Microsoft (MSFT) 10-K risk factor changes: FY2026 vs FY2025

Human review of certain inputs and outputs [added: or other forms of human oversight] may be required, including for agentic AI systems that can take actions autonomously.

Our implementation of AI systems could result in legal liability, regulatory action, [added: litigation,] brand, reputational, or competitive harm, or other adverse impacts.

These risks may stem from issues related to [added: AI model and system capabilities,] intellectual property, data privacy, [added: product liability,] and other claims associated with AI [removed: training] [added: training, outputs,] and [removed: outputs.][added: system behavior.]

They are further compounded by the evolving regulatory landscape, with new laws emerging [removed: globally, including the European Union (“EU”).][added: globally and increased scrutiny from regulators and lawmakers.]

[removed: Some] [added: Certain] AI [removed: scenarios] [added: technologies and use cases] present ethical issues or may have broad [added: or uneven] impacts on [added: society or vulnerable groups within] society.

We may [removed: have excessive outages, data losses, and disruptions of our online services if we fail] [added: be unable] to [removed: maintain an] [added: develop and expand] adequate [removed: operations] infrastructure. Our increasing user traffic, [added: our] growth in services, and the complexity of our products and services demand more [added: infrastructure capacity and] computing power.

We [added: have spent and will continue to] spend substantial amounts to build, purchase, or lease datacenters and equipment and to upgrade our technology and network [removed: infrastructure to handle more traffic on our websites and in our datacenters.][added: infrastructure.]

Our [removed: datacenters depend] [added: infrastructure capacity depends] on the availability of permitted and buildable land, predictable [added: and affordable] energy, networking supplies, and servers, including graphics processing units and other components.

These demands continue to increase as we introduce new products and services and support the growth and the augmentation of existing services, [removed: including through] [added: and scale further] the incorporation of AI features and/or functionality.

[removed: It] [added: We may experience outages, disruptions, or capacity constraints if we fail to maintain and operate adequate infrastructure or secure the resources necessary to support it. Maintaining, securing, and operating our infrastructure] requires that we maintain an Internet connectivity infrastructure and storage and compute capacity that is [removed: robust] [added: robust, resilient,] and reliable within [removed: competitive] [added: competitive, economic,] and regulatory constraints that continue to evolve.

Inefficiencies or operational failures, including temporary or permanent loss of customer data, outages, insufficient Internet connectivity, insufficient or unavailable power or water supply, [added: inefficient operation of our of our cloud-based and AI products and services on our infrastructure,] or inadequate storage and compute capacity could diminish the [added: actual or perceived] quality of our products, services, and user experience, resulting in contractual liability, claims by customers and other third parties, regulatory actions, damage to our reputation, and loss of current and potential users, subscribers, and advertisers, each of which could adversely affect our business, operations, financial condition, and results of operations.

We may experience supply [removed: or quality] problems. There are limited suppliers for certain [added: critical] device and datacenter [removed: components.][added: components, and those items are in short supply.]

We continue to identify and evaluate opportunities to expand our datacenter locations and increase our server capacity to meet the evolving needs of our customers, particularly given the growing demand for AI [added: products and] services.

Component shortages, excess or obsolete inventory, or price reductions resulting in inventory adjustments [added: have and] may increase our cost of revenue.

[removed: Datacenter servers, Xbox] [added: In addition to infrastructure, other products such as XBOX] consoles, Surface devices, and other hardware are [removed: assembled in Asia and other geographies that may be] [added: similarly] subject to [removed: disruptions in the] supply [removed: chain,] [added: chain challenges and disruptions,] resulting in shortages which could adversely affect our business, operations, financial condition, and results of operations.

[added: We may experience other quality problems.] Our [added: AI and other] software products and services also have and may in the future experience quality or reliability problems.

Our customers [removed: increasingly] rely on us for critical business functions and multiple workloads.

Weaknesses in our processes could result in defects we do not detect and fix in pre-release testing, which could cause reduced sales, damage to our reputation, repair or remediation costs, delays in the release of new products or versions, or legal liability, [removed: and] [added: any of which] could adversely affect our business, financial condition, and results of operations.

Although our license agreements typically contain provisions that eliminate or limit our exposure to liability, [removed: there is no assurance] these provisions [removed: will] [added: may not] withstand legal challenge.

Our [added: datacenters and our] hardware products such as [removed: Xbox] [added: XBOX] consoles, Surface devices, and other devices we design and market are highly complex.

Failure to prevent, detect, or address defects in design, manufacture, or associated software could [removed: result in recalls, safety alerts, or product liability claims, which could] adversely affect our business and results of operations.

We are subject to a variety of new, existing, and evolving legal and regulatory requirements that could adversely affect our results of operations. We are subject to a wide range of laws, regulations, and legal requirements in the U.S. and globally, including those that may apply to our products and online services offerings, and those that impose requirements related to user privacy, [added: cybersecurity,] telecommunications, data storage and protection, digital accessibility, advertising, and online safety.

[removed: In addition, laws requiring us to] retrieve and produce customer data in response to compulsory legal demands from law enforcement and governmental authorities are [removed: expanding] [added: evolving] and the requests we are experiencing are increasing in volume and complexity.

AI: Legislative and regulatory action is [removed: emerging in] [added: evolving with respect to] AI, which could increase costs or restrict opportunity.

AI regulatory areas include model and system development and deployment, frontier model safety, transparency, [removed: and] content [removed: provenance.][added: provenance, digital replicas, and AI companions.]

Economic sanctions in the U.S., the EU, and other countries [added: could] prohibit [removed: most] business with restricted entities or countries.

U.S. [removed: tariff and] [added: tariffs,] shifting AI export controls policies, [removed: like the AI Diffusion Rule, could] [added: and disagreements among governments on sanctions policies toward third countries, has and may continue to] increase operational costs, create uncertainty in the continuity of our products, and accelerate sovereignty initiatives among international partners and customers.

The potential replacement of the [removed: recently] rescinded AI Diffusion [removed: Rule] [added: Rule, expanded export license conditions,] and other potential AI-related rulemakings could adversely affect Microsoft’s business, strategy, and operations.

Periods of intense diplomatic or armed [removed: conflict like] [added: conflict, such as] the [removed: ongoing conflict] [added: conflicts] in Ukraine and the [removed: Israel-Hamas conflict] [added: Middle East] could [added: continue to] result in (1) new and rapidly evolving sanctions and trade restrictions, which may impair trade with sanctioned individuals and countries, and (2) negative impacts to regional trade ecosystems among our customers, partners, and us.

In addition, the EU General Data Protection Regulation [removed: (“GDPR”)] and other similar regulations impose a range of compliance obligations regarding the handling of personal data.

Environmental, Social, and Governance: Laws, regulations, and policies relating to environmental, social, and governance matters are being developed and formalized in Europe, the U.S., and elsewhere, which may include greenhouse gas emissions and energy usage caps, [added: permitting, reporting, procurement, operational, and infrastructure-siting requirements] as well as specific, target-driven environmental, social, and governance frameworks and disclosure requirements.

How these laws and regulations apply to our business is often unclear, subject to change, and sometimes may [added: conflict or] be inconsistent from jurisdiction to jurisdiction.

These claims may arise from a wide variety of business practices and initiatives, including major new product releases, AI [added: products and] services, significant business transactions, warranty or product claims, employment practices, and regulation.

[removed: For example, the] [added: The] Organisation for Economic Co-operation and Development continues to advance proposals or guidance in international taxation, including [removed: the establishment of a] global minimum tax.

We face risks related to the protection and utilization of our intellectual property that may result in our business and operating results being harmed. Protecting our intellectual property rights and combating unlicensed copying and use of our software, source code, [added: trade secrets,] and other intellectual property on a global basis is difficult.

Source code, the detailed program commands for our [removed: operating systems and other] software programs, is critical to our business.

Third parties may claim that we infringe their intellectual property. From time to time, others claim we infringe their intellectual property rights, including current copyright infringement and other claims arising from AI [removed: training] [added: training, inference,] and output.

These include product [removed: safety] [added: safety, quality,] or [removed: quality] [added: accessibility] issues, our environmental impact and sustainability, supply chain practices, or human rights record.

We may experience backlash from customers, government entities, advocacy groups, employees, and other stakeholders that disagree with our product offering [removed: decisions, public policy positions, or corporate philanthropic initiatives.]

Adverse economic or market conditions could harm our business. Worsening economic conditions, including inflation, recession, pandemic, or other changes in economic conditions, [added: periods of economic uncertainty, evolution of customer demand, technology investment cycles, interest rates, foreign exchange rates, or the timing and mix of customer spending,] may cause lower [added: or delayed] IT spending and adversely affect our results of operations.

Commission on January 19, 2024 and amended on March 8, 2024, beginning in late November 2023, a nation-state associated threat actor used a password spray attack to compromise a legacy test account and, in turn, gain access to Microsoft email accounts.

The threat actor used information it obtained to gain unauthorized access to some of our source code repositories and internal systems, and the threat actor could continue to utilize this and other information to attempt to gain access to our systems or otherwise adversely affect our business and results of operations.

This incident has and may continue to result in harm to our reputation and customer relationships.

Nation-state and state-sponsored actors can sustain malicious activities for extended periods and deploy significant resources to plan and carry out attacks.

Nation-state attacks against us, our customers, suppliers, or partners have and may continue to intensify due to our transparency to our customers, other stakeholders, and the public about cyberattacks, and during elections or periods of intense diplomatic or armed conflict.

Challenges or failures to update or apply security patches to all hardware and devices connected to our systems, including end-of-life and end-of-support equipment, have and may continue to result in unauthorized access to our systems and data in the future.

Cyber incidents and attacks, individually or in the aggregate, could adversely affect our financial condition, results of operations, competitive position, and reputation, or expose us to legal or regulatory risk.

Cyberthreats are constantly evolving and becoming increasingly sophisticated and complex, increasing the difficulty of preventing, detecting and successfully defending against them.

Threat actors also utilize emerging technologies such as AI and machine learning to, among other things, increase the speed and scale of attacks by generating and refining malicious content and code, automate reconnaissance and targeting, accelerate their ability to detect or exploit vulnerabilities, and rapidly iterate on attack techniques, which can broaden the scope, intensity, and sophistication of campaigns and reduce the time we have to identify and mitigate emerging threats.

Our current capabilities may not detect certain vulnerabilities or new attack methods, which may allow them to persist in the environment over long periods of time.

It may be difficult to determine the best way to investigate, mitigate, contain, and remediate the harm caused by a cyber incident.

Such efforts may not be successful, and we may make errors or fail to take necessary actions.

It is possible that threat actors may gain undetected access to other networks and systems after establishing a foothold on an internal system.

Cyber incidents and attacks can have cascading impacts that unfold with increasing speed across our internal networks and systems, as well as those of our partners and customers.

In addition, it may take considerable time for us to investigate and evaluate the full impact of incidents, particularly for sophisticated attacks.

As a result of these and other factors, we may not be able to provide prompt, full, and reliable information about the incident to our customers, partners, suppliers, regulators, and the public.

Breaches of our facilities, network, or data security can disrupt the security of our systems and business applications, impair our ability to provide services to our customers and protect the privacy of their data, result in product development delays, compromise confidential or technical business information, result in theft or misuse of our intellectual property or other assets, subject us to ransomware attacks, require us to allocate more resources to improve technologies or remediate the impacts of attacks, or otherwise adversely affect our business.

In addition, actions taken to remediate an incident could result in outages, data losses, and disruptions of our services.

Our internal environment continues to evolve.

Often, we are early adopters of new devices and technologies.

We embrace new ways of sharing data and communicating internally and with partners and customers using methods such as social networking and other consumer-oriented technologies.

Increasing use of AI, including models, algorithms, copilots, and autonomous or semi-autonomous agents, in our internal or third-party systems may create new attack surfaces or methods for adversaries.

Our business policies and internal security controls may not keep pace with emerging threats or the evolving regulatory landscape.

Inadequate account security or organizational security practices, including those of companies we have acquired or those of the third parties we utilize, have resulted and may result in unauthorized access to our systems and data, including customer systems and data.

For example, passwords may not be rotated and employee access may not be updated or removed on a timely basis.

Further, third parties that we utilize may also face the AI-based enhanced cybersecurity risk as described elsewhere in these risk factors.

Employees or third parties may intentionally compromise our or our users’ security or systems or reveal confidential information, and laws in certain jurisdictions may compel actions by such parties against our interests and could limit our recourse.

Malicious actors have and may continue to exploit the supply chain to compromise our systems by, for example, injecting malware, including through software updates or compromised supplier or open-source software code, accounts, or hardware.

Incidents involving the supply chain, including third-party vendors, suppliers, service providers, open-source software, or customer environments, may adversely affect our systems and our products and services, even where our own systems are not directly compromised.

Security of our products, services, devices, and customers’ data

The security of our products and services is important in our customers’ decisions to purchase or use our products or services across cloud and on-premises environments.

Security threats are a significant challenge to companies like us, whose business is providing technology products and services to others.

Threats to, or attacks on, our own infrastructure, such as the nation-state attack described in the prior risk factor, have also affected our customers and may do so in the future.

The reliability of our cloud-based services and the protection of customer data depend on the security of our infrastructure and the security of third-party infrastructure upon which we rely, which includes hardware, software, and other elements provided by third parties.

Adversaries tend to focus their efforts on the most popular operating systems, programs, and services, including many of ours, as well as customers with sensitive data, and we expect that to continue.

In addition, adversaries can attack our customers’ on-premises or cloud environments, sometimes exploiting previously unknown (“zero-day”) vulnerabilities.

Product vulnerabilities can persist even after we have issued security patches if customers have not installed the most recent updates, or if attackers, potentially with the assistance of artificial intelligence, reconstruct and exploit the vulnerabilities before patching.

Attackers may utilize vulnerabilities to install malware to further compromise customers’ systems.

Adversaries will continue to attack customers as they embrace digital transformation.

Adversaries that acquire user account information can use that information to compromise our users’ accounts, including where accounts share the same attributes such as passwords.

We are building AI into many of our offerings, including our productivity services, and we are also making AI available for our customers to use in solutions that they build.

This AI may be developed by Microsoft or others, including our strategic partner, OpenAI.

We expect these elements of our business to grow.

We envision a future in which AI operating in devices, applications, and the cloud helps our customers be more productive in their work and personal lives.

As with many innovations, AI presents risks and challenges that could affect its adoption, and therefore our business.

AI algorithms or training methodologies may be flawed.

Finally, if we enable or offer AI solutions that have unintended consequences, unintended usage or customization by our customers and partners, are contrary to our responsible AI policies and practices, or are otherwise controversial because of the impact on human rights, privacy, employment, or other social, economic, or political issues, our reputation, competitive position, business, financial condition, and results of operations could be adversely affected.

The cost or availability of these dependencies could be adversely affected by a variety of factors, including the transition to a clean energy economy, local and regional environmental regulations, and geopolitical disruptions.

Maintaining, securing, and expanding this infrastructure is expensive and complex, and requires development of principles for datacenter builds in geographies with higher safety and reliability risks.

Capacity available to us may be affected as competitors use some of the same suppliers and materials for hardware components.

If components are delayed or become unavailable, whether because of supplier capacity constraint, industry shortages, legal or regulatory changes that restrict supply sources, or other reasons, we may not obtain timely replacement supplies, resulting in reduced sales or inadequate datacenter capacity to support the delivery and continued development of our products and services.

Changes in the law may continue to weaken our ability to prevent the use of patented technology.

Our increasing engagement with open source software will also cause us to license our intellectual property rights broadly in certain situations.

If we are unable to protect our intellectual property, our results of operations could be adversely affected.

If our source code leaks, we might lose future trade secret protection for that code.

[removed: Impairment] [added: Measurement and Impairment] of Investment Securities

This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, [removed: estimation of] the [removed: useful life] [added: period] over which cash flows [removed: will occur,] [added: are expected to be generated,] and determination of our weighted average cost of capital.

Cash, Cash Equivalents, and Investments

Cash, cash equivalents, and short-term investments totaled $76.8 billion and $94.6 billion as of June 30, 2026 and 2025, respectively.

Equity and other investments were $36.3 billion and $15.4 billion as of June 30, 2026 and 2025, respectively.

Our short-term investments are primarily intended to facilitate liquidity and capital preservation.

They consist predominantly of highly liquid investment-grade fixed-income securities, diversified among industries and individual issuers.

The investments are predominantly U.S. dollar-denominated securities, but also include foreign currency-denominated securities to diversify risk.

Our fixed-income investments are exposed to interest rate risk and credit risk.

The credit risk and average maturity of our fixed-income portfolio are managed to achieve economic returns that correlate to certain fixed-income indices.

The settlement risk related to these investments is insignificant given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities.

Valuation

In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine the fair value of our financial instruments.

This pricing methodology applies to our Level 1 investments, such as U.S. government securities, common and preferred stock, and mutual funds.

If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly.

This pricing methodology applies to our Level 2 investments, such as commercial paper, certificates of deposit, U.S. agency securities, foreign government bonds, mortgage- and asset-backed securities, corporate notes and bonds, and municipal securities.

Level 3 investments are valued using internally-developed models with unobservable inputs.

Assets and liabilities measured at fair value on a recurring basis using unobservable inputs are an immaterial portion of our portfolio.

A majority of our investments are priced by pricing vendors and are generally Level 1 or Level 2 investments as these vendors either provide a quoted market price in an active market or use observable inputs for their pricing without applying significant adjustments.

Broker pricing is used mainly when a quoted price is not available, the investment is not priced by our pricing vendors, or when a broker price is more reflective of fair values in the market in which the investment trades.

Our broker-priced investments are generally classified as Level 2 investments because the broker prices these investments based on similar assets without applying significant adjustments.

In addition, all our broker-priced investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments.

Our fair value processes include controls that are designed to ensure appropriate fair values are recorded.

These controls include model validation, review of key model inputs, analysis of period-over-period fluctuations, and independent recalculation of prices where appropriate.

Cash Flows

Cash from operations increased $46.8 billion to $182.9 billion for fiscal year 2026, primarily due to an increase in cash received from customers and a decrease in cash used to pay income taxes, offset in part by an increase in cash paid to suppliers.

Cash used in financing increased $847 million to $52.5 billion for fiscal year 2026, primarily due to a $6.0 billion decrease in cash used for repayments of debt, offset in part by a $3.9 billion increase in common stock repurchases and a $2.4 billion increase in dividends paid.

Cash used in investing increased $66.9 billion to $139.5 billion for fiscal year 2026, primarily due to a $51.4 billion increase in additions to property and equipment and a $22.2 billion increase in cash used in other investing primarily to facilitate the purchase of components, offset in part by a $4.2 billion decrease in cash used in the acquisition of companies, net of cash acquired and divestitures, and purchases of intangible and other assets and a $2.4 billion decrease in cash used in net investment purchases, sales, and maturities.

Debt Proceeds

We issue debt to take advantage of favorable pricing and liquidity in the debt markets, reflecting our credit rating.

The proceeds of these issuances were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, repurchases of capital stock, acquisitions, and repayment of existing debt.

Refer to Note 10 – Debt of the Notes to Financial Statements (Part II, Item 8 of this Form 10-K).

Unearned Revenue

Unearned revenue comprises mainly unearned revenue related to volume licensing programs, which may include cloud services and Software Assurance (“SA”).

Unearned revenue is generally invoiced annually at the beginning of each contract period for multi-year agreements and recognized ratably over the coverage period.

Unearned revenue also includes payments for other offerings for which we have been paid in advance and earn the revenue when we transfer control of the product or service.

Refer to Note 1 – Accounting Policies of the Notes to Financial Statements (Part II, Item 8 of this Form 10-K).

The following table outlines the expected future recognition of unearned revenue as of June 30, 2026:

| | | | | |

| --- | --- | --- | --- | --- |

| (In millions) | | | | |

| | | | | |

| Risk Categories | | Hypothetical Change | | June 30, [removed: 2025] [added: 2026] | | | | | Impact | |

| Foreign currency – Revenue | | 10% decrease in foreign exchange rates | | $ | [removed: (11,596] [added: (13,653] | ) | | | Earnings | |

| Foreign currency – Investments | | 10% decrease in foreign exchange rates | | | [removed: (17] [added: (5] | ) | | | Fair Value | |

| Interest rate | | 100 basis point increase in U.S. treasury interest rates | | | [removed: (1,415] [added: (1,201] | ) | | | Fair Value | |

| Credit | | 100 basis point increase in credit spreads | | | [removed: (436] [added: (412] | ) | | | Fair Value | |

| Equity | | 10% decrease in equity market prices | | | [removed: (1,213] [added: (2,654] | ) | | | Earnings | |

| Year Ended June 30, | | [removed: 2025] [added: 2026] | | | | [removed: 2024] [added: 2025] | | | | [removed: 2023] [added: 2024] | | |

| Product | | $ | [removed: 63,946] [added: 64,696] | | | $ | [removed: 64,773] [added: 63,946] | | | $ | [removed: 64,699] [added: 64,773] | |

| Service and other | | | [removed: 217,778] [added: 267,143] | | | | [removed: 180,349] [added: 217,778] | | | | [removed: 147,216] [added: 180,349] | |

| Total revenue | | | [removed: 281,724] [added: 331,839] | | | | [removed: 245,122] [added: 281,724] | | | | [removed: 211,915] [added: 245,122] | |

| Product | | | [removed: 13,501] [added: 12,098] | | | | [removed: 15,272] [added: 13,501] | | | | [removed: 17,804] [added: 15,272] | |

| Service and other | | | [removed: 74,330] [added: 94,276] | | | | [removed: 58,842] [added: 74,330] | | | | [removed: 48,059] [added: 58,842] | |

| Total cost of revenue | | | [removed: 87,831] [added: 106,374] | | | | [removed: 74,114] [added: 87,831] | | | | [removed: 65,863] [added: 74,114] | |

| Gross margin | | | [removed: 193,893] [added: 225,465] | | | | [removed: 171,008] [added: 193,893] | | | | [removed: 146,052] [added: 171,008] | |

| Research and development | | | [removed: 32,488] [added: 35,562] | | | | [removed: 29,510] [added: 32,488] | | | | [removed: 27,195] [added: 29,510] | |

| Sales and marketing | | | [removed: 25,654] [added: 26,710] | | | | [removed: 24,456] [added: 25,654] | | | | [removed: 22,759] [added: 24,456] | |

| General and administrative | | | [removed: 7,223] [added: 7,956] | | | | [removed: 7,609] [added: 7,223] | | | | [removed: 7,575] [added: 7,609] | |

| Operating income | | | [removed: 128,528] [added: 155,237] | | | | [removed: 109,433] [added: 128,528] | | | | [removed: 88,523] [added: 109,433] | |

| Other income (expense), net | | | [removed: (4,901] [added: 10,697] | [removed: )] | | | [removed: (1,646] [added: (4,901] | ) | | | [removed: 788] [added: (1,646] | [added: )] |

| Income before income taxes | | | [removed: 123,627] [added: 165,934] | | | | [removed: 107,787] [added: 123,627] | | | | [removed: 89,311] [added: 107,787] | |

| Provision for income taxes | | | [removed: 21,795] [added: 32,185] | | | | [removed: 19,651] [added: 21,795] | | | | [removed: 16,950] [added: 19,651] | |

| Net income | | $ | [removed: 101,832] [added: 133,749] | | | $ | [removed: 88,136] [added: 101,832] | | | $ | [removed: 72,361] [added: 88,136] | |

| Basic | | $ | [removed: 13.70] [added: 18.00] | | | $ | [removed: 11.86] [added: 13.70] | | | $ | [removed: 9.72] [added: 11.86] | |

| Diluted | | $ | [removed: 13.64] [added: 17.95] | | | $ | [removed: 11.80] [added: 13.64] | | | $ | [removed: 9.68] [added: 11.80] | |

| Basic | | | [removed: 7,433] [added: 7,429] | | | | [removed: 7,431] [added: 7,433] | | | | [removed: 7,446] [added: 7,431] | |

| Diluted | | | [removed: 7,465] [added: 7,453] | | | | [removed: 7,469] [added: 7,465] | | | | [removed: 7,472] [added: 7,469] | |

| Net change related to derivatives | | | [removed: (5] [added: 8] | [removed: )] | | | [removed: 24] [added: (5] | [added: )] | | | [removed: (14] [added: 24] | [removed: )] |

| Net change related to investments | | | [removed: 1,574] [added: 215] | | | | [removed: 957] [added: 1,574] | | | | [removed: (1,444] [added: 957] | [removed: )] |

| Translation adjustments and other | | | [removed: 674] [added: (160] | [added: )] | | | [removed: (228] [added: 674] | [removed: )] | | | [removed: (207] [added: (228] | ) |

| Other comprehensive income [removed: (loss)] | | | [removed: 2,243] [added: 63] | | | | [removed: 753] [added: 2,243] | | | | [removed: (1,665] [added: 753] | [removed: )] |

| Comprehensive income | | $ | [removed: 104,075] [added: 133,812] | | | $ | [removed: 88,889] [added: 104,075] | | | $ | [removed: 70,696] [added: 88,889] | |

| [removed: June] [added: Year Ended June] 30, | | [added: 2026 | | | |] 2025 | | | | 2024 | | |

| Cash and cash equivalents | | $ | [removed: 30,242] [added: 20,935] | | | $ | [removed: 18,315] [added: 30,242] | |

| Short-term investments | | | [removed: 64,323] [added: 55,908] | | | | [removed: 57,228] [added: 64,323] | |

| Total cash, cash equivalents, and short-term investments | | | [removed: 94,565] [added: 76,843] | | | | [removed: 75,543] [added: 94,565] | |

| Accounts receivable, net of allowance for doubtful accounts of [removed: $944] [added: $1,040] and [removed: $830] [added: $944] | | | [removed: 69,905] [added: 80,876] | | | | [removed: 56,924] [added: 69,905] | |

| Inventories | | | [removed: 938] [added: 1,397] | | | | [removed: 1,246] [added: 938] | |

| Other current assets | | | [removed: 25,723] [added: 48,594] | | | | [removed: 26,021] [added: 25,723] | |

| Total current assets | | | [removed: 191,131] [added: 207,710] | | | | [removed: 159,734] [added: 191,131] | |

| Property and equipment, net of accumulated depreciation of [removed: $93,653] [added: $118,691] and [removed: $76,421] [added: $93,653] | | | [removed: 204,966] [added: 313,076] | | | | [removed: 135,591] [added: 204,966] | |

| Net income | | $ | 133,749 | | | $ | 101,832 | | | $ | 88,136 | |

| Common stock issued | | | 2,009 | | | | 2,056 | | | | 2,002 | |

| Net income | | | 133,749 | | | | 101,832 | | | | 88,136 | |

| Other comprehensive income | | | 63 | | | | 2,243 | | | | 753 | |

Cloud services, which include software-as-a-service, infrastructure-as-a-service, and platform-as-a-service, are provided on either a subscription or consumption basis.

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.

Additionally, as of June 30, 2026, restricted investments pursuant to a supplier agreement were $11.3 billion, with $3.8 billion included in short-term investments and $7.5 billion included in equity and other investments in our consolidated balance sheet.

We are subject to global intangible low-taxed income (“GILTI”) in the U.S. and have elected to include GILTI in the measurement of deferred income taxes.

Identifying observable changes in price requires judgment in evaluating whether transactions are orderly and whether the securities are comparable, including consideration of the rights and preferences of the securities, the composition of the investor group, and other relevant facts and circumstances.

Equity method investments may be recorded on a lag of up to three months when sufficient financial information is not available in a timely manner.

For equity method investments recorded on a lag, we recognize the impact of intervening events that have a material impact on our consolidated financial statements in the period in which they occurred.

We have a long-term strategic partnership with OpenAI.

In October 2025, we signed a new definitive agreement with OpenAI that extends this partnership.

As an equity method investee, OpenAI is a related party as defined in Accounting Standards Codification Topic 850, *Related Party Disclosures* (“ASC 850”).

In accordance with ASC 850, we are disclosing revenue and accounts receivable balances from transactions with OpenAI.

For fiscal year 2026, we recorded revenue from commercial arrangements with OpenAI, inclusive of revenue-sharing payments, of $24.1 billion, and accounts receivable from OpenAI as of June 30, 2026 was $6.0 billion.

We have made total funding commitments of $13.0 billion related to our investment, of which $11.9 billion has been funded as of June 30, 2026.

We calculate our equity method income or loss using the hypothetical liquidation at book value (“HLBV”) method because our liquidation rights and priorities differ from our underlying ownership interest.

Under the HLBV method, we recognize income or loss based on the change in the amount we would receive if the net assets of the investee were distributed at book value.

In October 2025, OpenAI formed a public benefit corporation and completed a recapitalization (“OpenAI Recapitalization”).

During fiscal year 2026, our proportionate ownership of OpenAI decreased due to the OpenAI Recapitalization and other funding activity, and we recorded dilution gains in other income (expense), net.

Refer to Note 3 – Other Income (Expense), Net for additional information.

The adoption resulted in incremental income tax disclosures.

Other income (expense), net included $6.5 billion of net gains, $4.8 billion of net losses, and $1.5 billion of net losses for fiscal years 2026, 2025, and 2024, respectively, from investments in OpenAI, primarily net recognized gains (losses) on our equity method investment reflected in Other, net.

The net gains recorded for fiscal year 2026 primarily relate to the dilution gain from the OpenAI Recapitalization.

| June 30, 2026 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| U.S. government securities | | | Level 1 | | | | 49,714 | | | | 2 | | | | (1,154 | ) | | | 48,562 | | | | 399 | | | | 40,675 | | | | 7,488 | |

| Corporate notes and bonds | | | Level 3 | | | | 1,618 | | | | 120 | | | | 0 | | | | 1,738 | | | | 0 | | | | 118 | | | | 1,620 | |

| Total debt investments | | | | | | $ | 72,170 | | | $ | 188 | | | $ | (1,274 | ) | | $ | 71,084 | | | $ | 6,260 | | | $ | 55,716 | | | $ | 9,108 | |

| Equity investments | | | Level 1 | | | | | | | | | | | | | | | $ | 4,289 | | | $ | 1,616 | | | $ | 0 | | | $ | 2,673 | |

| Total equity investments | | | | | | | | | | | | | | | | | | $ | 28,856 | | | $ | 1,616 | | | $ | 0 | | | $ | 27,240 | |

| Cash | | | | | | | | | | | | | | | | | | $ | 13,059 | | | $ | 13,059 | | | $ | 0 | | | $ | 0 | |

| Total | | | | | | | | | | | | | | | | | | $ | 113,191 | | | $ | 20,935 | | | $ | 55,908 | | | $ | 36,348 | |

| (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 | | |

Foreign Currencies

Certain forecasted transactions, assets, and liabilities are exposed to foreign currency risk.

Interest Rate

Securities held in our fixed-income portfolio are subject to different interest rate risks based on their maturities.

Credit

Our fixed-income portfolio is diversified and consists primarily of investment-grade securities.

Equity

PART II

Item 8

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| (In millions) | | | | | | | | | | | | |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| (In millions) | | | | | | | | |

| Short-term debt | | | 0 | | | | 6,693 | |

In August 2024, we announced changes to the composition of our segments.

These changes align our segments with how we currently manage our business, most notably bringing the commercial components of Microsoft 365 together in the Productivity and Business Processes segment.

Beginning in fiscal year 2025, the information that our chief operating decision maker is regularly provided and reviews for purposes of allocating resources and assessing performance reflects these segment changes.

Prior period segment information has been recast to conform to the way we internally manage and monitor our business during fiscal year 2025.

These changes primarily impacted Note 8 – Goodwill, Note 12 – Unearned Revenue, and Note 18 – Segment Information and Geographic Data.

Cloud services, which allow customers to use hosted software over the contract period without taking possession of the software, are provided on either a subscription or consumption basis.

We have an investment in OpenAI Global, LLC (“OpenAI”) and have made total funding commitments of $13 billion.

Related Party Transactions

In March 2024, we entered into an agreement with Inflection AI, Inc. (“Inflection”), pursuant to which we obtained a non-exclusive license to Inflection’s intellectual property.

Reid Hoffman, a member of our Board of Directors, is a co-founder of and serves on the board of directors of Inflection.

As of the date of the agreement with Inflection, Reprogrammed Interchange LLC (“Reprogrammed”) and entities affiliated with Greylock Ventures (“Greylock”) each held less than a 10% equity interest in Inflection.

Mr. Hoffman may be deemed to beneficially own the shares held by Reprogrammed and Greylock by virtue of his relationship with such entities.

Mr. Hoffman did not participate in any portions of the meetings of our Board of Directors or any committee thereof to review and approve the transaction with Inflection.

*Segment Reporting – Improvements to Reportable Segment Disclosures*

The guidance expands the disclosures required for reportable segments in our annual and interim consolidated financial statements, primarily through enhanced disclosures about significant segment expenses.

The adoption resulted in incremental segment reporting disclosures, most notably disclosure of cost of revenue and operating expenses for each reportable segment.

Refer to Note 18 – Segment Information and Geographic Data.

In December 2023, the FASB issued a new standard to improve income tax disclosures.

The standard will be effective for us beginning with our annual reporting for fiscal year 2026, with early adoption permitted.

We are currently evaluating the impact of this standard on our income tax disclosures.

Other, net primarily reflects net recognized losses on equity method investments, including OpenAI.

| June 30, 2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| U.S. government securities | | | Level 1 | | | | 49,603 | | | | 4 | | | | (2,948 | ) | | | 46,659 | | | | 14 | | | | 46,645 | | | | 0 | |

| Corporate notes and bonds | | | Level 3 | | | | 1,641 | | | | 0 | | | | (1 | ) | | | 1,640 | | | | 0 | | | | 140 | | | | 1,500 | |

Growth of our [removed: Gaming] [added: XBOX] business is determined by the overall active user base through [removed: Xbox] [added: XBOX] enabled content, availability of games, providing exclusive game content that gamers seek, the computational power and reliability of the devices used to access our content and services, and the ability to create new experiences.

Search [removed: and News] Advertising

Our Search [removed: and news] advertising business is designed to deliver relevant search, native, and display advertising to a global audience.

Our Search [removed: and news] advertising business competes with search engines, and a wide array of websites, social platforms, and portals that provide content and online offerings to end users.

As of June 30, [removed: 2025,] [added: 2026,] we employed approximately [removed: 228,000] [added: 223,000] people on a full-time basis, [removed: 125,000] [added: 121,000] in the U.S. and [removed: 103,000] [added: 102,000] internationally.

Of the total employees, 89,000 were in operations, including product support and consulting services, datacenter operations, and manufacturing and distribution; [removed: 80,000] [added: 77,000] were in product research and development; [removed: 44,000] [added: 43,000] were in sales and marketing; and [removed: 15,000] [added: 14,000] were in general and administration.

We have [removed: regional] [added: a global] operations service [removed: centers in] [added: center covering] the Americas, Asia Pacific, Europe, and the Middle East that [removed: support] [added: supports] our business operations, including customer contract and order processing, billing, credit and collections, customer lifecycle AI and cloud operations, and vendor management and logistics.

In addition to our operations [removed: centers,] [added: center,] we also operate datacenters throughout each of these regions.

Our datacenters depend on the availability of permitted and buildable land, predictable energy, networking supplies, and servers, including graphics processing units [removed: (“GPUs”)] and other components.

Extended or unforeseen [removed: disruptions at] [added: disruptions, or limited availability of components from] these suppliers could impact our ability to operate our datacenters and manufacture devices on time to meet consumer demand.

We [removed: plan to continue to make significant investments in a broad range of product research and development activities, and as appropriate, we] will coordinate our research and development across operating segments and leverage the results across the [removed: company.][added: company, as appropriate.]

Our engagement with [removed: open source] [added: open-source] software also causes us to license our intellectual property rights broadly in certain situations.

We are subject to a wide range of laws, regulations, and legal requirements in the U.S. and globally, including those that may apply to our [removed: products] [added: products, services,] and [removed: online services offerings,] [added: infrastructure,] and those that impose requirements related to user privacy, telecommunications, data storage and protection, advertising, and online content.

Our executive officers as of July [removed: 30, 2025] [added: 29, 2026] were as follows:

| Satya Nadella | | | [removed: 57] [added: 58] | | | Chairman and Chief Executive Officer |

| Judson B. Althoff | | | [removed: 52] [added: 53] | | | [removed: Executive Vice President and] Chief [added: Executive Officer, Microsoft] Commercial [removed: Officer] [added: Business] |

| Amy L. Coleman | | | [removed: 53] [added: 54] | | | Executive Vice President and Chief Human Resources Officer |

| Amy E. Hood | | | [removed: 53] [added: 54] | | | Executive Vice President and Chief Financial Officer |

| Takeshi Numoto | | | [removed: 54] [added: 55] | | | Executive Vice President and Chief Marketing Officer |

| Bradford L. Smith | | | [removed: 66] [added: 67] | | | Vice Chair and President |

[removed: Mr. Althoff was appointed] [added: He previously served as] Executive Vice President and Chief Commercial Officer [removed: in] [added: since] July 2021.

He served as Executive Vice President, Worldwide Commercial Business from July 2017 until [removed: that time.][added: July 2021.]

Mr. Althoff also serves on the Board of Directors of Ecolab Inc. [added: and General Electric Company, operating as GE Aerospace.]

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material [removed: with] [added: with,] or furnish it [removed: to] [added: to,] the Securities and Exchange Commission (“SEC”) at www.sec.gov.

Press releases on quarterly earnings, product and service announcements, [removed: legal developments,] and [removed: international news.][added: legal developments.]

Corporate governance information including our articles of incorporation, bylaws, governance guidelines, committee charters, codes of conduct and ethics, [removed: global] corporate [removed: social] responsibility initiatives, and other governance-related policies.

We publish a variety of reports and resources related to our Corporate [removed: Social] Responsibility programs and progress on our Reports Hub website, www.microsoft.com/corporate-responsibility/reports-hub, including [removed: reports on responsible AI, sustainability, responsible sourcing, accessibility, digital trust,] [added: the Environmental Sustainability Report, Microsoft Digital Defense Report,] and [removed: public policy engagement.][added: Microsoft Impact Summary.]

Our competitors range in size from diversified global companies with significant research and development resources to small, specialized firms [removed: whose narrower product lines] [added: who] may [removed: let them] be more effective in deploying technical, marketing, and financial resources.

We face significant competition from competing platforms developed for new [removed: devices and form factors such as] [added: types of devices, including] smartphones and tablets.

To [removed: compete,] [added: compete successfully,] we must [removed: successfully] enlist developers to write applications for our platform and ensure that these applications have high quality, security, customer appeal, and value.

We and our competitors continue to devote significant resources to developing and deploying cloud-based strategies and services for consumers and business [removed: customers, and pricing and delivery models are evolving.][added: customers.]

We are investing in [removed: artificial intelligence (“AI”)] [added: AI] across the entire company and infusing [removed: generative] AI capabilities into our [removed: consumer and commercial] offerings.

Some companies compete with us by modifying and then distributing [removed: open source] [added: open-source] software at little or no cost to end users, developing, making available, or using AI models that are open, and earning revenue on advertising or integrated products and services.

These firms do not bear the full costs of research and development for the [removed: open source] [added: open-source] products.

Some [removed: open source] [added: open-source] products mimic the features and functionality of our products.

Whether we succeed in cloud-based and AI [added: products and] services depends on our execution in several areas, including:

Continuing to bring to market compelling cloud-based and AI [removed: services and] products [added: and services] that generate increasing traffic and market share.

[removed: Maintaining] [added: Making our suite of cloud-based and AI products and services platform-agnostic and maintaining] the utility, compatibility, and performance of our cloud-based and AI [added: products and] services on the growing array of computing devices, including PCs, smartphones, tablets, gaming consoles, and other devices.

Ensuring our cloud-based [added: and AI] services meet the reliability expectations and specific requirements of our customers and maintain the security of their data as well as help them meet their own compliance needs.

If we are not effective in executing organizational and technical changes to increase efficiency and accelerate innovation, or if we fail to generate sufficient usage of our new products and services, [removed: we] [added: the timing or magnitude of any revenue growth] may not [removed: grow revenue] [added: be] in line with [removed: the infrastructure and development investments described above.][added: these costs.]

We plan to continue to make significant investments in a broad range of product research and development activities, including AI-based products and services.

Distribution occurs through a combination of direct and indirect channels.

Direct sales activities serve customers ranging from large multinational enterprises and public sector organizations to small and medium-sized businesses.

Indirect sales activities serve customers through a broad network of partners that support the sale, deployment, and management of Microsoft products and services worldwide.

The indirect channel extends the reach of commercial offerings and supports customers across industries, geographies, and organization sizes.

Sales and distribution models continue to evolve to support cloud-based, subscription-based, and consumption-based offerings while maintaining multiple options through which customers may acquire and manage our products and services.

OEMs license and preinstall certain Microsoft software on devices that are sold to end customers.

In addition, certain products and services are available through online purchasing channels and digital marketplaces.

We offer a range of volume purchasing programs that enable organizations of varying sizes to acquire software, cloud services, and related support benefits through direct and partner-assisted purchasing arrangements.

These programs provide customers with flexible purchasing, deployment, and management options and are tailored to large enterprises, mid-sized organizations, small businesses, educational institutions, and government entities.

Mr. Althoff was appointed Chief Executive Officer, Microsoft Commercial Business in October 2025.

Statements in this section reflect our beliefs and opinions as to matters that could adversely affect us in the future.

References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such matters have occurred in the past.

Firms offering competing platforms may make it more difficult to attract and retain customers.

Expansion of our vertically-integrated capabilities, including developing proprietary hardware, infrastructure, and artificial intelligence (“AI”) models, could increase our cost structure, reduce margins, and expose us to operational risks.

Our AI offerings compete with AI products from hyperscalers, open-source offerings, and frontier model providers, some of which are also current or potential partners.

Our cloud and AI strategy requires substantial investments and depends on evolving customer demand, technological developments, competitive dynamics, and regulatory conditions, any of which could adversely affect our business, financial condition, and results of operations. We have made and are continuing to make significant capital and operational investments to develop, train, deploy, and support AI models and related cloud-based services, including building and expanding datacenters, acquiring necessary components, and securing energy resources.

These investments are being made at significant scale and on an accelerated timeline, require substantial and increasing capital expenditures and continued access to capital, and are in advance of fully developed revenue streams.

The associated revenue may not be realized in the expected timeframes or at expected levels.

Our capital and operational investments are complex and involve projects in multiple locations around the world that expose us to increased compliance risks and political challenges, among others.

Our ability to fund these investments depends on our ability to generate sufficient cash flows and obtain financing on acceptable terms.

Adverse changes in interest rates, credit markets, investor sentiment, our credit ratings, or other factors affecting capital availability could increase our cost of capital or limit our ability to execute our infrastructure strategy.

The financial success of these investments depends on a number of uncertain factors, including customer demand for cloud-based and AI products and services and continued customer use of Azure to build, train, deploy, and run AI workloads, our ability to price and monetize those services at levels sufficient to recover our costs, competitive dynamics affecting pricing, and the pace of adoption of AI.

Customers may reduce, delay, or shift AI workloads to competing platforms, on-premises or local deployments, or other alternatives.

If adoption of our AI services develops more slowly than expected, or if customers do not continue to utilize Azure for AI workloads at anticipated levels, we may not realize the expected returns on our investments.

Demand for cloud-based and AI products and services is evolving and difficult to forecast.

Overestimation of demand or misalignment of capacity investments may result in underutilization of infrastructure and may lead to impairment of assets on our balance sheet.

Conversely, demand exceeding available capacity limits our ability to meet customer needs in a timely manner.

The cost structure for AI products and services is subject to significant uncertainty, including with respect to model training and inference costs, the availability and pricing of components, and energy costs.

If these costs increase, remain elevated, or fail to decline, or if pricing for AI products and services declines as a result of competition, commoditization, or other market forces, our margins, financial condition, and results of operations could be adversely affected.

Our AI strategy also depends in part on strategic relationships with third parties that provide technologies, models, products, and services that enhance our offerings.

These relationships may change over time, and many of these partners compete with us with respect to certain products and services.

Changes in strategic priorities, contractual arrangements, our access to third-party technologies, or key commercial relationships could adversely affect the competitiveness of our AI products and services.

In some cases, these parties are significant customers of Azure and other cloud services.

The economic benefits we expect to derive from these relationships, including through commercial arrangements, technology access, and Azure consumption, may not be realized or sustained.

As we manage infrastructure capacity constraints and evolving customer demand, we may modify capacity allocations, deployment priorities, pricing, or other commercial arrangements.

Strategic partners and other customers may likewise adjust their purchasing decisions, deployment strategies, workloads, or anticipated use of our products and services.

As a result, expected consumption or anticipated demand may not materialize, may be delayed or reduced, or may decline over time.

Our success depends on our ability to develop, deliver, and maintain competitive cloud-based and AI products and services that achieve broad customer adoption and sustainable revenue growth. Our ability to succeed depends on our ability to develop and deliver differentiated products and services that meet evolving customer needs, achieve broad adoption, maintain customer trust, and generate sustainable revenue and growth.

The markets for cloud-based and AI products and services are highly dynamic, characterized by shifting customer expectations, increasing regulatory and governmental scrutiny, intense competition, and rapid technological change, such as the accelerating importance of agentic computing.

Gaming

Microsoft is expanding how billions of people globally access and play video games on PC, console, mobile, and cloud.

Our game content is developed through a collection of first-party studios creating iconic and differentiated gaming experiences.

We continue to invest in gaming studios and content to expand our intellectual property roadmap and leverage new content creators.

These unique gaming experiences are the cornerstone of Xbox Game Pass, a subscription service and gaming community with access to a curated library of first- and third-party titles.

We also compete with other providers of entertainment services such as video streaming platforms.

PART I

Item 1

Our customers include individual consumers, small and medium organizations, large global enterprises, public-sector institutions, service providers, application developers, and OEMs.

We market and distribute our products and services through the following channels: direct, distributors and resellers, and OEMs.

Our sales organization performs a variety of functions, including working directly with commercial enterprises and public-sector organizations worldwide to identify and meet their technology and digital transformation requirements; supporting system integrators, independent software vendors, and other partners who engage directly with our customers to perform sales, consulting, and fulfillment functions for our products and services; and managing OEM relationships.

Direct

Many organizations that license our products and services transact directly with us through Enterprise Agreements and Enterprise Services contracts, with sales support from system integrators, independent software vendors, web agencies, and partners that advise organizations on licensing our products and services (“Enterprise Agreement Software Advisors” or “ESA”).

Microsoft offers direct sales programs targeted to reach small, medium, and corporate customers, in addition to those offered through the reseller channel.

A large network of partner advisors support many of these sales.

We also sell commercial and consumer products and services directly to customers, such as cloud services, search, and gaming, through our digital marketplaces and online stores.

Additionally, our Microsoft Experience Centers are designed to facilitate deeper engagement with our partners and customers across industries.

Distributors and Resellers

Organizations also license our products and services indirectly, primarily through licensing solution partners (“LSP”), distributors, value-added resellers (“VAR”), and retailers.

Although each type of reselling partner may reach organizations of all sizes, LSPs are primarily engaged with large organizations, distributors resell primarily to VARs, and VARs typically reach small and medium organizations.

ESAs are also typically authorized as LSPs and operate as resellers for our other volume licensing programs.

Microsoft Cloud Solution Provider is our main partner program for reselling cloud services.

We distribute our retail packaged products primarily through independent non-exclusive distributors, authorized replicators, resellers, and retail outlets.

Individual consumers obtain these products primarily through retail outlets.

We distribute our devices through third-party retailers.

We have a network of field sales representatives and field support personnel that solicit orders from distributors and resellers and provide product training and sales support.

Our Dynamics business solutions are also licensed to enterprises through a global network of channel partners providing vertical solutions and specialized services.

OEMs

We distribute our products and services through OEMs that pre-install our software on new devices and servers they sell.

The largest component of the OEM business is the Windows operating system pre-installed on devices.

OEMs also sell devices pre-installed with other Microsoft products and services, including applications such as Office and the capability to subscribe to Microsoft 365 Consumer.

There are two broad categories of OEMs.

The largest category of OEMs are direct OEMs as our relationship with them is managed through a direct agreement between Microsoft and the OEM.

We have distribution agreements covering one or more of our products with virtually all the multinational OEMs, including Dell, Hewlett-Packard, Lenovo, and with many regional and local OEMs.

The second broad category of OEMs are system builders consisting of lower-volume PC manufacturers, which source Microsoft software for pre-installation and local redistribution primarily through the Microsoft distributor channel rather than through a direct agreement or relationship with Microsoft.

We offer options for organizations of varying sizes that want to purchase our cloud services and on-premises software.

We license these organizations under volume licensing agreements to allow the customer to acquire multiple licenses of products and services instead of having to acquire separate licenses through retail channels.

These volume licensing programs have varying programmatic requirements and benefits to best meet the needs of our customers.

Software Assurance (“SA”) conveys rights to new software and upgrades for perpetual licenses released over the contract period.

It also provides support, tools, training, and other licensing benefits to help customers deploy and use software efficiently.

| | For the Fiscal Year Ended June 30, [removed: 2025] [added: 2026] |

As of December 31, [removed: 2024,] [added: 2025,] the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was [removed: $3.1] [added: $3.6] trillion based on the closing sale price as reported on the NASDAQ National Market System.

As of July [removed: 24, 2025,] [added: 23, 2026,] there were [removed: 7,433,166,379] [added: 7,425,545,491] shares of common stock outstanding.

Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held on December [removed: 5, 2025] [added: 8, 2026] are incorporated by reference into Part III.

For the Fiscal Year Ended June 30, [removed: 2025][added: 2026]

| | | | | [Information about our Executive Officers](#information_about_our_executive_ficers) | | [removed: 14] [added: 12] | |

| | | Item 1A. | | [Risk Factors](#item_1a_risk_factors) | | [removed: 16] [added: 14] | |

| | | Item 1B. | | [Unresolved Staff Comments](#item_1b_unresolved_staff_comments) | | [removed: 30] [added: 29] | |

| | | Item 1C. | | [Cybersecurity](#item_1c_cybersecurity) | | [removed: 30] [added: 29] | |

| | | Item 2. | | [Properties](#item_2_properties) | | [removed: 32] [added: 31] | |

| | | Item 3. | | [Legal Proceedings](#item_3_legal_proceedings) | | [removed: 32] [added: 31] | |

| | | Item 4. | | [Mine Safety Disclosures](#item_4_mine_safety_disclosures) | | [removed: 32] [added: 31] | |

| | | Item 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](#item5_market_for_registrants) | | [removed: 33] [added: 32] | |

| | | Item 6. | | [\[Reserved\]](#item_6_reserved) | | [removed: 34] [added: 33] | |

| | | Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#item_7_managements_discussion_analysis_f) | | [removed: 35] [added: 34] | |

| | | Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#item_12_security_ownership_certain_benef) | | [removed: 91] [added: 92] | |

| | | Item 13. | | [Certain Relationships and Related Transactions, and Director Independence](#item_13_certain_relationships_related_tr) | | [removed: 91] [added: 92] | |

These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” [added: “could,”] “will be,” “will continue,” “will likely result,” and similar expressions.

We develop and support a broad portfolio of technology solutions for individuals and businesses, focusing on secure, trusted, and innovative platforms and [removed: tools] [added: applications] that meet evolving customer needs across [added: AI,] cloud computing, productivity and collaboration, and personal computing.

We offer an array of services, including cloud-based solutions that provide customers with [added: AI,] software, services, platforms, and content, and we provide solution support and consulting services.

Our products include operating systems, [removed: cross-device productivity and collaboration applications,] server applications, business solution applications, [added: software development tools,] desktop and server management tools, [removed: software development tools,] and video games.

Build the intelligent cloud and intelligent edge platform to provide a foundation for our customers’ digital [removed: workloads] [added: workloads,] including hybrid consistency, developer productivity, data and AI capabilities, and trusted security and compliance.

Create more personal computing [removed: to enable users] [added: experiences that empower people] to [added: play, create, and] interact with technology in more intuitive, engaging, and dynamic ways.

Since announcing these goals, we have [removed: made meaningful progress while having] seen major changes in both the technology sector and in our understanding of what it will take to meet our goals.

[removed: Progress] [added: More information about our progress] toward these goals can be found in our annual Environmental Sustainability Report.

Server products and cloud services, including Azure and other cloud services, comprising cloud and AI consumption-based services, GitHub cloud services, [added: Health and Life Sciences cloud services (formerly] Nuance Healthcare cloud [removed: services,] [added: services),] virtual desktop offerings, and other cloud services; and Server products, comprising SQL Server, Windows Server, Visual Studio, System Center, related Client Access Licenses (“CALs”), and other on-premises offerings.

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

Customers can use Azure through our global network of datacenters for computing, networking, storage, mobile and web application services, AI, [added: and] Internet of [removed: Things, cognitive services, and machine learning.][added: Things.]

GitHub [removed: and Nuance Healthcare include] [added: includes] both cloud and on-premises offerings.

[removed: Nuance Healthcare] [added: Health and Life Sciences cloud services] provides AI solutions to the healthcare industry.

Enterprise and partner [removed: services, including Enterprise Support Services, Industry Solutions, Nuance professional services, Microsoft Partner Network, and Learning Experience,] [added: services] assist customers in developing, deploying, and managing Microsoft server solutions, Microsoft desktop solutions, and [removed: Nuance] conversational AI and ambient intelligent solutions, along with providing training and certification to developers and IT professionals on various Microsoft products.

Azure faces diverse competition from cloud service providers and [removed: open source] [added: open-source] offerings.

Our AI offerings compete with AI products from hyperscalers, as well as products from other emerging competitors and other [removed: open source] [added: open-source] offerings, many of which are also current or potential partners.

Our Azure Security offerings include our cloud security solution and [added: our] security information and event management solution, which compete with providers in the cybersecurity and cloud security space.

Our products for software developers compete against offerings from major technology providers, as well as [removed: open source] [added: open-source] alternatives.

[removed: Gaming,] [added: XBOX (formerly Gaming),] including [removed: Xbox] [added: XBOX] hardware and [removed: Xbox] [added: XBOX] content and services, comprising first- and third-party content (including games and in-game content), [removed: Xbox] [added: XBOX] Game Pass and other subscriptions, [removed: Xbox] [added: XBOX] Cloud Gaming, advertising, and other cloud services.

Search [added: advertising (formerly Search] and news [removed: advertising,] [added: advertising),] comprising [removed: Bing and] [added: Bing,] Copilot, Microsoft News, Microsoft Edge, and third-party affiliates.

Helping customers drive frontier transformation by applying frontier AI capabilities, engineering expertise, and trusted platforms to reinvent how their organizations operate, improve decision-making, create new value, and deliver measurable business outcomes from AI.

Providing a unified intelligence layer for enterprise AI to ground AI in a continuously evolving understanding of an organization’s data.

XBOX

Microsoft is expanding how billions of people globally access and play video games on PC, console, mobile, and cloud.

Our game content is developed through a collection of first-party studios creating iconic and differentiated gaming experiences.

We continue to invest in gaming studios and content to expand our intellectual property roadmap and leverage new content creators.

These unique gaming experiences are the cornerstone of XBOX Game Pass, a subscription service and gaming community with access to a curated library of first- and third-party titles.

In August 2024, we announced changes to the composition of our segments.

These changes align our segments with how we currently manage our business, most notably bringing the commercial components of Microsoft 365 together in the Productivity and Business Processes segment.

Beginning in fiscal year 2025, the information that our chief operating decision maker is regularly provided and reviews for purposes of allocating resources and assessing performance reflects these segment changes.

We have received no written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more preceding the end of our fiscal year [removed: 2025] [added: 2026] that remain unresolved.

ITEM 1C.

CYBERSECURITY

RISK MANAGEMENT AND STRATEGY

Microsoft plays a central role in the world’s digital ecosystem.

We have made it the top corporate priority to protect the computing environment used by our customers and employees and to support the resiliency of our cloud infrastructure and services, products, devices, and our internal corporate resources from determined adversaries.

In response to the evolving cybersecurity threat landscape, we launched the Secure Future Initiative (“SFI”) in November 2023 and expanded the scope of SFI in May 2024.

The SFI focuses our business strategy and efforts on continual improvement in cybersecurity protection, and is aligned around three security principles:

Secure by Design: Security comes first when designing any product or service.

Secure by Default: Security protections are enabled and enforced by default, require no extra effort, and are not optional.

Secure Operations: Security controls and monitoring will continuously be improved to meet current and future threats.

We operate a cybersecurity program and governance framework designed to protect our computing environments against cybersecurity threats, and we have controls, policies, and procedures to identify, manage, and mitigate cybersecurity threats.

Annually, we assess our cybersecurity program’s alignment with the National Institute of Standards & Technology’s Cyber Security Framework (“NIST”) and other applicable industry standards.

We also undertake integrated planning and preparedness activities to support business continuity and operational resiliency.

We assess our program's effectiveness through various exercises, including tabletop simulations and production environment tests, penetration and vulnerability tests, red team exercises, and other related activities.

We conduct mandatory cybersecurity training, provide employees with tools to report suspected incidents and assess their own security posture, and conduct real-time simulated employee education exercises, such as phishing email campaigns designed to emulate real-world attacks.

We also engage in robust cybersecurity assessments and remediation efforts for acquired companies.

Our computing environments, products, and services are reviewed by our internal audit teams as well as independent third-party assessors.

We are committed to managing the most significant risks to our strategies and ambitions, including cybersecurity risks.

The Enterprise Risk Management (“ERM”) organization supports management in this commitment by facilitating the semiannual risk assessment, which documents the priority and status of these risks and aligns them with our strategic mitigation efforts.

ERM is structured using a framework based on the Committee of Sponsoring Organization (“COSO”) guidance on Enterprise Risk Management Integrating Strategy with Performance and it also aligns with the International Organization for Standardization 31000:2018 Risk Management Standard.

We continuously monitor our computing environments, products, and services for vulnerabilities and signs of compromise, and we utilize our own security products to combat cybersecurity threats.

We integrate security into our computing environments, products, and services through our Security Development Lifecycle (“SDL”).

Our SDL introduces security and privacy considerations throughout all phases of our development process and through the adoption of zero-trust end-to-end architecture.

We utilize machine learning and AI-powered security tools to gain insights from 84 trillion signals per day.

We track over 1,500 unique threat actors, including more than 600 nation-state actors, 300 cybercriminal groups, 200 influence operation groups, and hundreds of others.

To support our efforts, we operate a Cyber Defense Operations Center connected to over 10,000 security and threat intelligence experts, including engineers, researchers, data scientists, cybersecurity experts, threat hunters, geopolitical analysts, investigators, and frontline responders across the globe.

PART I

When appropriate, we utilize external service providers [added: and tools] to assess, test, or otherwise assist our program.

The [removed: CGC] [added: CGC’s] responsibilities include approving our enterprise security risk assessment process and results, determining the appropriate cybersecurity risk level and mitigations, reviewing the [removed: NIST CSF] [added: industry standard] alignment, and supporting compliance with cybersecurity regulations.

RISK MANAGEMENT AND STRATEGY

Microsoft plays a central role in the world’s digital ecosystem.

We have made it a top corporate priority to protect the computing environment used by our customers and employees and to support the resiliency of our cloud infrastructure and services, products, devices, and our internal corporate resources from determined adversaries.

In response to the evolving cybersecurity threat landscape, we launched the Secure Future Initiative (“SFI”) in November 2023 and expanded the scope of SFI in May 2024.

The SFI focuses our business strategy and efforts on continual improvement in cybersecurity protection.

We operate a cybersecurity program and governance framework designed to protect our computing environments against cybersecurity threats, and we have controls, policies, and procedures to identify, manage, and mitigate cybersecurity threats.

Annually, we assess our cybersecurity program’s alignment with applicable industry standards.

We also undertake integrated planning and preparedness activities to support business continuity and operational resiliency.

We assess our program's effectiveness through a range of validation activities, which may include tabletop simulations, production environment tests, penetration and vulnerability tests, red team exercises, and other related activities.

We conduct mandatory cybersecurity training, provide employees with tools to report suspected incidents and assess their own security posture, and conduct real-time simulated employee education exercises, such as phishing email campaigns designed to emulate real-world attacks.

We also engage in robust cybersecurity assessments and remediation efforts for acquired companies.

Our computing environments, products, and services are reviewed by our internal audit teams as well as independent third-party assessors.

We are committed to managing the most significant risks to our strategies and ambitions, including cybersecurity risks.

The Enterprise Risk Management (“ERM”) organization supports management in this commitment by facilitating the semiannual risk assessment, which documents the priority and status of these risks and aligns them with our strategic mitigation efforts.

ERM is structured using a framework based on the Committee of Sponsoring Organization guidelines that also aligns with the International Organization for Standardization 31000:2018 Risk Management Standard.

We continuously monitor our computing environments, products, and services for vulnerabilities and signs of compromise, and we utilize our own security products, third-party security products, and leading artificial intelligence models to combat cybersecurity threats.

We integrate security into our computing environments, products, and services through our Security Development Lifecycle (“SDL”).

Our SDL introduces security and privacy considerations throughout all phases of our development process and through the adoption of zero-trust end-to-end architecture.

Item 1C

Following resolution, we conduct post incident reviews for incidents that meet established criteria to capture learnings and strengthen our processes.

PART I

After the incident is resolved, a comprehensive post-incident review process is conducted.

We have approximately [removed: 15] [added: 14] million square feet of space located in King County, Washington that is used for engineering, sales, marketing, and operations, among other general and administrative purposes.

These facilities include approximately 12 million square feet of owned space situated on approximately [removed: 530] [added: 520] acres of land we own at our corporate headquarters, and approximately [removed: 3] [added: 2] million square feet of space we lease.

The largest owned international properties include space in the following locations: China, India, Ireland, [removed: and] the [removed: Netherlands.][added: Netherlands, and Sweden.]

The largest leased international properties include space in the following locations: Australia, Canada, China, France, Germany, India, Ireland, [removed: Israel,] Japan, the Netherlands, and the United Kingdom.

The table below shows a summary of the square footage of our properties owned and leased domestically and internationally as of June 30, [removed: 2025:][added: 2026:]

| U.S. | | | [removed: 34] [added: 41] | | | | [removed: 23] [added: 24] | | | | [removed: 57] [added: 65] | |

| International | | | [removed: 13] [added: 17] | | | | [removed: 27] [added: 30] | | | | [removed: 40] [added: 47] | |

| Total | | | [removed: 47] [added: 58] | | | | [removed: 50] [added: 54] | | | | [removed: 97] [added: 112] | |

Refer to Research and Development (Part I, Item 1 of this Form 10-K) for further discussion of our research and development facilities.

On July [removed: 24, 2025,] [added: 23, 2026,] there were [removed: 77,014] [added: 74,199] registered holders of record of our common stock.

Following are our monthly share repurchases for the fourth quarter of fiscal year [removed: 2025:][added: 2026:]

Our Board of Directors declared the following dividends during the fourth quarter of fiscal year [removed: 2025:][added: 2026:]

We returned [removed: $9.4] [added: $10.2] billion to shareholders in the form of share repurchases and dividends in the fourth quarter of fiscal year [removed: 2025.][added: 2026.]

| April 1, 2026 – April 30, 2026 | | | 1,002,119 | | | | $ | 398.88 | | | | 1,002,119 | | | $ | 43,630 | |

| May 1, 2026 – May 31, 2026 | | | 3,559,509 | | | | | 416.81 | | | | 3,559,509 | | | | 42,147 | |

| June 1, 2026 – June 30, 2026 | | | 3,828,061 | | | | | 396.19 | | | | 3,828,061 | | | | 40,630 | |

| | | | 8,389,689 | | | | | | | | | 8,389,689 | | | | | |

| June 10, 2026 | | | August 20, 2026 | | | | September 10, 2026 | | | $ | 0.91 | | | $ | 6,759 | |

| | | | | | | | | | | | | | | | | |

| April 1, 2025 – April 30, 2025 | | | 3,180,776 | | | | $ | 376.90 | | | | 3,180,776 | | | $ | 59,350 | |

| May 1, 2025 – May 31, 2025 | | | 2,360,700 | | | | | 448.01 | | | | 2,360,700 | | | | 58,293 | |

| June 1, 2025 – June 30, 2025 | | | 1,979,017 | | | | | 476.78 | | | | 1,979,017 | | | | 57,349 | |

| | | | 7,520,493 | | | | | | | | | 7,520,493 | | | | | |

On September 16, 2024, our Board of Directors approved a share repurchase program authorizing up to $60.0 billion in share repurchases.

This share repurchase program commenced in April 2025, following completion of the program approved on September 14, 2021, has no expiration date, and may be terminated at any time.

| June 10, 2025 | | | August 21, 2025 | | | | September 11, 2025 | | | $ | 0.83 | | | $ | 6,170 | |

RECENT SALES OF UNREGISTERED SECURITIES

In May 2025, as consideration for the acquisition of a business, we issued 117,623 shares of common stock to the seller in connection with the closing in reliance on exemption from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof because the issuance of securities did not involve a public offering.

This section generally discusses the results of our operations for the year ended June 30, [removed: 2025] [added: 2026] compared to the year ended June 30, [removed: 2024.][added: 2025.]

For a discussion of the year ended June 30, [removed: 2024] [added: 2025] compared to the year ended June 30, [removed: 2023,] [added: 2024,] please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended June 30, [removed: 2024 and our Form 8-K filed on December 3, 2024.][added: 2025.]

We create platforms and [removed: tools,] [added: applications,] powered by AI, that deliver innovative solutions that meet the evolving needs of our customers.

Highlights from fiscal year [removed: 2025] [added: 2026] compared with fiscal year [removed: 2024] [added: 2025] included:

Microsoft Cloud revenue increased [removed: 23%] [added: 27%] to [removed: $168.9] [added: $214.4] billion.

Microsoft 365 Commercial products and cloud services revenue increased [removed: 14% driven by Microsoft 365 Commercial cloud revenue growth of 15%.][added: $14.2 billion or 16%.]

Microsoft 365 Consumer products and cloud services revenue increased [removed: 11% driven by Microsoft 365 Consumer cloud revenue growth of 11%.][added: $1.8 billion or 24%.]

LinkedIn revenue increased [removed: 9%.][added: 11%.]

Dynamics products and cloud services revenue increased [added: $1.2 billion or] 15% driven by [removed: Dynamics 365 revenue] growth [removed: of 19%.][added: in Dynamics 365.]

Server products and cloud services revenue increased [removed: 23%] [added: $31.0 billion or 31%] driven by Azure and other cloud [removed: services revenue growth of 34%.][added: services.]

Windows OEM and Devices revenue [removed: increased 3%.][added: decreased slightly.]

[removed: Xbox] [added: XBOX] content and services revenue [removed: increased 16%.][added: decreased 5%.]

Search [added: advertising (formerly Search] and news [removed: advertising] [added: advertising)] revenue excluding traffic acquisition costs increased [removed: 20%.][added: 12%.]

[removed: Microsoft and OpenAI maintain] [added: We have] a long-term strategic partnership [added: with OpenAI which was] originally established in 2019.

Microsoft is a major investor in [removed: OpenAI,] [added: OpenAI] and [removed: the companies have reciprocal] [added: will continue to receive] revenue-sharing [removed: arrangements.][added: payments.]

Our datacenters depend on the availability of permitted and buildable land, predictable energy, networking supplies, and servers, including graphics processing units [removed: (“GPUs”)] and other components.

Extended [removed: disruptions at] [added: or unforeseen disruptions, or limited availability of components from] these suppliers could impact our ability to [added: operate our datacenters and] manufacture devices on time to meet consumer demand.

Fluctuations in the U.S. dollar relative to certain foreign currencies [added: increased reported revenue and] did not have a material impact on reported [removed: revenue and] expenses from our international operations in fiscal year [removed: 2025.][added: 2026.]

We report our financial performance based on the following [added: three] segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

In the first quarter of fiscal year [removed: 2025,] [added: 2026,] we made updates to our metrics [removed: in connection] [added: to align] with [removed: the segment changes described above.][added: how we manage and monitor certain businesses.]

| Azure and other cloud services revenue growth | | Revenue from Azure and other cloud services, including cloud and AI consumption-based services, GitHub cloud services, [added: Health and Life Sciences cloud services (formerly] Nuance Healthcare cloud [removed: services,] [added: services),] virtual desktop offerings, and other cloud services |

| Search [removed: and news] advertising revenue (ex TAC) growth | | Revenue from search [removed: and news] advertising excluding traffic acquisition costs (“TAC”) paid to Bing Ads network publishers and [removed: news] [added: content] partners |

| (In millions, except [removed: percentages and] [added: percentages and] per share amounts) | | [added: 2026 | | | |] 2025 | | | | [added: |] 2024 | | | [added: Percentage Change 2026 Versus 2025] | [added: | |] Percentage [removed: Change] [added: Change 2025 Versus 2024] | | |

| Gross margin | | | [removed: 193,893] [added: 225,465] | | | | [removed: 171,008] [added: 193,893] | | | | [removed: 13%] [added: 16%] | |

| Operating income | | | [removed: 128,528] [added: 155,237] | | | | [removed: 109,433] [added: 128,528] | | | | [removed: 17%] [added: 21%] | |

| Net income | | [added: $] | [removed: 101,832] [added: 133,749] | | | [added: $] | [added: 101,832 | | | $ |] 88,136 | | | [added: 31%] | [added: | |] 16% | | [added: |]

| Diluted earnings per share | | [added: $] | [removed: 13.64] [added: 17.95] | | | [added: $] | [added: 13.64 | | | $ |] 11.80 | | | [added: 32%] | [added: | |] 16% | | [added: |]

Fiscal Year [removed: 2025] [added: 2026] Compared with Fiscal Year [removed: 2024][added: 2025]

[removed: Revenue] [added: Gross margin] increased [removed: $36.6] [added: $31.6] billion or [removed: 15%] [added: 16%] with growth across each of our segments.

More Personal Computing revenue [removed: increased] [added: decreased] driven by [removed: Gaming and] [added: XBOX (formerly Gaming), offset in part by growth in] Search [removed: and news] advertising.

Cost of revenue increased [removed: $13.7] [added: $18.5] billion or [removed: 19%] [added: 21%] driven by growth in Microsoft Cloud.

[removed: Microsoft Cloud gross] [added: Gross] margin percentage decreased [removed: to 69%] driven by the [removed: impact of scaling our] [added: continued investments in] AI [removed: infrastructure,] [added: infrastructure as well as sales mix shift to Azure,] offset in part by efficiency gains in Azure.

| (In millions, except percentages) | | [removed: 2025] [added: 2026] | | | | [removed: 2024] [added: 2025] | | | | Percentage Change | | |

| Cost of revenue | | | [removed: 22,422] [added: 25,017] | | | | [removed: 19,611] [added: 22,422] | | | | [removed: 14%] [added: 12%] | |

| Operating expenses | | | [removed: 28,615] [added: 31,100] | | | | [removed: 27,548] [added: 28,615] | | | | [removed: 4%] [added: 9%] | |

| Operating [removed: Income] [added: income] | | $ | [removed: 69,773] [added: 83,879] | | | $ | [removed: 59,661] [added: 69,773] | | | | [removed: 17%] [added: 20%] | |

| Cost of revenue | | | [removed: 40,171] [added: 57,876] | | | | [removed: 29,611] [added: 40,171] | | | | [removed: 36%] [added: 44%] | |

| Operating expenses | | | [removed: 21,505] [added: 22,943] | | | | [removed: 20,040] [added: 21,505] | | | | 7% | |

| Operating [removed: Income] [added: income] | | $ | [removed: 44,589] [added: 56,972] | | | $ | [removed: 37,813] [added: 44,589] | | | | [removed: 18%] [added: 28%] | |

| Revenue | | $ | [removed: 54,649] [added: 54,052] | | | $ | [removed: 50,838] [added: 54,649] | | | | [removed: 7%] [added: (1)%] | |

Commercial remaining performance obligation increased 84% to $678 billion.

Dynamics 365 revenue increased 18%.

In October 2025 and April 2026, we extended this partnership and continue to build on our shared vision to advance artificial intelligence responsibly and make its benefits broadly accessible.

As part of these updates, Microsoft 365 Consumer subscribers was removed as a metric.

| (In millions, except percentages and per share amounts) | | 2026 | | | | 2025 | | | | Percentage Change | | |

| Revenue | | $ | 331,839 | | | $ | 281,724 | | | | 18% | |

| Net income | | | 133,749 | | | | 101,832 | | | | 31% | |

| Diluted earnings per share | | | 17.95 | | | | 13.64 | | | | 32% | |

| Adjusted net income (non-GAAP) | | | 128,786 | | | | 105,452 | | | | 22% | |

| Adjusted diluted earnings per share (non-GAAP) | | | 17.28 | | | | 14.13 | | | | 22% | |

Adjusted net income and adjusted diluted earnings per share (“EPS”) are non-GAAP financial measures.

These non-GAAP financial measures exclude net gains and losses from investments in OpenAI.

Refer to the Non-GAAP Financial Measures section below for a reconciliation of our financial results reported in accordance with GAAP to non-GAAP financial results.

Microsoft Cloud gross margin percentage decreased to 66% driven by continued investments in AI infrastructure and growing AI product usage, offset in part by efficiency gains in Azure and Microsoft 365 Commercial cloud.

Operating expenses increased $4.9 billion or 7% driven by continued investments in research and development compute capacity, AI talent, and data to support product development that benefits the entire portfolio, impairment and other related expenses in our XBOX business, investments in commercial sales, and higher Copilot advertising expenses.

Operating income increased $26.7 billion or 21% driven by growth in Productivity and Business Processes and Intelligent Cloud.

Revenue and operating income both included a favorable foreign currency impact of 2%.

Current year net income and diluted EPS were positively impacted by net gains from investments in OpenAI, which resulted in an increase in net income and diluted EPS of $5.0 billion and $0.67, respectively.

Prior year net income and diluted EPS were negatively impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted EPS of $3.6 billion and $0.49, respectively.

| Revenue | | $ | 139,996 | | | $ | 120,810 | | | | 16% | |

| Revenue | | $ | 137,791 | | | $ | 106,265 | | | | 30% | |

| Revenue | | $ | 331,839 | | | $ | 281,724 | | | | 18% | |

| Cost of revenue | | | 106,374 | | | | 87,831 | | | | 21% | |

Fiscal Year 2026 Compared with Fiscal Year 2025

Microsoft 365 Commercial cloud revenue grew 17% with growth in revenue per user driven by Microsoft 365 Copilot and Microsoft 365 E5.

Cost of revenue increased $2.6 billion or 12% driven by investments in AI infrastructure to support Microsoft 365 Copilot seat and usage growth.

Gross margin percentage increased slightly primarily driven by efficiency gains in Microsoft 365 Commercial cloud, offset in part by continued investments in AI infrastructure and growing AI product usage.

Operating expenses increased $2.5 billion or 9% driven by continued investments in research and development compute capacity, AI talent, and data to support product development that benefits the entire portfolio, as well as investments in commercial sales and higher Copilot advertising expenses.

Revenue, gross margin, and operating income included a favorable foreign currency impact of 2%, 3%, and 3%, respectively.

Server products revenue increased 1% primarily driven by higher purchases of licenses running in multi-cloud environments, offset in part by continued customer shift to cloud.

Cost of revenue increased $17.7 billion or 44% driven by investments in AI infrastructure to support growing customer demand.

Operating expenses increased $1.4 billion or 7% driven by continued investments in research and development compute capacity, AI talent, and data to support product development that benefits the entire portfolio.

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

Revenue decreased $597 million or 1%.

XBOX content and services revenue decreased 5% on a prior year comparable that benefited from strong first-party content performance, offset in part by growth in XBOX Game Pass.

Operating income increased $220 million or 2%.

Cost of revenue decreased $1.8 billion or 7% driven by lower hardware sales.

Gross margin increased $1.2 billion or 4% driven by growth in Search advertising and Windows OEM.

Gross margin percentage increased driven by sales mix shift to higher margin businesses.

Operating expenses increased $940 million or 6% driven by impairment and other related expenses in our XBOX business and continued investments in research and development compute capacity, AI talent, and data to support product development that benefits the entire portfolio.

PART II

Item 7

The OpenAI API is exclusive to Azure, runs on Azure, and is available through the Azure OpenAI Service.

We also have a right of first refusal on OpenAI's new capacity needs.

In August 2024, we announced changes to the composition of our segments.

These changes align our segments with how we currently manage our business, most notably bringing the commercial components of Microsoft 365 together in the Productivity and Business Processes segment.

Beginning in fiscal year 2025, the information that our chief operating decision maker is regularly provided and reviews for purposes of allocating resources and assessing performance reflects these segment changes.

Prior period segment information has been recast to conform to the way we internally manage and monitor our business during fiscal year 2025.

These changes align our metrics with how we manage and monitor certain businesses.

The key change was bringing the commercial components of Microsoft 365 together and creating a new Microsoft 365 Commercial cloud revenue growth metric.

Other changes include combining Windows OEM and Devices into a single revenue growth metric that brings revenue from PC market-driven businesses together, as well as elevating our cloud revenue growth metrics to align to our strategic focus on cloud growth.

| | | |

| Microsoft 365 Consumer subscribers | | The number of Microsoft 365 Consumer subscribers at end of period |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Revenue | | $ | 281,724 | | | $ | 245,122 | | | | 15% | |

Gross margin increased $22.9 billion or 13% with growth across each of our segments.

Gross margin percentage decreased slightly driven by Intelligent Cloud, offset in part by More Personal Computing.

Operating expenses increased $3.8 billion or 6% driven by investments in cloud and AI engineering and Gaming, including the impact of the Activision Blizzard acquisition.

Operating income increased $19.1 billion or 17% with growth across each of our segments.

| Revenue | | $ | 120,810 | | | $ | 106,820 | | | | 13% | |

| Revenue | | $ | 106,265 | | | $ | 87,464 | | | | 21% | |

| Cost of revenue | | | 87,831 | | | | 74,114 | | | | 19% | |

Dynamics products and cloud services revenue increased $996 million or 15% driven by growth in Dynamics 365, offset in part by a decline in Dynamics on-premises products.

Server products revenue decreased 3% driven by a decrease in transactional purchasing with continued customer shift to cloud offerings.

Cost of revenue increased $10.6 billion or 36% 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 $1.5 billion or 7% driven by investments in cloud and AI engineering.

Revenue increased $3.8 billion or 7%.

Xbox content and services revenue increased 16% driven by the impact of the Activision Blizzard acquisition and Xbox Game Pass.

Operating income increased $2.2 billion or 18%.

Cost of revenue increased $346 million or 1% driven by growth in Search and news advertising.

Gross margin increased $3.5 billion or 13% with growth across all businesses.

Gross margin percentage increased with improvement across all businesses.

Operating expenses increased $1.3 billion or 9% driven by Gaming, including the impact of the Activision Blizzard acquisition.

Research and development expenses increased $3.0 billion or 10% driven by investments in cloud and AI engineering and Gaming, including the impact of the Activision Blizzard acquisition.

Sales and marketing expenses increased $1.2 billion or 5% driven by investments in commercial sales and Gaming, including the impact of the Activision Blizzard acquisition.

General and administrative expenses decreased $386 million or 5% driven by Gaming, including the impact of the Activision Blizzard acquisition.

The Organisation for Economic Co-operation and Development (“OECD”) published its model rules “Tax Challenges Arising From the Digitalisation of the Economy - Global Anti-Base Erosion Model Rules (Pillar Two)” which established a global minimum corporate tax rate of 15% for certain multinational enterprises.

Many countries have implemented or are in the process of implementing the Pillar Two legislation, which applies to Microsoft beginning in fiscal year 2025.

| Fiscal Year 2025 | | | | | | | | | | | | | | [removed: (In millions)] | | |

| [removed: September] [added: September] 16, [removed: 2024] [added: 2024] | | | [removed: November] [added: November] 21, [removed: 2024] [added: 2024] | | | | [removed: December] [added: December] 12, [removed: 2024] [added: 2024] | | | [removed: $] [added: $] | [removed: 0.83] [added: 0.83] | | | [removed: $] [added: $] | [removed: 6,170] [added: 6,170] | |

| [removed: December] [added: December] 3, [removed: 2024] [added: 2024] | | | [removed: February] [added: February] 20, [removed: 2025] [added: 2025] | | | | [removed: March] [added: March] 13, [removed: 2025] [added: 2025] | | | | [removed: 0.83] [added: 0.83] | | | | [removed: 6,169] [added: 6,169] | |

| [removed: March] [added: March] 11, [removed: 2025] [added: 2025] | | | [removed: May] [added: May] 15, [removed: 2025] [added: 2025] | | | | [removed: June] [added: June] 12, [removed: 2025] [added: 2025] | | | | [removed: 0.83] [added: 0.83] | | | | [removed: 6,169] [added: 6,169] | |

| [removed: June] [added: June] 10, [removed: 2025] [added: 2025] | | | [removed: August] [added: August] 21, [removed: 2025] [added: 2025] | | | | [removed: September] [added: September] 11, [removed: 2025] [added: 2025] | | | | [removed: 0.83] [added: 0.83] | | | | [removed: 6,170] [added: 6,168] | |

| [removed: Total] [added: Total] | | | | | | | | | | [removed: $] [added: $] | [removed: 3.32] [added: 3.32] | | | [removed: $] [added: $] | [removed: 24,678] [added: 24,676] | |

| Fiscal Year [removed: 2024] [added: 2026] | | | | | | | | | | | | | | [added: (In millions)] | | |

The dividend declared on June 10, [removed: 2025] [added: 2026] was included in other current liabilities as of June 30, [removed: 2025.][added: 2026.]

| Year Ended June 30, | | [removed: 2025] | [removed: | | |] 2024 | | | | 2023 | | [removed: |]

| Balance, beginning of period | | $ | [removed: (3] [added: (8] | ) | | $ | [removed: (27] [added: (3] | ) | | $ | [removed: (13] [added: (27] | ) |

| Unrealized gains (losses), net of tax of [removed: $20, $(4),] [added: $(11), $20,] and [removed: $9] [added: $(4)] | | | [removed: 77] [added: (42] | [added: )] | | | [removed: (14] [added: 77] | [removed: )] | | | [removed: 34] [added: (14] | [added: )] |

| Reclassification adjustments for (gains) losses included in other income (expense), net | | | [removed: (103] [added: 63] | [removed: )] | | | [removed: 48] [added: (103] | [added: )] | | | [removed: (61] [added: 48] | [removed: )] |

| Tax expense (benefit) included in provision for income taxes | | | [removed: 21] [added: (13] | [added: )] | | | [removed: (10] [added: 21] | [removed: )] | | | [removed: 13] [added: (10] | [added: )] |

| Amounts reclassified from accumulated other comprehensive loss | | | [removed: (82] [added: 50] | [removed: )] | | | [removed: 38] [added: (82] | [added: )] | | | [removed: (48] [added: 38] | [removed: )] |

| Net change related to derivatives, net of tax of [removed: $(1), $6,] [added: $2, $(1),] and [removed: $(4)] [added: $6] | | | [removed: (5] [added: 8] | [removed: )] | | | [removed: 24] [added: (5] | [added: )] | | | [removed: (14] [added: 24] | [removed: )] |

| Balance, end of period | | $ | [removed: (8] [added: 0] | [removed: )] | | $ | [removed: (3] [added: (8] | ) | | $ | [removed: (27] [added: (3] | ) |

| Balance, beginning of period | | $ | [removed: (2,625] [added: (1,051] | ) | | $ | [removed: (3,582] [added: (2,625] | ) | | $ | [removed: (2,138] [added: (3,582] | ) |

| Unrealized [removed: gains (losses),] [added: gains,] net of tax of [removed: $411, $247,] [added: $57, $411,] and [removed: $(393)] [added: $247] | | | [removed: 1,560] [added: 232] | | | | [removed: 915] [added: 1,560] | | | | [removed: (1,523] [added: 915] | [removed: )] |

| Reclassification adjustments for [added: (gains)] losses included in other income (expense), net | | | [removed: 17] [added: (21] | [added: )] | | | [removed: 53] [added: 17] | | | | [removed: 99] [added: 53] | |

| Tax [removed: benefit] [added: expense (benefit)] included in provision for income taxes | | | [removed: (3] [added: 4] | [removed: )] | | | [removed: (11] [added: (3] | ) | | | [removed: (20] [added: (11] | ) |

| Amounts reclassified from accumulated other comprehensive loss | | | [removed: 14] [added: (17] | [added: )] | | | [removed: 42] [added: 14] | | | | [removed: 79] [added: 42] | |

| Net change related to investments, net of tax of [removed: $414, $258,] [added: $53, $414,] and [removed: $(373)] [added: $258] | | | [removed: 1,574] [added: 215] | | | | [removed: 957] [added: 1,574] | | | | [removed: (1,444] [added: 957] | [removed: )] |

| Balance, end of period | | $ | [removed: (1,051] [added: (836] | ) | | $ | [removed: (2,625] [added: (1,051] | ) | | $ | [removed: (3,582] [added: (2,625] | ) |

| Balance, beginning of period | | $ | [removed: (2,962] [added: (2,288] | ) | | $ | [removed: (2,734] [added: (2,962] | ) | | $ | [removed: (2,527] [added: (2,734] | ) |

| Translation adjustments and other, net of tax of [removed: $8, $0,] [added: $0, $8,] and $0 | | | [removed: 674] [added: (160] | [added: )] | | | [removed: (228] [added: 674] | [removed: )] | | | [removed: (207] [added: (228] | ) |

| Balance, end of period | | $ | [removed: (2,288] [added: (2,448] | ) | | $ | [removed: (2,962] [added: (2,288] | ) | | $ | [removed: (2,734] [added: (2,962] | ) |

| Accumulated other comprehensive loss, end of period | | $ | [removed: (3,347] [added: (3,284] | ) | | $ | [removed: (5,590] [added: (3,347] | ) | | $ | [removed: (6,343] [added: (5,590] | ) |

| Stock-based compensation expense | | $ | [removed: 11,974] [added: 12,405] | | | $ | [removed: 10,734] [added: 11,974] | | | $ | [removed: 9,611] [added: 10,734] | |

| Income tax benefits related to stock-based compensation | | | [removed: 2,027] [added: 2,089] | | | | [removed: 1,826] [added: 2,027] | | | | [removed: 1,651] [added: 1,826] | |

| Year Ended June 30, | | [removed: | | | |] 2025 | | | | [removed: | |] 2024 | | | [removed: | | | 2023 | |]

| Dividends per share (quarterly amounts) | | | $ | [removed: 0.75 –] 0.83 [added: – 0.91] | | | | | $ | [removed: 0.68 –] 0.75 [added: – 0.83] | | | | | $ | [removed: 0.62 –] 0.68 [added: – 0.75] | | | |

| Interest rates | | | | 3.4% – [removed: 5.5%] [added: 4.5%] | | | | | | [removed: 3.8%] [added: 3.4%] – [removed: 5.6%] [added: 5.5%] | | | | | | [removed: 2.0%] [added: 3.8%] – [removed: 5.4%] [added: 5.6%] | | | |

During fiscal year [removed: 2025,] [added: 2026,] the following activity occurred under our stock plans:

| Nonvested balance, beginning of year | | | [removed: 88] [added: 82] | | | $ | [removed: 292.28] [added: 347.44] | |

| Nonvested balance, end of year | | | [removed: 82] [added: 78] | | | [removed: $] | [removed: 347.44] [added: 409.94] | |

*Includes* *1* *million of PSUs granted at target and performance adjustments above target levels for each of the fiscal years [added: 2026,] 2025, [removed: 2024,] and [removed: 2023.*][added: 2024.*]

As of June 30, [removed: 2025,] [added: 2026,] total unrecognized compensation costs related to stock awards were [removed: $21.6] [added: $24.8] billion.

The weighted average grant-date fair value of stock awards granted was [added: $471.00,] $413.90, [removed: $339.46,] and [removed: $252.59] [added: $339.46] for fiscal years [added: 2026,] 2025, [removed: 2024,] and [removed: 2023,] [added: 2024,] respectively.

The fair value of stock awards vested was [removed: $16.2] [added: $16.3] billion, [removed: $16.0] [added: $16.2] billion, and [removed: $11.9] [added: $16.0] billion, for fiscal years [added: 2026,] 2025, [removed: 2024,] and [removed: 2023,] [added: 2024,] respectively.

As of June 30, [removed: 2025,] [added: 2026,] an aggregate of [removed: 98] [added: 292] million shares were authorized for future grant under our stock plans.

Unrealized Losses on Debt Investments

Debt investments with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values were as follows:

| | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Less than 12 Months | | | | | | | | 12 Months or Greater | | | | | | | | | | | | Total Unrealized Losses | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| (In millions) | | Fair Value | | | | | Unrealized Losses | | | Fair Value | | | | Unrealized Losses | | | | Total Fair Value | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| June 30, 2026 | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| U.S. government and agency securities | | $ | 19,100 | | | $ | (100 | ) | | $ | 22,042 | | | $ | (1,054 | ) | | $ | 41,142 | | | $ | (1,154 | ) |

| Foreign government bonds | | | 74 | | | | (1 | ) | | | 30 | | | | (6 | ) | | | 104 | | | | (7 | ) |

| Mortgage- and asset-backed securities | | | 905 | | | | (5 | ) | | | 129 | | | | (18 | ) | | | 1,034 | | | | (23 | ) |

| Corporate notes and bonds | | | 5,066 | | | | (31 | ) | | | 909 | | | | (40 | ) | | | 5,975 | | | | (71 | ) |

| Municipal securities | | | 0 | | | | 0 | | | | 122 | | | | (19 | ) | | | 122 | | | | (19 | ) |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| Total | | $ | 25,145 | | | $ | (137 | ) | | $ | 23,232 | | | $ | (1,137 | ) | | $ | 48,377 | | | $ | (1,274 | ) |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Less than 12 Months | | | | | | | | 12 Months or Greater | | | | | | | | | | | | | Total Unrealized Losses | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| (In millions) | | | Fair Value | | | | Unrealized Losses | | | | Fair Value | | | | Unrealized Losses | | | | Total Fair Value | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| June 30, 2025 | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| U.S. government and agency securities | | $ | 2,569 | | | $ | (51 | ) | | $ | 34,608 | | | $ | (1,411 | ) | | $ | 37,177 | | | $ | (1,462 | ) |

| Foreign government bonds | | | 43 | | | | (2 | ) | | | 106 | | | | (7 | ) | | | 149 | | | | (9 | ) |

| Mortgage- and asset-backed securities | | | 841 | | | | (4 | ) | | | 189 | | | | (23 | ) | | | 1,030 | | | | (27 | ) |

| Corporate notes and bonds | | | 1,107 | | | | (8 | ) | | | 3,105 | | | | (98 | ) | | | 4,212 | | | | (106 | ) |

| Municipal securities | | | 0 | | | | 0 | | | | 168 | | | | (21 | ) | | | 168 | | | | (21 | ) |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| Total | | $ | 4,560 | | | $ | (65 | ) | | $ | 38,176 | | | $ | (1,560 | ) | | $ | 42,736 | | | $ | (1,625 | ) |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| September 19, 2023 | | | November 16, 2023 | | | | December 14, 2023 | | | $ | 0.75 | | | $ | 5,574 | |

| November 28, 2023 | | | February 15, 2024 | | | | March 14, 2024 | | | | 0.75 | | | | 5,573 | |

| March 12, 2024 | | | May 16, 2024 | | | | June 13, 2024 | | | | 0.75 | | | | 5,574 | |

| June 12, 2024 | | | August 15, 2024 | | | | September 12, 2024 | | | | 0.75 | | | | 5,574 | |

| Total | | | | | | | | | | $ | 3.00 | | | $ | 22,295 | |

| Granted (a) | | | 39 | | | | 413.90 | |

| Vested | | | (38 | ) | | | 293.25 | |

| Forfeited | | | (7 | ) | | | 317.23 | |

We have recast certain prior period amounts to conform to the way we internally manage and monitor our business.

Refer to Note 1 – Accounting Policies for further information.

| Gaming | | | 23,455 | | | | 21,503 | | | | 15,466 | |

| Other | | | 72 | | | | 45 | | | | 119 | |

July 30, 2025

Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of June 30, [removed: 2025.][added: 2026.]

There were no changes in our internal control over financial reporting during the quarter ended June 30, [removed: 2025] [added: 2026] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Deloitte & Touche LLP has audited our internal control over financial reporting as of June 30, [removed: 2025;] [added: 2026;] their report is included in Item 9A.

We have audited the internal control over financial reporting of Microsoft Corporation and subsidiaries (the “Company”) as of June 30, [removed: 2025,] [added: 2026,] based on criteria established in *Internal Control — Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, [removed: 2025,] [added: 2026,] based on criteria established in *Internal Control — Integrated Framework (2013)* issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended June 30, [removed: 2025,] [added: 2026,] of the Company and our report dated July [removed: 30, 2025,] [added: 29, 2026,] expressed an unqualified opinion on those financial statements.

Item 9B, 9C, 10, [removed: 11, 12, 13][added: 11]

July 29, 2026

July 30, 2025

[removed: None of our] [added: No other] officers or directors, as defined in Rule [removed: 16a-1(f) of the Securities Exchange Act of 1934,] [added: 16a-1(f),] adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, during the three months ended June 30, [removed: 2025.][added: 2026.]

Our Section 16 officers and directors, as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934 (the “Exchange Act”), may from time to time enter into plans for the purchase or sale of our common stock that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act.

During the quarter ended June 30, 2026, the following Section 16 officers and directors adopted, modified, or terminated “Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K of the Exchange Act):

Amy E.

Hood, our Executive Vice President and Chief Financial Officer, adopted a new written 10b5-1 trading plan on June 10, 2026, during an open trading window.

The plan’s maximum duration is until March 5, 2027.

The first trade will not occur until September 14, 2026, at the earliest.

The trading plan is intended to permit Ms. Hood to sell (i) up to 48,700 shares of our common stock, (ii) 100% of net vested shares of our common stock pursuant to Restricted Stock Awards that will vest on August 31, 2026, and (iii) 100% of net vested shares of our common stock pursuant to Restricted Stock Awards that will vest on February 28, 2027.

Information about our directors may be found under the caption “Our Director Nominees” in our Proxy Statement for the Annual Meeting of Shareholders to be held December [removed: 5, 2025] [added: 8, 2026] (the “Proxy Statement”).

PART III

Item 12, 13, 14

PART III

Item 14

| [removed: 4.5] [added: 4.3] | | [Form of Second Supplemental Indenture for 0.875% Notes due 2013, 1.625% Notes due 2015, 3.00% Notes due 2020, and 4.50% Notes due 2040, dated as of September 27, 2010, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312510216531/dex42.htm) | | | | 8-K | | | | 4.2 | | 9/27/2010 | |

| [removed: 4.6] [added: 4.4] | | [Third Supplemental Indenture for 2.500% Notes due 2016, 4.000% Notes due 2021, and 5.300% Notes due 2041, dated as of February 8, 2011, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312511026916/dex42.htm) | | | | 8-K | | | | 4.2 | | 2/8/2011 | |

| [removed: 4.7] [added: 4.5] | | [Fourth Supplemental Indenture for 0.875% Notes due 2017, 2.125% Notes due 2022, and 3.500% Notes due 2042, dated as of November 7, 2012, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312512456267/d433368dex41.htm) | | | | 8-K | | | | 4.1 | | 11/7/2012 | |

| [removed: 4.8] [added: 4.6] | | [Fifth Supplemental Indenture for 2.625% Notes due 2033, dated as of May 2, 2013, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312513192843/d531397dex41.htm) | | | | 8-K | | | | 4.1 | | 5/1/2013 | |

| [removed: 4.9] [added: 4.7] | | [Sixth Supplemental Indenture for 1.000% Notes due 2018, 2.375% Notes due 2023, and 3.750% Notes due 2043, dated as of May 2, 2013, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312513192843/d531397dex42.htm) | | | | 8-K | | | | 4.2 | | 5/1/2013 | |

| [removed: 4.10] [added: 4.8] | | [Seventh Supplemental Indenture for 2.125% Notes due 2021 and 3.125% Notes due 2028, dated as of December 6, 2013, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312513464138/d638276dex41.htm) | | | | 8-K | | | | 4.1 | | 12/6/2013 | |

| [removed: 4.11] [added: 4.9] | | [Eighth Supplemental Indenture for 1.625% Notes due 2018, 3.625% Notes due 2023, and 4.875% Notes due 2043, dated as of December 6, 2013, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312513464138/d638276dex42.htm) | | | | 8-K | | | | 4.2 | | 12/6/2013 | |

| [removed: 4.12] [added: 4.10] | | [Ninth Supplemental Indenture for 1.850% Notes due 2020, 2.375% Notes due 2022, 2.700% Notes due 2025, 3.500% Notes due 2035, 3.750% Notes due 2045, and 4.000% Notes due 2055, dated as of February 12, 2015, between Microsoft Corporation and U.S. Bank National Association, as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312515045564/d871136dex41.htm) | | | | 8-K | | | | 4.1 | | 2/12/2015 | |

| [removed: 4.13] [added: 4.11] | | [Tenth Supplemental Indenture for 1.300% Notes due 2018, 2.000% Notes due 2020, 2.650% Notes due 2022, 3.125% Notes due 2025, 4.200% Notes due 2035, 4.450% Notes due 2045, and 4.750% Notes due 2055, dated as of November 3, 2015, between Microsoft Corporation and U.S. Bank National Association, as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312515363226/d88549dex41.htm) | | | | 8-K | | | | 4.1 | | 11/3/2015 | |

| [removed: 4.14] [added: 4.12] | | [Eleventh Supplemental Indenture for 1.100% Notes due 2019, 1.550% Notes due 2021, 2.000% Notes due 2023, 2.400% Notes due 2026, 3.450% Notes due 2036, 3.700% Notes due 2046, and 3.950% Notes due 2056, dated as of August 8, 2016, between Microsoft Corporation and U.S. Bank, National Association, as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312516673577/d236874dex41.htm) | | | | 8-K | | | | 4.1 | | 8/5/2016 | |

| [removed: 4.15] [added: 4.13] | | [Twelfth Supplemental Indenture for 1.850% Notes due 2020, 2.400% Notes due 2022, 2.875% Notes due 2024, 3.300% Notes due 2027, 4.100% Notes due 2037, 4.250% Notes due 2047, and 4.500% Notes due 2057, dated as of February 6, 2017, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312517030734/d270302dex41.htm) | | | | 8-K | | | | 4.1 | | 2/3/2017 | |

| [removed: 4.16] [added: 4.14] | | [Thirteenth Supplemental Indenture for 2.525% Notes due 2050 and 2.675% Notes due 2060, dated as of June 1, 2020, between Microsoft Corporation and U.S. Bank National Association, as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312520157234/d829164dex41.htm) | | | | 8-K | | | | 4.1 | | 6/1/2020 | |

| [removed: 4.17] [added: 4.15] | | [Fourteenth Supplemental Indenture for 2.921% Notes due 2052 and 3.041% Notes due 2062, dated as of March 17, 2021, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee, to the Indenture, dated as of May 18, 2009, between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312521084239/d130687dex41.htm) | | | | 8-K | | | | 4.1 | | 3/17/2021 | |

| [removed: 4.18] [added: 4.16] | | [Fifteenth Supplemental Indenture, dated as of November 6, 2023, by and between Microsoft Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee](https://www.sec.gov/Archives/edgar/data/789019/000119312523271376/d566386dex42.htm) | | | | 8-K | | | | 4.2 | | 11/6/2023 | |