Microsoft Corporation on January 28, 2026 reported Microsoft second quarter financial results that beat Wall Street expectations across key metrics. The company announced revenue of $81.3 billion for the quarter ended December 31, 2025. This represents a growth of 17% compared to the same period last year.
Figure 1: Microsoft CEO Satya Nadella speaks at a public forum and reports strong second-quarter revenue growth driven by cloud and AI expansion. (Source: Yahoo Finance)
Microsoft’s second quarter revenue increased 21% year over year, with operating income of $38.3 billion. Microsoft Cloud revenue surpasses the $50 billion milestone for the first time. CEO Satya Nadella said Microsoft has built an AI business bigger than some of the company’s largest franchises.
Strong performance across revenue metrics
Despite market concerns, Microsoft’s quarterly profit performance beat analysts’ expectations. GAAP net income reached USD 38.5 billion, a growth of 60%. Diluted earnings per share came to $5.16, beating Wall Street’s expectations of $3.92.
Figure 2: Microsoft income statement for the three and six months ended December 31, 2025. It shows solid growth in revenue, operating income, and net income. (Source: Microsoft Investor Relations)
Microsoft’s Q2 2026 revenue growth reflects strong demand across the company’s product portfolio. CFO Amy Hood emphasized that Microsoft exceeded expectations in terms of revenue, operating income, and earnings per share. The company returned $12.7 billion to shareholders through dividends and share repurchases, an increase of 32%.
Non-GAAP net income, excluding the impact of the OpenAI investment, totaled $30.9 billion. This equates to 23% growth on an adjusted basis. Adjusted diluted earnings per share were $4.14, an increase of 24% compared to the same period last year.
Microsoft Cloud achieves historic milestone
Microsoft’s second quarter earnings showed strength in cloud services across customer segments. Microsoft Cloud revenue reached $51.5 billion, exceeding analyst expectations of $51.2 billion. This compares to USD 40.9 billion in the same period last year.
Figure 3: Revenue growth (constant currency) for selected Microsoft products and services, highlighting strong performance in the cloud, Azure, and Microsoft 365 segments. (Source: Microsoft Investor Relations)
Remaining commercial performance obligations increased 110% to USD 625 billion. Approximately 45% of this total comes from OpenAI efforts. This metric helps Wall Street assess overall AI demand across Microsoft’s customer base.
Microsoft’s quarterly profit benefited from expansion across multiple cloud product lines. Revenue from Azure and other cloud services increased 39% year over year. Microsoft 365 commercial cloud revenue increased 17% during the quarter.
Business sector results are mixed.
Microsoft’s revenue growth in the second quarter of 2026 varied across the company’s three major business segments. Productivity and business process revenue increased by 16% to USD 34.1 billion. Wall Street had expected US$33.6 billion for the sector.
Microsoft 365 Consumer Cloud revenue increased 29% year over year. LinkedIn’s revenue increased 11% during the quarter. Dynamics 365 revenue increased 19%, demonstrating continued adoption of enterprise software.
The Intelligent Cloud business generated revenue of USD 32.9 billion and recorded a growth of 29%. This exceeded analysts’ expectations of $32.2 billion. Sales in the Other Personal Computing segment decreased 3% to $14.3 billion.
AI capability constraints impact revenue potential
Microsoft’s second-quarter earnings highlighted continued challenges in meeting AI customer demand. We continue to face constraints in our AI capabilities, with customer demand outpacing Microsoft’s ability to supply our services. This places an artificial cap on potential revenue growth.
Figure 4: Microsoft corporate branding displayed at headquarters. It reflects the company’s global technology and cloud services footprint. (Source: Office apps)
Microsoft responded by significantly increasing capital expenditures to expand its infrastructure. Spending in the quarter reached USD 37.5 billion, up from USD 22.6 billion in Q2 2025. These investments are aimed at addressing capacity limitations and supporting future growth.
Nadella emphasized that Microsoft is still in the early stages of AI adoption. He noted that the company is pushing the frontiers across the entire AI stack. This approach aims to bring new value to our customers and partners.
Segment performance shows different growth trajectories
Contributions to Microsoft’s quarterly profits vary widely by product category. Windows OEM and device sales rose just 1% in the quarter. Xbox content and services revenue was down 5% year over year.
Figure 5: Microsoft’s second quarter 2026 GAAP revenue and financial performance reconciliation showing non-GAAP revenue, operating income, and profit growth. (Source: Microsoft Investor Relations)
Search and news ad revenue, excluding traffic acquisition costs, increased 10%. This proved that Microsoft’s advertising business continues to perform well. More Personal Computing generated US$14.3 billion, meeting analyst expectations.
Microsoft’s Q2 2026 revenue growth increased 15% overall, excluding currency effects. This adjustment removes currency fluctuations and presents underlying performance. Operating profit increased 19% at constant currency.
Stock prices fell despite higher profits
Microsoft’s second-quarter results triggered a negative market reaction, with the stock falling more than 4%. The stock price closed at $481.63, but fell to $455.35 in after-hours trading. This represents an overnight decrease of 5.46 percent.
Figure 6: Microsoft’s stock performance shows a post-earnings decline even though earnings and earnings beat analyst expectations. (Source: Yahoo Finance)
The decline occurred despite beating expectations for both sales and bottom line. Investors continue to express concerns about the AI industry’s high spending levels. Microsoft stock has risen just 7% in the past 12 months.
The performance slightly outpaced cloud rival Amazon, which rose 2% during the same period. Google’s stock price has risen 69% in 12 months, which is largely related to the debut of its Gemini 3 model.
Investing in OpenAI creates accounting impact
Microsoft’s quarterly profit calculations include a significant impact from the OpenAI investment. GAAP net income includes gains from these investments of $7.6 billion in the second quarter of 2026. The loss for the same period last year was US$939 million.
Microsoft has provided non-GAAP measures to assist investors in understanding operational performance. Management considers these adjusted measures alongside GAAP results when evaluating operating results. We believe this additional insight will help uncover trends impacting your business.
OpenAI’s investment gains increased GAAP diluted earnings per share by $1.02. Excluding this effect allows comparisons to previous periods and underlying business trends.
Future guidance and strategic outlook
Microsoft’s revenue growth in Q2 2026 positions us for continued expansion across our cloud services. Microsoft plans to provide forward-looking guidance during its earnings call. We maintain significant research and development investments to empower our customers.
Hood highlighted the strong demand for Microsoft’s service portfolio. We deliver hundreds of products, services and enhancements every quarter. These releases result from years of significant R&D investment.
Microsoft’s second quarter earnings demonstrated the execution of the company’s cloud and AI strategy. The results reflect the momentum in the story of how technology is shaping the industry and driving customer success.
About Microsoft Corporation
Microsoft Corporation develops AI-powered platforms and tools to deliver innovative solutions. We meet the evolving needs of our customers through cloud-based services and software products. Microsoft remains committed to our mission of empowering all individuals and organizations to achieve more.
This technology company is committed to making AI widely available and responsibly. Microsoft operates across productivity software, cloud infrastructure, gaming, and personal computing. The company is headquartered in Redmond, Washington and trades on the Nasdaq under the ticker MSFT.
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FAQ
Q1. What were Microsoft’s second quarter earnings results?
answer. Microsoft reported second quarter 2026 revenue of $81.3 billion. This is a 17% year-over-year growth and exceeded analyst expectations.
Q2. How much revenue did Microsoft Cloud generate?
answer. Microsoft Cloud revenue exceeded US$50 billion for the first time, reaching US$51.5 billion in the quarter ended December 31, 2025.
Q3.Why did Microsoft’s stock price fall even though it exceeded its profits?
answer. Despite strong financial results, Microsoft shares fell more than 4% as investors grew concerned about the company’s huge spending on the AI industry.
Q4. How much is Microsoft investing in AI infrastructure?
answer. Microsoft’s capital expenditures reached US$37.5 billion in the second quarter, up from US$22.6 billion in the year-ago period.
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Last updated: January 30, 2026
