Microsoft Corp. today announced the following results for the quarter ended September 30, 2025, as compared to the corresponding period of last fiscal year:
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-- Revenue was $77.7 billion and increased 18% (up 17% in constant currency)
-- Operating income was $38.0 billion and increased 24% (up 22% in constant currency)
-- Net income, on a GAAP basis, was $27.7 billion and increased 12%, and on a non-GAAP basis was $30.8 billion and increased 22% (up 21% in constant currency)
-- Diluted earnings per share, on a GAAP basis, was $3.72 and increased 13%, and on a non-GAAP basis was $4.13 and increased 23% (up 21% in constant currency)
-- Non-GAAP results exclude the impact from investments in OpenAI, explained in the Non-GAAP Definition section below
"Our planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact," said Satya Nadella, chairman and chief executive officer of Microsoft. "It's why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead."
"We delivered a strong start to the fiscal year, exceeding expectations across revenue, operating income, and earnings per share," said Amy Hood, executive vice president and chief financial officer of Microsoft. "Continued strength in the Microsoft Cloud reflects the growing customer demand for our differentiated platform."
Thefollowing table reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.
 | Three Months Ended September 30,
($ in millions, except per share amounts) Net Income Diluted Earnings per Share
2024 As Reported (GAAP) $24,667 $3.30
Impact from investments in OpenAI 523 0.07
2024 As Adjusted (non-GAAP) $25,190 $3.37
2025 As Reported (GAAP) $27,747 $3.72
Impact from investments in OpenAI 3,086 0.41
2025 As Adjusted (non-GAAP) $30,833 $4.13
Percentage Change Y/Y (GAAP) 12% 13%
Percentage Change Y/Y Constant Currency 11% 11%
Percentage Change Y/Y (non-GAAP) 22% 23%
Percentage Change Y/Y (non-GAAP) Constant Currency 21% 21%
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Business Highlights
Microsoft Cloud revenue was $49.1 billion and increased 26% (up 25% in constant currency), and commercial remaining performance obligation increased 51% to $392 billion.
Revenue in Productivity and Business Processes was $33.0 billion and increased 17% (up 14% in constant currency), with the following business highlights:
-- Microsoft 365 Commercial cloud revenue increased 17% (up 15% in constant currency)
-- Microsoft 365 Consumer cloud revenue increased 26% (up 25% in constant currency)
-- LinkedIn revenue increased 10% (up 9% in constant currency)
-- Dynamics 365 revenue increased 18% (up 16% in constant currency)
Revenue in Intelligent Cloud was $30.9 billion and increased 28% (up 27% in constant currency), with the following business highlights:
-- Azure and other cloud services revenue increased 40% (up 39% in constant currency)
Revenue in More Personal Computing was $13.8 billion and increased 4%, with the following business highlights:
-- Windows OEM and Devices revenue increased 6%
-- Xbox content and services revenue increased 1% (relatively unchanged in constant currency)
-- Search and news advertising revenue excluding traffic acquisition costs increased 16% (up 15% in constant currency)
Microsoft returned $10.7 billion to shareholders in the form of dividends and share repurchases in the first quarter of fiscal year 2026.
Business Outlook
Microsoft 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 Details
Satya Nadella, chairman and chief executive officer, Amy Hood, executive vice president and chief financial officer, Alice Jolla, chief accounting officer, Keith Dolliver, corporate secretary anddeputy general counsel, 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. To access the earnings call, dial (877) 407-0666 or +1-201-689-8023 for international. The webcast will be available at http://www.microsoft.com/en-us/investorfor replay through the close of business on September 30, 2026.
Non-GAAP Definition
Impact from investments in OpenAI.In the first quarter of fiscal year 2026, net income and diluted earnings per share were impacted by losses from investments in OpenAI, which resulted in a decrease in net income and diluted earnings per share of $3.1 billion and $0.41, respectively. In the first quarter of fiscal year 2025, net income and diluted earnings per share were impacted by losses from investments in OpenAI, which resulted in a decrease in net income and diluted earnings per share of $523 million and $0.07, respectively.
Microsoft has provided non-GAAP financial measures related to the impact from investments in OpenAI to aid investors in better understanding our performance. Microsoft believes these non-GAAP measures assist investors by providing additional insight into its operational performance and help clarify trends affecting its business. For comparability of reporting, management considers non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
Constant Currency
Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
Financial Performance Constant Currency Reconciliation
| Three Months Ended September 30,
($ in millions, except per share amounts) Revenue Operating Net Diluted
Income Income Earnings
per Share
2024 As Reported (GAAP) $65,585 $30,552 $24,667 $3.30
2024 As Adjusted (non-GAAP) $65,585 $30,552 $25,190 $3.37
2025 As Reported (GAAP) $77,673 $37,961 $27,747 $3.72
2025 As Adjusted (non-GAAP) $77,673 $37,961 $30,833 $4.13
Percentage Change Y/Y (GAAP) 18% 24% 12% 13%
Percentage Change Y/Y (non-GAAP) 18% 24% 22% 23%
Constant Currency Impact $1,015 $730 $430 $0.06
Percentage Change Y/Y Constant Currency 17% 22% 11% 11%
Percentage Change Y/Y (non-GAAP) Constant Currency 17% 22% 21% 21%
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Segment Revenue Constant Currency Reconciliation
| Three Months Ended September 30,
($ in millions) Productivity and Intelligent Cloud More Personal
Business Processes Computing
2024 As Reported (GAAP) $28,317 $24,092 $13,176
2025 As Reported (GAAP) $33,020 $30,897 $13,756
Percentage Change Y/Y (GAAP) 17% 28% 4%
Constant Currency Impact $656 $251 $107
Percentage Change Y/Y Constant Currency 14% 27% 4%
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Selected Product and Service Revenue Constant Currency Reconciliation
| Three Months Ended September 30, 2025
Percentage Change Constant Percentage Change
Y/Y (GAAP) Currency Impact Y/Y Constant
Currency
Microsoft Cloud 26% (1)% 25%
Commercial remaining performance obligation 51% 0% 51%
Microsoft 365 Commercial cloud 17% (2)% 15%
Microsoft 365 Consumer cloud 26% (1)% 25%
LinkedIn 10% (1)% 9%
Dynamics 365 18% (2)% 16%
Azure and other cloud services 40% (1)% 39%
Windows OEM and Devices 6% 0% 6%
Xbox content and services 1% (1)% 0%
Search and news advertising excluding traffic acquisition costs 16% (1)% 15%
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About Microsoft
Microsoft (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 Statements
Statements 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;
-- focus on cloud-based and AI services presenting execution and competitive risks;
-- 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 advertising, professional, marketplace, or gaming 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 use of AI in our offerings that may result in reputational or competitive harm, or liability;
-- excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;
-- supply or quality problems;
-- 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, such as the COVID-19 pandemic, 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 September 30, 2025. 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.
| MICROSOFT CORPORATION
INCOME STATEMENTS
(In millions, except per share amounts) (Unaudited)
Three Months Ended
September 30,
2025 2024
Revenue:
Product $15,922 $15,272
Service and other 61,751 50,313
Total revenue 77,673 65,585
Cost of revenue:
Product 2,922 3,294
Service and other 21,121 16,805
Total cost of revenue 24,043 20,099
Gross margin 53,630 45,486
Research and development 8,146 7,544
Sales and marketing 5,717 5,717
General and administrative 1,806 1,673
Operating income 37,961 30,552
Other expense, net (3,660) (283)
Income before income taxes 34,301 30,269
Provision for income taxes 6,554 5,602
Net income $27,747 $24,667
Earnings per share:
Basic $3.73 $3.32
Diluted $3.72 $3.30
Weighted average shares outstanding:
Basic 7,433 7,433
Diluted 7,466 7,470
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| COMPREHENSIVE INCOME STATEMENTS
(In millions) (Unaudited)
Three Months Ended
September 30,
2025 2024
Net income $27,747 $24,667
Other comprehensive income (loss), net of tax:
Net change related to derivatives (3) (10)
Net change related to investments 687 1,114
Translation adjustments and other (98) 304
Other comprehensive income 586 1,408
Comprehensive income $28,333 $26,075
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| BALANCE SHEETS
(In millions) (Unaudited)
September 30, June 30,
2025 2025
Assets
Current assets:
Cash and cash equivalents $28,849 $30,242
Short-term investments 73,163 64,323
Total cash, cash equivalents, and short-term investments 102,012 94,565
Accounts receivable, net of allowance for doubtful 52,894 69,905
accounts of $687 and $944
Inventories 1,130 938
Other current assets 33,030 25,723
Total current assets 189,066 191,131
Property and equipment, net of accumulated 230,861 204,966
depreciation of $98,880 and $93,653
Operating lease right-of-use assets 24,791 24,823
Equity and other investments 11,465 15,405
Goodwill 119,497 119,509
Intangible assets, net 21,236 22,604
Other long-term assets 39,435 40,565
Total assets $636,351 $619,003
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $32,580 $27,724
Current portion of long-term debt 7,832 2,999
Accrued compensation 9,201 13,709
Short-term income taxes 3,655 7,211
Short-term unearned revenue 58,987 64,555
Other current liabilities 22,741 25,020
Total current liabilities 134,996 141,218
Long-term debt 35,376 40,152
Long-term income taxes 26,569 25,986
Long-term unearned revenue 2,546 2,710
Deferred income taxes 2,852 2,835
Operating lease liabilities 17,348 17,437
Other long-term liabilities 53,588 45,186
Total liabilities 273,275 275,524
Commitments and contingencies
Stockholders' equity:
Common stock and paid-in capital - shares authorized 110,964 109,095
24,000; outstanding 7,434 and 7,434
Retained earnings 254,873 237,731
Accumulated other comprehensive loss (2,761) (3,347)
Total stockholders' equity 363,076 343,479
Total liabilities and stockholders' equity $636,351 $619,003
| |
| CASH FLOWS STATEMENTS
(In millions) (Unaudited)
Three Months Ended
September 30,
2025 2024
Operations
Net income $27,747 $24,667
Adjustments to reconcile net income to net cash from operations:
Depreciation, amortization, and other 13,061 7,383
Stock-based compensation expense 2,983 2,832
Net recognized gains on investments and derivatives (1,007) (125)
Deferred income taxes 2,491 (1,433)
Changes in operating assets and liabilities:
Accounts receivable 16,490 14,037
Inventories (192) (373)
Other current assets (1,162) (82)
Other long-term assets (394) (1,761)
Accounts payable (614) (916)
Unearned revenue (5,418) (5,553)
Income taxes (2,944) 1,016
Other current liabilities (5,507) (5,479)
Other long-term liabilities (477) (33)
Net cash from operations 45,057 34,180
Financing
Repayments of debt, maturities of 90 days or less 0 (5,746)
Repayments of debt 0 (966)
Common stock issued 689 706
Common stock repurchased (5,650) (4,107)
Common stock cash dividends paid (6,169) (5,574)
Other, net (669) (889)
Net cash used in financing (11,799)(16,576)
Investing
Additions to property and equipment (19,394)(14,923)
Acquisition of companies, net of cash acquired and divestitures, (578) (1,849)
and purchases of intangible and other assets
Purchases of investments (17,671)(1,620)
Maturities of investments 6,031 2,136
Sales of investments 3,262 1,968
Other, net (6,209) (913)
Net cash used in investing (34,559)(15,201)
Effect of foreign exchange rates on cash and cash equivalents (92) 122
Net change in cash and cash equivalents (1,393) 2,525
Cash and cash equivalents, beginning of period 30,242 18,315
Cash and cash equivalents, end of period $28,849 $20,840
SEGMENT RESULTS
(In millions) (Unaudited)
Three Months Ended
September 30,
2025 2024
Productivity and Business Processes
Revenue $33,020 $28,317
Cost of revenue 5,721 5,294
Operating expenses 6,892 6,507
Operating income $20,407 $16,516
Intelligent Cloud
Revenue $30,897 $24,092
Cost of revenue 12,314 8,614
Operating expenses 5,192 4,975
Operating income $13,391 $10,503
More Personal Computing
Revenue $13,756 $13,176
Cost of revenue 6,008 6,191
Operating expenses 3,585 3,452
Operating income $4,163 $3,533
Total
Revenue $77,673 $65,585
Cost of revenue 24,043 20,099
Operating expenses 15,669 14,934
Operating income $37,961 $30,552
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