FY26 Q2 - Intelligent Cloud Performance - Investor Relations

Intelligent Cloud

Revenue increased $7.4 billion or 29%.

• Server products and cloud services revenue increased $7.2 billion or 31% driven by Azure and other cloud services. Azure and other cloud services revenue grew 39% driven by demand for our portfolio of services with continued growth across all workloads. Server products revenue increased 2% driven by demand for our hybrid solutions, with benefit from the launch of SQL Server 2025, and higher transactional purchasing.

• Enterprise and partner services revenue increased $146 million or 8% driven by growth in Enterprise Support Services.

Operating income increased $3.0 billion or 28%.

• Cost of revenue increased $4.2 billion or 44% driven by growth in Azure.

• Gross margin increased $3.2 billion or 20% driven by growth in Azure. Gross margin percentage decreased driven by the continued investments in AI infrastructure and sales mix shift to Azure, offset in part by efficiency gains in Azure.

• Operating expenses increased $180 million or 3% driven by research and development investments in compute capacity and AI talent.

Cost of revenue included an unfavorable foreign currency impact of 2%.

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.