Microsoft simply posted the second quarter of its 2026 fiscal monetary outcomes. The software program maker made $81.3 billion in income and a web revenue of $30.9 billion throughout Q3. Income is up 17 p.c, and web revenue has elevated by 23 p.c.
The vacation quarter noticed PC shipments develop unexpectedly amid an ongoing RAM scarcity. Microsoft’s finish of Home windows 10 help helped push PC shipments up, however IDC revealed earlier this month that PC makers have additionally been aggressively pulling ahead stock to fight potential tariffs and ongoing world reminiscence scarcity.
Microsoft’s Home windows OEM and units income over this vacation interval was up simply 1 p.c year-over-year. Companies and shoppers have clearly been upgrading PCs and laptops through the Home windows 10 finish of life interval, as a result of Home windows OEM income by itself was up 5 p.c. However this income was offset by a decline in units income as Microsoft combines Floor income and Home windows OEM income collectively now.
Home windows 11 additionally hit a giant milestone within the quarter, hitting one billion customers. That’s up 45 p.c year-over-year, in line with Microsoft CEO Satya Nadella. The top of help for Home windows 10 undoubtedly fueled this development, which has helped Home windows 11 attain one billion customers sooner than Home windows 10 did.
Microsoft didn’t announce any new Floor units through the current quarter, after launching each the 12-inch Floor Professional and 13-inch Floor Laptop computer in Could final yr. I’d anticipate to listen to extra about new Floor units within the spring.
Microsoft’s Xbox {hardware} income has declined for 3 monetary years in a row, and it appears to be like like these declining revenues are going to proceed all through fiscal 2026. Xbox {hardware} income was down 32 p.c year-over-year through the current vacation quarter. Total gaming income was additionally down 9 p.c.
Xbox content material and companies, which incorporates Recreation Cross, is down 5 p.c, too. This decline is essentially being attributed to stronger first-party content material efficiency within the earlier yr, and never the Recreation Cross Final worth hike through the quarter. That factors in the direction of softer gross sales numbers for Name of Responsibility: Black Ops 7, which not solely needed to go up towards Battlefield 6, but in addition the success of Black Ops 6 in 2024.
Unsurprisingly, Microsoft isn’t giving us an replace on Xbox Recreation Cross subscriber numbers. The corporate final reported it had 34 million subscribers almost two years in the past, which included Xbox Recreation Cross Important (beforehand Xbox Reside Gold / Recreation Cross Core) members.
Microsoft has continued to publish extra video games on PS5, as a part of its technique to make beforehand Xbox-exclusive video games out there on Nintendo and Sony platforms. Microsoft revealed final yr that Halo: Marketing campaign Advanced is coming to PS5 and Xbox in 2026, and Fable and Forza Horizon 6 are additionally coming to Sony’s console this yr.
Microsoft’s cloud income was as soon as once more robust this quarter, and even crossed $50 billion general — up 26 p.c year-over-year. Azure and different cloud companies income grew 39 p.c. “Microsoft Cloud income crossed $50 billion this quarter, reflecting the robust demand for our portfolio of companies,” says Microsoft CFO Amy Hood. “We exceeded expectations throughout income, working revenue, and earnings per share.”
All eyes are nonetheless on Microsoft’s AI revenues and the related prices, and the software program maker hasn’t pulled out any particular AI product numbers this quarter. Capital expenditure in Q2 was $37.5 billion, and the vast majority of that spend was on belongings like CPU and GPUs to gas cloud and AI information facilities. Industrial bookings have additionally elevated 230 p.c year-over-year, due to Azure commitments from OpenAI and Anthropic.
Microsoft introduced its newest in-house AI chip this week, which can assist host GPT-5.2 and different fashions for Microsoft Foundry and Microsoft 365 Copilot. The Maia 200 chip is designed for large-scale AI workloads and can go head-to-head with related AI inference chips from Amazon and Google.
Microsoft additionally noticed Microsoft 365 shopper cloud income development of 29 p.c year-over-year, alongside Microsoft 365 industrial cloud income development of 17 p.c. LinkedIn income additionally grew by 11 p.c year-over-year.
The energy of Microsoft’s Clever Cloud enterprise, which incorporates Azure and server merchandise, actually shines a brilliant mild on the decline of the Extra Private Computing enterprise of Home windows, Xbox, and Floor. Clever Cloud contributed $32.9 billion in income this quarter, greater than double the $14.3 billion from Extra Private Computing. In truth, the Extra Private Computing division declined by 3 p.c in income year-over-year, the one enterprise unit to take action this quarter.
Microsoft blames that Extra Private Computing decline on gaming, and it was offset by search and information promoting revenues rising by 10 p.c and Home windows OEM development.
Replace, January twenty eighth: Article up to date with feedback from Microsoft CEO Satya Nadella.
