Record profit at Microsoft, as data-center spending cuts free cash flow
Revenue grew 17.8% to $331.8 billion and operating margin hit 46.8%. Capital spending rose 80% to $115.9 billion, so free cash flow fell for a second year.
Revenue
$331.8B
↑ 17.8% vs FY2025
Operating margin
46.8%
↑ 1.2 pts vs 45.6%
Net income
$133.7B
↑ 31.3% · 22.1% excl. OpenAI
Capital spending
$115.9B
79.6% vs $64.6B
Free cash flow
$67.0B
↓ 6.5% vs $71.6B
Microsoft's revenue grew 17.8% to $331.8 billion in fiscal 2026, its fastest growth since fiscal 2022, and its operating margin reached 46.8%, the highest of the eight years covered here. Cash spent on property and equipment rose 80% to $115.9 billion. That left free cash flow at $67.0 billion, down for a second year even though operating cash flow grew by a third.
Growth picked up and operating margin kept widening
Revenue growth accelerated to 17.8% after 15.7% in fiscal 2024 and 14.9% in fiscal 2025. Over seven years revenue has grown 2.6 times, from $125.8 billion in fiscal 2019, a compound rate of 14.9% a year.
Operating margin rose for a third straight year, from 34.1% in fiscal 2019 to 46.8%. Operating expenses grew more slowly than revenue: research and development was 10.7% of revenue in fiscal 2026, against 13.4% in fiscal 2019. Gross margin moved the other way. It fell for a second year, from 69.8% in fiscal 2024 to 67.9%, because cost of revenue, which includes the cost of running Microsoft's data centers, grew 21.1% against revenue growth of 17.8%.
OpenAI lifted net income
Net income rose 31.3% to $133.7 billion and diluted earnings per share rose 31.6% to $17.95. Part of that came from outside the operating business. Other income swung from a $4.9 billion loss in fiscal 2025 to a $10.7 billion gain. Microsoft's earnings release says net gains on its investments in OpenAI added $4,963 million to fiscal 2026 net income ($0.67 per share), after losses on the same investments reduced fiscal 2025 net income by $3,620 million ($0.49 per share).
Excluding both years' OpenAI effects, net income rose 22.1%, close to the 20.8% growth in operating income. The effective tax rate was 19.4%.
Capital spending now takes most of the operating cash
Cash from operations rose 34.4% to $182.9 billion. Additions to property and equipment rose faster, by 79.6% to $115.9 billion, which is 4.1 times the fiscal 2023 figure. Capital spending absorbed 63% of operating cash flow, compared with 27% in fiscal 2019 and 32% in fiscal 2023.
Free cash flow fell from $74.1 billion in fiscal 2024 to $71.6 billion and then $67.0 billion. As a share of revenue it dropped to 20.2%, from a range of 28% to 33% between fiscal 2019 and fiscal 2023.
Leases are extra. The capital spending figure counts only cash paid for property and equipment. Microsoft also adds data-center capacity through finance leases, which do not show up as capital spending in the cash flow statement. Its finance lease liabilities grew from $17.1 billion in June 2023 to $66.6 billion in June 2026.The balance sheet is turning into property
Property and equipment, net of depreciation, reached $313.1 billion in June 2026. That is 3.3 times the June 2023 level and 8.6 times June 2019, and equal to 71% of shareholders' equity, up from 36% in 2019.
Cash and short-term investments of $76.8 billion still exceed total debt of $40.3 billion, down from $72.2 billion in 2019. Counting finance lease liabilities as debt, Microsoft had $30.0 billion more debt than cash at June 2026. A year earlier the same measure showed $5.2 billion more cash than debt. It had also been negative at June 2024, by $3.2 billion, when Microsoft carried short-term borrowings as well as long-term debt. In 2019 it showed $55.1 billion more cash than debt.
Payouts to shareholders rose again
Microsoft paid $26.4 billion in dividends, up 9.8%, and spent $22.3 billion buying back shares. Together that is $48.7 billion, or 73% of free cash flow, up from 59% in fiscal 2025. The diluted share count fell 0.2% during the year to 7,453 million, and 3.9% since fiscal 2019.
Eight years of figures
Updated October 6, 2026: debt now includes short-term borrowings, as on the site's company pages. This raised debt at June 2024, when Microsoft had short-term borrowings, and changed the comparison of cash with debt and leases for that year and, by rounding, for 2019.
Sources: Form 10-K (SEC EDGAR) · Form 10-K filing index · EDGAR company facts for Microsoft · Microsoft fiscal 2026 fourth-quarter earnings release (Exhibit 99.1). More figures for Microsoft are on its company page.
Twelve quarters of figures
| Quarter | Q1 '24 | Q2 '24 | Q3 '24 | Q4 '24 | Q1 '25 | Q2 '25 | Q3 '25 | Q4 '25 | Q1 '26 | Q2 '26 | Q3 '26 | Q4 '26 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $56.5B | $62.0B | $61.9B | $64.7B | $65.6B | $69.6B | $70.1B | $76.4B | $77.7B | $81.3B | $82.9B | $90.0B |
| Revenue growth | 12.8% | 17.6% | 17.0% | 15.2% | 16.0% | 12.3% | 13.3% | 18.1% | 18.4% | 16.7% | 18.3% | 17.8% |
| Gross margin | 71.2% | 68.4% | 70.1% | 69.6% | 69.4% | 68.7% | 68.7% | 68.6% | 69.1% | 68.0% | 67.6% | 67.2% |
| Operating margin | 47.6% | 43.6% | 44.6% | 43.1% | 46.6% | 45.5% | 45.7% | 44.9% | 48.9% | 47.1% | 46.3% | 45.1% |
| Net income | $22.3B | $21.9B | $21.9B | $22.0B | $24.7B | $24.1B | $25.8B | $27.2B | $27.7B | $38.5B | $31.8B | $35.8B |
| Diluted EPS | $2.99 | $2.93 | $2.94 | $2.95 | $3.30 | $3.23 | $3.46 | $3.65 | $3.72 | $5.16 | $4.27 | $4.81 |
| Cash from operations | $30.6B | $18.9B | $31.9B | $37.2B | $34.2B | $22.3B | $37.0B | $42.6B | $45.1B | $35.8B | $46.7B | $55.4B |
| Capital expenditure | $9.9B | $9.7B | $11.0B | $13.9B | $14.9B | $15.8B | $16.7B | $17.1B | $19.4B | $29.9B | $30.9B | $35.8B |
| Free cash flow | $20.7B | $9.1B | $21.0B | $23.3B | $19.3B | $6.5B | $20.3B | $25.6B | $25.7B | $5.9B | $15.8B | $19.6B |
| Dividends and buybacks | $9.9B | $9.6B | $9.8B | $9.8B | $9.7B | $11.2B | $11.0B | $10.7B | $11.8B | $14.2B | $11.4B | $11.3B |
This story describes figures the company has published. It is for information only and is not investment advice or a recommendation to buy, sell or hold any security. Check the original filings before relying on any figure. Stoqly is not affiliated with the SEC or Microsoft.
