Microsoft FY2026: cloud growth and the cost of delivering it
Microsoft Corporation · MSFT. Intelligent Cloud grew rapidly in FY2026, while its delivery costs rose faster than revenue.
- Research updated
- Latest filing analyzed
- 10-K for period ended 2026-06-30, filed 2026-07-29
- SEC filing cutoff
- Publication version
- msft-reviewed-2026-09-18
Business and reporting model
Microsoft sells productivity and business software, cloud infrastructure and services, and personal-computing products. Its Productivity and Business Processes segment includes Microsoft 365 and Dynamics; Intelligent Cloud includes Azure, server products and enterprise services; More Personal Computing includes Windows, devices, gaming and search advertising. These are operating segments, so their revenue and operating-income figures are more informative than treating every product as one undifferentiated software business.
Provenance: Original Arqaris synthesis of Item 1 and the segment disclosures in Microsoft's FY2026 Form 10-K; no vendor company profile was used. Read the SEC-hosted annual filing.
What the latest filing shows
These findings describe fiscal years ended june 30, 2026 and 2025. Each reported fact is drawn from the latest SEC filing analyzed; calculations use the unrounded reported values. Interpretation and limits are Arqaris analysis.
Reported fact: Intelligent Cloud revenue was $137,791 million, compared with $106,265 million a year earlier. SEC source ↗
Calculation: The increase was $31,526 million, or about 30%.
Interpretation: Cloud supplied most of Microsoft's $50,115 million increase in consolidated revenue; its growth matters more to this filing than the nearly flat personal-computing segment.
Limit: The segment includes server products and services beyond Azure, so its revenue cannot be labeled Azure revenue.
Reported fact: Intelligent Cloud operating income rose from $44,589 million to $56,972 million, while its cost of revenue rose from $40,171 million to $57,876 million. SEC source ↗
Calculation: Cost of revenue grew about 44%, faster than the segment's roughly 30% revenue growth.
Interpretation: The filing shows expansion with a heavier delivery-cost burden; revenue growth alone does not describe cloud economics.
Reported fact: More Personal Computing revenue was $54,052 million versus $54,649 million, while Productivity and Business Processes reached $139,996 million versus $120,810 million. SEC source ↗
Interpretation: Microsoft's three segments moved differently in the same fiscal year, making a single company-wide growth rate an incomplete summary.
Comparable financial evidence
Reported values are USD millions for fiscal years ended june 30, 2026 and 2025. Changes are Arqaris calculations: (current ÷ prior − 1) × 100, rounded to one decimal place. The note column identifies reporting boundaries that matter for this company.
| Measure | Current | Prior | Calculated change | Reporting note |
|---|---|---|---|---|
| Intelligent Cloud revenue | 137,791 | 106,265 | 29.7% | Operating segment |
| Intelligent Cloud operating income | 56,972 | 44,589 | 27.8% | Operating segment |
| Productivity and Business Processes revenue | 139,996 | 120,810 | 15.9% | Operating segment |
| More Personal Computing revenue | 54,052 | 54,649 | -1.1% | Operating segment |
| Consolidated revenue | 331,839 | 281,724 | 17.8% | Company total |
How to read the change
The segment table permits a useful comparison of both scale and profit. Intelligent Cloud's revenue increase was substantial, but the rise in its cost of revenue was proportionately larger. That does not by itself identify the cost of AI capacity, depreciation or any single workload; those explanations require the filing's fuller discussion and future comparable periods.
Productivity and Business Processes remained Microsoft's largest revenue segment in FY2026 by a narrow margin. More Personal Computing did not share the other two segments' growth. The mix matters because customers, pricing models and infrastructure costs differ across the three businesses.
What this research cannot establish
- Fiscal-year figures are not a measure of the following quarter or a forecast of Azure demand.
- Segment operating income follows Microsoft's allocations and should not be read as standalone product profitability.
- This selected analysis omits cash flow, capital commitments, gaming detail and valuation.
This is selected filing analysis, not a valuation, recommendation, live price or forecast. It does not cover every risk or event after the SEC cutoff. Read the full filings before relying on any selected figure. How revenue differs from operating profit and review Arqaris methodology.
Primary sources and method
- Microsoft Corporation 10-K, period ended 2026-06-30; accession 0001193125-26-323660, filed 2026-07-29. Source for the current and comparable values and filing-specific findings.
- Microsoft Corporation 10-K, period ended 2026-06-30; accession 0001193125-26-323660, filed 2026-07-29. Source for the business and reporting-model context.
Business explanations and interpretations are original Arqaris text. Historical facts are attributed to SEC-hosted issuer filings; percentage changes and selected shares are Arqaris calculations. No commercial company-profile description is reproduced.