This ranking evaluates how Fortune 500 companies are deploying AI, and how technology leaders value those investments relative to industry peers.

Fortune AIQ 75

The companies on the Global 500 employ 70.2 million people, and their revenue represents more than one-third of the world’s GDP.

Fortune Global 500

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

The 300 companies on this year’s list brought in over $12.5 trillion in revenue for the latest 12 months, with the median revenue figure at $24 billion.

America's Most Innovative Companies

AI is a major force shaping this year’s list—but it’s far from the only story.

World's Most Admired Companies

Fortune AIQ 50

The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

Leaders in all industries rely more than ever on Big Tech—and appreciate the giants that deliver, at scale, without drama.

These 50 companies exemplify the innovation, progress, and potential of AI.

AI Innovators 2025-Microsoft

Fortune 50 AI Innovators

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are computers, internet services, IT services, semiconductors, and software companies.

Fortune Sector Leaders: Technology

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 200 companies on this list are transforming industries from the inside out.

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

WMA 2024-Microsoft

The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

WMAC 2023-Microsoft

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-Microsoft

The software, cloud services, and gaming giant has become a trailblazer in artificial intelligence. Meanwhile, its productivity apps and services and other products continue to generate huge profits; Microsoft earned $72.7 billion in 2022, second only to Apple among U.S. Fortune 500 companies. 
<ul> 
 	<li>In January 2023, Microsoft announced that it was making a new $10 billion investment in its longtime partner OpenAI, the creator of ChatGPT. Early products emerging from that partnership include an A.I. assistant to Microsoft 365 apps and services, known as Copilot, and its Bing GPT-4 chatbot.</li> 
 	<li>Even as it announced A.I. advances, Microsoft drew criticism for laying off a team that worked on ensuring ethical outcomes for the technology. Microsoft let the team go as part of a 10,000-employee culling in March 2023. Microsoft said at the time that it was just one of the company’s ethics teams, and that its product teams all had staffers now who “are accountable for ensuring we put our A.I. principles into practice.”</li> 
 	<li>In April 2023, the U.K.’s Competition and Markets Authority blocked Microsoft’s $69 billion acquisition of video-game maker Activision Blizzard, a deal first announced in January 2022. Microsoft has appealed the ruling. The company took a step closer to the merger in July 2023 when a U.S. court ruled against the Federal Trade Commission's efforts to block the deal.</li> 
</ul>

The essential guide to a sector that’s now attracting one out of every four startup investment dollars.

AI-Innovators-2023-Microsoft

While OpenAI deserves the credit for having created ChatGPT, it wouldn't have happened without billions of dollars in investment from Microsoft. The tech giant has committed a reported $13 billion to OpenAI so far and it has built one of the world's largest supercomputing clusters to help OpenAI train its ever-larger, more capable AI models. Microsoft’s Bing Chat, a chatbot and search engine, was built with models from OpenAI, and since its debut, users engaged in over a billion chats with the bot and generated more than a billion images with Bing Image Creator, which uses AI to turn user prompts into images. What Bing hasn't done, however, is move the needle on Microsoft's searh business: Bing remains stuck at about 3% of the global search market, compared to Google's 91%. But for Microsoft, the more important wins from generative AI have been in its Cloud business. Here, Microsoft's ability to offer OpenAI's technology to its Azure cloud customers has helped the tech giant turns in sales and profit growth that has beaten Wall Street expectations, with generative AI accounting for about 3% of the growth in Cloud revenues in the quarter ended in September. Microsoft has also been implementing AI across its core business producitivity software products, from PowerPoint to Outlook, as well as adding products like GitHub Copilot, an AI-powered coding assistant.

The 300 companies on this list are transforming industries from the inside out.

Fortune collaborated with the Diligent Institute to rank the most innovative boards of directors among S&P 500.

Modern Board 2023-Microsoft

After reaching the top spot on last year’s Modern Board 25 ranking, Microsoft has taken a steep tumble but still makes an appearance given its commitment to ESG and board expertise. Its movement on the former includes a push to be carbon negative by 2030, remove historical emissions, and build a “planetary computer” to measure, monitor, and model environmental data. The 12-member board, almost all of whom are independent, includes CEO Satya Nadella, who has been with Microsoft since the early ’90s and previously served as executive vice president of Microsoft’s cloud and enterprise group. Other CEO directors include Wells Fargo’s Charles Scharf, Padmasree Warrior of social reading platform Fable Group, and Emma Walmsley of biopharmaceutical company GSK. In April, The U.K.’s antitrust watchdog vetoed Microsoft’s $69 billion bid to acquire gaming company Activision Blizzard. The company plans to appeal, but a remedy will take time.

Fortune Modern Board 25

The companies on this list are mobilizing the creative tools of capitalism to help solve social problems.

CTW 2023-Microsoft

Only 11% of Indians speak English, the language of the country’s government, while only 57% speak Hindi. That leaves hundreds of millions who speak neither of those languages without good access to information about government services. Microsoft is deploying AI to help: In May, it partnered with local research lab AI4Bharat to create Jugalbandi, a chatbot that combines text-to-speech, translation, and generative AI to give rural Indians access to public services, like university scholarship applications or financial assistance programs, in their own language. The service, which people communicate with through WhatsApp, uses GPT models housed on Microsoft’s Azure OpenAI Service to process questions and uncover information. Jugalbandi is just one way Microsoft hopes to use AI to tackle India’s social issues—and what works in India, with all its complexity, could work globally as well.

Change the World

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500 2023-Microsoft

The software, cloud services, and gaming giant has become a trailblazer in artificial intelligence. Meanwhile, its productivity apps and services and other products continue to generate huge profits; Microsoft earned $72.7 billion in 2022, second only to Apple on the Fortune 500. 
<ul> 
 	<li>In January 2023, Microsoft announced that it was making a new $10 billion investment in its longtime partner OpenAI, the creator of ChatGPT. Early products emerging from that partnership include an A.I. assistant to Microsoft 365 apps and services, known as Copilot, and its Bing GPT-4 chatbot.</li> 
 	<li>Even as it announced A.I. advances, Microsoft drew criticism for laying off a team that worked on ensuring ethical outcomes for the technology. Microsoft let the team go as part of a 10,000-employee culling in March 2023. Microsoft said at the time that it was just one of the company’s ethics teams, and that its product teams all had staffers now who “are accountable for ensuring we put our A.I. principles into practice.”</li> 
 	<li>In April 2023, the U.K.’s Competition and Markets Authority blocked Microsoft’s $69 billion acquisition of video-game maker Activision Blizzard, a deal first announced in January 2022. Microsoft has appealed the ruling.</li> 
</ul>

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

WMAC-2022-03-Microsoft

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

G500 2022-33-Microsoft

Microsoft posted a robust 38% increase in profits last year—earning $61 billion as revenue rose 17.5% to $168 billion. But it wasn’t all smooth sailing. The company’s hardware teams coped with a global chip crisis that led to a shortage of Xbox game consoles, but reveled in successes with the release of new Surface laptops and tablet devices. Its software divisions took some lumps, including a disappointing release of Windows 11 (fewer than 1% of 10 million PCs surveyed by IT firm Lansweeper upgraded to the new system) and an early 2021 cybersecurity attack involving Microsoft’s Exchange email software that affected tens of thousands of customers. On the geopolitical front, Microsoft pulled its LinkedIn social platform from China in October 2021 after facing increased content restrictions from the government. In March 2021, the company unveiled its virtual reality platform Microsoft Mesh; it later won a $22 billion contract to supply U.S. Army combat troops with augmented reality headsets. Microsoft took its place in the stock market record books in June 2021, when it became only the second company in U.S. history, after Apple, to reach a $2 trillion market valuation.

Modern Boards 2022 Microsoft

Microsoft has been one of the top-performing companies in tech (or in any sector) for several years running. It also earns the top spot on our inaugural Modern Board 25, thanks to high marks in gender equality, board independence, board expertise, and ESG. <a href="https://news.microsoft.com/leadership/?section=board-members">Eight of its 12 board members</a> and three out of four committee chairs represent gender or ethnic diversity, which studies have shown correlates with stronger company performance and a greater ability to handle emerging business challenges.  
 
Microsoft’s lead independent director is John W. Thompson, former CEO of Virtual Instruments and Symantec, and one of the most prominent Black executives in tech. After joining the board in 2012, Thompson succeeded Microsoft founder Bill Gates as chairman in 2014 and held that role until 2021. Gates left Microsoft’s board in March 2020.  
 
Reid Hoffman, angel investor and cofounder of LinkedIn, joined the board in 2017 after Microsoft bought his company for $26 billion in 2016. Microsoft’s board also boasts former U.S. secretary of commerce Penny Pritzker, and the former worldwide chairman for Johnson &amp; Johnson, Sandra Peterson. The current CEOs of GlaxoSmithKline, ADP, and Wells Fargo are also directors. Padmasree Warrior, former CTO of Cisco, and two CFOs round out the group, along with CEO Satya Nadella, who was named chairman in 2021. 
 
Some governance experts consider having the CEO serve as board chairman to be suboptimal, but as Thompson explained in a <a href="https://www.cnbc.com/2021/07/07/microsoft-lead-director-ceo-satya-nadella-earned-right-to-be-chair.html">recent interview</a>, Nadella has earned the role of chairman because of the company’s exceptional performance under his watch; since Nadella became CEO in 2014, the company has seen major growth in cloud services and video gaming while remaining dominant in productivity software. Microsoft is one of only a handful of U.S. companies to have exceeded a $1 trillion market capitalization; after briefly dipping below $150 at the beginning of the COVID-19 outbreak in North America, its share price has been over $300 for most of 2022.   
 
Microsoft made headlines in early 2022 with its proposed acquisition of Activision Blizzard, a gaming company embroiled in numerous scandals involving its allegedly toxic work environment. Microsoft’s board and C-suite leaders will face a major challenge as they seek to reshape the acquired company’s culture.

This year’s Fortune 500 marks the 68th running of the list.

F500 2022 Microsoft

Microsoft posted a robust 38% increase in profits last year—earning $61 billion, the fourth-largest sum among Fortune 500 companies—as revenue rose 17.5% to $168 billion. But it wasn’t all smooth sailing. The company’s hardware teams coped with a global chip crisis that led to a shortage of Xbox game consoles, but reveled in successes with the release of new Surface laptops and tablet devices. Its software divisions took some lumps, including a disappointing release of Windows 11 (fewer than 1% of 10 million PCs surveyed by IT firm Lansweeper upgraded to the new system) and an early 2021 cybersecurity attack involving Microsoft’s Exchange email software that affected tens of thousands of customers. On the geopolitical front, Microsoft pulled its LinkedIn social platform from China in October 2021 after facing increased content restrictions from the government. In March 2021, the company unveiled its virtual reality platform Microsoft Mesh; it later won a $22 billion contract to supply U.S. Army combat troops with augmented reality headsets. Microsoft took its place in the stock-market record books in June 2021, when it became only the second company in U.S. history, after Apple, to reach a $2 trillion market valuation.

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

WMAC-2021-03-Microsoft

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500-2021-033-Microsoft

While many Big Tech companies faced withering criticism last year for their behavior, Microsoft largely escaped scrutiny. That may be because CEO Satya Nadella has built a collection of complementary parts that perform exceptionally without being the dominant player in any new market. Microsoft’s Azure cloud service, part of the cloud business that increased revenue 34% in the calendar fourth quarter of 2020, trails Amazon. And even as it lags Sony in gaming, Microsoft’s gaming unit saw revenue jump 51% in the holiday quarter with the release of the new Xbox Series X and S. Microsoft still leads its category with the old Windows PC software business, but its PC hardware sales rank outside the top five, and in mobile phones Microsoft is just another app developer. All of this meant that Microsoft was left out of the U.S. House antitrust subcommittee's 450-page report that targeted Apple, Amazon, Facebook, and Google. Sure, there was a complaint in Europe by Slack, alleging that Microsoft had unfairly helped its Teams app. But no one’s seeking to break up the tech giant or undo its acquisitions—at least not for the moment.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-15-Microsoft

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-047-Microsoft

Microsoft jumps 13 spots on this year's Global 500. In the company's fiscal 2019, overall sales soared 14% year-over-year, to $125.8 billion, and the Redmond, Wash., giant churned out $39 billion in profits to boot. Last fall, Microsoft won a coveted cloud-computing contract with the Pentagon worth up to $10 billion, a deal that would help solidify the company's reputation as a leading cloud vendor. (That deal is on hold and under review, however, after rival bidder Amazon raised questions about the bidding process.) So far in 2020, a surge in remote working, as a result of the coronavirus pandemic, has led to even greater demand for the company’s Azure cloud service and its Office 365 workplace apps.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-021-Microsoft

Microsoft reached its highest ranking ever on the Fortune 500, up five spots from last year, and churned out $39 billion in profits to boot. In Microsoft’s fiscal 2019, overall sales soared 14% year-over-year, to $125.8 billion. Last fall, the software titan won a coveted cloud-computing contract with the Pentagon worth up to $10 billion, a deal that would help solidify Microsoft’s reputation as a leading cloud vendor. (That deal is on hold and under review, however, after rival bidder Amazon raised questions about the bidding process.) So far in 2020, a surge in remote working as a result of the coronavirus pandemic has led to even greater demand for the company’s Azure cloud service and its Office 365 workplace apps. Microsoft’s shares hit an all-time high in February at nearly $189, underscoring Wall Street’s enthusiasm for the company's evolution under CEO Satya Nadella.

As we face unprecedented collective challenges, cooperation has become a business superpower.

16.CTW20.Microsoft

Microsoft started off 2020 with a startling announcement: By 2030, the software titan aims to be not just carbon neutral, but carbon negative. By 2050, Microsoft says, it will have negated all of its carbon emissions since its 1975 founding. (Pictured here: Microsoft president Brad Smith, chief financial officer Amy Hood and CEO Satya Nadella on the day of the announcement, Jan. 15, 2020.) 
 
The company is tackling nearer-term crises too. When the world’s focus shifted to the coronavirus, Microsoft responded by offering 25 million people free online training in digital skills such as data analytics, IT, and cybersecurity. It represented a vital lifeline to those whose jobs may never come back—and in particular for women and minorities, who have been hit hardest financially by the pandemic. 
 
That short-term offering is part of a much broader Microsoft upskilling effort. In Africa, for instance, Microsoft’s 4Afrika initiative has established training programs to address the continent’s digital skills gap. It’s a good deed, but it isn’t charity: Microsoft sees Africa as a growth market, and 4Afrika is busy signing up customers and spotting new business ideas.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune Global 500 generated $27.7 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 64th running of the list.

Here’s our look at 57 companies that do well by doing good.

Here are the World's Most Admired Companies for 2017 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 63rd running of the list.

Here’s our look at 50 companies that do well by doing good.

Here are the World's Most Admired Companies for 2016 as ranked in their industries. See who made the list.

This year's Fortune Global 500 generated $27.6 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

The world's 500 largest companies generated $31.2 trillion in revenues and $1.7 trillion in profits in 2014. Together, this year's Fortune Global 500 employ 65 million people worldwide and are represented by 36 countries.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Google tops the list once again, marking its eighth appearance and fifth time as No. 1.

Fortune 100 Best Companies to Work For

Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Change The World

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Routinely ranked as one of the world’s most valuable companies by market capitalization, the software giant makes the popular Windows PC operating system and the Microsoft 365 suite of business productivity software. It also runs the Microsoft Azure cloud computing service, and owns the Xbox gaming platform, the code repository GitHub, and the professional social network LinkedIn. Cofounded by Bill Gates in 1975, Microsoft operates data centers around the globe to support its cloud computing services. In recent years, Microsoft has been at the forefront of the generative AI revolution through its partnership with OpenAI, its Copilot-branded AI applications, and its own AI models produced in-house.

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Microsoft (MSFT): Company Profile, Stock Price, News, Rankings

legacy

Microsoft

microsoft

It is now my pleasure to introduce Jonathan Neilson, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today. On the call with me are Satya Nadella, Chairman and Chief Executive Officer, Amy Hood, Chief Financial Officer, Alice Jolla, Chief Accounting Officer, and Brian DeFoe, Deputy General Counsel and Corporate Secretary. On the Microsoft Investor Relations website, you can find our earnings press release and financial summary slide deck, which is intended to supplement our prepared remarks during today's call and provides the reconciliation of differences between GAAP and non-GAAP financial measures. More detailed outlook slides will be available on the Microsoft Investor Relations website when we provide outlook commentary on today's call. On this call, we will discuss certain non-GAAP items. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP.

They are included as additional clarifying items to aid investors in further understanding the company's third quarter performance in addition to the impact these items and events have on the financial results. All growth comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted. We will also provide growth rates in constant currency when available as a framework for assessing how our underlying businesses performed, excluding the effect of foreign currency rate fluctuations. Where growth rates are the same in constant currency, we will refer to the growth rate only. We will post our prepared remarks to our website immediately following the call until the complete transcript is available. Today's call is being webcast live and recorded. If you ask a question, it will be included in our live transmission, in the transcript, and in any future use of the recording.

You can replay the call and view the transcript on the Microsoft Investor Relations website. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the Risk Factors section of our Form 10-K, Forms 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. With that, I'll turn the call over to Satya.

Thank you very much, Jonathan. It was a record third quarter powered by the continued strength of Microsoft Cloud, which exceeded $54 billion in revenue, up 29% year-over-year. Our AI business surpassed $37 billion ARR, up 123%. We are at the beginning of one of the most consequential platform shifts that will change the entire tech stack as agents proliferate and become the dominant workload. This will drive TAM expansion and change the value creation equation across the entire economy. To capture this opportunity, we are executing against two priorities. First, we are building the world's leading cloud and AI infrastructure for agentic computing era. Second, we are building high-value agentic systems across core domains such as productivity, coding, and security.

These two layers reinforce each other. We are focused on driving competitive value and differentiation for customers across each so that they can eval max their outcomes. Today, I'll focus my remarks on both priorities, starting with infrastructure. We're optimizing every layer of the tech stack, from DC design to silicon to systems software, the model architecture, as well as its optimization. This is translating into operational gains. We have reduced dock-to-live times for new GPUs in our biggest regions by nearly 20% since the beginning of the year. Our Fairwater data center in Wisconsin came online earlier this month, six weeks ahead of schedule, allowing us to recognize revenue earlier. We delivered a 40% improvement in inference throughput for our most used models across Copilot, driven by our software and hardware optimization work.

All up, we added another gigawatt of capacity this quarter and remain on track to double our overall footprint in just two years. We are moving aggressively to add capacity aligned to our demand signals we see, and we've announced new data center investments across four continents. We also continue to modernize our fleet with our first-party innovation alongside the latest from NVIDIA and AMD. Across our fleet, millions of servers are powered by our custom networking, security, and virtualization silicon, including Azure Boost, as well as our first-party CPUs and accelerators. Our Maia 200 AI accelerator, which offers over 30% improved tokens per dollar compared to the latest silicon in our fleet, is now live in our Iowa and Arizona data centers.

Our Cobalt server CPU is deployed in nearly half of our DC regions, running workloads at scale for customers like Databricks, Siemens, and Snowflake. As our largest customers scale their AI deployments, they're increasingly leveraging other services across our platform and choosing to run those workloads on Cobalt. We are expanding Cobalt supply significantly to meet this demand. The next layer up from infrastructure is the agent app platform. It starts with model choice. We offer the broadest selection of models of any hyperscaler, so customers can choose the right model for the right workload across OpenAI, Anthropic, open source, and more. Over 10,000 customers have used more than one model on Foundry, 5,000 have used open-source models, and the number who have used Anthropic and OpenAI models increased 2x quarter-over-quarter.

For example, Bayer is using multiple models in Microsoft Foundry to create its own in-house agent platform with more than 20,000 active monthly users. All up, over 300 customers are on track to process over 1 trillion tokens on Microsoft Foundry this year, accelerating 30% quarter-over-quarter. We also remain focused on our first-party model work to differentiate our high-value copilots and agents and reduce cogs. We introduced MAI-Transcribe-1, a state-of-the-art speech-to-text model, and MAI-Image-2, one of the top image generation models in the world. These models are already powering first-party scenarios like image generation in Microsoft Bing and Microsoft PowerPoint. We're working towards having Transcribe-One power transcription in Copilot and Microsoft Teams. Early signals show 67% increase in GPU efficiency with Transcribe-One and up to 260% increase in Image-Two.

We also brought MAI models to commercial customers like Shutterstock and WPP for the first time through Foundry. We are innovating on OpenAI IP to drive product evals and lower cogs. Two recent examples of what we have done with multi-step retrieval with Work IQ in Copilot and how reasoning adapts to intent complexity in Researcher with much reduced latency and increased accuracy. The next layer up is all about enterprise data and context across Fabric, Foundry, Microsoft 365, and our security graph. We are building a unified IQ layer for organizational intelligence. Thousands of enterprises already are accessing context across these IQ layers. As AI usage grows, so does the context layer, creating a flywheel that continuously improves the grounding, relevance, and effectiveness of every agent they use and build, making our IQ layers an unmatched context engine for organizational intelligence.

More broadly, our database business accelerated quarter-over-quarter. Cosmos DB alone saw 50% year-over-year revenue growth driven by AI app workloads. We now have 35,000 paid Fabric customers, up 60% year-over-year. In all of the amount of data in Fabric OneLake data lake increased nearly 4x year-over-year. Over 15,000 customers now use both Foundry and Fabric, up 60% year-over-year as enterprises connect agents to real-time operational, analytical, and unstructured data that Fabric brings together. We are very excited about the continued progress with Foundry Agent Service and how customers can now build durable stateful agents that run across time boundaries, orchestrate tools and models, and close the loop with evals and improvement over long-running workflows. Beyond Fabric and Foundry, we are also helping knowledge workers build agents with tools like Copilot Studio.

Nearly 90% of the Fortune 500 now have active agents built with our low-code, no-code tools, and we are seeing fast growth of our Copilot credit consumptive offer, up nearly 2x quarter-over-quarter as customers increasingly extend Copilot with custom agents tailored to their workflows. Finally, with Agent 365, we offer a control plane that extends companies' existing governance, identity, security, and management frameworks to agents. Tens of thousands of companies are already managing tens of millions of agents in Agent 365, and we expect this momentum to grow significantly as agents will increasingly need tools for identity governance, security, and more. Let me turn to the high-value agentic systems we ourselves are building on this platform. We are evolving our family of Copilots from synchronous assistants to async coworkers that can execute long-running tasks across key domains.

In knowledge work, it was another record quarter for Microsoft 365 Copilot seat adds, which increased 250% year-over-year, representing our fastest growth since launch. Quarter-over-quarter, we continue to see acceleration and now have over 20 million Microsoft 365 Copilot paid seats. The number of customers with over 50,000 seats quadrupled year-over-year, Accenture now has over 740,000 seats, our largest Copilot win to date. Bayer, Johnson & Johnson, Mercedes, and Roche all committed to 90,000 or more seats. Copilot is uniquely valuable at work where nearly every task depends on organizational context. Work IQ grounds Copilot responses in the full context of an organization, including people, roles, documents, and communications, all within the company's security boundary.

The system of work behind Work IQ alone now spans more than 17 EB of data, growing 35% year-over-year. The liquidity and freshness of that data matters, with billions of emails, documents, chats, hundreds of millions of Teams meetings, and millions of SharePoint sites added each day. That context is getting even richer as Copilot adoption grows, Copilot and agent conversations and artifacts that create feedback into Work IQ, making it even more context rich. We continue to increase the pace of feature innovation across Microsoft 365 Copilot, introducing over 625 updates over the past year, up 50%. In Microsoft 365 Copilot, you now have access in chat to multiple models by default with intelligent auto-routing. In agents with Critique and Council, you can use multiple models together to generate optimal responses.

As of last week, agent mode is now default experience across Copilot in Word, Excel, and PowerPoint, and with Cowork, you now have a new way to delegate and complete work using Copilot. All this innovation is driving record usage intensity across Copilot. We have seen a surge in usage of our first-party agents with monthly active usage up 6x year-to-date. Copilot queries per user were up nearly 20% quarter-over-quarter. To put this momentum in perspective, weekly engagement is now at the same level as Outlook as more and more users make Copilot a habit. When it comes to biz apps, we are seeing a new pattern emerge as customers shift from traditional seat model to seats plus consumption. The customer service category is at the forefront of this transformation, as nearly 60% of our service customers are already purchasing usage-based credits.

For example, HSBC uses pre-built agents with Dynamics 365 to manage customer inquiries across products, markets, regulatory requirements, reducing issue resolution time by over 30%. Our agentic products in LinkedIn Talent Solutions, which help hirers automate time-consuming tasks like sourcing, screening, and drafting messages, have already surpassed a $450 million annualized revenue run rate. When it comes to developers, GitHub itself is seeing unprecedented growth driven by proliferation of agentic coding, and we are hard at work to scale and meet this demand. We see this even with GitHub Copilot. Nearly 140,000 organizations now use GitHub Copilot, and enterprise subscribers have nearly tripled year-over-year. The majority of users leverage multiple models. We're also seeing rapid adoption of GitHub Copilot CLI, with usage nearly doubling month-over-month.

Earlier this week, we announced our move to usage-based pricing model for GitHub Copilot as we align pricing to actual usage and costs. When it comes to security, the physics of cybersecurity has changed as AI compresses the window between vulnerability and exploitation. To help mitigate risk immediately, we sim-ship Defender protections when updates for AI-discovered vulnerabilities are released, and we are on course to productize new multi-modal AI-driven scanning harness as well. Already, the number of Security Copilot customers increased 2x year-over-year. Our data security triage agents alone handled over 2 million unique alerts this quarter, and we are helping customers secure their AI deployments as well. 35 billion Copilot interactions have been audited by Purview to date, up 7x year-over-year.

Finally, when it comes to our consumer business, we're doing the foundational work required to win back fans and strengthen engagement across Windows, Xbox, Bing, and Edge. In the near term, we are focused on fundamentals, prioritizing quality and serving our core users better. You see this in the work underway across our consumer products. With Windows, we recently announced performance improvements for lower memory devices, streamlined the Windows update experience, and brought back focus to core features and fundamentals that matter most to our customers. You also see this in Xbox, where the team is recommitting to our core fans and players and shaping the future of play. Last week's Game Pass changes are one example of how we are staying responsive to customer feedback. Monthly active Windows devices surpassed 1.6 billion, and over time, Windows value will extend to deliver unmetered intelligence at the edge.

Our Edge browser has taken share for 20 consecutive quarters, and Bing monthly active users reached 1 billion for the first time. LinkedIn has 1.3 billion members, and we are seeing increased depth of conversation, and it's the leading B2B sales and advertising channel for large and small businesses. We set new records for monthly Xbox active users in the quarter, as well as game streaming hours. In Microsoft 365 Consumer, we now have nearly 95 million subscribers, and early signals show increasing satisfaction as we make agent mode the default. Across everything I've talked about, we're also hard at work changing the way we work. Our North Star remains the same, delivering customer value with highest quality and top-class innovation, and this is what gives me confidence in our ability to shape the next phase of growth for our company and our customers.

With that, let me turn it over to Amy to walk through our financial results and outlook.

Thank you, Satya, and good afternoon, everyone. We delivered results that exceeded expectations across revenue, operating income, and earnings per share, driven by strong demand and execution. As Satya shared, our AI business annual revenue run rate surpassed $37 billion this quarter, growing 123% year-over-year. We're accelerating our pace of innovation as we execute against the expansive opportunity ahead. This quarter, revenue was $82.9 billion, up 18% and 15% in constant currency. Gross margin dollars increased 16% and 13% in constant currency, while operating income increased 20% and 16% in constant currency. Earnings per share was $4.27, an increase of 21% and 18% in constant currency when adjusted for the impact from our investment in OpenAI.

FX was roughly in line with guidance at the total company level. Company gross margin percentage was 68%, down year-over-year, driven by continued investment in AI infrastructure and growing AI product usage. The impact from these investments was partially offset by ongoing efficiency gains, particularly in Azure and M365 Commercial Cloud. Operating expenses increased 9% and 8% in constant currency, driven by continued investment in AI, including R&D compute capacity, talent, and data to support product development across the portfolio. This quarter, growth was impacted by a low prior year comparable, particularly in sales and marketing and G&A expenses. Operating margins increased slightly year-over-year to 46%. Total company headcount declined year-over-year as we focus on building high-performing teams that operate with pace and agility.

When adjusted for the impact from our investments in OpenAI, other income and expense was $961 million. Favorability was driven by gains on investments that were partially offset by losses on foreign currency remeasurement. Capital expenditures were $31.9 billion, down sequentially due to the normal variability from cloud infrastructure build-outs and the timing of delivery of finance leases. This quarter, roughly 2/3 of our CapEx was for short-lived assets, primarily GPUs and CPUs. The remaining spend was for long-lived assets that will support monetization over the ne/xt 15 years and beyond. This quarter, total finance leases were $4.7 billion and were primarily for large data center sites.

Cash paid for PP&E was $30.9 billion, roughly in line with capital expenditures, as the impact from finance leases was partially offset by differences between the receipt of goods and payment. Cash flow from operations was $46.7 billion, up 26%, driven by strong cloud billings and collections, partially offset by an increase in operating lease payments. Free cash flow was $15.8 billion, reflecting higher capital expenditures. Finally, we returned $10.2 billion to shareholders through dividends and share repurchases. Now to our commercial results. Commercial bookings grew 7% when excluding the impact from OpenAI, driven by consistent execution in our core annuity sales motions. Bookings decreased 4% and 6% in constant currency when including Azure commitments from OpenAI.

Commercial remaining performance obligation grew 26%, in line with historic seasonality when excluding OpenAI. RPO increased to $627 billion and was up 99% year-over-year, with a weighted average duration of approximately 2.5 years when including OpenAI. Roughly 25% will be recognized in revenue in the next 12 months, up 39% year-over-year. The remaining portion recognized beyond the next 12 months increased 138%. Microsoft Cloud revenue was $54.5 billion and grew 29% and 25% in constant currency, reflecting strong demand across the Azure platform and our first-party AI applications and services. Microsoft Cloud gross margin percentage was slightly better than expected at 66% and down year-over-year due to continued investments in AI, partially offset by the ongoing efficiency gains noted earlier.

Now to our segment results. Revenue from productivity and business processes was $35 billion and grew 17% and 13% in constant currency. M365 commercial cloud revenue increased 19% and 15% in constant currency, ahead of expectations. Strong execution and improving product quality drove accelerating M365 Copilot seat adds this quarter, with paid seats now over 20 million. ARPU growth was again led by both E5 and M365 Copilot. Paid M365 commercial seats grew 6% year-over-year, with installed base expansion across all customer segments, though primarily in our small and medium business and frontline worker offerings. M365 commercial products revenue increased 1% and decreased 3% in constant currency, down sequentially as Office 2024 transactional purchasing trends continued to normalize as expected. M365 consumer cloud revenue increased 33% and 29% in constant currency, again driven by ARPU growth.

M365 consumer subscriptions grew 7%. LinkedIn revenue increased 12% and 9% in constant currency, with growth across all lines of business. Dynamics 365 revenue increased 22% and 17% in constant currency, with continued share gains and growth across all workloads. Bookings growth was impacted by weaker renewals as customers balanced spend between the traditional per seat and the emerging seats plus consumption model. Segment gross margin dollars increased 18% and 13% in constant currency, and gross margin percentage increased slightly, again driven by efficiency gains in M365 commercial cloud that were partially offset by continued investments in AI, including the impact of growing adoption and usage of Copilot.

Against a low prior year comparable, operating expenses increased 11% and 9% in constant currency, driven by the shared R&D AI investments mentioned earlier, as well as higher Copilot advertising spend. Operating income increased 21% and 14% in constant currency, and operating margins increased year-over-year to 60%. Next, the Intelligent Cloud segment. Revenue was $34.7 billion and grew 30% and 28% in constant currency. In Azure and other cloud services, revenue grew 40% and 39% in constant currency against a prior year that included accelerating growth. Results were ahead of expectations as we delivered capacity earlier in the quarter, enabling increased consumption across both AI and non-AI services. Strong customer demand across workloads, customer segments, and geographic regions continues to exceed available capacity.

In our on-premises server business, revenue increased slightly and decreased 3% in constant currency with ongoing customer shift to cloud offerings. Segment gross margin dollars increased 19% and 18% in constant currency. Gross margin percentage decreased year-over-year, driven by continued AI investment and increased GitHub Copilot usage, partially offset by ongoing efficiency gains in Azure. Operating expenses increased 9% and 7% in constant currency, driven by the shared R&D AI investment noted earlier. Operating income grew 24% and 23% in constant currency, and operating margins were 40%. Now to more personal computing. Revenue was $13.2 billion and declined 1% and 3% in constant currency. Windows OEM and devices revenue decreased 2% and 3% in constant currency.

Windows OEM increased slightly and was ahead of expectations as OEM and channel partners continued to build inventory given increasing memory prices. Search advertising revenue ex-TAC increased 12% and 9% in constant currency, with growth driven by higher volume and revenue per search across Edge and Bing. In gaming, revenue decreased 7% and 9% in constant currency. Xbox content and services revenue decreased 5% and 7% in constant currency against a prior year comparable that benefited from strong first-party content performance. Segment gross margin dollars increased 6% and 4% in constant currency, and gross margin percentage increased year-over-year, driven by sales mix shift to higher margin businesses.

Against a low prior year comparable, operating expenses increased 7% and 6% in constant currency, driven by impairment and other related expenses in our gaming business, as well as continued investments in shared R&D mentioned earlier that benefits the entire portfolio. Operating income increased 4% and 1% in constant currency, and operating margins increased year-over-year to 28%. Now, moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. Based on current rates, we expect FX to increase revenue growth by roughly one point in Productivity and Business Processes and More Personal Computing with no meaningful impact to Intelligent Cloud. Overall impact to total revenue is expected to be less than one point, and FX should increase COGS growth by roughly one point with no impact to operating expense growth. Starting with our commercial business.

In commercial bookings, when adjusted for the impact from OpenAI, we expect healthy growth on a growing expiry base with consistent execution in our core annuity sales motions against a significant prior year comparable. Microsoft Cloud gross margin percentage should be roughly 64%, down year-over-year, driven by continued investments in AI and increased GitHub Copilot usage. Just this week, we announced a business model transition in GitHub Copilot that will align pricing with usage and value that takes effect on June 1st of this year. Now to segment guidance. In Productivity and Business Processes, we expect revenue of $37 billion-$37.3 billion or growth of 12%-13%. In M365 commercial cloud, on an adjusted basis, we expect revenue growth to be between 15% and 16% in constant currency.

When normalized for the prior year comparable, that benefited from two points of in-period revenue recognition. On a reported basis, we expect revenue growth to be between 13% and 14% in constant currency. Building on the Copilot momentum we saw in Q3, we expect net paid seat adds to increase sequentially, which will drive continued ARPU growth. M365 commercial products revenue should grow in the mid-single digits against a prior year that benefited from higher than expected Office 2024 transactional purchasing. As a reminder, M365 commercial products includes components that can be variable due to in-period revenue recognition dynamics. M365 consumer cloud revenue growth should be in the low 20% range, down sequentially as we start to lap the benefit from last year's price increase. Growth will again be driven by ARPU and an increase in subscription volume.

For LinkedIn, we expect revenue growth of approximately 10%. In Dynamics 365, we expect revenue growth to be in the low double digits, down sequentially, with impact from a strong prior year comparable and the bookings trends noted earlier. For Intelligent Cloud, we expect revenue of $37.95 billion-$38.25 billion or growth of 27%-28%. In Azure, we continue to focus on accelerating the delivery of capacity and increasing fleet efficiencies, and therefore, we expect Q4 revenue growth to be between 39% and 40% in constant currency against a strong prior year comparable that included accelerating growth.

Broad and growing customer demand continues to exceed supply, and we continue to balance the incoming supply we can allocate here against our other high ROI priorities, first-party applications, R&D, and end-of-life server replacement. As a reminder, year-over-year Azure growth rates can vary quarter-to-quarter based on capacity, timing, and contract mix. In our on-premise server business, we expect revenue to decline in the mid-single digits with ongoing customer shift to cloud offerings. In more personal computing, we are lapping strong prior year comparables, navigating complex PC market dynamics impacted by memory prices and refocusing on delivering quality and value to consumers. Therefore, we expect revenue to be $11.75 billion-$12.25 billion.

Windows OEM revenue should decline in the high teens, with roughly six points of impact from a prior comparable that benefited from Windows 10 end of support, six points from inventory levels that we expect to come down through the quarter, and six points from a lower PC market as prices increase due to memory cost. The range of potential outcomes remains wider than normal. Therefore, Windows OEM and devices revenue should decline in the mid to high teens. Search advertising revenue ex-TAC growth should be in the high single digits, driven by revenue per search and volume, with continued share gains across Bing and Edge.

In Xbox content and services, we expect revenue to decline in the low teens%, reflecting a prior comparable that benefited from strong first-party content as well as the recent price changes for Xbox Game Pass as we focus on delivering more value to gamers. Hardware revenue should decline year-over-year. Therefore, at the total company level, revenue should be between $86.7 billion and $87.8 billion, or growth of 13%-15%, with accelerating commercial growth partially offset by our consumer business. Our Q4 outlook for COGS and operating expenses includes roughly $900 million in one-time costs for the recently announced voluntary retirement program. Therefore, we expect COGS of $29.4 billion-$29.6 billion, or growth of 22%-23%, including roughly $350 million from the retirement program.

Operating expense of $19.3 billion-$19.4 billion, or growth of approximately 7%, including roughly $550 million from the retirement program. Even as we invested through the year in additional capacity to serve the growing AI platform, apps and services demand, and inclusive of these one-time costs, we expect full-year FY 2026 operating margins to be up about oone point year-over-year. Excluding any impact from our investments in OpenAI, other income and expense is expected to be roughly -$100 million, as interest income will be more than offset by interest expense, which includes the interest payments related to data center finance leases. We expect our adjusted Q4 effective tax rate to be approximately 19%. Next, capital expenditures.

We expect CapEx spend to increase to over $40 billion as we continue to bring more capacity online. The sequential increase includes roughly $5 billion from higher component pricing, as well as the impact from finance leases, which add variability given the full value is recorded in the period of lease commencement. We expect the mix of short-lived assets to remain similar to Q3. For calendar year 2026, we expect to invest roughly $190 billion in capital expenditures, which includes approximately $25 billion from the impact of higher component pricing. We remain confident in the return on these investments, given higher demand signals and increasing product usage, as well as the efficiencies we're driving across the platform.

Even with these additional investments and continued efforts to bring GPU, CPU, and storage capacity online faster, we expect to remain constrained at least through 2026. Despite these constraints and the continued need to balance incoming supply, we expect Azure growth to show modest acceleration in the second half of the calendar year compared with the first half. Now I'd like to share some closing thoughts as we look to next fiscal year. First, we continue to evolve how we operate to increase our pace and agility, and therefore, we expect head count will decrease year-over-year. Operating expense growth will be in the mid to high single digits, reflecting ongoing investments in R&D, inclusive of AI investment in compute, data, and talent to accelerate product innovation.

Next, as a reminder, we will lap strong prior year comparables impacted by Windows 10 end of support, elevated OEM inventory levels, as well as increased Office and server transactional purchasing. Finally, we remain focused on delivering a platform that enables customers to build and run AI solutions and on driving innovation in our first-party AI applications and services. Therefore, we expect another year of double-digit revenue and operating income growth at FY 2027. In closing, we are committed to delivering innovation that helps customers create new business value as we enter the final quarter of our fiscal year. With that, let's go to Q&A, Jonathan.

Thanks, Amy. We'll now move over to Q&A. Out of respect for others on the call, we request that participants please only ask one question. Operator, can you please repeat your instructions?

Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Keith Weiss with Morgan Stanley. Please proceed.

Excellent. Thank you guys for taking the question, and congratulations on another really solid quarter. Those Microsoft 365 Copilot numbers are super impressive and I think way ahead of most people's expectations. I wanted to ask a broader question on demand. We've been talking about strong demand for a while. We see it in our CIO surveys, and you guys definitely express it in what you're seeing in your business. Maybe in the short term, Amy, you could talk to us about how that demand translates into commercial bookings and how that might be changing. You mentioned different contracting cycles between seats and consumption that may impact that, and then we also have to think about renewal bases.

Longer term, maybe this opens it up to Satya, what is supporting this demand over time? Or said another way, who's paying for all of this? Because while we see excitement for Microsoft in our CIO survey, like, our overall IT spending expectations aren't increasing, and GDP growth isn't really increasing. At some point, like, how does this get paid for? Are you starting to see the indications of where those dollars are gonna come from? Thank you.

Well, why don't I start with the first half of your question, Keith, around, you know, how do some of these models impact bookings? I think it's really important, you're right, we have the normal cyclical things that happen with bookings. It's the expiration base, or maybe large multi-year Azure commitments that get signed, and that stuff has always had some volatility to it. I think if you take a step back, which is I think the broader question you're asking, and obviously I'll let Satya talk to it too, you're really thinking through as we go through using a model that's been historically thought of as a per-seat business, and suddenly if you think about getting work done and being more productive, it's thinking about being a seat or a worker plus an agent.

When I think about that model, I start to think about it as a license business plus a consumption business, and really applying far more broadly than I think people have thought about that. It starts to mean that over time bookings will actually also look a little different. It'll still have that per-seat license logic, but it'll also have a meter, just like you see in Azure, and it may not all flow through bookings in the same way. You'll just bill for usage, and if that usage has great value to customers, and I'll let Satya talk a little bit about this, then you'll keep spinning and you'll keep using those agents if they're adding direct value or growth to your business.

I think it's probably healthy to sort of start to think about that transition in a broader way. While you may not see it in the short term in bookings, I think if I were to frame how to think about the opportunity, I would probably think about it more in that light.

Yeah. I think Amy captured it. I think the basic transformation of, I'll say, any per-user business of ours, whether it's productivity, coding, security, will become a per-user and usage business. That's the best way to think about. It's obviously already happening with coding. That's where you see it already perhaps at scale. Some of the business model changes even we made this quarter speak to that. But it also speaks, I think, to the intensity of usage, right? Because where these dollars gonna come from? At the end of the day, it'll come from some eval and outcome that a business has, where these agents that are working on behalf of users or with users has created value. That's sort of where it starts.

Whether it's customer service, whether it's individual productivity, team productivity, a business process, some cost or is either decreasing because of the use of agents, or some revenue is increasing because of agents because it was able to compress these workflows. That's what you broadly start seeing, right? Even when people talk about Copilot, it's obviously they use chat with reasoning, they use Cowork, they use agent mode, inside a Word, Excel, PowerPoint, but it's all being done in the context of some task trajectory. When they start seeing that task trajectory is compressing the workflow, improving revenue, decreasing costs, that is what's driving usage. It may not be, by the way, pure seat coverage type of motions like in the past.

This is more about getting intense users and intense usage, and that's what we're focused on.

Keith, maybe just to take a quick second, just a big thank you to you. It's been a real privilege to work with you, over many, many quarters. Just to say we've really appreciated your coverage over this time, and congratulations. I think this is our last earnings quarter with you.

Yeah. Thank you. Operator, next question, please.

The next question comes from the line of Karl Keirstead with UBS. Please proceed.

Okay. Great. Thank you. Maybe, Amy, could you elaborate a little bit on the CapEx guidance you just provided? Obviously it requires a fairly material pickup in CapEx in the second half of the calendar year, maybe to the tune of $120 billion. I'm just curious your confidence in working through the, you know, physical component, constraints to hit that number. Does it involve the greater use of partners? How are you thinking about allocating that increased capacity between third party and first party? Do you have a general framework you'd advise us to keep in mind? Thank you.

Sure. Thanks. Thanks, Karl. No, I actually feel quite good about our ability to work through the physical sort of limitations, I think of the industrial logic of the supply chain, to be able to put that, both, you know, some of that, as we've talked about, is getting capacity online, but a lot of that is far more short-term in nature, being able to get CPUs, GPUs, storage, put in place, to be able to, you know, start to support even better the demand signals we've been seeing. Tried to give some help on part of that being price. I think that just helps give you a sense on volumes. Obviously it leans more to short-term assets when you see that type of impact of price on the number.

I would also say in terms of a sense of allocation, you should assume, you know, we talked a little bit about what you were seeing in Azure, you know, looking for 39-40 in constant currency in Q4 means that we're, you know, able to use some efficiencies to make sure we're able to meet demand as we can best do that in a balanced way across Azure. Our Copilot usage, which I think you've seen, in Q3, has really been on a different trajectory than we saw it up to this point. That applies across coding, it applies across productivity, and I have some confidence it's also gonna apply across security.

If you think about talking about some acceleration, into what I would call the first half of the first half of FY 2027, the second half of the calendar year, it means we're getting some insights into our abilities to increasingly put pressure on efficiencies, being able to speed up the deliveries into our data centers and make that what I would call revenue-ready as quickly as we can. I would expect, you know, the pressure between first-party usage and being able to meet Azure demand will persist, as I said, but we're doing our best to be able to get things in as quickly as we can and hence the CapEx number that we see in the second half of the year.

Microsoft (MSFT) Q3 2026 Earnings Call Transcript

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