Microsoft reported strong revenue and earnings in its fiscal 2026 second quarter, surpassing both revenue and earnings estimates. Revenue rose approximately 16% year over year to $81.28 billion, exceeding the Street consensus estimate of $80.26 billion, while earnings per share increased 28% to $4.14, surpassing the $3.97 estimate.
Despite these results, Microsoft shares fell 6% in after-hours trading, continuing a decline that began three months prior when the company reported a quarter lacking substantial revenue growth. Azure revenue growth met analyst expectations but did not provide the anticipated increase to justify a 66% year-over-year rise in capital expenditures.
In the second quarter, Microsoft’s Commercial Bookings and Commercial Remaining Performance Obligation (RPO) increased significantly, with bookings up 230% year over year, largely due to commitments from OpenAI and Anthropic. Commercial RPO grew 110% to $625 billion, with about 25% expected to be recognized in the next 12 months.
Productivity and Business Processes revenue reached $34.1 billion, also exceeding estimates. Microsoft 365 commercial cloud revenue increased 17%, while consumer cloud revenue rose 29%. Conversely, the More Personal Computing segment fell short of revenue expectations, declining 3% to $14.25 billion as gaming sales decreased.
Microsoft’s capital expenditures in the quarter totaled $37.5 billion, reflecting a 66% increase year over year as the company invests in AI infrastructure and resources. Outlook for the fiscal 2026 third quarter indicates revenue between $80.65 billion and $81.75 billion, slightly aligning with market expectations.
The company expects Azure revenue growth for the next quarter to remain stable on a constant currency basis, projected between 37% and 38%. Capital expenditures are anticipated to decrease sequentially due to variability in cloud infrastructure build-outs.
Overall, while Microsoft’s financial performance shows strength, investor concerns regarding Azure growth and capital allocation strategies continue to impact stock performance.
Source: Reported based on publicly available information from www.cnbc.com.
