Microsoft Corporation Q2 FY2026 Earnings Call

· Earnings call transcript and AI-powered summary

Quarter Overview
  • Microsoft reported $81.3 billion in revenue, up 17% year over year (constant currency).
  • Microsoft Cloud surpassed $50 billion in quarterly revenue for the first time, growing 26% year over year.
  • Operating income increased 21% year over year; EPS of $4.14 grew 24% year over year (constant currency, adjusted for OpenAI impacts).
  • Cloud demand continues to exceed supply, particularly due to AI workloads and capacity constraints.
Key Business Drivers and Performance
  • Microsoft Cloud
    • Revenue: $51.5 billion (+26%).
    • Gross margin: 67% (down year over year due to AI infrastructure spend).
    • Azure revenue: +39% year over year (constant currency), slightly ahead of expectations.
    • On‑premises server revenue: +21% driven by SQL Server 2025 launch and pre-buying ahead of memory price increases.
  • Productivity & Business Processes
    • Revenue: $34.1 billion (+16%).
    • Microsoft 365 commercial revenue: +17% year over year.
    • Microsoft 365 consumer revenue: +29% year over year.
    • LinkedIn revenue: +11% year over year.
    • Dynamics 365 revenue: +19% year over year.

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Operator: Greetings, and welcome to the Microsoft Corporation Fiscal Year 2026 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jonathan Neilson, Vice President of Investor Relations. Please go ahead. Jonathan Neilson: Good afternoon, and thank you for joining us today. On the call with me are Satya Nadella, Chairman and Chief Executive Officer; Amy Hood, Chief Financial Officer; Alice Jolla, Chief Accounting Officer; and Keith Dolliver, Corporate Secretary and Deputy General Counsel. On the Microsoft Corporation Investor Relations website, you can find our earnings press release and financial summary slide deck, which is intended to supplement our prepared remarks during today's call and provides the reconciliation of differences between GAAP and non-GAAP financial measures. More detailed outlook slides will be available on the Microsoft Corporation Investor Relations website when we provide Outlook commentary on today's call. On this call, we will discuss certain non-GAAP items. The non-GAAP financial measures provided should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid in further understanding the company's second quarter performance in ad

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