Microsoft Corporation · Earnings release · 8-K Exhibit 99

EX-99.1 2 msft-ex99_1.htm EX-99.1 EX-99.1 Exhibit 99.1 Microsoft Cloud and AI Strength Drives Second Quarter Results REDMOND, Wash. — January 28, 2026 — Microsoft Corp. today announced the following results for the quarter ended December 31, 2025, as compared to the corresponding period of last fiscal year: • Revenue was $81.3 billion and increased 17% (up 15% in constant currency) • Operating income was $38.3 billion and increased 21% (up 19% in constant currency) • Net income on a GAAP basis was $38.5 billion and increased 60%, and on a non-GAAP basis was $30.9 billion and increased 23% (up 21% in constant currency) • Diluted earnings per share on a GAAP basis was $5.16 and increased 60%, and on a non-GAAP basis was $4.14 and increased 24% (up 21% in constant currency) • Non-GAAP results exclude the impact from investments in OpenAI, explained in the Non-GAAP Definition section below “T1We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises," said Satya Nadella, chairman and chief executive officer of Microsoft. “We are pushing the frontier across our entire AI stack to drive new value for our customers and partners.” “T2Microsoft Cloud revenue crossed $50 billion this quarter, reflecting the strong demand for our portfolio of services,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “T3We exceeded expectations across revenue, operating income, and earnings per share.” The following 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 December 31,                      ($ in millions, except per share amounts)   Net Income   Diluted Earnings per Share                     2024 As Reported (GAAP)   $24,108   $3.23 Impact from investments in OpenAI   939   0.12 2024 As Adjusted (non-GAAP)   $25,047   $3.35 2025 As Reported (GAAP)   $38,458   $5.16 Impact from investments in OpenAI   (7,583)   (1.02) 2025 As Adjusted (non-GAAP)   $30,875   $4.14 Percentage Change Y/Y (GAAP)   60%   60% Percentage Change Y/Y Constant Currency   57%   58% Percentage Change Y/Y (non-GAAP)   23%   24% Percentage Change Y/Y (non-GAAP) Constant Currency   21%   21% Business Highlights Microsoft Cloud revenue was $51.5 billion and increased 26% (up 24% in constant currency), and T4commercial remaining performance obligation increased 110% to $625 billion.

Revenue in Productivity and Business Processes was $34.1 billion and increased 16% (up 14% in constant currency), with the following business highlights: • Microsoft 365 Commercial cloud revenue increased 17% (up 14% in constant currency) • Microsoft 365 Consumer cloud revenue increased 29% (up 27% in constant currency)     • LinkedIn revenue increased 11% (up 10% in constant currency) • Dynamics 365 revenue increased 19% (up 17% in constant currency) Revenue in Intelligent Cloud was $32.9 billion and increased 29% (up 28% in constant currency), with the following business highlights: • T5Azure and other cloud services revenue increased 39% (up 38% in constant currency) T6Revenue in More Personal Computing was $14.3 billion and decreased 3%, with the following business highlights: • Windows OEM and Devices revenue increased 1% (relatively unchanged in constant currency) • Xbox content and services revenue decreased 5% (down 6% in constant currency) • Search and news advertising revenue excluding traffic acquisition costs increased 10% (up 9% in constant currency) T7Microsoft returned $12.7 billion to shareholders in the form of dividends and share repurchases in the second quarter of fiscal year 2026, an increase of 32% compared to the second quarter of fiscal year 2025.

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 and deputy 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. 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 January 28, 2027. Non-GAAP Definition Impact from investments in OpenAI. In the second quarter of fiscal year 2026, T8net 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 $7.6 billion and $1.02, respectively.

In the second quarter of 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 $939 million and $0.12, 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 December 31,                                      ($ in millions, except per share amounts)   Revenue   Operating Income   Net Income   Diluted Earnings per Share                                     2024 As Reported (GAAP)   $69,632   $31,653   $24,108   $3.23 2024 As Adjusted (non-GAAP)   $69,632   $31,653   $25,047   $3.35 2025 As Reported (GAAP)   $81,273   $38,275   $38,458   $5.16 2025 As Adjusted (non-GAAP)   $81,273   $38,275   $30,875   $4.14 Percentage Change Y/Y (GAAP)   17%   21%   60%   60% Percentage Change Y/Y (non-GAAP)   17%   21%   23%   24% Constant Currency Impact   $972   $596   $558   $0.07 Percentage Change Y/Y Constant Currency   15%   19%   57%   58% Percentage Change Y/Y (non-GAAP) Constant Currency   15%   19%   21%   21% Segment Revenue Constant Currency Reconciliation   Three Months Ended December 31,                              ($ in millions)   Productivity and Business Processes   Intelligent Cloud   More Personal Computing                             2024 As Reported (GAAP)   $29,437   $25,544   $14,651 2025 As Reported (GAAP)   $34,116   $32,907   $14,250 Percentage Change Y/Y (GAAP)   16%   29%   (3)% Constant Currency Impact   $580   $292   $100 Percentage Change Y/Y Constant Currency   14%   28%   (3)%     Selected Product and Service Revenue Constant Currency Reconciliation   Three Months Ended December 31, 2025                               Percentage Change Y/Y (GAAP)   Constant Currency Impact   Percentage Change Y/Y Constant Currency                             Microsoft Cloud   26%   (2)%   24% Commercial remaining performance obligation   110%   0%   110% Microsoft 365 Commercial cloud   17%   (3)%   14% Microsoft 365 Consumer cloud   29%   (2)%   27% LinkedIn   11%   (1)%   10% Dynamics 365   19%   (2)%   17% Azure and other cloud services   39%   (1)%   38% Windows OEM and Devices   1%   (1)%   0% Xbox content and services   (5)%   (1)%   (6)% Search and news advertising excluding traffic acquisition costs   10%   (1)%   9%   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 December 31, 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.

For more information, press only: Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, rrt@we-worldwide.com For more information, financial analysts and investors only: Jonathan Neilson, Vice President, Investor Relations, (425) 706-4400 Note 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 Ended December 31,   Six Months Ended December 31,   2025   2024   2025   2024                                     Revenue:                 Product   $16,451   $16,219   $32,373   $31,491 Service and other   64,822   53,413   126,573   103,726                                     Total revenue   81,273   69,632   158,946   135,217                                     Cost of revenue:                 Product   3,505   3,856   6,427   7,150 Service and other   22,473   17,943   43,594   34,748                                     Total cost of revenue   25,978   21,799   50,021   41,898                                     Gross margin   55,295   47,833   108,925   93,319 Research and development   8,504   7,917   16,650   15,461 Sales and marketing   6,584   6,440   12,301   12,157 General and administrative   1,932   1,823   3,738   3,496                                     Operating income   38,275   31,653   76,236   62,205 Other income (expense), net   9,971   (2,288)   6,311   (2,571)                                     Income before income taxes   48,246   29,365   82,547   59,634 Provision for income taxes   9,788   5,257   16,342   10,859                                     Net income   $38,458   $24,108   $66,205   $48,775                                     Earnings per share:                 Basic   $5.18   $3.24   $8.91   $6.56 Diluted   $5.16   $3.23   $8.87   $6.53                   Weighted average shares outstanding:                 Basic   7,431   7,435   7,432   7,434 Diluted   7,460   7,468   7,463   7,469                         COMPREHENSIVE INCOME STATEMENTS (In millions) (Unaudited)     Three Months Ended   Six Months Ended   December 31,   December 31,   2025   2024   2025   2024                                     Net income   $38,458   $24,108   $66,205   $48,775                                     Other comprehensive income (loss), net of tax:                 Net change related to derivatives   (3)   34   (6)   24 Net change related to investments   (161)   (434)   526   680 Translation adjustments and other   223   (1,034)   125   (730)                                     Other comprehensive income (loss)   59   (1,434)   645   (26)                                     Comprehensive income   $38,517   $22,674   $66,850   $48,749                         BALANCE SHEETS (In millions) (Unaudited)     December 31, 2025   June 30, 2025                     Assets         Current assets:         Cash and cash equivalents   $24,296   $30,242 Short-term investments   65,166   64,323                     Total cash, cash equivalents, and short-term investments   89,462   94,565 Accounts receivable, net of allowance for doubtful accounts of $729  and $944   56,535   69,905 Inventories   1,059   938 Other current assets   33,134   25,723                     Total current assets   180,190   191,131 T9Property and equipment, net of accumulated depreciation of $104,950 and $93,653   261,126   204,966 Operating lease right-of-use assets   25,103   24,823 Equity and other investments   21,202   15,405 Goodwill   119,622   119,509 Intangible assets, net   20,289   22,604 Other long-term assets   37,770   40,565                     Total assets   $665,302   $619,003                     Liabilities and stockholders' equity         Current liabilities:         Accounts payable   $37,328   $27,724 Current portion of long-term debt   4,837   2,999 Accrued compensation   10,103   13,709 Short-term income taxes   2,050   7,211 Short-term unearned revenue   51,376   64,555 Other current liabilities   24,311   25,020                     Total current liabilities   130,005   141,218 Long-term debt   35,425   40,152 Long-term income taxes   27,256   25,986 Long-term unearned revenue   2,668   2,710 Deferred income taxes   2,876   2,835 Operating lease liabilities   17,345   17,437 Other long-term liabilities   58,852   45,186                     Total liabilities   274,427   275,524                     Commitments and contingencies         Stockholders' equity:         Common stock and paid-in capital - shares authorized 24,000; outstanding 7,429  and 7,434   112,788   109,095 Retained earnings   280,789   237,731 Accumulated other comprehensive loss   (2,702)   (3,347)                     Total stockholders' equity   390,875   343,479                     Total liabilities and stockholders' equity   $665,302   $619,003                 CASH FLOWS STATEMENTS (In millions) (Unaudited)     Three Months Ended   Six Months Ended   December 31,   December 31,   2025   2024   2025   2024                                     Operations                 Net income   $38,458   $24,108   $66,205   $48,775 Adjustments to reconcile net income to net cash from operations:                 Depreciation, amortization, and other   9,198   5,667   17,345   12,383 Stock-based compensation expense   3,219   3,089   6,202   5,921 Net recognized losses (gains) on investments and derivatives   (9,931)   2,136   (6,024)   2,678 Deferred income taxes   4,446   (1,158)   6,937   (2,591) Changes in operating assets and liabilities:                 Accounts receivable   (3,436)   (5,978)   13,054   8,059 Inventories   70   711   (122)   338 Other current assets   619   (353)   (543)   (435) Other long-term assets   (1,288)   (1,089)   (1,682)   (2,850) Accounts payable   1,197   958   583   42 Unearned revenue   (7,483)   (6,338)   (12,901)   (11,891) Income taxes   (920)   (3,395)   (3,864)   (2,379) Other current liabilities   2,802   3,217   (2,705)   (2,262) Other long-term liabilities   (1,193)   716   (1,670)   683                                     Net cash from operations   35,758   22,291   80,815   56,471                                     Financing                 Repayments of debt, maturities of 90 days or less   0   0   0   (5,746) Repayments of debt   (3,000)   0   (3,000)   (966) Common stock issued   259   256   948   962 Common stock repurchased   (7,415)   (4,986)   (13,065)   (9,093) Common stock cash dividends paid   (6,762)   (6,170)   (12,931)   (11,744) Other, net   (699)   (343)   (1,368)   (1,232)                                     Net cash used in financing   (17,617)   (11,243)   (29,416)   (27,819)                                     Investing                 Additions to property and equipment   (29,876)   (15,804)   (49,270)   (30,727) Acquisition of companies, net of cash acquired and divestitures, and purchases of intangible and other assets   (455)   (1,405)   (1,033)   (3,254) Purchases of investments   (9,845)   (2,050)   (27,516)   (3,670) Maturities of investments   12,417   2,604   18,448   4,740 Sales of investments   5,691   2,559   8,953   4,527 Other, net   (637)   (16)   (6,846)   (929)                                     Net cash used in investing   (22,705)   (14,112)   (57,264)   (29,313)                                     Effect of foreign exchange rates on cash and cash equivalents   11   (294)   (81)   (172)                                     Net change in cash and cash equivalents   (4,553)   (3,358)   (5,946)   (833) Cash and cash equivalents, beginning of period   28,849   20,840   30,242   18,315                                     Cash and cash equivalents, end of period   $24,296   $17,482   $24,296   $17,482                   We have recast certain prior period amounts to conform to the current period presentation.     SEGMENT RESULTS (In millions) (Unaudited)     Three Months Ended   Six Months Ended   December 31,   December 31,   2025   2024   2025   2024                                     Productivity and Business Processes                                   Revenue   $34,116   $29,437   $67,136   $57,754 Cost of revenue   6,110   5,569   11,831   10,863 Operating expenses   7,407   6,983   14,299   13,490                                     Operating income   $20,599   $16,885   $41,006   $33,401                                     Intelligent Cloud                                   Revenue   $32,907   $25,544   $63,804   $49,636 Cost of revenue   13,566   9,405   25,880   18,019 Operating expenses   5,468   5,288   10,660   10,263                                     Operating income   $13,873   $10,851   $27,264   $21,354                                     More Personal Computing                                   Revenue   $14,250   $14,651   $28,006   $27,827 Cost of revenue   6,302   6,825   12,310   13,016 Operating expenses   4,145   3,909   7,730   7,361                                     Operating income   $3,803   $3,917   $7,966   $7,450                                     Total                                   Revenue   $81,273   $69,632   $158,946   $135,217 Cost of revenue   25,978   21,799   50,021   41,898 Operating expenses   17,020   16,180   32,689   31,114                                     Operating income   $38,275   $31,653   $76,236   $62,205