Microsoft closed its financial year by turning the artificial-intelligence boom into hard cash. For the three months to the end of June, the company reported revenue of $90 billion, up 18%, and net income of $35.8 billion. The engine was the cloud: Microsoft Cloud revenue rose 27% to $59.3 billion, and Azure, its cloud platform, passed $100 billion in annual sales for the first time.
The AI bets pay off, mostly
The quarter came with an unusual boost. Microsoft booked a $3.2 billion gain on its investment in Anthropic, the rival AI lab it backed with $5 billion in late 2025 as part of a deal that also had Anthropic buying $30 billion of Azure services. That single gain nearly matched what Microsoft's much larger OpenAI stake delivered across the entire year. The OpenAI investment was a more mixed bag this quarter, but across the full year it still added about $5 billion to earnings. Chief executive Satya Nadella said Microsoft 365 Copilot, its AI assistant for office work, has now passed 30 million paid seats.
The consumer side drags
Not everything is firing. Revenue from Xbox content and services, such as its Game Pass subscription, fell 10%, while Xbox hardware sales dropped 13%. Windows revenue from PC makers and devices slipped 7%, which Microsoft put down to weaker PC demand. Nadella was frank that the games business needs work: "we are making the necessary decisions... to reset the business for long-term growth," he said, adding he expects Xbox to return to growth in fiscal 2027.
For the full year, Microsoft rang up $331.8 billion in revenue and $133.7 billion in profit, a reminder of how much the AI build-out is now feeding the bottom line. The question for the year ahead is whether the cloud can keep growing fast enough to outrun the soft spots the consumer business keeps exposing.
