Microsoft announced revenue of $90.0 billion for the fourth quarter of its 2026 fiscal year on July 29, 2026, an 18% increase from the same period a year earlier. Operating income, which is profit from the company's core business activities, was $40.6 billion, also up 18% (Microsoft Investor Relations). Net income reached $35.8 billion, up 31%, and earnings per share were $4.81, up 32%. Both figures beat what Wall Street analysts had expected — they had predicted revenue of $87.7 billion and earnings of $4.25 per share (Yahoo Finance).

Microsoft also reports an adjusted version of its profits that leaves out some one-time items. Those adjusted figures showed net income of $35.3 billion, up 22%, and earnings per share of $4.74, up 23% (Microsoft Investor Relations). The adjusted numbers exclude Microsoft's investments in OpenAI but do include a $3.2 billion gain from its stake in Anthropic, another AI company. The quarter also included write-downs related to Xbox and costs from employee severance. Together, these special items added $0.27 per share to the company's earnings.

Microsoft's cloud computing business brought in $59.3 billion for the quarter, up 27% (The Verge). Azure, the part of Microsoft that provides cloud services to other businesses, passed $100 billion in annual revenue for the first time (Microsoft Investor Relations). The segment that includes Microsoft 365 (the subscription version of Word, Excel, and other Office apps) and LinkedIn grew 14% to $37.8 billion. Microsoft 365 Copilot, an AI assistant built into those Office apps, now has over 30 million paying users. Microsoft also reported $678 billion in future cloud contracts that customers have signed but not yet paid for — an 84% jump that signals strong long-term demand.

Not every part of Microsoft grew. Revenue from Windows and devices fell 7% as PC demand softened (The Verge). Xbox services revenue, including the Game Pass subscription, dropped 10%, and Xbox hardware sales fell 14%. These declines continue a pattern seen throughout the fiscal year: in Q3, gaming revenue fell $380 million, or 7% (Microsoft Investor Relations). In Q2, total revenue had been $81.3 billion, up 17%, with cloud revenue at $51.5 billion, up 26% (Microsoft Investor Relations).

Xbox leader Asha Sharma announced a "reset" plan involving major layoffs and the sale of four game studios (The Verge). Xbox will also raise console prices by at least $100 starting August 1st. This comes after a June 2026 report that Microsoft had considered separating Xbox into its own company (Reuters).

The contrast inside Microsoft is sharp. Cloud and AI revenue are growing at rates that few companies this large have ever maintained. Azure passing $100 billion in annual revenue and $678 billion in signed future contracts suggests businesses are committing serious money to AI through cloud services. And 30 million paying users for Copilot is a substantial number for a product that barely existed two years ago.

The Xbox situation is harder to read. The division took financial write-downs this quarter, and the combination of selling studios, cutting jobs, and raising console prices looks more like shrinking to protect profits than like growing the business. Raising prices when hardware sales are already down 14% is a choice to accept fewer sales in exchange for higher margins per unit. Whether the layoffs and studio sales can fix Game Pass is uncertain, since the 10% drop in services revenue suggests the subscription is not yet making up for weaker hardware and game sales.

The Anthropic gain also makes the earnings picture harder to interpret. A $3.2 billion increase from an investment is not the same as profit from running the business. And because Microsoft's adjusted numbers exclude its OpenAI stake but include the Anthropic one, these AI investments show up in the financial reports unevenly. Anyone trying to judge how Microsoft's core business is doing needs to set aside both the Anthropic gain and the Xbox write-downs.

The broader story is that Microsoft's cloud and AI businesses are pulling far ahead of its consumer and gaming divisions. The $678 billion in future contracted revenue is the figure worth watching most. An 84% increase at that scale is a strong sign that companies are moving AI projects from experiments into real, funded budgets.