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 March 31, 2026
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 April 23, 2026
Common Stock, $0.00000625 par value per share		7,428,434,704 shares

MICROSOFT CORPORATION

FORM 10-Q

For the Quarter Ended March 31, 2026

INDEX

				Page
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		a)	Income Statements for the Three and Nine Months Ended March 31, 2026 and 2025	3
		b)	Comprehensive Income Statements for the Three and Nine Months Ended March 31, 2026 and 2025	4
		c)	Balance Sheets as of March 31, 2026 and June 30, 2025	5
		d)	Cash Flows Statements for the Three and Nine Months Ended March 31, 2026 and 2025	6
		e)	Stockholders’ Equity Statements for the Three and Nine Months Ended March 31, 2026 and 2025	7
		f)	Notes to Financial Statements	8
		g)	Report of Independent Registered Public Accounting Firm	30
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		48
	Item 4.	Controls and Procedures		48
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings		49
	Item 1A.	Risk Factors		49
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		65
	Item 5.	Other Information		66
	Item 6.	Exhibits		67
SIGNATURE				68

PART I

Item 1

PART I. FINANCI****AL INFORMATION

ITEM 1. FINA****NCIAL STATEMENTS

INCOME STA****TEMENTS

(In millions, except per share amounts) (Unaudited)		Three Months Ended March 31,									Nine Months Ended March 31,
		2026				2025					2026				2025
Revenue:
Product		$	15,089			$	15,319			$	47,462			$	46,810
Service and other			67,797				54,747				194,370				158,473
Total revenue			82,886				70,066				241,832				205,283
Cost of revenue:
Product			2,733				3,037				9,160				10,187
Service and other			24,095				18,882				67,689				53,630
Total cost of revenue			26,828				21,919				76,849				63,817
Gross margin			56,058				48,147				164,983				141,466
Research and development			8,915				8,198				25,565				23,659
Sales and marketing			6,814				6,212				19,115				18,369
General and administrative			1,931				1,737				5,669				5,233
Operating income			38,398				32,000				114,634				94,205
Other income (expense), net			942				(623	)			7,253				(3,194	)
Income before income taxes			39,340				31,377				121,887				91,011
Provision for income taxes			7,562				5,553				23,904				16,412
Net income		$	31,778			$	25,824			$	97,983			$	74,599
Earnings per share:
Basic		$	4.28			$	3.47			$	13.19			$	10.03
Diluted		$	4.27			$	3.46			$	13.14			$	9.99
Weighted average shares outstanding:
Basic			7,426				7,434				7,430				7,434
Diluted			7,445				7,461				7,457				7,466

Refer to accompanying notes.

PART I

Item 1

COMPREHENSIVE IN****COME STATEMENTS

(In millions) (Unaudited)		Three Months Ended March 31,								Nine Months Ended March 31,
		2026				2025					2026				2025
Net income		$	31,778			$	25,824			$	97,983			$	74,599
Other comprehensive income (loss), net of tax:
Net change related to derivatives			0				(20	)			**(**6	)			4
Net change related to investments			**(**239	)			450				287				1,130
Translation adjustments and other			**(**287	)			353				**(**162	)			(377	)
Other comprehensive income (loss)			**(**526	)			783				119				757
Comprehensive income		$	31,252			$	26,607			$	98,102			$	75,356

Refer to accompanying notes.

PART I

Item 1

BALANCE SHEETS

(In millions) (Unaudited)
		March 31, 2026				June 30, 2025
Assets
Current assets:
Cash and cash equivalents		$	32,105			$	30,242
Short-term investments			46,167				64,323
Total cash, cash equivalents, and short-term investments			78,272				94,565
Accounts receivable, net of allowance for doubtful accounts of **$**794 and $944			60,041				69,905
Inventories			1,219				938
Other current assets			35,797				25,723
Total current assets			175,329				191,131
Property and equipment, net of accumulated depreciation of **$**111,723 and $93,653			283,228				204,966
Operating lease right-of-use assets			24,403				24,823
Equity and other investments			33,683				15,405
Goodwill			119,661				119,509
Intangible assets, net			19,325				22,604
Other long-term assets			38,599				40,565
Total assets		$	694,228			$	619,003
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	37,513			$	27,724
Current portion of long-term debt			8,839				2,999
Accrued compensation			11,270				13,709
Short-term income taxes			3,563				7,211
Short-term unearned revenue			50,924				64,555
Other current liabilities			24,552				25,020
Total current liabilities			136,661				141,218
Long-term debt			31,423				40,152
Long-term income taxes			27,941				25,986
Long-term unearned revenue			2,753				2,710
Deferred income taxes			2,899				2,835
Operating lease liabilities			16,703				17,437
Other long-term liabilities			61,481				45,186
Total liabilities			279,861				275,524
Commitments and contingencies
Stockholders’ equity:
Common stock and paid-in capital – shares authorized 24,000; outstanding 7,429 and 7,434			115,069				109,095
Retained earnings			302,526				237,731
Accumulated other comprehensive loss			**(**3,228	)			(3,347	)
Total stockholders’ equity			414,367				343,479
Total liabilities and stockholders’ equity		$	694,228			$	619,003

Refer to accompanying notes.

PART I

Item 1

CASH FLOWS STATEMENTS

(In millions) (Unaudited)		Three Months Ended March 31,									Nine Months Ended March 31,
		2026				2025					2026				2025
Operations
Net income		$	31,778			$	25,824			$	97,983			$	74,599
Adjustments to reconcile net income to net cash from operations:
Depreciation, amortization, and other			10,167				7,734				27,512				20,116
Stock-based compensation expense			3,081				2,980				9,283				8,901
Net recognized losses (gains) on investments and derivatives			**(**1,280	)			708				**(**7,304	)			3,387
Deferred income taxes			2,602				(2,244	)			9,539				(4,835	)
Changes in operating assets and liabilities:
Accounts receivable			**(**4,707	)			(2,461	)			8,347				5,598
Inventories			**(**161	)			52				**(**283	)			390
Other current assets			758				1,076				215				642
Other long-term assets			**(**932	)			(518	)			**(**2,614	)			(3,368	)
Accounts payable			2,320				1,179				2,903				1,221
Unearned revenue			**(**166	)			(1,032	)			**(**13,067	)			(12,923	)
Income taxes			2,296				1,298				**(**1,568	)			(1,081	)
Other current liabilities			2,539				2,839				**(**166	)			576
Other long-term liabilities			**(**1,616	)			(391	)			**(**3,286	)			292
Net cash from operations			46,679				37,044				127,494				93,515
Financing
Repayments of debt, maturities of 90 days or less			0				0				0				(5,746	)
Repayments of debt			0				(2,250	)			**(**3,000	)			(3,216	)
Common stock issued			541				546				1,489				1,508
Common stock repurchased			**(**4,627	)			(4,781	)			**(**17,692	)			(13,874	)
Common stock cash dividends paid			**(**6,756	)			(6,169	)			**(**19,687	)			(17,913	)
Other, net			**(**509	)			(382	)			**(**1,877	)			(1,614	)
Net cash used in financing			**(**11,351	)			(13,036	)			**(**40,767	)			(40,855	)
Investing
Additions to property and equipment			**(**30,876	)			(16,745	)			**(**80,146	)			(47,472	)
Acquisition of companies, net of cash acquired and divestitures, and purchases of intangible and other assets			**(**258	)			(981	)			**(**1,291	)			(4,235	)
Purchases of investments			**(**12,006	)			(4,474	)			**(**39,522	)			(8,144	)
Maturities of investments			11,976				6,721				30,424				11,461
Sales of investments			6,358				2,161				15,311				6,688
Other, net			**(**2,599	)			604				**(**9,445	)			(325	)
Net cash used in investing			**(**27,405	)			(12,714	)			**(**84,669	)			(42,027	)
Effect of foreign exchange rates on cash and cash equivalents			**(**114	)			52				**(**195	)			(120	)
Net change in cash and cash equivalents			7,809				11,346				1,863				10,513
Cash and cash equivalents, beginning of period			24,296				17,482				30,242				18,315
Cash and cash equivalents, end of period		$	32,105			$	28,828			$	32,105			$	28,828

Refer to accompanying notes.

PART I

Item 1

STOCKHOLDERS’ EQ****UITY STATEMENTS

(In millions, except per share amounts) (Unaudited)		Three Months Ended March 31,									Nine Months Ended March 31,
		2026				2025					2026				2025
Common stock and paid-in capital
Balance, beginning of period		$	112,788			$	104,829			$	109,095			$	100,923
Common stock issued			541				546				1,489				1,508
Common stock repurchased			**(**1,341	)			(1,390	)			**(**4,796	)			(4,366	)
Stock-based compensation expense			3,081				2,980				9,283				8,901
Other, net			0				0				**(**2	)			(1	)
Balance, end of period			115,069				106,965				115,069				106,965
Retained earnings
Balance, beginning of period			280,789				203,482				237,731				173,144
Net income			31,778				25,824				97,983				74,599
Common stock cash dividends			**(**6,756	)			(6,168	)			**(**20,277	)			(18,508	)
Common stock repurchased			**(**3,285	)			(3,379	)			**(**12,911	)			(9,476	)
Balance, end of period			302,526				219,759				302,526				219,759
Accumulated other comprehensive loss
Balance, beginning of period			**(**2,702	)			(5,616	)			**(**3,347	)			(5,590	)
Other comprehensive income (loss)			**(**526	)			783				119				757
Balance, end of period			**(**3,228	)			(4,833	)			**(**3,228	)			(4,833	)
Total stockholders’ equity		$	414,367			$	321,891			$	414,367			$	321,891
Cash dividends declared per common share		$	0.91			$	0.83			$	2.73			$	2.49

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 $11.8 billion has been funded as of March 31, 2026.

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 March 31, 2026 and June 30, 2025, long-term accounts receivable, net of allowance for doubtful accounts, was $5.1 billion and $5.2 billion, respectively, and is included in other long-term assets in our consolidated balance sheets.

As of March 31, 2026 and June 30, 2025, other receivables related to activities to facilitate the purchase of server components were $17.8 billion and $8.2 billion, respectively, and are included in other current assets in our consolidated balance sheets. Additionally, as of March 31, 2026, restricted investments pursuant to a supplier agreement were $11.5 billion, with $2.8 billion included in short-term investments and $8.7 billion included in equity and other investments in our consolidated balance sheet.

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 March 31, 2026 and June 30, 2025, our financing receivables, net were $2.6 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 prospectively on the effective date in our annual reporting for fiscal year 2026.

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 March 31,									Nine Months Ended March 31,
		2026				2025					2026				2025
Net income available for common shareholders (A)		$	31,778			$	25,824			$	97,983			$	74,599
Weighted average outstanding shares of common stock (B)			7,426				7,434				7,430				7,434
Dilutive effect of stock-based awards			19				27				27				32
Common stock and common stock equivalents (C)			7,445				7,461				7,457				7,466
Earnings Per Share
Basic (A/B)		$	4.28			$	3.47			$	13.19			$	10.03
Diluted (A/C)		$	4.27			$	3.46			$	13.14			$	9.99

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

NOTE 3 — OTHER INCOME (EXPENSE), NET

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

(In millions)		Three Months Ended March 31,									Nine Months Ended March 31,
		2026				2025					2026				2025
Interest and dividends income		$	730			$	597			$	2,546			$	1,878
Interest expense			**(**778	)			(594	)			**(**2,212	)			(1,770	)
Net recognized gains (losses) on investments			1,652				111				1,419				(286	)
Net gains (losses) on derivatives			124				187				1,740				(267	)
Net gains (losses) on foreign currency remeasurements			**(**295	)			89				**(**367	)			112
Other, net			**(**491	)			(1,013	)			4,127				(2,861	)
Total		$	942			$	(623	)		$	7,253			$	(3,194	)

PART I

Item 1

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

Net Recognized Gains (Losses) on Investments

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

(In millions)		Three Months Ended March 31,									Nine Months Ended March 31,
		2026				2025					2026				2025
Realized gains from sales of available-for-sale securities		$	54			$	8			$	89			$	25
Realized losses from sales of available-for-sale securities			**(**18	)			(17	)			**(**37	)			(51	)
Impairments and allowance for credit losses			**(**6	)			3				**(**23	)			1
Total		$	30			$	(6	)		$	29			$	(25	)

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

(In millions)		Three Months Ended March 31,									Nine Months Ended March 31,
		2026				2025					2026				2025
Net realized gains on investments sold		$	32			$	9			$	106			$	66
Net unrealized gains on investments still held			1,621				135				1,371				572
Impairments of investments			**(**31	)			(27	)			**(**87	)			(899	)
Total		$	1,622			$	117			$	1,390			$	(261	)

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
March 31, 2026
Changes in Fair Value Recorded in Other Comprehensive Income
Commercial paper		Level 2			$	5,544			$	0			$	0			$	5,544			$	5,543			$	1			$	0
Certificates of deposit		Level 2				1,394				0				0				1,394				1,350				44				0
U.S. government securities		Level 1				50,821				25				**(**1,078	)			49,768				8,923				32,119				8,726
U.S. agency securities		Level 2				3,215				0				0				3,215				2,465				750				0
Foreign government bonds		Level 2				225				13				**(**5	)			233				0				233				0
Mortgage- and asset-backed securities		Level 2				2,010				6				**(**23	)			1,993				0				1,993				0
Corporate notes and bonds		Level 2				10,652				66				**(**73	)			10,645				0				10,645				0
Corporate notes and bonds		Level 3				1,601				120				0				1,721				0				101				1,620
Municipal securities		Level 2				152				1				**(**6	)			147				0				147				0
Municipal securities		Level 3				104				0				**(**14	)			90				0				90				0
Total debt investments					$	75,718			$	231			$	**(**1,199	)		$	74,750			$	18,281			$	46,123			$	10,346
Changes in Fair Value Recorded in Net Income
Equity investments		Level 1															$	3,911			$	1,093			$	0			$	2,818
Equity investments		Other																20,519				0				0				20,519
Total equity investments																	$	24,430			$	1,093			$	0			$	23,337
Cash																	$	12,731			$	12,731			$	0			$	0
Derivatives, net (a)																		44				0				44				0
Total																	$	111,955			$	32,105			$	46,167			$	33,683

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 March 31, 2026 and June 30, 2025, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $9.3 billion and $2.9 billion, respectively, and equity investments measured using the equity method were $11.1 billion and $6.0 billion, respectively.

PART I