Q1 FY27 · the quarter MSFT reports
Sales
PricedIn$91.9B$88.9B – $94.2B
$88.9B$90.5B$91.9B$93.0B$94.2B
adjusted EPS
PricedIn$4.84$4.48 – $5.16
$4.48$4.66$4.84$5.00$5.16
Middlethe forecast50% range1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside.80% range1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.
Five of six sit above the guided midpoint, and all within a few billion dollars of each other. Muse Spark Open, lowest at $90.4B, takes the range at face value: it 'used mid-point 90.4B' to set its plan. Kimi, highest at $93.0B, expects Microsoft 'to keep beating conservatively framed quarterly guidance more often than not', and placed its middle above the range because the company beat its recent ranges 'across all three segments'.
The models expect first-quarter fiscal 2027 sales of about $91.9B, above the company's own range, as new cloud capacity is sold quickly.
Sales$91.9B+18% on Q1 FY26 ($77.7B)50% range$90.5B – $93.0B80% range$88.9B – $94.2B
Adjusted EPS$4.84+17% on Q1 FY26 ($4.13)50% range$4.66 – $5.0080% range$4.48 – $5.16
Investment and cash generation
Base case
Capital spending$45.5B
Free cash flow$6.75B
Free cash flow: operating cash flow less capital spending.
Microsoft closed fiscal 2026 with fourth-quarter sales of $90.0B, up 18% on a year earlier, and earnings per share of $4.74. Sales for the year reached $332B. Capital spending rose to $116B for the year, and free cash flow slipped to $67.0B as that spending climbed.
For the July to September quarter the company guided revenue of $89.85B to $90.95B, with Azure, its cloud platform, growing about 45% in constant currency. It says customer demand still exceeds the capacity it can supply, and that personal computer sales will fall as component prices rise.
Five of the six models put the middle above the guided midpoint of $90.4B, and the average is $91.9B. Their reason is a record of beats: the June quarter landed at $90.0B against a range of $86.7B to $87.8B.
They differ on the size of the beat. Muse Spark Open stays at the midpoint; Sol sits about $2.1B above it, led by capacity becoming usable sooner. Opus trimmed its middle, judging that part of June's personal computing strength came from partners building stock.
Spending stays heavy: the models put capital spending near $45.5B for the quarter, leaving free cash flow of only about $6.8B on average.
Earnings per share, excluding the OpenAI investment impact, average $4.84, up 17% on a year earlier. Costs are expected near the company's guidance, with a tax rate of about 20%.
Outlook against result
Q2 FY26+0.8% above$79.5B–$80.6B → $81.3Bguided “USD 79.5 billion to USD 80.6 billion”
Q3 FY26+1.4% above$80.7B–$81.8B → $82.9Bguided “$80.65 to $81.75 billion”
Q4 FY26+2.5% above$86.7B–$87.8B → $90.0Bguided “between USD 86.7 billion and USD 87.8 billion”
Q1 FY27+1.0% above$89.8B–$91.0B → $91.9Bguided “between 89.85 and 90.95 billion U.S. dollars”
Each outlook is the one the company gave before the quarter. The last row is the models' forecast.
The quarter forecast, line by line
The lines as the company's statement shows them. The forecast columns are the average of the models, line by line. Sales growth is the change on the same quarter a year earlier. Earnings per share is the headline's: the company's own for the reported quarter, and for a forecast quarter worked out from the averaged lines with the company's adjustments.
Quarterly revenue through fiscal 2026
Dec 2025 quarter$81.3B
Mar 2026 quarter$82.9B
Jun 2026 quarter$90.0B
Where each number comes from
- Dec 2025 quarter
This quarter, revenue was $81.3 billion, up 17% in constant currency.
- Mar 2026 quarter
This quarter, revenue was $82.9 billion, up 18% and 15% in constant currency.
- Jun 2026 quarter
This quarter, revenue was $90 billion, up 18 percent and 17 percent in constant currency.
Each quarter came in above the range the company had given, the record behind the models' beat.
What it rests on
- Quarter revenue outlook
- $89.85B to $90.95B, growth of 16 to 17 percent
Therefore, at the total company level, revenue should be between 89.85 and 90.95 billion U.S. dollars, or growth of 16 to 17 percent, with accelerating commercial growth, partially offset by the impact from the PC market dynamics noted earlier.
July 2026 earnings call - Azure outlook
- About 45% growth in constant currency, demand exceeding supply
In Azure, we expect revenue growth of approximately 45% in constant currency, and we remain focused on delivering efficiencies that help us bridge the gaps we see as customer demand continues to exceed supply.
July 2026 earnings call - June quarter revenue
- $90.0B, up 18%
This quarter, revenue was $90 billion, up 18 percent and 17 percent in constant currency.
July 2026 earnings call - June quarter outlook
- $86.7B to $87.8B, beaten by the result
Therefore, at the total company level, revenue should be between USD 86.7 billion and USD 87.8 billion or growth of 13% to 15%, with accelerating commercial growth, partially offset by our consumer business.
April 2026 earnings call - Personal computing outlook
- $12.2B to $12.7B, hit by component prices and inventory
In more personal computing, we expect revenue to be $12.2 to $12.7 billion U.S. dollars as we continue to lap the strong prior year comparables noted earlier and navigate complex PC market dynamics impacted by component prices and inventory levels.
July 2026 earnings call - Cost outlook
- Cost of revenue $29.6B to $29.8B; operating expense $16.8B to $16.9B
We expect COGS of 29.6 to 29.8 billion U.S. dollars, or growth of 23 to 24 percent, An operating expense of $16.8 to $16.9 billion U.S. dollars, a growth of 7 to 8 percent, driven by continued investment in R&D compute capacity and talent.
July 2026 earnings call
Low and high
Basethe middle forecast
Key assumptions
Sales land above the guided midpoint, repeating the company's habit of beating its own range. June revenue of $90.0B beat a range of $86.7B to $87.8B.5 of 6
- Opus 5.5I put the middle about 1.8 billion dollars above its midpoint
- DeepSeek V4.1 Flashbecause the company finished above the top of its own range in each of the last three quarters
- GLM 5.3shaded revenue slightly above the midpoint because of the company's persistent beats
- Kimi K3.1 Proplaced the middle above it because Microsoft exceeded the preceding several quarterly revenue ranges across all three segments
- GPT-6.1 SolMy September-quarter middle is $92.5 billion, about $2.1 billion above the guidance midpoint.
Azure grows about 45% as new capacity is sold as soon as it arrives. The company says demand still exceeds supply, and extra capacity in June was quickly sold.5 of 6
- Opus 5.5Azure growth in the mid 40s as capacity comes online
- GLM 5.3Azure grows about 45% in constant currency in the first quarter
- Kimi K3.1 ProAzure capacity additions and roughly mid-forties near-term growth
- DeepSeek V4.1 FlashAzure and AI capacity arriving faster than planned, keeping Intelligent Cloud above the guided range
- GPT-6.1 SolFaster delivery and better utilization of cloud capacity
Costs land near guidance, with a tax rate of about 20%. Costs have tracked the company's guidance even in quarters when revenue beat.5 of 6
- Opus 5.5Costs have landed near guidance even when revenue beat
- Muse Spark OpenCOGS 29.6-29.8B and opex 16.8-16.9B directly set quarter plan lines and margins
- GLM 5.3I built my statement lines on these
- DeepSeek V4.1 Flasha 20 percent tax rate
- Kimi K3.1 ProAdjusted earnings use negative $100 million of quarterly other income and expense
Personal computing shrinks but lands near the top of its $12.2B to $12.7B range. Component prices and partner inventory weigh on personal computer demand, but the segment beat in recent quarters.3 of 6
- Opus 5.5personal computing lands near the top of its guided range
- GPT-6.1 SolThe September-quarter plan assumes a smaller shortfall than guidance in that segment
- DeepSeek V4.1 FlashI take more personal computing to 12.7 billion dollars in the September quarter
If all of this happens
$91.9Bsales
$4.84adjusted EPS
$45.5BCapital spending
$6.75BFree cash flow
Cash walk not supplied by every model.
Lowabout 1 chance in 10 of worse
What the low case assumes
Personal computer and Xbox sales fall faster than the company guided. Rising component prices raise device prices, and June's segment strength partly came from partners building stock.4 of 6
- Opus 5.5Windows and Xbox revenue falling faster than guided
- Muse Spark OpenPC and Xbox weakness deepens
- Kimi K3.1 ProPersonal-computing declines and higher component costs
- GPT-6.1 SolWeak personal-computer and gaming spending
Azure growth falls short of the about 45% guide as capacity arrives late. The company calls demand for cloud and AI difficult to forecast, and capacity timing moves Azure each quarter.3 of 6
- Opus 5.5Azure growth limited by late capacity or softer AI demand
- GPT-6.1 SolDelayed power and equipment availability
- Kimi K3.1 ProSlower Azure consumption and delayed capacity monetization
Infrastructure costs squeeze margins harder than planned. Cost of revenue is guided to grow 23 to 24 percent, faster than sales.3 of 6
- Opus 5.5Depreciation from record capital spending pressing gross margin
- Kimi K3.1 ProMargin pressure from infrastructure and operating leases
- Muse Spark OpenGross margin compresses to 65% from under-utilized AI infrastructure and higher component costs
If all of this happens
$88.9Bsales · −3% vs base
$4.48EPS · −7% vs base
For sales near the average low of $88.9B, 3.2% under the base, the company would have to miss its own range of $89.85B to $90.95B: cloud capacity arriving late, cloud usage softer, and personal computers falling harder than guided as component prices lift device prices. Earnings per share would fall to about $4.48, 7.4% under the base. Muse Spark Open goes furthest, to $87.5B and $4.20, because it alone starts from the guided midpoint rather than a beat, and it lets high rates and a sharply contracting PC market cut enterprise and consumer spending.
The June quarter's $90.0B came in above a range of $86.7B to $87.8B, and the models found beats in each recent quarter.
The six lows run from $87.5B (Muse Spark Open) to $89.8B (Opus 5.5).
First signIn the first-quarter report: Azure growth below about 45% in constant currency, or revenue near the bottom of the $89.85B to $90.95B range.
Highabout 1 chance in 10 of better
What the high case assumes
Azure accelerates toward 50% as capacity arrives early and is sold at once. June revenue beat on efficiency gains across the CPU and GPU fleet and earlier delivery of capacity.6 of 6
- Opus 5.5Azure accelerating toward 50 percent
- GLM 5.3letting Azure print above 47 percent growth each quarter
- DeepSeek V4.1 FlashAzure above 47 percent constant currency through the year as new capacity is monetised on arrival
- Muse Spark Openpushing Azure growth above 50 percent
- GPT-6.1 SolMore cloud capacity monetized sooner
- Kimi K3.1 ProFaster data-center and processor deployment
Usage-based Copilot billing lifts Microsoft 365 cloud ahead of plan. Usage billing began in July alongside over 30 million paid Copilot seats.4 of 6
- Opus 5.5Usage-based Copilot billing expanding Microsoft 365 revenue
- GPT-6.1 SolLarge-scale Copilot and agent consumption
- Kimi K3.1 ProRapid Copilot and premium-suite adoption
- DeepSeek V4.1 FlashCopilot seat growth plus premium tier and usage billing accelerating Microsoft 365 commercial cloud
Personal computing does better than its guided decline. Partners restocking channel inventory lifted the segment in June.3 of 6
- Opus 5.5Windows revenue better than the guided decline
- GLM 5.3PC market holds up better than feared as inventories normalise
- DeepSeek V4.1 FlashThe personal computer decline bottoming sooner, limiting the drag from the consumer half
If all of this happens
$94.2Bsales · +3% vs base
$5.16EPS · +7% vs base
For sales near the average high of $94.2B, 2.5% above the base, capacity would have to arrive even earlier and be sold at once, pushing Azure toward 50%; usage-based Copilot billing, begun in July, would have to add revenue quickly; and personal computing would have to beat its guided decline. Earnings per share would reach about $5.16, 6.6% above the base. Sol and DeepSeek go furthest on sales, to $95.0B. Sol reaches the highest earnings, $5.28, because its middle already sits about $2.1B above the guidance midpoint and it adds a smaller currency headwind and more cloud capacity monetized sooner.
The company credits June's beat to efficiency gains across its processor fleet and earlier delivery of new capacity.
The six highs run from $93.0B (GLM 5.3) to $95.0B (GPT-6.1 Sol).
First signAzure growth above 46 percent in the first-quarter report, with a second-quarter outlook that rises again.
Watch
The first-quarter report: total revenue against $89.85B to $90.95B, Azure against about 45%, and cost of revenue against $29.6B to $29.8B. A beat smaller than recent quarters points lower; Azure above 46 percent and a stronger December outlook point higher.
Q2 FY27 · the quarter after
Sales
PricedIn$95.3B$91.0B – $99.5B
$91.0B$93.2B$95.3B$97.2B$99.5B
adjusted EPS
PricedIn$4.88$4.48 – $5.31
$4.48$4.68$4.88$5.10$5.31
Middlethe forecast50% range1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside.80% range1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.
Five models cluster from $92.5B to $95.7B; Sol stands out at $98.0B. Muse Spark Open, lowest, starts from the guided midpoint and builds on 'Azure near 40 percent' where others see the mid 40s. Sol, highest, plans '$92.5 billion in September, $98 billion in December', assuming usage billing and premium subscriptions 'gradually accelerate Microsoft 365 revenue'. Sol also has the widest range, from $92.0B to $104B.
The models expect second-quarter fiscal 2027 sales of about $95.3B, up 17% on a year earlier, with cloud growth still leading.
Sales$95B+17% on Q2 FY26 ($81B)50% range$93B – $97B80% range$91B – $99B
Adjusted EPS$4.88+18% on Q2 FY26 ($4.14)50% range$4.68 – $5.1080% range$4.48 – $5.31
Investment and cash generation
Capital spending: not supplied by every model
Free cash flow: not supplied by every model
Free cash flow: operating cash flow less capital spending.
The October to December quarter has no company outlook yet; Microsoft gives one with its first-quarter report. A year earlier the quarter brought sales of $81.3B and earnings per share of $4.14.
The company has said it expects growth in the first half of the fiscal year to accelerate, while warning that Azure growth can vary from quarter to quarter with capacity, timing and contract mix.
Five models put the middle between $92.5B and $95.7B, with Sol apart at $98.0B; the average is $95.3B. Most see sales rising 2.3% to 3.8% from the first quarter; Sol sees 5.9%.
Earnings per share barely move from the first quarter in most forecasts, as depreciation and operating costs absorb the added sales. Sol alone sees a clear step up, of 4.1%, to $5.09.
The spread is wider than for the first quarter, because the models must guess both the first-quarter result and the outlook that follows it.
Earnings per share average $4.88, up 18% on a year earlier but close to the first quarter's $4.84, as rising depreciation and operating costs absorb most of the added sales.
What it rests on
- First-half outlook
- Growth expected to accelerate in the first half
Even with the strong close to Q4, we continue to expect H1 growth to accelerate.
July 2026 earnings call - Year-earlier quarter revenue
- $81.3B
This quarter, revenue was $81.3 billion, up 17% in constant currency.
January 2026 earnings call - Windows and devices outlook
- Revenue to decline in the high teens for the fiscal year
As a result, we expect revenue to decline in the high teens for the fiscal year.
July 2026 earnings call - Microsoft 365 cloud outlook
- Growth to accelerate through the year with usage billing added in July
With the premium SKU momentum and the increased monetization opportunity from adding usage-based billing products alongside per-seat licensing in July, we expect to see acceleration in M365 commercial cloud revenue growth through this fiscal year.
July 2026 earnings call - Contracted backlog
- Up 84% to $678B
Microsoft Cloud revenue was $59.3 billion and increased 27%, and commercial remaining performance obligation increased 84% to $678 billion.
July 2026 earnings release
Low and high
Basethe middle forecast
Key assumptions
Microsoft 365 cloud growth accelerates on Copilot seats, premium suites and usage billing. Management expects acceleration in that business through the fiscal year after adding usage billing in July.5 of 6
- Opus 5.5Copilot seats and usage-based billing lifting Microsoft 365 cloud
- GPT-6.1 SolPremium subscriptions and usage-based agent spending
- GLM 5.3Microsoft 365 commercial cloud accelerates through the year on Copilot seat momentum
- DeepSeek V4.1 FlashCopilot seats, the premium tier and usage billing keep Microsoft 365 commercial cloud growing around 16 to 17 percent
- Kimi K3.1 ProCopilot seats, premium suites and consumption revenue
Personal computing keeps shrinking, with Windows and devices down in the high teens. The company guided that decline for the fiscal year on component prices and inventory.5 of 6
- Opus 5.5Windows OEM and devices revenue down in the high teens
- GLM 5.3Windows OEM and devices declines in the high teens
- DeepSeek V4.1 FlashWindows OEM and devices down high teens and gaming shrinking, dragging the consumer half
- GPT-6.1 SolConsumer weakness offsets part of commercial expansion
- Kimi K3.1 ProModerating personal-computing and gaming revenue
Azure keeps growing in the mid 40s as capacity keeps arriving. The company expects first-half growth to accelerate and demand to keep exceeding supply.5 of 6
- Opus 5.5supports a mid 40s Azure path in the first two quarters
- DeepSeek V4.1 FlashAzure holds 44 to 45 percent constant-currency growth into the autumn and a little above that in December
- GLM 5.3stays around 40-45% through the year as capacity is delivered
- Kimi K3.1 ProAzure capacity additions and roughly mid-forties near-term growth
- GPT-6.1 Soleasing to about 46% for the full year
Operating expenses grow slower than sales, offsetting part of rising infrastructure costs. Headcount fell to about 223,000 from 228,000 a year earlier.4 of 6
- Opus 5.5Operating expenses held to mid to high single digit growth
- GPT-6.1 SolExpense growth below revenue growth
- DeepSeek V4.1 FlashOperating expenses up only about eight and a half percent and a twenty percent tax rate
- Muse Spark OpenOperating leverage from 7-8 percent opex growth offsets COGS up low-20s
If all of this happens
$95Bsales
$4.88adjusted EPS
Lowabout 1 chance in 10 of worse
What the low case assumes
Azure slows toward the low 30s as capacity arrives late or demand softens. The company warns that demand for cloud and AI is evolving and difficult to forecast.4 of 6
- Opus 5.5Azure growth limited by late capacity or softer AI demand
- Muse Spark OpenAzure growth decelerates to 20-25% as customers optimize spend
- GLM 5.3Azure decelerates into the low-30s
- DeepSeek V4.1 FlashAzure growth falling to the low thirties or below as enterprise AI budgets tighten
Windows and devices fall more than 20 percent as device prices rise. Component prices are raising personal computer prices, which cuts demand.4 of 6
- GLM 5.3cutting Windows OEM and devices more than 20 percent
- DeepSeek V4.1 FlashWindows OEM down 25 percent or more
- Kimi K3.1 ProPersonal-computing declines and higher component costs
- Opus 5.5Windows and Xbox revenue falling faster than guided
Copilot seat additions flatten and usage billing adds little. Usage billing began only in July, so its size is untested.3 of 6
- GLM 5.3Copilot seat adds flatten and usage-based billing revenue disappoints
- Kimi K3.1 ProWeaker Copilot seat expansion and usage billing
- GPT-6.1 SolSlower paid-agent adoption or customer funding stress
If all of this happens
$91Bsales · −5% vs base
$4.48EPS · −8% vs base
For sales near the average low of $91.0B, 4.5% under the base, the first quarter would have to disappoint and the December outlook come in soft: cloud capacity late, usage billing slow to add revenue, and personal computers weaker than guided. Earnings per share would fall to about $4.48, 8.4% under the base. Muse Spark Open goes furthest, to $88.5B and $4.30, because it alone lets Azure slow sharply, with growth that 'decelerates to 20-25%' as customers trim spending or move to competitors, where the others stop at the low 30s.
The year-earlier quarter's $81.3B already grew 17%, and the company has not yet given an outlook for this quarter.
The six lows run from $88B (Muse Spark Open) to $92B (GLM 5.3).
First signA first-quarter report with Azure below about 45%, or a December outlook implying little growth from the first quarter.
Highabout 1 chance in 10 of better
What the high case assumes
Azure accelerates toward 50% as capacity is monetized on arrival. Efficiency gains and earlier capacity delivery drove June's beat.5 of 6
- Opus 5.5Azure accelerating toward 50 percent
- Muse Spark Openpushing Azure growth above 50 percent
- GLM 5.3letting Azure print above 47 percent growth each quarter
- DeepSeek V4.1 FlashAzure above 47 percent constant currency through the year as new capacity is monetised on arrival
- GPT-6.1 SolMore cloud capacity monetized sooner
Copilot seats and usage billing grow faster than planned. Net Copilot seat additions more than doubled quarter over quarter in June.4 of 6
- GPT-6.1 SolLarge-scale Copilot and agent consumption
- Kimi K3.1 ProRapid Copilot and premium-suite adoption
- GLM 5.3Copilot seat adds keep doubling sequentially toward 60 million-plus paid seats
- Muse Spark OpenAzure and Copilot usage-based billing exceed expectations
Another investment gain lifts earnings per share. June's adjusted earnings included a $3.2B gain from Anthropic.3 of 6
- GLM 5.3Another large portfolio investment gain and a tax rate below 20 percent
- Opus 5.5Gains like the Anthropic gain last quarter sit only in the high end.
- GPT-6.1 SolThe upper earnings ranges allow investment gains that would remain in Microsoft's adjusted earnings
If all of this happens
$99Bsales · +4% vs base
$5.31EPS · +9% vs base
For sales near the average high of $99.5B, 4.4% above the base, Azure would have to accelerate toward 50%, Copilot usage billing would have to scale quickly, and an investment gain like June's could lift earnings. Earnings per share would reach about $5.31, 8.7% above the base. Sol goes furthest, to $104B and $5.75, because it already expects the strongest December of any model, a step of 5.9% from the first quarter in its middle, and lets more cloud capacity be monetized sooner on top of that. Kimi follows at $101B.
June's adjusted earnings included a $3.2B gain from Anthropic, a kind of gain the company's adjusted figures do not exclude.
The six highs run from $97B (GLM 5.3) to $104B (GPT-6.1 Sol).
First signA December-quarter outlook that rises again, with Azure above 46 percent in the first-quarter report.
Watch
The first-quarter report brings the company's December outlook. Watch its revenue range against $95.3B, the Azure growth it expects, and Copilot seat additions. A range well below that number points lower; a higher Azure outlook points higher.