Microsoft Reports 23% Non-GAAP EPS Growth in Q1 FY2026, Driven by Cloud and AI

Redmond, WA – Microsoft Corporation announced strong financial results for its first fiscal quarter of 2026, ending September 30, 2025, with non-GAAP diluted earnings per share (EPS) reaching $4.13, a 23% increase year-over-year. The company also reported total revenue of $77.7 billion, surpassing analyst expectations and marking an 18% rise from the previous year.

The robust performance was largely attributed to the continued strength of Microsoft Cloud and significant advancements in artificial intelligence. "Our planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact," stated Satya Nadella, chairman and chief executive officer of Microsoft. He added that the company continues to increase investments in AI to meet the "massive opportunity ahead."

Microsoft Cloud revenue grew by 26% (25% in constant currency) to $49.1 billion, with Azure and other cloud services revenue seeing a 40% increase (39% in constant currency). This growth highlights the increasing customer demand for Microsoft's cloud infrastructure and AI offerings. Amy Hood, executive vice president and chief financial officer, noted, "We delivered a strong start to the fiscal year, exceeding expectations across revenue, operating income, and earnings per share."

The company's investment in OpenAI, however, impacted GAAP net income by $3.1 billion, equivalent to a $0.41 decrease in diluted EPS. Despite this, non-GAAP net income still saw a 22% increase. Microsoft also reported capital expenditures of $34.9 billion for the quarter, reflecting substantial investments in AI infrastructure to support growing demand.

Microsoft's Productivity and Business Processes segment generated $33.0 billion in revenue, up 17%, while the Intelligent Cloud segment reached $30.9 billion, increasing 28%. The More Personal Computing segment, which includes Windows and devices, grew 4% to $13.8 billion. The company anticipates continued strong performance, with Q2 revenue projected to be between $79.5 billion and $80.6 billion.