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Annual resultsFrom SEC filings

Record profit at Microsoft, as data-center spending cuts free cash flow

Microsoft Corporation · Nasdaq: MSFT Fiscal year ended June 30, 2026 Form 10-K filed July 29, 2026 · 0001193125-26-323660 Published

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.

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

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.

Revenue
US$ billions, fiscal years ending June 30

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%.

Gross and operating margin
Percent of revenue
Gross marginOperating margin

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.

Where operating cash flow went
US$ billions. Each column is cash from operations, split into capital spending and what was left as free cash flow.
Free cash flowAdditions to property and equipment

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 long-term debt of $40.3 billion, which has fallen steadily from $72.2 billion in 2019. Counting finance lease liabilities as debt, Microsoft had $30.0 billion more debt than cash at June 2026. That is the first negative figure in the period. A year earlier the same measure showed $5.2 billion more cash than debt, and in 2019 it showed $55.0 billion more.

US$ billions at June 30. Long-term debt includes the current portion.

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

US$ billions unless stated. Fiscal years end June 30. Where a later 10-K restated a year, the latest filed figure is shown. Download these figures (CSV, US$ millions)

How this report was made

  • All financial figures come from Microsoft's annual reports on Form 10-K, taken from the SEC's EDGAR structured data (XBRL) for Microsoft, CIK 0000789019.
  • The OpenAI adjustments come from Microsoft's earnings release for the fourth quarter of fiscal 2026.
  • Free cash flow is net cash from operations minus additions to property and equipment. Capital spending means additions to property and equipment.
  • This report does not cover the share price, valuation or analyst forecasts.

Sources: Form 10-K filing index (SEC EDGAR) · EDGAR company facts for Microsoft · Microsoft FY2026 Q4 earnings release

This report 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. The Filing Desk is not affiliated with Microsoft.