Microsoft has reported a 60% improve in web earnings for the second quarter of fiscal 12 months 2026 (Q2 FY26), reaching $38.5bn on a GAAP foundation, in comparison with $24.1bn in the identical quarter final 12 months.
On a non-GAAP foundation, web earnings for the quarter ending 31 December 2025, was $30.9bn, reflecting a 23% improve from $25bn.
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The reported quarter’s income totalled $81.3bn, representing a 17% year-over-year (YoY) development from $69.6bn, or 15% when adjusted for fixed forex.
Working earnings elevated by 21% to $38.3bn, up from $31.7bn.
Diluted earnings per share (EPS) on a GAAP foundation rose by 60% to $5.16, in comparison with $3.23, whereas the non-GAAP EPS elevated by 24% to $4.14 from $3.35.
A big contributor to this development was Microsoft’s cloud section, which generated $51.5bn in income, a 26% improve from the earlier 12 months. The business remaining efficiency obligation (RPO) surged by 110% to $625bn.
Within the Productiveness and Enterprise Processes division, income rose to $34.1bn, a 16% improve from $29.4bn. This features a 17% development in Microsoft 365 business cloud income and a 29% rise in client cloud income.
LinkedIn and Dynamics 365 additionally noticed income will increase of 11% and 19%, respectively.
The Clever Cloud section reported a 29% income improve to $32.9bn, up from $25.5bn, with Azure and different cloud providers experiencing a 39% rise. Conversely, the Extra Private Computing division noticed a slight income decline to $14.3bn from $14.7bn, primarily because of a 5% discount in Xbox content material and providers income.
Throughout Q2 FY26, Microsoft returned $12.7bn to shareholders via dividends and share repurchases, a 32% improve over the earlier 12 months.
Microsoft govt vp and chief monetary officer Amy Hood mentioned: “Microsoft Cloud income crossed $50bn this quarter, reflecting the sturdy demand for our portfolio of providers.
“We exceeded expectations throughout income, working earnings, and earnings per share.”
Within the Q2 FY26 earnings name, Microsoft emphasised the rising demand for AI-driven options alongside continued infrastructure investments.
Microsoft chairman and CEO Satya Nadella reported that Microsoft Cloud income exceeded $50bn for the primary time. He described the quarter as early within the “AI diffusion” cycle, which is anticipated to develop Microsoft’s market throughout the stack. Nadella outlined progress in three areas, which embrace “Cloud & Token Manufacturing facility,” an “agent platform,” and “excessive worth agentic experiences.”
He famous a 50% throughput acquire in OpenAI inferencing workloads and described new “Fairwater” datacentres related by an AI WAN. Microsoft added almost one gigawatt of capability throughout the quarter and superior its silicon expertise with the Maia 200 accelerator and Cobalt 200 CPU, in partnership with Nvidia and AMD. Nadella additionally talked about new datacentre investments in seven international locations.
On the platform facet, Nadella positioned “brokers as the brand new apps,” highlighting mannequin decisions in Foundry, together with GPT 5.2 and Claude 4.5, and the momentum in Foundry Data and Cloth.
Cloth’s annual income run charge surpassed $2bn with over 31,000 prospects. Microsoft additionally launched Agent 365 throughout the second quarter for cross-cloud governance and safety.
Nadella mentioned: “We’re solely originally phases of AI diffusion and already Microsoft has constructed an AI enterprise that’s bigger than a few of our greatest franchises.
“We’re pushing the frontier throughout our whole AI stack to drive new worth for our prospects and companions.”
Final month, Microsoft revealed plans to speculate $17.5bn in India, with the funds to be allotted from 2026 to 2029. The funding is meant to reinforce India’s cloud and AI infrastructure, present workforce coaching, and broaden present operations.
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