Microsoft’s cloud business powered another quarter of double-digit growth, with Azure surpassing a revenue milestone as the software giant reported stronger-than-expected financial results.
This was driven by sustained demand for artificial intelligence (AI) infrastructure and cloud services.
For the fourth quarter ended 30 June, Microsoft posted revenue of $90 billion, up 18% year-on-year, while operating income rose 18% to $40.6 billion. Net income increased 31% to $35.8 billion on a generally accepted accounting principles (GAAP) basis.
The company says Microsoft Cloud generated $59.3 billion in quarterly revenue, an increase of 27% from the same period last year, underscoring the growing importance of its cloud platform as enterprises continue investing in AI workloads.
Earlier this month, rival Alphabet also delivered a standout second quarter for 2026, with its cloud business emerging as the company’s fastest-growing segment.
The Google parent company reported Google Cloud revenue of $24.8 billion for the quarter ended 30 June, an 82% year-on-year increase from $13.6 billion a year earlier.
Expanding impact
For Microsoft, Azure remained the standout performer, with revenue from Azure and other cloud services climbing 43% year-on-year.
The result helped push annual Azure revenue beyond the $100 billion mark for the first time, highlighting the platform’s rapid expansion as organisations migrate workloads to the cloud and deploy generative AI applications.
“We are advancing the frontier on the cost-to-outcome curve, ensuring every customer can turn tokens into business results,” says Satya Nadella, chairman and chief executive officer of Microsoft.
“This year, Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation.”
The results reinforce Microsoft’s position as one of the biggest beneficiaries of the AI boom, with Azure continuing to attract customers seeking cloud infrastructure capable of supporting increasingly compute-intensive AI models and applications.
The company’s Intelligent Cloud division, home to Azure, generated $39.3 billion in revenue during the quarter, representing 32% year-on-year growth, significantly outpacing Microsoft’s other business segments.
Commercial demand also remained robust, with Microsoft’s commercial remaining performance obligation – a measure of future contracted revenue – increasing 84% to $678 billion, providing strong visibility into future cloud revenue.
Chief financial officer Amy Hood notes that cloud continued to underpin Microsoft’s financial performance.
“We delivered a strong quarter to close out the fiscal year, highlighted by Microsoft Cloud revenue of $59.3 billion, up 27% year-over-year,” she says.
While cloud and AI drove growth, Microsoft’s productivity software business also delivered solid gains. Revenue in the productivity and business processes segment increased 14% to $37.8 billion, supported by continued adoption of Microsoft 365 Commercial, Microsoft 365 Consumer, LinkedIn and Dynamics 365.
Microsoft 365 Commercial cloud revenue increased 14% on a reported basis, while Microsoft 365 Consumer cloud revenue rose 24%. LinkedIn revenue grew 12% and Dynamics 365 revenue increased 13%.
Xbox, OpenAI considerations
By contrast, the ‘More Personal Computing’ division declined 4% to $12.9 billion. Windows OEM and devices revenue fell 7%, while Xbox content and services revenue declined 10%. Search advertising revenue, excluding traffic acquisition costs, increased 10%.
Microsoft points out that several discrete items influenced its quarterly earnings. These included a $3.2 billion gain from its investment in Anthropic and lower-than-expected costs associated with its voluntary retirement programme.
According to the company, these gains were partly offset by severance expenses and impairment charges within the Xbox business.
Excluding the impact of its investments in OpenAI, Microsoft reported non-GAAP net income of $35.3 billion, up 22%, with diluted earnings per share of $4.74, also up 23%.
For the full 2026 financial year, Microsoft generated revenue of $331.8 billion, an increase of 18%, while operating income climbed 21% to $155.2 billion.
Annual net income reached $133.7 billion, up 31% on a GAAP basis. Excluding the impact of OpenAI-related investments, non-GAAP net income increased 22%.
The company also returned $10.2 billion to shareholders through dividends and share repurchases during the quarter.
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