Microsoft Corporation

Microsoft Corporation earns money from cloud computing, software subscriptions and licenses, advertising, gaming and devices. Its shares trade on Nasdaq as MSFT. Azure and Microsoft 365 cloud are major sources of growth, while infrastructure investment is becoming a larger use of cash.

Latest reported results

First-quarter revenue rose 19% from a year earlier and operating income increased 21%. GAAP net income was $36.629 billion, up 32%. Adjusted net income increased 18% to $36.422 billion after excluding OpenAI investment gains and losses. Adjusted diluted EPS was $4.89, compared with $4.13 a year earlier.

Microsoft changed its segment reporting in September 2026 and recast the comparisons. Agents and Infra revenue reached $76.795 billion, up 25%, while Devices and Consumer revenue fell 3% to $15.484 billion.

Azure revenue rose 48% to $33.165 billion. Microsoft Cloud revenue, which also includes Microsoft 365 commercial cloud and Industry solutions cloud, reached $63.9 billion, compared with $49.1 billion a year earlier and $59.3 billion in the preceding quarter. Cloud gross margin was 66%, versus 68% a year earlier and 65% in the preceding quarter.

Cash generation and infrastructure demands

Operating cash flow rose 29%, while cash spending on property and equipment more than doubled. The company's free-cash-flow measure subtracts that equipment and property spending from operating cash flow. It fell 27% to $18.633 billion.

Other investing cash outflow was $12.949 billion, compared with $6.209 billion a year earlier. Management primarily attributed the $6.7 billion increase to facilitating component purchases. Subtracting this separate outflow from free cash flow leaves $5.684 billion before dividends, repurchases, finance-lease principal and other flows.

Cash dividends paid were $6.757 billion. The cash-flow repurchase line was $4.379 billion, including employee tax-withholding settlements; purchases under the share-repurchase program were $2.925 billion. Microsoft also paid $1 billion of finance-lease principal. Interest on those leases was already included in operating cash flow.

Completed November financing

On November 4, 2026, Microsoft completed ten bond series totaling $25 billion of principal. The October 29 pricing package preceded the closing. Proceeds were about $24.912 billion after issue-price and underwriting discounts, before other expenses, for general corporate purposes including capital spending, repurchases, acquisitions and debt repayment.

Eight series have fixed rates from 4.85% to 6.35%, with maturities from November 2028 to November 2066. Their combined annualized cash interest is $1.28425 billion while all eight remain outstanding. Two $1 billion floating-rate series mature in November 2028 and November 2029, paying compounded SOFR plus 0.35 and 0.53 percentage points, respectively.

Fixed-rate interest payments begin in May 2027; floating-rate payments begin in February 2027. The annualized fixed interest calculation describes a full year on those eight series.

Balance sheet and future obligations

At September 30, before the financing, cash and short-term investments totaled $64.509 billion. That included $4 billion of restricted investments under a supplier agreement. A separate $8.6 billion of restricted investments was classified among noncurrent investments. Receivables related to facilitating server-component purchases were $35.7 billion.

Existing debt had a carrying amount of $35.481 billion and face value of $41.269 billion. The prospectus showed carrying debt of $60.358 billion after adjusting the September balance for the new notes, before using the proceeds. That is a pro forma comparison on the September reporting date.

Recognized finance-lease liabilities were $70.973 billion and operating-lease liabilities were $27.477 billion. Separately, additional leases that had not yet begun totaled $364.6 billion, mainly for data centers. They are scheduled to start between fiscal 2027 and fiscal 2034, with some subject to contractual conditions.

Outlook and the next tests

On October 28, Microsoft forecast December-quarter revenue of $96 billion to $97.1 billion. It expected Azure revenue growth of 49% to 50% in constant currency, which removes exchange-rate movements, and Microsoft Cloud gross margin of about 65%.

Management expected more than $50 billion of capital expenditures in that quarter, including finance-lease assets, and approximately $170 billion for calendar 2026. It also expected spending to accelerate in the second half of fiscal 2027 as delayed third-party capacity became available. Chief Financial Officer Amy Hood said fiscal 2027 free cash flow was expected to remain positive and described access to financing when attractive.

Commercial remaining performance obligations were $677 billion at September 30, representing contracted future revenue. Microsoft expected to recognize roughly 30% over the next 12 months. Converting demand into delivered capacity and cash generation remains central to funding the investment cycle.

Our analysis of Microsoft's new borrowing explains the cash uses behind the completed bond sale.