Microsoft today announced the financial results for the FY26 Q2 quarter, which ended December 31, 2025. The overall company revenue was $81.3 billion and operating income was $38.3 billion, up 17% and 21% respectively when compared to the corresponding period of the last financial year.
As expected, Microsoft’s Cloud business is the main growth driver. Revenue from Microsoft Cloud was $51.5 billion, a 26% increase from FY25 Q2. Microsoft also revealed that the commercial remaining performance obligation (RPO) increased 110% to $625 billion. About 45% of the RPO is now from OpenAI"s commitment alone. The RPO from the rest of the customers grew 28%, though this includes Anthropic"s recent Azure commitment.
Overall revenue in the Intelligent Cloud segment was $32.9 billion, a 29% increase, mainly driven by Azure and other cloud services revenue which increased 39%.
Revenue in the Productivity and Business Processes business was $34.1 billion, up 16% from the previous corresponding period. Microsoft 365 Commercial cloud revenue was up 17%, while Microsoft 365 consumer revenue grew 29%.
As expected, revenue in the More Personal Computing business was down 3% to $14.3 billion, primarily due to falling Xbox revenue. It is important to note that Xbox hardware revenue has been declining for almost three financial years now. This quarter, even Xbox content and services revenue decreased 5%. Search and news advertising revenue, which includes Bing, MSN, and others, increased 10%.
Despite the impressive results, Microsoft"s stock is down nearly 6% after hours. Microsoft"s capital expenditures were $37.5 billion, up 66%. Microsoft highlighted that this increase is due to investments in short-lived assets like GPUs to support AI and cloud offerings.
Microsoft CFO Amy Hood said:
"Roughly two-thirds of our CapEx was on short-lived assets, primarily GPUs and CPUs. Our customer demand continues to exceed our supply. Therefore, we must balance the need to have our incoming supply better meet growing demand."
While the cloud business remains a powerhouse, Microsoft must now prove it can turn these heavy AI datacenter investments into sustainable long-term profitable business.