MICROSOFT CORP (MSFT) · Material Event (8-K) SEC Filing

EX-99.1 2 msft-ex99_1.htm EX-99.1 EX-99.1 Exhibit 99.1Microsoft Cloud and AI Strength Fuels Fourth Quarter Results REDMOND, Wash. — July 29, 2026 — Microsoft Corp. today announced the following results for the quarter ended June 30, 2026, as compared to the corresponding period of last fiscal year:•Revenue was $90.0 billion and increased 18% (up 17% in constant currency)•Operating income was $40.6 billion and increased 18%•Net income was $35.8 billion and increased 31% on a GAAP basis, and was $35.3 billion and increased 22% on a non-GAAP basis•Diluted earnings per share was $4.81 and increased 32% on a GAAP basis, and was $4.74 and increased 23% on a non-GAAP basis•Non-GAAP results exclude the impact from investments in OpenAI, explained in the Non-GAAP Definition section belowSeveral discrete items impacted our financial results in the quarter when compared to our forward-looking guidance provided on April 29, 2026, resulting in a benefit of $0.27 on diluted earnings per share. These include a $3.2 billion gain from our investment in Anthropic and lower-than-expected expenses related to the Voluntary Retirement Program which were partially offset by severance expense and impairment charges in XBOX. When adjusting for these items, we exceeded expectations across revenue, operating income, and diluted earnings per share.“We are advancing the frontier on the cost-to-outcome curve, ensuring every customer can turn tokens into business results,” said 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.”“We delivered a strong quarter to close out the fiscal year, highlighted by Microsoft Cloud revenue of $59.3 billion, up 27% year-over-year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.The following table adjusts for the impact from investments in OpenAI and reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year. Three Months Ended June 30, 2026 2025 Percentage Change Y/Y Percentage Change Y/Y ($ in millions, except per share amounts) As Reported (GAAP) Impact from OpenAI* As Adjusted (non-GAAP) As Reported (GAAP) Impact from OpenAI* As Adjusted (non-GAAP) GAAP Constant Currency Net Impact from OpenAI* Non-GAAP Non-GAAP Constant Currency Net Income $35,766 $(480) $35,286 $27,233 $1,575 $28,808 31% 31% $(2,055) 22% 22% Diluted Earnings per Share $4.81 $(0.07) $4.74 $3.65 $0.21 $3.86 32% 32% $(0.28) 23% 23% *Impact from OpenAI adjusts for the impact from investments in OpenAI Business HighlightsMicrosoft Cloud revenue was $59.3 billion and increased 27%, and commercial remaining performance obligation increased 84% to $678 billion.Revenue in Productivity and Business Processes was $37.8 billion and increased 14%, with the following business highlights:•Microsoft 365 Commercial cloud revenue increased 16% when adjusted for the prior year comparable that benefited from 2 points of in-period revenue recognition. On a reported basis, Microsoft 365 Commercial cloud revenue increased 14%.•Microsoft 365 Consumer cloud revenue increased 24% (up 22% in constant currency) •LinkedIn revenue increased 12% (up 10% in constant currency)•Dynamics 365 revenue increased 13% (up 12% in constant currency)Revenue in Intelligent Cloud was $39.3 billion and increased 32% (up 31% in constant currency), with the following business highlights:•Azure and other cloud services revenue increased 43%Revenue in More Personal Computing was $12.9 billion and decreased 4% (down 5% in constant currency), with the following business highlights:•Windows OEM and Devices revenue decreased 7% •XBOX content and services revenue decreased 10%•Search advertising revenue excluding traffic acquisition costs increased 10% (up 9% in constant currency)Microsoft returned $10.2 billion to shareholders in the form of dividends and share repurchases in the fourth quarter of fiscal year 2026.Fiscal Year 2026 ResultsMicrosoft Corp. today announced the following results for the fiscal year ended June 30, 2026, as compared to the corresponding period of last fiscal year:•Revenue was $331.8 billion and increased 18% (up 16% in constant currency)•Operating income was $155.2 billion and increased 21% (up 19% in constant currency)•Net income was $133.7 billion and increased 31% on a GAAP basis, and increased 22% (up 20% in constant currency) on a non-GAAP basis•Diluted earnings per share was $17.95 and increased 32% on a GAAP basis, and increased 22% (up 21% in constant currency) on a non-GAAP basis•Non-GAAP results exclude the impact from investments in OpenAI, explained in the Non-GAAP Definition section belowThe following table adjusts for the impact from investments in OpenAI and reconciles our financial results reported in accordance with GAAP to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year. Twelve Months Ended June 30, 2026 2025 Percentage Change Y/Y Percentage Change Y/Y ($ in millions, except per share amounts) As Reported (GAAP) Impact from OpenAI* As Adjusted (non-GAAP) As Reported (GAAP) Impact from OpenAI* As Adjusted (non-GAAP) GAAP Constant Currency Net Impact from OpenAI* Non-GAAP Non-GAAP Constant Currency Net Income $133,749 $(4,963) $128,786 $101,832 $3,620 $105,452 31% 30% $(8,583) 22% 20% Diluted Earnings per Share $17.95 $(0.67) $17.28 $13.64 $0.49 $14.13 32% 30% $(1.16) 22% 21% *Impact from OpenAI adjusts for the impact from investments in OpenAI Business OutlookMicrosoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast. Quarterly Highlights, Product Releases, and Customer Stories Every quarter Microsoft delivers hundreds of products, services, and enhancements. These releases are driven by years of significant research and development investments, to empower customers with greater productivity, security, and differentiated value. This momentum is reflected in stories that showcase how our technology is shaping industries and driving customer success. We share innovation updates on our product blogs across Azure, Microsoft 365, and more on our Official Microsoft blog.Webcast DetailsSatya Nadella, chairman and chief executive officer, Amy Hood, executive vice president and chief financial officer, Alice Jolla, chief accounting officer, Brian DeFoe, deputy general counsel and corporate secretary, and Jonathan Neilson, vice president of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/en-us/investor. Participants can also dial into the conference call at (877) 407-0666 or +1 (201) 689-8023 for international, no password required. The webcast will be available for replay through the close of business on July 29, 2027.Non-GAAP DefinitionImpact from investments in OpenAI. In fiscal year 2026, net income and diluted earnings per share were impacted by net gains from investments in OpenAI, which resulted in an increase in net income and diluted earnings per share of $480 million and $0.07, respectively, in the fourth quarter, and $4,963 million and $0.67, respectively, for the full fiscal year. In fiscal year 2025, net income and diluted earnings per share were impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted earnings per share of $1,575 million and $0.21, respectively, in the fourth quarter, and $3,620 million and $0.49, respectively, for the full fiscal year.Microsoft has provided non-GAAP financial measures related to the impact from investments in OpenAI to aid investors in better understanding our performance. Microsoft believes these non-GAAP measures assist investors by providing additional insight into its operational performance and help clarify trends affecting its business. For comparability of reporting, management considers non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.Constant CurrencyMicrosoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. Financial Performance Constant Currency Reconciliation Three Months Ended June 30, 2026 2025 Percentage Change Y/Y Percentage Change Y/Y ($ in millions, except per share amounts) As Reported (GAAP) As Adjusted (non-GAAP) As Reported (GAAP) As Adjusted (non-GAAP) GAAP Non-GAAP Constant Currency Impact Constant Currency Non-GAAP Constant Currency Revenue $90,007 - $76,441 - 18% - $391 17% - Operating Income $40,603 - $34,323 - 18% - $269 18% - Net Income $35,766 $35,286 $27,233 $28,808 31% 22% $40 31% 22% Diluted Earnings per Share $4.81 $4.74 $3.65 $3.86 32% 23% $0.01 32% 23% Twelve Months Ended June 30, 2026 2025 Percentage Change Y/Y Percentage Change Y/Y ($ in millions, except per share amounts) As Reported (GAAP) As Adjusted (non-GAAP) As Reported (GAAP) As Adjusted (non-GAAP) GAAP Non-GAAP Constant Currency Impact Constant Currency Non-GAAP Constant Currency Revenue $331,839 - $281,724 - 18% - $4,445 16% - Operating Income $155,237 - $128,528 - 21% - $2,896 19% - Net Income $133,749 $128,786 $101,832 $105,452 31% 22% $1,772 30% 20% Diluted Earnings per Share $17.95 $17.28 $13.64 $14.13 32% 22% $0.24 30% 21% Segment Revenue Constant Currency Reconciliation Three Months Ended June 30, 2026 2025 Percentage Change Y/Y Percentage Change Y/Y ($ in millions) As Reported (GAAP) As Reported (GAAP) GAAP Constant Currency Impact Constant Currency Productivity and Business Processes $37,847 $33,112 14% $244 14% Intelligent Cloud $39,306 $29,878 32% $80 31% More Personal Computing $12,854 $13,451 (4)% $67 (5)% Selected Product and Service Information Constant Currency Reconciliation Three Months Ended June 30, 2026 Percentage Change Y/Y (GAAP) Constant Currency Impact Percentage Change Y/Y Constant Currency Microsoft Cloud revenue 27% 0% 27% Commercial remaining performance obligation 84% 0% 84% Microsoft 365 Commercial cloud revenue 14% 0% 14% Microsoft 365 Consumer cloud revenue 24% (2)% 22% LinkedIn revenue 12% (2)% 10% Dynamics 365 revenue 13% (1)% 12% Azure and other cloud services revenue 43% 0% 43% Windows OEM and Devices revenue (7)% 0% (7)% XBOX content and services revenue (10)% 0% (10)% Search advertising revenue excluding traffic acquisition costs 10% (1)% 9% About MicrosoftMicrosoft (Nasdaq “MSFT” @microsoft) creates platforms and tools powered by AI to deliver innovative solutions that meet the evolving needs of our customers. The technology company is committed to making AI available broadly and doing so responsibly, with a mission to empower every person and every organization on the planet to achieve more. Forward-Looking StatementsStatements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as: •intense competition in all of our markets that could adversely affect our results of operations;•substantial investments in cloud and AI strategy that depend on customer demand, technological developments, competitive dynamics, and regulatory condition;•development, delivery, and maintenance of competitive cloud-based and AI products and services that achieve broad customer adoption and sustainable revenue growth;•significant investments in products and services that may not achieve expected returns;•acquisitions, joint ventures, and strategic alliances that could have an adverse effect on our business;•cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position;•disclosure and misuse of personal data that could cause liability and harm to our reputation; •the possibility that we may not be able to protect information in our products and services from use by others;•abuse of our platforms that may harm our reputation or user engagement;•products and services, how they are used by customers, and how third-party products and services interact with them, presenting security, privacy, and execution risks;•issues about the development, deployment, and use of AI that may result in reputational or competitive harm, or liability; •inability to develop and expand adequate infrastructure;•supply or other quality problems;•excessive outages, disruptions, or capacity constraints of our services if we fail to maintain an adequate operations infrastructure or secure resources necessary to support it;•potential consequences of new, existing, and evolving legal and regulatory requirements;•claims against us that could result in adverse outcomes in legal disputes;•uncertainties relating to our business with government customers;•additional tax liabilities;•an inability to protect and utilize our intellectual property may harm our business and operating results;•claims that Microsoft has infringed the intellectual property rights of others;•damage to our reputation or our brands that may harm our business and results of operations;•adverse economic or market conditions that could harm our business; •catastrophic events or geopolitical conditions that could disrupt our business; •exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange; and•the dependence of our business on our ability to attract and retain talented employees.For more information about risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/en-us/investor. All information in this release is as of June 30, 2026. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.For more information, press only: Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, [email protected] For more information, financial analysts and investors only: Jonathan Neilson, Vice President, Investor Relations, (425) 706-4400Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. Pacific time conference call with investors and analysts, is available at http://www.microsoft.com/en-us/investor. MICROSOFT CORPORATION INCOME STATEMENTS(In millions, except per share amounts) (Unaudited) Three Months EndedJune 30, Twelve Months EndedJune 30, 2026 2025 2026 2025 Revenue: Product $17,234 $17,136 $64,696 $63,946 Service and other 72,773 59,305 267,143 217,778 Total revenue 90,007 76,441 331,839 281,724 Cost of revenue: Product 2,938 3,314 12,098 13,501 Service and other 26,587 20,700 94,276 74,330 Total cost of revenue 29,525 24,014 106,374 87,831 Gross margin 60,482 52,427 225,465 193,893 Research and development 9,997 8,829 35,562 32,488 Sales and marketing 7,595 7,285 26,710 25,654 General and administrative 2,287 1,990 7,956 7,223 Operating income 40,603 34,323 155,237 128,528 Other income (expense), net 3,444 (1,707) 10,697 (4,901) Income before income taxes 44,047 32,616 165,934 123,627 Provision for income taxes 8,281 5,383 32,185 21,795 Net income $35,766 $27,233 $133,749 $101,832 Earnings per share: Basic $4.82 $3.66 $18.00 $13.70 Diluted $4.81 $3.65 $17.95 $13.64 Weighted average shares outstanding: Basic 7,427 7,432 7,429 7,433 Diluted 7,443 7,461 7,453 7,465 COMPREHENSIVE INCOME STATEMENTS(In millions) (Unaudited) Three Months Ended Twelve Months Ended June 30, June 30, 2026 2025 2026 2025 Net income $35,766 $27,233 $133,749 $101,832 Other comprehensive income (loss), net of tax: Net change related to derivatives 14 (9) 8 (5) Net change related to investments (72) 444 215 1,574 Translation adjustments and other 2 1,051 (160) 674 Other comprehensive income (loss) (56) 1,486 63 2,243 Comprehensive income $35,710 $28,719 $133,812 $104,075 BALANCE SHEETS(In millions) (Unaudited) June 30,2026 June 30,2025 Assets Current assets: Cash and cash equivalents $20,935 $30,242 Short-term investments 55,908 64,323 Total cash, cash equivalents, and short-term investments 76,843 94,565 Accounts receivable, net of allowance for doubtful accounts of $1,040 and $944 80,876 69,905 Inventories 1,397 938 Other current assets 48,594 25,723 Total current assets 207,710 191,131 Property and equipment, net of accumulated depreciation of $118,691 and $93,653 313,076 204,966 Operating lease right-of-use assets 24,177 24,823 Equity and other investments 36,348 15,405 Goodwill 119,651 119,509 Intangible assets, net 18,609 22,604 Other long-term assets 38,805 40,565 Total assets $758,376 $619,003 Liabilities and stockholders' equity Current liabilities: Accounts payable $42,416 $27,724 Current portion of long-term debt 9,227 2,999 Accrued compensation 14,945 13,709 Short-term income taxes 2,534 7,211 Short-term unearned revenue 72,965 64,555 Other current liabilities 26,738 25,020 Total current liabilities 168,825 141,218 Long-term debt 31,067 40,152 Long-term income taxes 28,647 25,986 Long-term unearned revenue 2,747 2,710 Deferred income taxes 3,054 2,835 Operating lease liabilities 16,532 17,437 Other long-term liabilities 65,117 45,186 Total liabilities 315,989 275,524 Commitments and contingencies Stockholders' equity: Common stock and paid-in capital - shares authorized 24,000; outstanding 7,427 and 7,434 117,406 109,095 Retained earnings 328,265 237,731 Accumulated other comprehensive loss (3,284) (3,347) Total stockholders' equity 442,387 343,479 Total liabilities and stockholders' equity $758,376 $619,003 CASH FLOWS STATEMENTS(In millions) (Unaudited) Three Months Ended Twelve Months Ended June 30, June 30, 2026 2025 2026 2025 Operations Net income $35,766 $27,233 $133,749 $101,832 Adjustments to reconcile net income to net cash from operations: Depreciation, amortization, and other 11,022 9,317 38,534 29,433 Stock-based compensation expense 3,122 3,073 12,405 11,974 Net recognized losses (gains) on investments and derivatives (3,743) 1,942 (11,047) 5,329 Deferred income taxes 4,650 (2,221) 14,189 (7,056) Changes in operating assets and liabilities: Accounts receivable (21,084) (16,179) (12,737) (10,581) Inventories (178) (81) (461) 309 Other current assets (2,842) (3,686) (2,627) (3,044) Other long-term assets (1,350) 418 (3,964) (2,950) Accounts payable 2,365 (652) 5,268 569 Unearned revenue 22,428 18,361 9,361 5,438 Income taxes (307) 1,043 (1,875) (38) Other current liabilities 7,013 5,346 6,847 5,922 Other long-term liabilities (1,421) (1,267) (4,707) (975) Net cash from operations 55,441 42,647 182,935 136,162 Financing Repayments of debt, maturities of 90 days or less 0 0 0 (5,746) Repayments of debt 0 0 (3,000) (3,216) Common stock issued 520 548 2,009 2,056 Common stock repurchased (4,579) (4,546) (22,271) (18,420) Common stock cash dividends paid (6,758) (6,169) (26,445) (24,082) Other, net (962) (677) (2,839) (2,291) Net cash used in financing (11,779) (10,844) (52,546) (51,699) Investing Additions to property and equipment (35,802) (17,079) (115,948) (64,551) Acquisition of companies, net of cash acquired and divestitures, and purchases of intangible and other assets (452) (1,743) (1,743) (5,978) Purchases of investments (18,829) (21,631) (58,351) (29,775) Maturities of investments 4,181 4,618 34,605 16,079 Sales of investments 6,487 2,621 21,798 9,309 Other, net (10,416) 2,642 (19,861) 2,317 Net cash used in investing (54,831) (30,572) (139,500) (72,599) Effect of foreign exchange rates on cash and cash equivalents (1) 183 (196) 63 Net change in cash and cash equivalents (11,170) 1,414 (9,307) 11,927 Cash and cash equivalents, beginning of period 32,105 28,828 30,242 18,315 Cash and cash equivalents, end of period $20,935 $30,242 $20,935 $30,242 We have recast certain prior period amounts to conform to the current period presentation. SEGMENT RESULTS(In millions) (Unaudited) Three Months Ended Twelve Months Ended June, June 30, 2026 2025 2026 2025 Productivity and Business Processes Revenue $37,847 $33,112 $139,996 $120,810 Cost of revenue 6,989 6,042 25,017 22,422 Operating expenses 8,958 8,077 31,100 28,615 Operating income $21,900 $18,993 $83,879 $69,773 Intelligent Cloud Revenue $39,306 $29,878 $137,791 $106,265 Cost of revenue 16,876 11,845 57,876 40,171 Operating expenses 6,475 5,893 22,943 21,505 Operating income $15,955 $12,140 $56,972 $44,589 More Personal Computing Revenue $12,854 $13,451 $54,052 $54,649 Cost of revenue 5,660 6,127 23,481 25,238 Operating expenses 4,446 4,134 16,185 15,245 Operating income $2,748 $3,190 $14,386 $14,166 Total Revenue $90,007 $76,441 $331,839 $281,724 Cost of revenue 29,525 24,014 106,374 87,831 Operating expenses 19,879 18,104 70,228 65,365 Operating income $40,603 $34,323 $155,237 $128,528