Microsoft

Refresh delta (since 2026-08-06)

1. New segments from FY27. Microsoft moved from three segments to two: Agents and Infra (Microsoft Cloud, productivity and server licensing, consulting and support) and Devices and Consumer (Windows, XBOX, advertising). Azure was redefined: GitHub cloud and Security Copilot moved to Microsoft 365 commercial cloud, and Healthcare and Life Sciences cloud moved to a new Industry solutions metric [8-KForm 8-KA filing for something that happened between reports and matters enough to tell shareholders now. segments]. FY2026 10-KForm 10-KA company’s audited annual report to the US regulator. The most complete thing it publishes. figures were recast to the new structure [8-K recast]. The prior dossier's Azure, Intelligent Cloud and segment figures are on the old basis and do not compare directly with what follows.

2. FY27 Q1 actuals: revenue $92,279M, +19% (prior-year quarter: $77,673M); gross margin $62,559M, 67.8%; operating income $45,915M, +21%, 49.8% of revenue; net income $36,629M, GAAP diluted EPS $4.92 (+32%); non-GAAP EPS, excluding OpenAI investment effects, $4.89 (+18%) [8-K Q1; 10-QForm 10-QThe quarterly version of the annual report. Lighter, and not audited. Q1].

3. Segments and metrics: Agents and Infra $76,795M (+25%); Devices and Consumer $15,484M (−3%). Microsoft Cloud $63.9B (+30%); Azure +48% on the new definition; Microsoft 365 commercial cloud +17%; search and advertising ex-TAC +12%; Windows OEM and devices −22% [8-K Q1]. Microsoft Cloud gross margin fell to 66%, which the 10-Q puts down to the mix shift to Azure [10-Q Q1, MD&A].

4. Commercial RPO: $677B, +73% YoY, weighted-average duration about 2.3 years; total-company RPO $683B [10-Q Q1, revenue note; 8-K Q1]. The prior dossier recorded $678B at 2026-06-30, so the commercial figure was about flat sequentially. About 30% is expected to be recognised in the next 12 months [10-Q Q1].

5. OpenAI is now quantified as a customer. Revenue from commercial arrangements with OpenAI, including revenue-sharing payments, was $10.0B in the quarter; receivables from OpenAI were $7.2B (2026-06-30: $6.0B). Microsoft's equity-method stake is about 24% on an as-converted basis; OpenAI investment effects added $272M of net gains to other income [10-Q Q1, related-party note]. $10.0B is about 11% of quarterly revenue.

6. Capex and cash: additions to property and equipment $39,367M (prior-year quarter $19,394M); finance-lease right-of-use assets obtained $5,192M; operating-lease assets obtained $6,523M [10-Q Q1, cash-flow statement and lease note]. Cash plus finance leases is $44,559M; management's own capexCapital expenditureMoney spent on long-lived things — buildings, machines, servers — rather than on running costs. figure is on the call, not read. Operating cash flow $58,000M, so cash flow less cash PP&E was $18,633M. The prior dossier's guide of "over $50 billion" for the quarter was on management's definition, so it is not tested here.

7. Capital return and balance sheet: $10.2B returned in dividends and buybacks [8-K Q1]; $4,850M of debt repaid. Cash and short-term investments $64,509M (2026-06-30: $76,843M); debt $35,481M (2026-06-30: $40,294M) [10-Q Q1, balance sheet; estimate: current plus long-term portions]. Headcount fell 2% YoY [10-Q Q1, MD&A].

What held

• Azure keeps accelerating on its own reported basis (+48%), and Microsoft Cloud growth rose to 30% (fact 3).
• Free cash flowFree cash flowCash left after paying to run and maintain the business. Unlike profit, it is hard to flatter with accounting choices. stayed positive, as the FY27 guide promised (fact 6).
• The operating margin held near 50% despite the cloud gross-margin dip (facts 2, 3).