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NOTE 8 — INTANGIBLE ASSETS

The components of intangible assets, all of which are finite-lived, were as follows:


(In millions)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount


	March 31, 2026							June 30, 2025

Marketing-related	$	16,495	$	(4,492	)	$	12,003	$	16,502	$	(3,901	)	$	12,601
Technology-based		22,757		(17,500	)		5,257		22,560		(14,959	)		7,601
Customer-related		4,278		(2,500	)		1,778		4,278		(2,050	)		2,228
Contract-based		381		(94	)		287		217		(43	)		174


Total	$	43,911	$	(24,586	)	$	19,325	$	43,557	$	(20,953	)	$	22,604

Intangible assets amortization expense was $1.1 billion and $3.7 billion for the three and nine months ended March 31, 2026, respectively, and $1.5 billion and $4.5 billion for the three and nine months ended March 31, 2025, respectively.

The following table outlines the estimated future amortization expense related to intangible assets held as of March 31, 2026:


(In millions)


Year Ending June 30,

2026 (excluding the nine months ended March 31, 2026)	$	1,024
2027		3,032
2028		2,081
2029		1,890
2030		1,425
Thereafter		9,873


Total	$	19,325

NOTE 10 — INCOME TAXES

Effective Tax Rate

Our effective tax rate was 19% and 18% for the three months ended March 31, 2026 and 2025, respectively, and 20% and 18% for the nine months ended March 31, 2026 and 2025, respectively. The increase in our effective tax rate for the three months ended March 31, 2026 compared to the prior year was primarily due to changes in the mix of our earnings and tax expenses between the U.S. and foreign countries. The increase in our effective tax rate for the nine months ended March 31, 2026 compared to the prior year was primarily due to changes in the mix of our earnings and tax expenses between the U.S. and foreign countries and deferred tax expense attributable to the dilution gain from the OpenAI Recapitalization.

Our effective tax rate was lower than the U.S. federal statutory rate for the three and nine months ended March 31, 2026, primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations center in Ireland.

Uncertain Tax Positions

As of March 31, 2026 and June 30, 2025, unrecognized tax benefits and other income tax liabilities were $29.3 billion and $27.4 billion, respectively, and are included in long-term income taxes in our consolidated balance sheets.

We remain under audit by the IRS for tax years 2014 to 2017. With respect to the audit for tax years 2004 to 2013, on September 26, 2023, we received Notices of Proposed Adjustment (“NOPAs”) from the IRS. The primary issues in the NOPAs relate to intercompany transfer pricing. In the NOPAs, the IRS is seeking an additional tax payment of $28.9 billion plus penalties and interest. As of March 31, 2026, we believe our allowances for income tax contingencies are adequate. We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRS’s administrative appeals office and, if necessary, judicial proceedings. We do not expect a final resolution of these issues in the next 12 months. Based on the information currently available, we do not anticipate a significant increase or decrease to our income tax contingencies for these issues within the next 12 months.

We are subject to income tax in many jurisdictions outside the U.S., some of which are currently under audit by local tax authorities. The resolution of these audits is not expected to be material to our consolidated financial statements. Our operations in Ireland remain subject to examination for tax years 2021 and thereafter.

NOTE 7 — GOODWILL

Changes in the carrying amount of goodwill were as follows:


(In millions)	June 30, 2025		Acquisitions		Other			March 31, 2026


Productivity and Business Processes	$	31,457	$	67	$	41		$	31,565
Intelligent Cloud		25,689		36		10			25,735
More Personal Computing		62,363		5		(7	)		62,361


Total	$	119,509	$	108	$	44		$	119,661

The measurement periods for the valuation of assets acquired and liabilities assumed end as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available, but do not exceed 12 months. Adjustments in purchase price allocations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined.

Any change in the goodwill amounts resulting from foreign currency translations and purchase accounting adjustments are presented as “Other” in the table above. Also included in “Other” are business dispositions and transfers between segments due to reorganizations, as applicable.

NOTE 2 — EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and stock awards.

The components of basic and diluted EPS were as follows:


(In millions, except per share amounts)	Three Months Ended March 31,					Nine Months Ended March 31,


	2026		2025			2026		2025

Net income available for common shareholders (A)	$	31,778	$	25,824	$	97,983	$	74,599


Weighted average outstanding shares of common stock (B)		7,426		7,434		7,430		7,434
Dilutive effect of stock-based awards		19		27		27		32


Common stock and common stock equivalents (C)		7,445		7,461		7,457		7,466


Earnings Per Share

Basic (A/B)	$	4.28	$	3.47	$	13.19	$	10.03
Diluted (A/C)	$	4.27	$	3.46	$	13.14	$	9.99

Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

NOTE 9 — DEBT

The components of long-term debt were as follows:


(In millions, issuance by calendar year)	Maturities (calendar year)				Stated Interest Rate				Effective Interest Rate			March 31, 2026			June 30, 2025


2009 issuance of $3.8 billion				2039				5.20%			5.24%	$	520		$	520
2010 issuance of $4.8 billion				2040				4.50%			4.57%		486			486
2011 issuance of $2.3 billion				2041				5.30%			5.36%		718			718
2012 issuance of $2.3 billion				2042				3.50%			3.57%		454			454
2013 issuance of $5.2 billion				2043		3.75%	–	4.88%	3.83%	–	4.92%		314			314
2013 issuance of €4.1 billion		2028	–	2033		2.63%	–	3.13%	2.69%	–	3.22%		2,650			2,700
2015 issuance of $23.8 billion		2035	–	2055		3.50%	–	4.75%	3.60%	–	4.78%		4,555			7,555
2016 issuance of $19.8 billion		2026	–	2056		2.40%	–	3.95%	2.46%	–	4.03%		7,930			7,930
2017 issuance of $17.1 billion		2026	–	2057		3.30%	–	4.50%	3.38%	–	5.49%		6,833			6,833
2020 issuance of $10.1 billion		2030	–	2060		1.35%	–	2.68%	2.53%	–	5.43%		10,111			10,111
2021 issuance of $8.2 billion		2052	–	2062		2.92%	–	3.04%	2.92%	–	3.04%		8,185			8,185
2023 issuance of $0.1 billion		2026	–	2050		1.35%	–	4.50%	5.16%	–	5.49%		56			56
2024 issuance of $3.3 billion		2026	–	2050		1.35%	–	4.50%	5.16%	–	5.49%		3,344			3,344


Total face value													46,156			49,206
Unamortized discount and issuance costs													(1,098	)		(1,155	)
Hedge fair value adjustments (a)													(17	)		(36	)
Premium on debt exchange													(4,779	)		(4,864	)


Total debt													40,262			43,151
Current portion of long-term debt													(8,839	)		(2,999	)


Long-term debt												$	31,423		$	40,152

(a)

Refer to Note 5 – Derivatives for further information on the interest rate swaps related to fixed-rate debt.

As of March 31, 2026 and June 30, 2025, the estimated fair value of long-term debt, including the current portion, was $36.6 billion and $40.4 billion, respectively. The estimated fair values are based on Level 2 inputs.

Debt in the table above is comprised of senior unsecured obligations and ranks equally with our other outstanding obligations. Interest is paid semi-annually, except for the Euro-denominated debt, which is paid annually.

The following table outlines maturities of our long-term debt, including the current portion, as of March 31, 2026:


(In millions)


Year Ending June 30,

2026 (excluding the nine months ended March 31, 2026)	$	0
2027		9,250
2028		0
2029		2,016
2030		0
Thereafter		34,890


Total	$	46,156

NOTE 15 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in accumulated other comprehensive income (loss) by component:


(In millions)	Three Months Ended March 31,							Nine Months Ended March 31,


		2026			2025			2026			2025

Derivatives

Balance, beginning of period	$	(14	)	$	21		$	(8	)	$	(3	)
Unrealized gains (losses), net of tax of $(7), $5, $(11), and $(1)		(27	)		20			(43	)		(1	)
Reclassification adjustments for (gains) losses included in other income (expense), net		34			(50	)		46			7
Tax expense (benefit) included in provision for income taxes		(7	)		10			(9	)		(2	)


Amounts reclassified from accumulated other comprehensive loss		27			(40	)		37			5


Net change related to derivatives, net of tax of $0, $(5), $(2), and $1		0			(20	)		(6	)		4


Balance, end of period	$	(14	)	$	1		$	(14	)	$	1


Investments

Balance, beginning of period	$	(525	)	$	(1,945	)	$	(1,051	)	$	(2,625	)
Unrealized gains (losses), net of tax of $(58), $118, $82, and $294		(215	)		445			310			1,110
Reclassification adjustments for (gains) losses included in other income (expense), net		(30	)		6			(29	)		25
Tax expense (benefit) included in provision for income taxes		6			(1	)		6			(5	)


Amounts reclassified from accumulated other comprehensive loss		(24	)		5			(23	)		20


Net change related to investments, net of tax of $(64), $119, $76, and $299		(239	)		450			287			1,130


Balance, end of period	$	(764	)	$	(1,495	)	$	(764	)	$	(1,495	)


Translation Adjustments and Other

Balance, beginning of period	$	(2,163	)	$	(3,692	)	$	(2,288	)	$	(2,962	)
Translation adjustments and other, net of tax of $0, $0, $0, and $0		(287	)		353			(162	)		(377	)


Balance, end of period	$	(2,450	)	$	(3,339	)	$	(2,450	)	$	(3,339	)


Accumulated other comprehensive loss, end of period	$	(3,228	)	$	(4,833	)	$	(3,228	)	$	(4,833	)

NOTE 16 — SEGMENT INFORMATION AND GEOGRAPHIC DATA

In its operation of the business, management, including our chief operating decision maker (“CODM”), who is also our Chief Executive Officer, reviews certain financial information, including segmented internal profit and loss statements. The primary profitability measure used by the CODM to review segment operating results is operating income. The CODM uses operating income to allocate resources during our annual planning process and throughout the year, as well as to assess the performance of our segments, primarily by monitoring actual results compared to prior periods and expected results. During the periods presented, we reported our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

Our reportable segments are described below.

Productivity and Business Processes

Our Productivity and Business Processes segment consists of products and services in our portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. This segment primarily comprises:

•

Microsoft 365 Commercial products and cloud services, including Microsoft 365 Commercial cloud, comprising Microsoft 365 Commercial, Enterprise Mobility + Security, the cloud portion of Windows Commercial, the per-user portion of Power BI, Exchange, SharePoint, Microsoft Teams, Microsoft 365 Security and Compliance, and Microsoft 365 Copilot; and Microsoft 365 Commercial products, comprising Windows Commercial on-premises and Office licensed on-premises.

•

Microsoft 365 Consumer products and cloud services, including Microsoft 365 Consumer subscriptions, Office licensed on-premises, and other consumer services.

•

LinkedIn, including Talent Solutions, Marketing Solutions, Premium Subscriptions, and Sales Solutions.

•

Dynamics products and cloud services, including Dynamics 365, comprising a set of intelligent, cloud-based applications across ERP, CRM, Power Apps, and Power Automate; and on-premises ERP and CRM applications.

Intelligent Cloud

Our Intelligent Cloud segment consists of our public, private, and hybrid server products and cloud services that power modern business and developers. This segment primarily comprises:

•

Server products and cloud services, including Azure and other cloud services, comprising cloud and AI consumption-based services, GitHub cloud services, Nuance Healthcare cloud services, virtual desktop offerings, and other cloud services; and Server products, comprising SQL Server, Windows Server, Visual Studio, System Center, related Client Access Licenses, and other on-premises offerings.

•

Enterprise and partner services, including Enterprise Support Services, Industry Solutions, Nuance professional services, Microsoft Partner Network, and Learning Experience.

More Personal Computing

Our More Personal Computing segment consists of products and services that put customers at the center of the experience with our technology. This segment primarily comprises:

•

Windows and Devices, including Windows OEM licensing (Windows Pro and non-Pro licenses sold through the OEM channel) and Devices, comprising Surface and PC accessories.

•

Gaming, including Xbox hardware and Xbox content and services, comprising first- and third-party content (including games and in-game content), Xbox Game Pass and other subscriptions, Xbox Cloud Gaming, advertising, and other cloud services.

•

Search advertising (formerly Search and news advertising), comprising Bing, Copilot, Microsoft News, Microsoft Edge, and third-party affiliates.

Revenue and costs are generally directly attributed to our segments. However, due to the integrated structure of our business, certain revenue recognized and costs incurred by one segment may benefit other segments. Revenue from certain contracts is allocated among the segments based on the relative value of the underlying products and services, which can include allocation based on actual prices charged, prices when sold separately, or estimated costs plus a profit margin. Cost of revenue is allocated in certain cases based on a relative revenue methodology. Operating expenses that are allocated primarily include those relating to our investments in AI infrastructure and training, as well as marketing of products and services, from which multiple segments benefit and are generally allocated based on relative gross margin.

In addition, certain costs are incurred at a corporate level and allocated to our segments. These allocated costs generally include legal, including settlements and fines, information technology, human resources, finance, excise taxes, field selling, shared facilities services, customer service and support, and severance incurred as part of a corporate program. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated and is generally based on relative gross margin or relative headcount.

Segment revenue, cost of revenue, operating expenses, and operating income were as follows during the periods presented:


(In millions)	Three Months Ended March 31,					Nine Months Ended March 31,


		2026		2025		2026		2025

Productivity and Business Processes

Revenue	$	35,013	$	29,944	$	102,149	$	87,698
Cost of revenue		6,197		5,517		18,028		16,380
Operating expenses		7,843		7,048		22,142		20,538


Operating income	$	20,973	$	17,379	$	61,979	$	50,780


Intelligent Cloud

Revenue	$	34,681	$	26,751	$	98,485	$	76,387
Cost of revenue		15,120		10,307		41,000		28,326
Operating expenses		5,808		5,349		16,468		15,612


Operating income	$	13,753	$	11,095	$	41,017	$	32,449


More Personal Computing

Revenue	$	13,192	$	13,371	$	41,198	$	41,198
Cost of revenue		5,511		6,095		17,821		19,111
Operating expenses		4,009		3,750		11,739		11,111


Operating income	$	3,672	$	3,526	$	11,638	$	10,976


Total

Revenue	$	82,886	$	70,066	$	241,832	$	205,283
Cost of revenue		26,828		21,919		76,849		63,817
Operating expenses		17,660		16,147		50,349		47,261


Operating income	$	38,398	$	32,000	$	114,634	$	94,205

No sales to an individual customer or country other than the United States accounted for more than 10% of revenue for the three or nine months ended March 31, 2026 or 2025. Revenue, classified by the major geographic areas in which our customers were located, was as follows:


(In millions)	Three Months Ended March 31,					Nine Months Ended March 31,


		2026		2025		2026		2025

United States (a)	$	42,336	$	36,084	$	123,823	$	105,534
Other countries		40,550		33,982		118,009		99,749


Total	$	82,886	$	70,066	$	241,832	$	205,283

(a)

Includes billings to OEMs and certain multinational organizations because of the nature of these businesses and the impracticability of determining the geographic source of the revenue.

Revenue, classified by significant product and service offerings, was as follows:


(In millions)		Three Months Ended March 31,			Nine Months Ended March 31,


		2026		2025	2026		2025

Server products and cloud services	$	32,592	$	24,761	$	92,329	$	70,557
Microsoft 365 Commercial products and cloud services		25,593		21,883		74,083		63,449
Gaming		5,341		5,721		16,807		17,923
LinkedIn		4,832		4,311		14,628		13,190
Windows and Devices		4,041		4,144		13,071		12,985
Search advertising		3,808		3,504		11,317		10,287
Microsoft 365 Consumer products and cloud services		2,297		1,821		6,806		5,369
Dynamics products and cloud services		2,292		1,929		6,632		5,691
Enterprise and partner services		2,087		1,946		6,147		5,766
Other		3		46		12		66


Total	$	82,886	$	70,066	$	241,832	$	205,283

Our Microsoft Cloud revenue, which includes Microsoft 365 Commercial cloud, Azure and other cloud services, the commercial portion of LinkedIn, and Dynamics 365, was $54.5 billion and $155.1 billion for the three and nine months ended March 31, 2026, respectively, and $42.4 billion and $122.2 billion for the three and nine months ended March 31, 2025, respectively. These amounts are included in Server products and cloud services, Microsoft 365 Commercial products and cloud services, LinkedIn, and Dynamics products and cloud services in the table above.

Assets are not allocated to segments for internal reporting presentations. A portion of amortization and depreciation is included with various other costs in an overhead allocation to each segment. It is impracticable for us to separately identify the amount of amortization and depreciation by segment that is included in the measure of segment profit or loss.

The components of investments were as follows:


(In millions)	Fair Value Level	Adjusted Cost Basis		Unrealized Gains		Unrealized Losses			Recorded Basis		Cash and Cash Equivalents		Short-term Investments		Equity and Other Investments


March 31, 2026

Changes in Fair Value Recorded in Other Comprehensive Income

Commercial paper	Level 2	$	5,544	$	0	$	0		$	5,544	$	5,543	$	1	$	0
Certificates of deposit	Level 2		1,394		0		0			1,394		1,350		44		0
U.S. government securities	Level 1		50,821		25		(1,078	)		49,768		8,923		32,119		8,726
U.S. agency securities	Level 2		3,215		0		0			3,215		2,465		750		0
Foreign government bonds	Level 2		225		13		(5	)		233		0		233		0
Mortgage- and asset-backed securities	Level 2		2,010		6		(23	)		1,993		0		1,993		0
Corporate notes and bonds	Level 2		10,652		66		(73	)		10,645		0		10,645		0
Corporate notes and bonds	Level 3		1,601		120		0			1,721		0		101		1,620
Municipal securities	Level 2		152		1		(6	)		147		0		147		0
Municipal securities	Level 3		104		0		(14	)		90		0		90		0


Total debt investments		$	75,718	$	231	$	(1,199	)	$	74,750	$	18,281	$	46,123	$	10,346


Changes in Fair Value Recorded in Net Income

Equity investments	Level 1								$	3,911	$	1,093	$	0	$	2,818
Equity investments	Other									20,519		0		0		20,519


Total equity investments									$	24,430	$	1,093	$	0	$	23,337


Cash									$	12,731	$	12,731	$	0	$	0
Derivatives, net (a)										44		0		44		0


Total									$	111,955	$	32,105	$	46,167	$	33,683


(In millions)	Fair Value Level	Adjusted Cost Basis		Unrealized Gains		Unrealized Losses			Recorded Basis		Cash and Cash Equivalents		Short-term Investments		Equity and Other Investments


June 30, 2025

Changes in Fair Value Recorded in Other Comprehensive Income

Commercial paper	Level 2	$	10,880	$	0	$	0		$	10,880	$	9,939	$	941	$	0
Certificates of deposit	Level 2		2,653		0		0			2,653		2,309		344		0
U.S. government securities	Level 1		52,878		71		(1,462	)		51,487		4,742		46,745		0
U.S. agency securities	Level 2		2,686		0		0			2,686		496		2,190		0
Foreign government bonds	Level 2		349		24		(9	)		364		0		364		0
Mortgage- and asset-backed securities	Level 2		2,558		10		(27	)		2,541		0		2,541		0
Corporate notes and bonds	Level 2		10,763		124		(101	)		10,786		0		10,786		0
Corporate notes and bonds	Level 3		2,511		65		(5	)		2,571		0		111		2,460
Municipal securities	Level 2		207		1		(7	)		201		0		201		0
Municipal securities	Level 3		104		0		(14	)		90		0		90		0


Total debt investments		$	85,589	$	295	$	(1,625	)	$	84,259	$	17,486	$	64,313	$	2,460


Changes in Fair Value Recorded in Net Income

Equity investments	Level 1								$	4,577	$	1,045	$	0	$	3,532
Equity investments	Other									9,141		0		0		9,141


Total equity investments									$	13,718	$	1,045	$	0	$	12,673


Cash									$	11,711	$	11,711	$	0	$	0
Derivatives, net (a)										282		0		10		272


Total									$	109,970	$	30,242	$	64,323	$	15,405

(a)

Refer to Note 5 – Derivatives for further information on the fair value of our derivative instruments.

NOTE 11 — UNEARNED REVENUE

Unearned revenue by segment was as follows:


(In millions)


	March 31, 2026		June 30, 2025

Productivity and Business Processes	$	39,904	$	50,567
Intelligent Cloud		10,892		14,022
More Personal Computing		2,881		2,676


Total	$	53,677	$	67,265

Changes in unearned revenue were as follows:


(In millions)


Nine Months Ended March 31, 2026

Balance, beginning of period	$	67,265
Deferral of revenue		143,442
Recognition of unearned revenue		(157,030	)


Balance, end of period	$	53,677

Revenue allocated to remaining performance obligations, which includes unearned revenue and amounts expected to be invoiced and recognized as revenue in future periods, was $633 billion as of March 31, 2026. Estimating revenue that will be allocated to remaining performance obligations can involve significant judgments, including identifying and assessing variable consideration and potential renegotiation of commitments. We consider factors such as the nature of the terms and duration of the contract across our portfolio of contracts. Revenue allocated to remaining performance obligations related to the commercial portion of revenue was $627 billion as of March 31, 2026, with a weighted average duration of approximately 2.5 years. We expect to recognize approximately 30% of our total company remaining performance obligation revenue and 25% of our commercial remaining performance obligation revenue over the next 12 months and the remainder thereafter.

NOTE 3 — OTHER INCOME (EXPENSE), NET

The components of other income (expense), net were as follows:


(In millions)	Three Months Ended March 31,							Nine Months Ended March 31,


	2026			2025				2026			2025

Interest and dividends income	$	730		$	597		$	2,546		$	1,878
Interest expense		(778	)		(594	)		(2,212	)		(1,770	)
Net recognized gains (losses) on investments		1,652			111			1,419			(286	)
Net gains (losses) on derivatives		124			187			1,740			(267	)
Net gains (losses) on foreign currency remeasurements		(295	)		89			(367	)		112
Other, net		(491	)		(1,013	)		4,127			(2,861	)


Total	$	942		$	(623	)	$	7,253		$	(3,194	)

Other income (expense), net included $19 million of net losses and $5.9 billion of net gains for the three and nine months ended March 31, 2026, respectively, and $768 million and $2.7 billion of net losses for the three and nine months ended March 31, 2025, respectively, from investments in OpenAI, primarily net recognized gains (losses) on our equity method investment reflected in Other, net. The net gains recorded for the nine months ended March 31, 2026 primarily relate to the dilution gain from the OpenAI Recapitalization.

Net Recognized Gains (Losses) on Investments

Net recognized gains (losses) on debt investments were as follows:


(In millions)	Three Months Ended March 31,							Nine Months Ended March 31,


	2026			2025				2026			2025

Realized gains from sales of available-for-sale securities	$	54		$	8		$	89		$	25
Realized losses from sales of available-for-sale securities		(18	)		(17	)		(37	)		(51	)
Impairments and allowance for credit losses		(6	)		3			(23	)		1


Total	$	30		$	(6	)	$	29		$	(25	)

Net recognized gains (losses) on equity investments were as follows:


(In millions)	Three Months Ended March 31,							Nine Months Ended March 31,


	2026			2025				2026			2025

Net realized gains on investments sold	$	32		$	9		$	106		$	66
Net unrealized gains on investments still held		1,621			135			1,371			572
Impairments of investments		(31	)		(27	)		(87	)		(899	)


Total	$	1,622		$	117		$	1,390		$	(261	)

NOTE 12 — LEASES

We have operating and finance leases for datacenters, corporate offices, research and development facilities, and certain equipment. Our leases have remaining lease terms of less than 1 year to 19 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.

The components of lease expense were as follows:


(In millions)	Three Months Ended March 31,					Nine Months Ended March 31,


		2026		2025		2026		2025

Operating lease cost	$	1,775	$	1,476	$	5,172	$	3,929


Finance lease cost:
Amortization of right-of-use assets	$	1,406	$	900	$	3,856	$	2,426
Interest on lease liabilities		668		374		1,829		986


Total finance lease cost	$	2,074	$	1,274	$	5,685	$	3,412

Supplemental cash flow information related to leases was as follows:


(In millions)	Three Months Ended March 31,					Nine Months Ended March 31,


		2026		2025		2026		2025

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,532	$	955	$	4,693	$	3,124
Operating cash flows from finance leases		668		344		1,829		938
Financing cash flows from finance leases		839		352		2,179		1,634
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		792		1,918		3,686		6,909
Finance leases		4,009		3,241		19,486		14,008

Supplemental balance sheet information related to leases was as follows:


(In millions, except lease term and discount rate)


	March 31, 2026			June 30, 2025

Operating Leases

Operating lease right-of-use assets	$	24,403		$	24,823


Other current liabilities	$	5,535		$	5,424
Operating lease liabilities		16,703			17,437


Total operating lease liabilities	$	22,238		$	22,861


Finance Leases

Property and equipment, at cost	$	77,633		$	53,876
Accumulated depreciation		(13,916	)		(9,861	)


Property and equipment, net	$	63,717		$	44,015


Other current liabilities	$	4,063		$	3,172
Other long-term liabilities		58,869			43,000


Total finance lease liabilities	$	62,932		$	46,172


Weighted Average Remaining Lease Term

Operating leases		6 years			6 years
Finance leases		13 years			13 years

Weighted Average Discount Rate

Operating leases		3.6%			3.5%
Finance leases		4.4%			4.2%

The following table outlines maturities of our lease liabilities as of March 31, 2026:


(In millions)


Year Ending June 30,	Operating Leases			Finance Leases

2026 (excluding the nine months ended March 31, 2026)	$	1,735		$	1,633
2027		5,910			6,786
2028		4,207			6,864
2029		3,011			6,232
2030		2,476			6,126
Thereafter		7,516			56,961


Total lease payments		24,855			84,602
Less imputed interest		(2,617	)		(21,670	)


Total	$	22,238		$	62,932

As of March 31, 2026, we had additional leases, primarily for datacenters, that had not yet commenced of $196.6 billion. These leases will commence between fiscal year 2026 and fiscal year 2031 with lease terms of 1 year to 21 years.

NOTE 6 — PROPERTY AND EQUIPMENT

The components of property and equipment were as follows:


(In millions)


	March 31, 2026			June 30, 2025

Land	$	9,813		$	9,338
Buildings and improvements		172,260			137,921
Leasehold improvements		15,444			12,117
Servers, network equipment, and software		190,883			132,836
Furniture and equipment		6,551			6,407


Total, at cost		394,951			298,619
Accumulated depreciation		(111,723	)		(93,653	)


Total, net	$	283,228		$	204,966

Depreciation expense was $9.0 billion and $24.0 billion for the three and nine months ended March 31, 2026, respectively, and $5.8 billion and $15.7 billion for the three and nine months ended March 31, 2025, respectively.

As of March 31, 2026 and June 30, 2025, purchases of property and equipment remaining in accounts payable were $22.6 billion and $6.9 billion, respectively.

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