Microsoft has released its financial results for the second quarter of fiscal year 2026, highlighting continued revenue growth, robust profitability and expanding demand for cloud and AI‑related services.
For the quarter ended December 31, 2025, Microsoft reported total revenue of $81.3 billion, an increase of 17% year‑over‑year, with operating income rising 21% to $38.3 billion. On a GAAP basis, net income reached $38.5 billion, up 60%, while non‑GAAP net income, excluding the impact of investments in OpenAI, was $30.9 billion, up 23%. Diluted earnings per share were $5.16 on a GAAP basis and $4.14 on a non‑GAAP basis.
Microsoft Cloud continued to be a central growth driver, with cloud and AI revenue exceeding $50 billion for the first time in a quarter. The Intelligent Cloud segment generated $32.9 billion in revenue, growing 29% year‑over‑year, driven by strong performance across Azure and related services. Within this segment, Azure and other cloud services expanded by approximately 39%, reflecting sustained enterprise and developer demand.
Revenue growth across Microsoft’s business segments showed a balanced contribution:
• Productivity and Business Processes revenue increased 16% year‑over‑year.
• Intelligent Cloud revenue grew 29%.
• More Personal Computing revenue declined slightly.
Gross margin expanded as well, with an overall increase across the company’s segments, although margin percentages were modestly impacted by increased investment in AI infrastructure. Operating expenses also rose, driven by research and development investments, compute capacity expansion, and talent acquisition.
Additional performance metrics showed strong commercial demand: Microsoft’s remaining performance obligations (RPO), a forward‑looking indicator of contracted revenue, surged substantially, reflecting extended customer commitments across cloud and enterprise solutions. Microsoft’s cloud platform and services such as Microsoft 365 Commercial also exhibited continued adoption growth.
The results underscore Microsoft’s ongoing transition toward an AI‑centric business model, with cloud and AI offerings playing an increasingly prominent role in the company’s revenue mix. Investments in data center infrastructure, compute capacity and AI tools are positioned to support future growth, even as capital expenditure remains significant to sustain this expansion.
