FY26 Q1 - Intelligent Cloud Performance - Investor Relations

Earnings Release FY26 Q1

Intelligent Cloud

Revenue increased $6.8 billion or 28%.

• Server products and cloud services revenue increased $6.7 billion or 30% driven by Azure and other cloud services. Azure and other cloud services revenue grew 40% driven by demand for our portfolio of services with continued growth across all workloads. Server products revenue increased 1% driven by an increase in transactional purchasing of Windows Server 2025.

• Enterprise and partner services revenue increased $94 million or 5% driven by growth in Enterprise Support Services, offset in part by a decline in Industry Solutions.

Operating income increased $2.9 billion or 27%.

Cost of revenue increased $3.7 billion or 43% driven by growth in Azure.

• Gross margin increased $3.1 billion or 20% driven by growth in Azure. Gross margin percentage decreased driven by the impact of scaling our AI infrastructure, offset in part by efficiency gains in Azure.

• Operating expenses increased $217 million or 4% driven by investments in cloud and AI engineering, including compute capacity and AI talent to support product development that benefits the entire portfolio.

IMPORTANT NOTICE TO USERS (summary only, click here for full text of notice) All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings. We do not endorse third-party information. All information speaks as of the last fiscal quarter or year for which we have filed a Form 10-K or 10-Q, or for historical information the date or period expressly indicated in or with such information. We undertake no duty to update the information. Forward-looking statements are subject to risks and uncertainties described in our Forms 10-Q and 10-K.