Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM **10-**Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended December 31, 2025
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Transition Period From to

Commission File Number 001-37845

MICROSOFT CORPORATION

Washington		91-1144442
(STATE OF INCORPORATION)		(I.R.S. ID)

ONE MICROSOFT WAY**,** REDMOND**,** Washington 98052-6399

(425) 882-8080

www.microsoft.com/investor

Securities registered pursuant to Section 12(b) of the Act:
Title of each class		Trading Symbol		Name of exchange on which registered
Common stock, $0.00000625 par value per share		MSFT		Nasdaq
3.125% Notes due 2028		MSFT		Nasdaq
2.625% Notes due 2033		MSFT		Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒		Accelerated Filer ☐
Non-accelerated Filer ☐		Smaller Reporting Company ☐
		Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding as of January 22, 2026
Common Stock, $0.00000625 par value per share		7,425,629,076 shares

MICROSOFT CORPORATION

FORM 10-Q

For the Quarter Ended December 31, 2025

INDEX

				Page
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		a)	Income Statements for the Three and Six Months Ended December 31, 2025 and 2024	3
		b)	Comprehensive Income Statements for the Three and Six Months Ended December 31, 2025 and 2024	4
		c)	Balance Sheets as of December 31, 2025 and June 30, 2025	5
		d)	Cash Flows Statements for the Three and Six Months Ended December 31, 2025 and 2024	6
		e)	Stockholders’ Equity Statements for the Three and Six Months Ended December 31, 2025 and 2024	7
		f)	Notes to Financial Statements	8
		g)	Report of Independent Registered Public Accounting Firm	29
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		46
	Item 4.	Controls and Procedures		46
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings		47
	Item 1A.	Risk Factors		47
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		62
	Item 5.	Other Information		63
	Item 6.	Exhibits		64
SIGNATURE				65

PART I

Item 1

PART I. FINANCI****AL INFORMATION

ITEM 1. FINANCI****AL STATEMENTS

INCOME STA****TEMENTS

(In millions, except per share amounts) (Unaudited)		Three Months Ended December 31,								Six Months Ended December 31,
		2025			2024					2025			2024
Revenue:
Product		$	16,451		$	16,219			$	32,373		$	31,491
Service and other			64,822			53,413				126,573			103,726
Total revenue			81,273			69,632				158,946			135,217
Cost of revenue:
Product			3,505			3,856				6,427			7,150
Service and other			22,473			17,943				43,594			34,748
Total cost of revenue			25,978			21,799				50,021			41,898
Gross margin			55,295			47,833				108,925			93,319
Research and development			8,504			7,917				16,650			15,461
Sales and marketing			6,584			6,440				12,301			12,157
General and administrative			1,932			1,823				3,738			3,496
Operating income			38,275			31,653				76,236			62,205
Other income (expense), net			9,971			(2,288	)			6,311			(2,571	)
Income before income taxes			48,246			29,365				82,547			59,634
Provision for income taxes			9,788			5,257				16,342			10,859
Net income		$	38,458		$	24,108			$	66,205		$	48,775
Earnings per share:
Basic		$	5.18		$	3.24			$	8.91		$	6.56
Diluted		$	5.16		$	3.23			$	8.87		$	6.53
Weighted average shares outstanding:
Basic			7,431			7,435				7,432			7,434
Diluted			7,460			7,468				7,463			7,469

Refer to accompanying notes.

PART I

Item 1

COMPREHENSIVE IN****COME STATEMENTS

(In millions) (Unaudited)		Three Months Ended December 31,						Six Months Ended December 31,
		2025			2024				2025			2024
Net income		$	38,458		$	24,108		$	66,205		$	48,775
Other comprehensive income (loss), net of tax:
Net change related to derivatives			**(**3	)		34			**(**6	)		24
Net change related to investments			**(**161	)		(434	)		526			680
Translation adjustments and other			223			(1,034	)		125			(730	)
Other comprehensive income (loss)			59			(1,434	)		645			(26	)
Comprehensive income		$	38,517		$	22,674		$	66,850		$	48,749

Refer to accompanying notes.

PART I

Item 1

BALANCE SHEETS

(In millions) (Unaudited)
		December 31, 2025				June 30, 2025
Assets
Current assets:
Cash and cash equivalents		$	24,296			$	30,242
Short-term investments			65,166				64,323
Total cash, cash equivalents, and short-term investments			89,462				94,565
Accounts receivable, net of allowance for doubtful accounts of **$**729 and $944			56,535				69,905
Inventories			1,059				938
Other current assets			33,134				25,723
Total current assets			180,190				191,131
Property and equipment, net of accumulated depreciation of **$**104,950 and $93,653			261,126				204,966
Operating lease right-of-use assets			25,103				24,823
Equity and other investments			21,202				15,405
Goodwill			119,622				119,509
Intangible assets, net			20,289				22,604
Other long-term assets			37,770				40,565
Total assets		$	665,302			$	619,003
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	37,328			$	27,724
Current portion of long-term debt			4,837				2,999
Accrued compensation			10,103				13,709
Short-term income taxes			2,050				7,211
Short-term unearned revenue			51,376				64,555
Other current liabilities			24,311				25,020
Total current liabilities			130,005				141,218
Long-term debt			35,425				40,152
Long-term income taxes			27,256				25,986
Long-term unearned revenue			2,668				2,710
Deferred income taxes			2,876				2,835
Operating lease liabilities			17,345				17,437
Other long-term liabilities			58,852				45,186
Total liabilities			274,427				275,524
Commitments and contingencies
Stockholders’ equity:
Common stock and paid-in capital – shares authorized 24,000; outstanding 7,429 and 7,434			112,788				109,095
Retained earnings			280,789				237,731
Accumulated other comprehensive loss			**(**2,702	)			(3,347	)
Total stockholders’ equity			390,875				343,479
Total liabilities and stockholders’ equity		$	665,302			$	619,003

Refer to accompanying notes.

PART I

Item 1

CASH FLOWS STATEMENTS

(In millions) (Unaudited)		Three Months Ended December 31,									Six Months Ended December 31,
		2025				2024					2025				2024
Operations
Net income		$	38,458			$	24,108			$	66,205			$	48,775
Adjustments to reconcile net income to net cash from operations:
Depreciation, amortization, and other			9,198				5,667				17,345				12,383
Stock-based compensation expense			3,219				3,089				6,202				5,921
Net recognized losses (gains) on investments and derivatives			**(**9,931	)			2,136				**(**6,024	)			2,678
Deferred income taxes			4,446				(1,158	)			6,937				(2,591	)
Changes in operating assets and liabilities:
Accounts receivable			**(**3,436	)			(5,978	)			13,054				8,059
Inventories			70				711				**(**122	)			338
Other current assets			619				(353	)			**(**543	)			(435	)
Other long-term assets			**(**1,288	)			(1,089	)			**(**1,682	)			(2,850	)
Accounts payable			1,197				958				583				42
Unearned revenue			**(**7,483	)			(6,338	)			**(**12,901	)			(11,891	)
Income taxes			**(**920	)			(3,395	)			**(**3,864	)			(2,379	)
Other current liabilities			2,802				3,217				**(**2,705	)			(2,262	)
Other long-term liabilities			**(**1,193	)			716				**(**1,670	)			683
Net cash from operations			35,758				22,291				80,815				56,471
Financing
Repayments of debt, maturities of 90 days or less			0				0				0				(5,746	)
Repayments of debt			**(**3,000	)			0				**(**3,000	)			(966	)
Common stock issued			259				256				948				962
Common stock repurchased			**(**7,415	)			(4,986	)			**(**13,065	)			(9,093	)
Common stock cash dividends paid			**(**6,762	)			(6,170	)			**(**12,931	)			(11,744	)
Other, net			**(**699	)			(343	)			**(**1,368	)			(1,232	)
Net cash used in financing			**(**17,617	)			(11,243	)			**(**29,416	)			(27,819	)
Investing
Additions to property and equipment			**(**29,876	)			(15,804	)			**(**49,270	)			(30,727	)
Acquisition of companies, net of cash acquired and divestitures, and purchases of intangible and other assets			**(**455	)			(1,405	)			**(**1,033	)			(3,254	)
Purchases of investments			**(**9,845	)			(2,050	)			**(**27,516	)			(3,670	)
Maturities of investments			12,417				2,604				18,448				4,740
Sales of investments			5,691				2,559				8,953				4,527
Other, net			**(**637	)			(16	)			**(**6,846	)			(929	)
Net cash used in investing			**(**22,705	)			(14,112	)			**(**57,264	)			(29,313	)
Effect of foreign exchange rates on cash and cash equivalents			11				(294	)			**(**81	)			(172	)
Net change in cash and cash equivalents			**(**4,553	)			(3,358	)			**(**5,946	)			(833	)
Cash and cash equivalents, beginning of period			28,849				20,840				30,242				18,315
Cash and cash equivalents, end of period		$	24,296			$	17,482			$	24,296			$	17,482

Refer to accompanying notes.

PART I

Item 1

STOCKHOLDERS’ EQ****UITY STATEMENTS

(In millions, except per share amounts) (Unaudited)		Three Months Ended December 31,									Six Months Ended December 31,
		2025				2024					2025				2024
Common stock and paid-in capital
Balance, beginning of period		$	110,964			$	102,976			$	109,095			$	100,923
Common stock issued			259				256				948				962
Common stock repurchased			**(**1,654	)			(1,491	)			**(**3,455	)			(2,976	)
Stock-based compensation expense			3,219				3,089				6,202				5,921
Other, net			0				(1	)			**(**2	)			(1	)
Balance, end of period			112,788				104,829				112,788				104,829
Retained earnings
Balance, beginning of period			254,873				188,929				237,731				173,144
Net income			38,458				24,108				66,205				48,775
Common stock cash dividends			**(**6,757	)			(6,169	)			**(**13,521	)			(12,340	)
Common stock repurchased			**(**5,785	)			(3,386	)			**(**9,626	)			(6,097	)
Balance, end of period			280,789				203,482				280,789				203,482
Accumulated other comprehensive loss
Balance, beginning of period			**(**2,761	)			(4,182	)			**(**3,347	)			(5,590	)
Other comprehensive income (loss)			59				(1,434	)			645				(26	)
Balance, end of period			**(**2,702	)			(5,616	)			**(**2,702	)			(5,616	)
Total stockholders’ equity		$	390,875			$	302,695			$	390,875			$	302,695
Cash dividends declared per common share		$	0.91			$	0.83			$	1.82			$	1.66

Refer to accompanying notes.

PART I

Item 1

NOTES TO FINANCI****AL STATEMENTS

(Unaudited)

NOTE 1 — ACCOUNTING POLICIES

Accounting Principles

Our unaudited interim consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Microsoft Corporation fiscal year 2025 Form 10-K filed with the U.S. Securities and Exchange Commission on July 30, 2025.

We have recast certain prior period amounts on our consolidated cash flows statements to conform to the current period presentation. The recast of these prior period amounts had no impact on our consolidated balance sheets, consolidated income statements, or net cash from (used in) operations, investing, or financing on our consolidated cash flows statements.

Principles of Consolidation

The consolidated financial statements include the accounts of Microsoft Corporation and its subsidiaries. Intercompany transactions and balances have been eliminated.

Estimates and Assumptions

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Examples of estimates and assumptions include: for revenue recognition, determining the nature and timing of satisfaction of performance obligations, and determining the standalone selling price of performance obligations, variable consideration, and other obligations such as product returns and refunds; loss contingencies; the fair value of and/or potential impairment of goodwill and intangible assets for our reporting units; product life cycles; useful lives of our tangible and intangible assets; allowances for doubtful accounts; stock-based compensation forfeiture rates; when technological feasibility is achieved for our products; the potential outcome of uncertain tax positions that have been recognized in our consolidated financial statements or tax returns; and determining the timing and amount of impairments for investments. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties.

Financial Instruments

Investments

We consider all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair values of these investments approximate their carrying values. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

PART I

Item 1

Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in fair value, excluding credit losses and impairments, are recorded in other comprehensive income. Fair value is calculated based on publicly available market information or other estimates determined by management. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost. To determine credit losses, we employ a systematic methodology that considers available quantitative and qualitative evidence. In addition, we consider specific adverse conditions related to the financial health of, and business outlook for, the investee. If we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in other income (expense), net and a new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, we may incur future impairments.

Equity investments with readily determinable fair values are generally measured at fair value. Equity investments that are not recorded at fair value are measured using the equity method of accounting when required or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative). For equity investments recorded at fair value, we perform a qualitative assessment on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value. Changes in fair value are recorded in other income (expense), net. 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.

Investments that are considered variable interest entities (“VIEs”) are evaluated to determine whether we are the primary beneficiary of the VIE, in which case we would be required to consolidate the entity. We evaluate whether we have (1) the power to direct the activities that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. We have determined we are not the primary beneficiary of any of our VIE investments. Therefore, our VIE investments are not consolidated and the majority are accounted for under the equity method of accounting.

We have a long-term strategic partnership with OpenAI. In October 2025, we signed a new definitive agreement with OpenAI that extends this partnership. Additionally, OpenAI formed a public benefit corporation and completed a recapitalization (“OpenAI Recapitalization”). We have an investment of approximately 27 percent of OpenAI on an as-converted basis accounted for under the equity method of accounting. As a result of the OpenAI Recapitalization, we had a decrease in our proportionate ownership of OpenAI and recorded a dilution gain in other income (expense), net. Refer to Note 3 – Other Income (Expense), Net for additional information. 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. We have made total funding commitments of $13 billion, of which $11.7 billion has been funded as of December 31, 2025.

Derivatives

Derivative instruments are recognized as either assets or liabilities and measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

For derivative instruments designated as fair value hedges, gains and losses are recognized in other income (expense), net with offsetting gains and losses on the hedged items. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in other income (expense), net.

For derivative instruments designated as cash flow hedges, gains and losses are initially reported as a component of other comprehensive income and subsequently recognized in other income (expense), net with the corresponding hedged item. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in other income (expense), net.

For derivative instruments that are not designated as hedges, gains and losses from changes in fair values are primarily recognized in other income (expense), net.

PART I

Item 1

Fair Value Measurements

We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 – inputs are based upon unadjusted quoted prices for identical instruments in active markets. Our Level 1 investments include U.S. government securities, common and preferred stock, and mutual funds. Our Level 1 derivative assets and liabilities include those actively traded on exchanges.

Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit spreads, foreign exchange rates, and forward and spot prices for currencies. Our Level 2 investments include commercial paper, certificates of deposit, U.S. agency securities, foreign government bonds, mortgage- and asset-backed securities, corporate notes and bonds, and municipal securities. Our Level 2 derivative assets and liabilities include certain cleared swap contracts and over-the-counter forward, option, and swap contracts.

Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. Our Level 3 assets and liabilities include investments in corporate notes and bonds, municipal securities, and goodwill and intangible assets, when they are recorded at fair value due to an impairment charge. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.

We measure equity investments without readily determinable fair values on a nonrecurring basis. The fair values of these investments are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections.

Our other current financial assets and current financial liabilities have fair values that approximate their carrying values.

Contract Balances and Other Receivables

As of December 31, 2025 and June 30, 2025, long-term accounts receivable, net of allowance for doubtful accounts, was $5.3 billion and $5.2 billion, respectively, and is included in other long-term assets in our consolidated balance sheets.

As of December 31, 2025 and June 30, 2025, other receivables related to activities to facilitate the purchase of server components were $15.1 billion and $8.2 billion, respectively, and are included in other current assets in our consolidated balance sheets.

We record financing receivables when we offer certain customers the option to acquire our software products and services offerings through a financing program in a limited number of countries. As of December 31, 2025 and June 30, 2025, our financing receivables, net were $2.7 billion and $4.3 billion, respectively, for short-term and long-term financing receivables, which are included in other current assets and other long-term assets in our consolidated balance sheets.

We record an allowance for doubtful accounts which reflects our best estimate of credit losses inherent in the accounts receivable and financing receivable balances. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence.

PART I

Item 1

Recent Accounting Guidance

Income Taxes – Improvements to Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (“FASB”) issued a new standard to improve income tax disclosures. The guidance requires additional disclosure of disaggregated income taxes paid and prescribes standardized categories for the components of the effective tax rate reconciliation. We will adopt the standard on the effective date in our annual reporting for fiscal year 2026. The standard can be applied either prospectively or retrospectively.

Income Statement – Disaggregation of Income Statement Expenses

In November 2024, the FASB issued a new standard to expand disclosures about income statement expenses. The guidance requires disaggregation of certain costs and expenses included in each relevant expense caption on our consolidated income statements in a separate note to the financial statements at each interim and annual reporting period, including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The standard will be effective for us beginning with our annual reporting for fiscal year 2028 and interim periods thereafter, with early adoption permitted. We are currently evaluating the impact of this standard on our disclosures.

NOTE 2 — EARNINGS PER SHARE

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

The components of basic and diluted EPS were as follows:

(In millions, except per share amounts)		Three Months Ended December 31,									Six Months Ended December 31,
		2025				2024					2025				2024
Net income available for common shareholders (A)		$	38,458			$	24,108			$	66,205			$	48,775
Weighted average outstanding shares of common stock (B)			7,431				7,435				7,432				7,434
Dilutive effect of stock-based awards			29				33				31				35
Common stock and common stock equivalents (C)			7,460				7,468				7,463				7,469
Earnings Per Share
Basic (A/B)		$	5.18			$	3.24			$	8.91			$	6.56
Diluted (A/C)		$	5.16			$	3.23			$	8.87			$	6.53

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

PART I

Item 1

NOTE 3 — OTHER INCOME (EXPENSE), NET

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

(In millions)		Three Months Ended December 31,									Six Months Ended December 31,
		2025				2024					2025				2024
Interest and dividends income		$	840			$	600			$	1,816			$	1,281
Interest expense			**(**736	)			(594	)			**(**1,434	)			(1,176	)
Net recognized gains (losses) on investments			339				(860	)			**(**233	)			(397	)
Net gains (losses) on derivatives			37				(116	)			1,616				(454	)
Net gains (losses) on foreign currency remeasurements			**(**50	)			(153	)			**(**72	)			23
Other, net			9,541				(1,165	)			4,618				(1,848	)
Total		$	9,971			$	(2,288	)		$	6,311			$	(2,571	)

Other income (expense), net included $10.0 billion and $5.9 billion of net gains for the three and six months ended December 31, 2025, respectively, and $1.2 billion and $1.9 billion of net losses for the three and six months ended December 31, 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 the three and six months ended December 31, 2025 primarily relate to the dilution gain from the OpenAI Recapitalization.

Net Recognized Gains (Losses) on Investments

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

(In millions)		Three Months Ended December 31,									Six Months Ended December 31,
		2025				2024					2025				2024
Realized gains from sales of available-for-sale securities		$	19			$	9			$	35			$	17
Realized losses from sales of available-for-sale securities			**(**9	)			(19	)			**(**19	)			(34	)
Impairments and allowance for credit losses			**(**21	)			(14	)			**(**17	)			(2	)
Total		$	**(**11	)		$	(24	)		$	**(**1	)		$	(19	)

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

(In millions)		Three Months Ended December 31,									Six Months Ended December 31,
		2025				2024					2025				2024
Net realized gains (losses) on investments sold		$	3			$	(8	)		$	74			$	57
Net unrealized gains (losses) on investments still held			385				25				**(**250	)			437
Impairments of investments			**(**38	)			(853	)			**(**56	)			(872	)
Total		$	350			$	(836	)		$	**(**232	)		$	(378	)

PART I

Item 1

NOTE 4 — INVESTMENTS

Investment Components

The components of investments were as follows:

(In millions)		Fair Value Level		Adjusted Cost Basis			Unrealized Gains			Unrealized Losses				Recorded Basis				Cash and Cash Equivalents			Short-term Investments				Equity and Other Investments
December 31, 2025
Changes in Fair Value Recorded in Other Comprehensive Income
Commercial paper		Level 2		$	8,367		$	0		$	0			$	8,367			$	7,622		$	745			$	0
Certificates of deposit		Level 2			3,506			0			0				3,506				3,062			444				0
U.S. government securities		Level 1			48,194			147			**(**1,046	)			47,295				2,045			45,250				0
U.S. agency securities		Level 2			2,444			0			0				2,444				0			2,444				0
Foreign government bonds		Level 2			402			18			**(**6	)			414				0			414				0
Mortgage- and asset-backed securities		Level 2			3,227			19			**(**21	)			3,225				0			3,225				0
Corporate notes and bonds		Level 2			12,162			176			**(**55	)			12,283				0			12,283				0
Corporate notes and bonds		Level 3			1,597			120			0				1,717				0			97				1,620
Municipal securities		Level 2			170			1			**(**6	)			165				0			165				0
Municipal securities		Level 3			105			0			**(**12	)			93				0			93				0
Total debt investments				$	80,174		$	481		$	**(**1,146	)		$	79,509			$	12,729		$	65,160			$	1,620
Changes in Fair Value Recorded in Net Income
Equity investments		Level 1												$	4,366			$	1,346		$	0			$	3,020
Equity investments		Other													16,562				0			0				16,562
Total equity investments														$	20,928			$	1,346		$	0			$	19,582
Cash														$	10,221			$	10,221		$	0			$	0
Derivatives, net (a)															6				0			6				0
Total														$	110,664			$	24,296		$	65,166			$	21,202

PART I

Item 1

(In millions)		Fair Value Level		Adjusted Cost Basis			Unrealized Gains			Unrealized Losses				Recorded Basis			Cash and Cash Equivalents			Short-term Investments			Equity and Other Investments
June 30, 2025
Changes in Fair Value Recorded in Other Comprehensive Income
Commercial paper		Level 2		$	10,880		$	0		$	0			$	10,880		$	9,939		$	941		$	0
Certificates of deposit		Level 2			2,653			0			0				2,653			2,309			344			0
U.S. government securities		Level 1			52,878			71			(1,462	)			51,487			4,742			46,745			0
U.S. agency securities		Level 2			2,686			0			0				2,686			496			2,190			0
Foreign government bonds		Level 2			349			24			(9	)			364			0			364			0
Mortgage- and asset-backed securities		Level 2			2,558			10			(27	)			2,541			0			2,541			0
Corporate notes and bonds		Level 2			10,763			124			(101	)			10,786			0			10,786			0
Corporate notes and bonds		Level 3			2,511			65			(5	)			2,571			0			111			2,460
Municipal securities		Level 2			207			1			(7	)			201			0			201			0
Municipal securities		Level 3			104			0			(14	)			90			0			90			0
Total debt investments				$	85,589		$	295		$	(1,625	)		$	84,259		$	17,486		$	64,313		$	2,460
Changes in Fair Value Recorded in Net Income
Equity investments		Level 1												$	4,577		$	1,045		$	0		$	3,532
Equity investments		Other													9,141			0			0			9,141
Total equity investments														$	13,718		$	1,045		$	0		$	12,673
Cash														$	11,711		$	11,711		$	0		$	0
Derivatives, net (a)															282			0			10			272
Total														$	109,970		$	30,242		$	64,323		$	15,405

(a)

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

Equity investments presented as “Other” in the tables above include investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments, measured using the equity method, or measured at fair value using net asset value as a practical expedient which are not categorized in the fair value hierarchy. As of December 31, 2025 and June 30, 2025, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $5.0 billion and $2.9 billion, respectively, and equity investments measured using the equity method were $11.5 billion and $6.0 billion, respectively.

PART I