving a $10 billion GAAP gain in OI&E | — |