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

Impact Segment

Sector

Industry

Current All-Star Rank

Previous All-Star Rank

Industry Rank

Previous Industry Rank

Overall Score

Innovation

People Management

Use of Corporate Assets

Social Responsibility

Quality of Management

Financial Soundness

Long-Term Investment Value

Quality of Products/Services

Global Competitiveness

Strongest Dimension

Years on list

Previous rank

State

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

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.

Q4 2026

Q3 2026

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

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

legacy

Microsoft

microsoft

Greetings, welcome to the Microsoft fiscal year 2026 fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jonathan Neilson, Vice President of Investor Relations. Please go ahead.

Good afternoon, 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 provide 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 fourth 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 factor section of our Form 10-K, Form 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 very strong close to what was a record fiscal year for us. All up, our annual revenue surpassed $331 billion, up 18%. Microsoft Cloud surpassed $214 billion, up 27%, and Azure surpassed $100 billion, up 41%. Going forward, we have two goals. Ensuring AI empowers every person, amplifying their agency and ambition, and empowering every organization to build their own continuous learning loop and ensuring that they don't outsource their core IP. Now, let's talk about how we're delivering this across our stack, starting with our AI platform and infrastructure. We added 31 new data centers across five continents this quarter, bringing the total to 88 this year as we expand our footprint in response to accelerating demand. We're also bringing capacity online faster than ever.

Over the last fiscal year, we've reduced dock-to-live times for new GPUs in our largest regions by nearly 50%. All up, we added another gigawatt of capacity this quarter and remain on track to roughly double our overall capacity in just two years. We're also getting more from the infrastructure we already have by optimizing across silicon systems and software. For example, we increased the throughput for Copilot workloads 4x since the start of the year. AI sovereignty is increasingly top of mind for our customers, and we are expanding our offerings to meet that need. Just last week, we announced a partnership with Mistral to bring its models to Microsoft Sovereign Cloud, enabling customers to run them across public, customer-controlled, and fully disconnected environments. We also continue to modernize our fleet with our own silicon innovation alongside the latest from NVIDIA and AMD. Maia 200 continues to scale.

It delivers 30% better performance per dollar than the latest generation hardware in our fleet and is now supporting both OpenAI and MAI models. And we will be among the first cloud providers to deploy next generation rack-scale AI infrastructure based on AMD Helios and NVIDIA Vera Rubin. When it comes to running agents, CPUs are just as important as GPUs. Our Cobalt VMs are powering both our own first-party workloads as well as workloads for customers, including Adobe, Arm, Elastic, OpenAI, Sprinklr, and TomTom. By the end of this month, we expect to have our Cobalt 200 racks in over 25 data centers around the world as we rapidly expand capacity. Now let me turn to the end-to-end platform we're building on this infrastructure to run, govern, and distribute apps and agents. It starts with model choice.

Every customer wants the right model for each task based on quality, latency, cost, and compliance. We offer the broadest model catalog in the cloud with over 11,000 models, including the latest from OpenAI, Anthropic, Mistral, xAI, as well as our own MAI family. Since the start of the year, we have seen 5x increase in the number of customers building with models from multiple providers. Levi Strauss & Co., for example, is using models from OpenAI and Anthropic on Foundry as it brings more than 1,000 domain-specific agents into a unified enterprise AI platform. We are also accelerating our own model development. We announced more than a dozen new models across image, voice, transcription, coding, security, including our first reasoning model, MAI Thinking-1, all with cost-efficient inference at the core for the enterprise use cases.

We are co-designing these models with our silicon. We are seeing 40% better performance per watt when running MAI models on Maia 200. More importantly, we are building a new model system where the harness, context, memory, and action space are separate from any one model family, thereby moving the frontier on the cost-to-outcome curve. It's not just about cost. It also has the added benefit of business continuity and resilience because every model is substitutable. This is the system we are using in our products with great results. For example, millions of developers have used MAI-Code-1-Flash on GitHub Copilot, achieving higher code acceptance rates and 10% lower median token usage while still having access to frontier capabilities from OpenAI and Anthropic.

In Excel, MAI-Code-1-Flash is delivering comparable quality to GPT-5.6 for the most common tasks while operating at significantly lower costs. In security, MAI-Cyber-1-Flash achieves better performance than much larger Mythos model, but at half the cost when combined with our multi-agent security harness. More broadly, across our model implementations, we are seeing significant efficiency gains, including 89% reduction of GPU costs in Dynamics 365 with MAI-Voice-2-Flash and up to 84% reduced GPU costs in PowerPoint with MAI-Image-2.5. This system is available to any company to use as part of Foundry. The next layer is the enterprise data and context. The data estate is evolving from primarily supporting apps used by people to supporting agents.

Customers are rapidly adopting our AI-optimized databases like Cosmos DB and PostgreSQL to give agents fast, secure access to real-time data and context they need for memory and retrieval. PostgreSQL revenue was up 55%, accelerating for the third consecutive quarter. Also, the number of PostgreSQL customers also using Foundry increased 80% as customers increasingly choose it as the database for AI workloads. We are going further with Horizon DB, our new fully managed PostgreSQL service on Azure, which delivers three times the throughput of self-managed deployments. When it comes to analytics, we now have over 40,000 paid Fabric customers, up more than 60% year-over-year, and over 17,000 customers now use Foundry and Fabric, up 60% year-over-year as enterprises connect agents to real-time operational, analytical, and unstructured data in Fabric.

This quarter, we also introduced Rayfin, the agent-first SDK that delivers a backend as a service for building apps in Fabric. More than 2,500 customers have already used Rayfin and is now powering the backends for apps created with Replit too. On top of this data estate, we are building an IQ layer that combines data with model capabilities to deliver the right context at the right time. Tens of thousands of customers, including nearly 90% of the Fortune 500, are already grounding their agents in enterprise context with Foundry, Fabric, and Work IQ. This quarter, we introduced Web IQ, which gives agents access to real-world intelligence from across the web. It is already being used by the most popular AI assistants, including ChatGPT. Beyond model choice, data, and context, we are building Foundry as the complete app and agent stack.

It gives agents access to the IQ layer, the tools they use, along with durable state and memory, secure sandboxes, rubrics and evals, and even their own self-improvement loops. We now have 100,000 Foundry customers and revenue more than doubled year-over-year. Telefónica, for example, adopted Foundry as the foundation of its corporate agentic platform with its first wave of agents tackling mission-critical network operations. All up, the number of Foundry customers at 1 trillion tokens annualized run rate increased 4x year-over-year. Finally, with Agent 365, we offer a control plane that extends companies' existing governance, identity, security, and management frameworks to agents they build. Just two months in, Agent 365 now has nearly 40 million agents registered across tens of thousands of companies. Let me turn to the apps and agents we are building on top of this platform for individuals and organizations.

When it comes to knowledge work, we now have over 30 million paid Microsoft 365 Copilot seats with net seat adds more than doubling quarter-over-quarter. Copilot is evolving rapidly from chat to Copilot to autopilots. Last month, we made Copilot generally available, helping customers complete multi-step tasks grounded in their work data while meeting enterprise security and compliance requirements. This quarter, we also introduced autopilots, autonomous long-running agents with full enterprise compliance, including always-on personal agent powered by OpenClaw. This quarter, we are bringing these Copilot experiences together, including code in one super app spanning both consumer and commercial experiences. This is a major step forward and I look forward to sharing more soon. More broadly, we have steadily been improving the quality and performance of Copilot and have been delighted by the recent customer feedback.

Over the last three quarters, user satisfaction scores have doubled and are now at an all-time high, this quarter alone, we cut latency by 25%. These quality improvements, together with continued product innovation, are driving record usage intensity. The number of conversations per user nearly doubled year-over-year. Average weekly engagement is on par with Outlook and Teams. The time from deployment to what we think of as high usage, meaning monthly active usage, about 80% across a customer's user base, has fallen from months to just days over the past year. The number of customers with more than 50,000 seats increased over 7x year-over-year, and the number of enterprise customers deploying Copilot to the majority of their information workers grew nearly 75% quarter-over-quarter, a signal of how central Copilot has become to their operations.

NHS England, for example, is rolling out Copilot to 505,000 clinicians and staff, the largest healthcare deployment of its kind after a trial showed it saved employees an average of 43 minutes per day. KPMG is expanding its deployment across its global workforce of more than 276,000 professional, HSBC committed to 200,000 seats to accelerate its workforce transformation. AstraZeneca, Boeing, Infosys, Coke Inc., Procter & Gamble, Stellantis, Tata Consultancy Services, University of Pittsburgh Medical Center, Wells Fargo, and Wipro each purchased 60,000 or more. We have been encouraged by the response to our new E7 suite as customers increasingly go all in on an integrated AI offering that brings together Copilot E5, Entra, and Agent 365. Just two months after launch, hundreds of enterprise customers have already purchased millions of seats, this quarter, EY deployed E7 to 400,000 employees in our largest win to date.

In addition to this, we are also evolving our business model beyond per seat to per seat plus consumption, further expanding our TAM and delivering more customer value. Earlier this month, we added usage-based billing to Copilot Cowork with thousands of customers already paying for and actively using it. In Biz Apps, we have been reinventing Microsoft Dynamics 365 for an agent-first world. We are exposing over 650,000 MCP actions across sales, finance, supply chain, HR, and customer service so that agents can now access business context and take action using the same data models, rules, permissions, security guardrails, and audit trails as any application user. We are also moving from seats to seats plus consumption model. Customer service is at the forefront of this transformation with usage-based credit consumption in this category up 4x quarter-over-quarter with customers like Northern Trust using our tools to drive proactive intelligence.

When it comes to developers, GitHub Copilot now has 50 million users. This quarter, we introduced usage-based billing and have continued to see business and enterprise seat growth and also significant consumption revenue after the new model went into effect. Copilot revenue accelerated over 60% quarter-over-quarter. All up, GitHub now has 225 million users as organizations across every industry, including over 90% of the Fortune 500, choose GitHub for their AI-powered development. The agentic era is being built on GitHub. Every major coding agent runs on the platform, and one in three pull requests on GitHub now involves an agent. In security, we are helping customers both secure their AI deployments and use AI to strengthen their security posture. To date, Microsoft Purview has audited over 15 billion Copilot interactions to meet compliance obligations, up nearly 360% year-over-year.

Earlier this week, we introduced Project Perception, a complete multimodal agentic security system that brings together teams of agents to simulate attacks, investigate threats, and drive remediation. As Perception moves beyond private preview, we expect to bring it to customers through a consumption-based offering. In healthcare, we are on pace to automate over 100 million patient encounters this calendar year, including 28 million this quarter, up 2x year-over-year. Mass General Brigham rolled out DAX Copilot to over 4,000 providers and after a study found Ambient AI reduced burnout by 21%. In science, Microsoft Discovery, now broadly available, provides a comprehensive platform for building and governing agentic workflows for science and engineering. Early customers include BHP, GSK, Pacific Northwest National Laboratory. Across both our high-value agentic experiences and the AI platform and infrastructure, we are focused on helping customers turn AI into measurable outcomes.

The most comprehensive and valuable data in the world is inside each of the customer tenants, and therefore, there is a tremendous opportunity to turn customers' workflows, domain knowledge, and accumulated judgment into AI systems that learn and improve with every usage. To help customers capture that opportunity this month, we launched Microsoft Frontier Company, the largest outcome-driven engineering organization in the industry. We will embed 6,000 industry and engineering experts with customers to co-design, co-innovate, and continuously improve AI systems at scale. We've been testing this model over the past year, completing over 330 projects across 164 customers, including many of the world's leading companies across industries. For example, our FD teams worked with Novo Nordisk to build an agent that helps analyze clinical data while meeting its strict compliance requirements.

We partnered with LSEG to embed AI into LSEG Workspace, helping finance professionals ask complex questions and quickly find answers across structured and unstructured financial content. Finally, let me talk about devices and consumer. When it comes to Xbox, we are making the necessary decisions required across our content portfolio platform and operations to reset the business for long-term growth. We have the best IP in the industry and talented studios around the world and believe we can bring these strengths together and expect to return the business to growth in fiscal 2027. In Windows, we are investing to ensure that it has the best quality and fundamentals, while also ensuring it's the best place to run secure edge AI. We see significant opportunity for Windows to become the offload for unmetered intelligence, combining powerful on-device compute with enterprise-grade security.

In search and advertising, Bing and Edge have both taken share for five straight years, and LinkedIn continues to see strong engagement across the platform with double-digit member growth for the 5th consecutive year. Recruiters at over 20,000 companies are now using our AI-powered solutions to reduce time to hire and improve candidate matching. Seats increased to 140% quarter-over-quarter. In closing, I'm energized by the opportunities ahead. I've never been more confident in Microsoft's opportunity to drive durable long-term growth and ensure the benefits of AI flow broadly. With that, let me turn it over to Amy to walk through our financial results and outlook.

Thank you, Satya, good afternoon, everyone. This fiscal year, we delivered over $331 billion in revenue, with growth accelerating to 18%, driven by strong demand across both the Azure platform and our first-party AI applications and services. Operating income growth outpaced revenue growth, increasing 21% to more than $155 billion as we invested in long-term growth while continuing to expand operating leverage. This quarter, revenue was $90 billion, up 18% and 17% in constant currency. Gross margin dollars increased 15%, and operating income increased 18%. Earnings per share was $4.74, an increase of 23% when adjusted for the impact from our investment in OpenAI, and FX was roughly in line with guidance. Several discrete items impacted our financial results in the quarter when compared to our forward-looking guidance provided on our April earnings call, resulting in a benefit of $0.27 undiluted earnings per share.

These included a $3.2 billion gain from our investment in Anthropic and lower than expected expenses related to the voluntary retirement program, which were partially offset by severance expense and impairment charges in Xbox. When adjusting for these items, we exceeded expectations across revenue, operating income, and earnings per share due to strong demand and execution in the quarter. Company gross margin percentage was 67%, down year-over-year, driven by sales mix shift to Azure, as well as continued investments in AI infrastructure and growing product usage, partially offset by ongoing efficiency gains, particularly in Azure and M365 Commercial Cloud. Operating expenses increased 10%, driven by continued investment in R&D compute capacity, talent, and data to support product development across the portfolio. G&A growth was impacted by a low prior year comparable, as well as some of the discrete items mentioned earlier.

Operating margins increased slightly year-over-year to 45%. Total company headcount declined 2% year-over-year. When adjusted for the impact of our investments in OpenAI, other income and expense was $2.8 billion, driven by the gain on investment in Anthropic noted earlier. Capital expenditures were $41 billion, including the impact from higher component pricing as noted in our guide. Roughly two-thirds of our CapEx was for short-lived assets, primarily CPUs and GPUs, as customers increasingly build solutions that leverage both AI and non-AI infrastructure. The remaining spend was for long-lived assets. This quarter, total finance leases were $5.6 billion and were primarily for large data center sites, and cash paid for PP&E was $35.8 billion. Cash flow from operations was $55.4 billion, up 30%, driven by strong cloud billings and collections, partially offset by an increase in operating lease payments.

Free cash flow was $19.6 billion, reflecting higher capital expenditures. Finally, we returned $10.2 billion to shareholders through dividends and share repurchases, bringing our total cash return to shareholders to over $43 billion for the full fiscal year. Now to our commercial results. Commercial bookings grew 18% when excluding the impact from OpenAI, driven by strong execution in our core annuity sales motions and reflecting broad customer demand across geographies and customer segments. Bookings increased 10% and 11% in constant currency when including Azure commitments from OpenAI. Commercial remaining performance obligation grew 84% to $678 billion. All sequential commercial RPO growth was driven by commitments from customers outside of Frontier Model companies, and RPO increased 25% when excluding OpenAI. RPO, including OpenAI, has a weighted average duration of 2.3 years, and roughly 30% will be recognized in revenue in the next 12 months, up 37% year-over-year.

The remaining portion, recognized beyond the next 12 months, increased 112%. Microsoft Cloud revenue was $59.3 billion and grew 27%, reflecting strong demand across Azure and our first-party AI applications and services. For the full year, our cloud revenue surpassed $214 billion, with nearly 90% from customers outside of Frontier Model companies. Microsoft Cloud gross margin percentage was better than expected at 65% and down year-over-year, driven by sales mix shift to Azure, as well as continued investments in AI infrastructure and increased product usage, partially offset by ongoing efficiency gains noted earlier. Now to our segment results. Revenue from productivity and business processes was $37.8 billion and grew 14%. M365 commercial cloud revenue increased 16% on adjusted basis when normalized for the prior year comparable that benefited from two points of in-period revenue recognition. On a reported basis, revenue growth was 14%.

Building on our Copilot momentum from Q3, net paid seat adds more than doubled sequentially, with paid seats now over 30 million. Premium offerings, including Copilot, E5, and early traction in E7, drove ARPU growth this quarter. 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 19%, ahead of expectations, driven by large, long-duration M365 contracts that resulted in higher in-period revenue recognition from the Windows Commercial on-premises component. M365 consumer cloud revenue increased 24%, and 22% in constant currency, again driven by ARPU growth. M365 consumer subscriptions grew 7%. LinkedIn revenue increased 12% and 10% in constant currency, primarily driven by marketing solutions. Dynamics 365 revenue increased 13% and 12% in constant currency against a strong prior year comparable.

Bookings growth at ERP remains healthy, while CRM continued to moderate with longer sales cycles. Segment gross margin dollars increased 14% and 13% in constant currency, and gross margin percentage decreased slightly with increased Microsoft 365 Copilot usage as we continue to invest in product quality and drive further efficiency gains. Operating expenses increased 11%, primarily driven by the shared R&D investments mentioned earlier. Operating income increased 15% and 14% in constant currency, and operating margins increased year-over-year to 58%. Next, the intelligent cloud segment. Revenue was $39.3 billion and grew 32% and 31% in constant currency. In Azure and other cloud services, revenue grew 43% against a prior year that included accelerating growth. Customer demand continues to exceed available capacity. Revenue growth was ahead of expectations, driven by efficiency gains across our CPU and GPU fleet, as well as process improvements to enable earlier delivery of new capacity.

That additional in-quarter capacity for Azure was quickly monetized. Results also benefited from stronger than expected GitHub Copilot consumption following the June business model change to align pricing with usage and value. In our on-premises server business, revenue was relatively unchanged year-over-year and was down 1% in constant currency. Results were ahead of expectations, primarily driven by renewals with higher in-period revenue recognition from the mix of contracts. Segment gross margin dollars increased 24% and gross margin percentage decreased year-over-year, primarily driven by sales mix shift to Azure, as well as the continued scaling of our AI infrastructure ahead of growing demand, partially offset by ongoing efficiency gains in Azure. Segment gross margins were also impacted by growing GitHub Copilot usage, though margins improved through the quarter with the June business model change to usage-based pricing.

Operating expenses increased 10%, driven by shared R&D investments noted earlier. Operating income grew 31%, and operating margins, with a strong focus on efficiencies and investment returns, were relatively unchanged year-over-year at 41%. Now to more personal computing. Revenue was $12.9 billion and declined 4% and 5% in constant currency. Windows OEM and devices revenue decreased 7%, and Windows OEM decreased 5%, driven by lower PC market demand and a high prior year comparable that benefited from Windows 10 end of support. Results were ahead of expectations as OEM and channel partners continued to build inventory given increasing component prices. Search advertising revenue ex TAC increased 10% and 9% in constant currency, with growth driven by higher revenue per search across Edge and Bing, as well as higher volume, though growth was impacted by third-party partnerships. In Xbox, revenue decreased 10% and 11% in constant currency.

Xbox content and services revenue decreased 10% against a prior year comparable that benefited from strong first-party content performance. Segment gross margin dollars decreased 2%, and gross margin percentage increased year-over-year, driven by lower amortization from the Activision acquisition. Operating expenses increased 8% and 7% in constant currency, driven by the continued investments in shared R&D noted earlier, as well as impairment charges in Xbox. Operating income decreased 14% and 15% in constant currency, and operating margins decreased year-over-year to 21%. Before I move to outlook, effective at the start of FY 2027, we are extending the estimated useful life of our data centers and office buildings from 15-25 years, reflecting our operating history and expected use of these assets. The impact of this update is reflected in today's guidance.

This change affects only the timing of future depreciation and is expected to have a minimal benefit to FY 2027 operating income. The greater impact is on capital expenditures, as more of our future data center leases will shift from finance leases to operating leases as a result of this update. Finance leases are included in capital expenditures, while operating leases are not. Outside of this useful life impact, our calendar year 2026 CapEx investment expectations remain unchanged. However, the shift from finance to operating leases adjusts our expectation to approximately $175 billion. Moving to our outlook. Let me start with some full-year commentary for FY 2027. First, some reminders. In both M365 commercial products and server products KPIs, we are lapping higher transactional purchasing from the timing of product launches and expect revenue from both to decline in the mid-single digits for the full fiscal year.

Growth in Windows OEM and devices will be impacted by lower PC market demand as higher component costs increase device pricing, a prior year comparable that benefited from Windows 10 end of support, and elevated inventory levels. As a result, we expect revenue to decline in the high teens for the fiscal year. Moving to FX. Assuming current rates remain stable, we now expect FX to decrease full-year fiscal revenue growth by less than one point, with no meaningful impact to COGS and operating expense growth. At the company level, with strong commercial momentum, we continue to expect another fiscal year of double-digit revenue and operating income growth. Operating expenses should grow in the mid to high single digits, reflecting continued investment in R&D compute capacity, talent, and data. We expect FY 2027 capital expenditures will grow year-over-year, given demand signals across our portfolio.

Even as we invest to meet growing demand, full fiscal year operating margins should be down less than a point. In addition, we expect to remain free cash flow positive in FY 2027. Finally, we expect our FY 2027 effective tax rate to be approximately 20%. To the outlook for our first quarter, which unless specifically noted otherwise, is on a U.S. dollar basis. Based on current rates, we expect FX to decrease total revenue growth by less than one point, with no meaningful impact to COGS or operating expense growth. Within the segments, we expect FX to decrease revenue growth in productivity and business processes by roughly one point and intelligent cloud by less than one point. There is no meaningful impact in more personal computing. Starting with our commercial business.

In commercial bookings, when adjusted for the impact from OpenAI, we expect healthy growth on a growing expiry base driven by strong execution across our core annuity sales motions. As a reminder, the significant OpenAI contract signed in the prior year will result in some quarterly volatility in both bookings and RPO growth rates. Microsoft Cloud gross margin percentage should be relatively stable quarter-over-quarter. To segment guidance. In productivity and business processes, we expect revenue of $36.7 billion-$37 billion or growth of 11%-12%. In M365 commercial cloud, we expect growth of approximately 16% in constant currency on an adjusted basis, which normalizes for the prior year comparable that benefited from one point of end-period revenue recognition or 15% on a reported basis.

Sequential growth from our momentum in Copilot, E5, and E7 is mitigated a bit by the lower ARPU new seat adds in front-line worker and small and medium business SKUs. With the premium SKU momentum and the increased monetization opportunity from adding usage-based billing products alongside per-seat licensing in July, we expect to see acceleration in M365 commercial cloud revenue growth through this fiscal year. M365 commercial product revenue should grow in the mid-single digits, driven by the timing of long-duration M365 contracts, partially offset by the impact from the prior year comparable noted earlier. M365 consumer cloud revenue should grow in the mid-teens, down sequentially, as we 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 in the high single digits.

In Dynamics 365, we expect revenue growth to be in the low teens, relatively stable quarter-over-quarter, driven by continued growth in ERP, although impacted by the bookings trends noted earlier. For Intelligent Cloud, we expect revenue of $40.95 billion-$41.25 billion or growth of 33%-34%. In Azure, we expect revenue growth of approximately 45% in constant currency, we remain focused on delivering efficiencies that help us bridge the gaps we see as customer demand continues to exceed supply. Even with the strong close to Q4, we continue to expect H1 growth to accelerate. As a reminder, year-over-year Azure growth rates can vary quarter to quarter based on capacity, timing, and contract mix.

In our on-premises server business, we expect revenue to decline in the low to mid-single digits with ongoing customer shift to cloud offerings and the prior year comparable noted earlier. In more personal computing, we expect revenue to be $12.2 billion-$12.7 billion as we continue to lap the strong prior year comparables noted earlier and navigate complex PC market dynamics impacted by component prices and inventory levels. Windows OEM and devices revenue should decline in the low 20s, driven by the market dynamics noted earlier. As in prior quarters, the range of potential outcomes remains wider than normal. Search advertising revenue ex-TAC growth should be in the mid-single digits, down sequentially, due to the impact of third-party partnerships. Growth will continue to be driven by consistent trends in revenue per search and volume.

In Xbox content and services, we expect revenue to decline in the mid-single digits. Hardware revenue should decline year-over-year. Therefore, at the total company level, revenue should be between $89.85 billion and $90.95 billion, or growth of 16%-17%, with accelerating commercial growth partially offset by the impact from the PC market dynamics noted earlier. We expect COGS of $29.6 billion-$29.8 billion, or growth of 23%-24%. Operating expense of $16.8 billion-$16.9 billion, or growth of 7%-8%, driven by continued investment in R&D compute capacity and talent. Operating margins should be relatively flat year-over-year.

Excluding any impact from our investments in OpenAI, other income and expense is expected to be roughly negative $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 Q1 effective tax rate to be approximately 20%. Next, capital expenditures. We expect CapEx spend will be over $50 billion, including the lease reclassification impact from the useful life update. In closing, in FY 2026, we delivered accelerating revenue and operating income growth while expanding operating margins. Our execution across sales and product engineering strengthened through the second half of the year. As we begin FY 2027, we remain focused on delivering products that create meaningful return on investment for our customers, which will result in durable long-term growth for Microsoft and our shareholders. 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. 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. One moment please while we poll for questions. Our first question comes from the line of Karl Keirstead with UBS. Please proceed.

Okay, great. Thank you. Satya, maybe I'll start away from the numbers and ask if you could spend a minute and elaborate on your opening comments about model choice and the protection of corporate IP. Maybe I could ask this in two parts. First, how material do you think traction could be for open and custom models over the next year or two, knowing that many enterprises might be initially reticent to use open models? Secondly, how exactly does Microsoft benefit from this shift, knowing that you've also got fairly large Frontier Lab exposure? Thanks so much.

Thank you, Karl. The way we are coming at this is, at the end of the day, the goal is to have the firm be in control of their own destiny in terms of what I describe as building their human capital and their token capital. Right? At the end of the day, if a firm is a learning machine, they need their own learning machine. That's really the goal. The models are an input, not some extraction of the knowledge of the enterprise, but in some sense, you have to really, at the end of the day, every firm is going to evaluate who are the providers who are helping them with their outcomes and their knowledge creation. I think that that is now fairly clear, and it's going to become clearer by the day.

This is not going to be about, come in and take all my knowledge and benefit yourself, whereas I am not getting anything out of it. Given that direction of travel, we are very clear about the architectural design of the platform, which is you've got to keep your harness separate from the model. The harness will ensure that your memory, your context, all of that is external. That means any given model at any given time is swappable. You should and you can use frontier models. There's no reason not to. You also can use multiple of them. Right?

If you look at some of the stats I gave, it's a great example of how to use the frontier models for what they deliver, how to use low-cost models for what they deliver, and in fact, train your own model when you don't want to use any external model itself, because after all, you have all the outputs, you have all the traces, you have all the context. That's really the enterprise design architecture that we are going to evangelize. We ourselves are using it. Copilot is built that way. GitHub Copilot is built that way. Our Security Copilot is built that way. We want to democratize that design pattern so that every enterprise can use it. Within there will be a mix of open weights, closed weights.

By the way, one of the things that Lisa talked about is, remember, if you look even at the Hugging Face incident, the biggest thing that we should take away from that is you can't depend on any one model. You will maybe need multiple models to even remediate some challenges that get caused by one model. That's the way to think about it, which is you can't be subject to the refusal of the one model. There's a lot more design space here. We talk about the frontier as if it's one thing. The frontier is about every firm having a frontier and the choice, the cost control, and the capability that they need in order to be able to control their destiny.

I think maybe, Karl, just to add a little bit to the end of your question, which is that it's why it's important that the platform is built, and I think Satya mentioned this in his comments, to be able to deliver the right model for the right job on the architecture called Azure. Given that we continue to see growing demand, no matter what model is chosen or what model family or whether it's run a model of your own, the Azure platform's quite efficient at delivering that. Think about that infrastructure as being pretty fungible.

Thanks, Karl. Operator, next question, please.

The next question comes from the line of Brent Thill with Jefferies. Please proceed.

Thanks. Amy, impressive acceleration in Azure, up to 43, going to mid-40s. I guess the questions around the underlying drivers, what you and Satya are seeing in terms of just what's driving this, and many of the questions around capacity constraints. Are we just still in the same environment, or is this Microsoft just executing better given the constraints we're all seeing? Thanks.

Thanks, Brent. There are still constraints in the system. I think we've continued to say, I think now for a number of quarters, that demand continues to exceed available supply, that certainly remains true. You can even see it, I think, in some of the pricing that's occurring in the spot market for assets. When you think about being able to deliver better, the first thing we focus on, and I tried to talk a little bit about it in my prepared remarks, is efficiency. Being able to get more out of everything that we've got in the fleet. That applies to efficiency gains in the CPU fleet. It's going to be efficiency gains in the GPU fleet. We saw a good work this quarter, in particular from our engineering teams, to make as much of that available as we could.

Because of the supply-demand imbalance we've been talking about, when we can make efficiency gains, they are quickly monetized in the quarter. I think that dynamic certainly impacted the quarter positively. I would also say, some of the process improvements we've made to make sure both CPUs and GPUs, just the lead time from how quickly we can get things, to simplify it tremendously, plugged in, was also improved over the past 90 days. Those improvements, again, are very quickly monetized when we're able to do that. At the scale that we're operating, in terms of across the entire hyperscale fleet, making efficiency improvements that can be quickly monetized does result in acceleration in the quarter. It's part of also what we expect to see and talk about with the Q1.

Thanks, Brent. Operator, next question, please.

The next question comes from the line of Mark Moerdler with Bernstein Research. Please proceed.

Thank you very much for taking my question. Congratulations on the solid, really great quarter. Satya, Amy, sentiment around AI remains incredibly volatile, with concerns about oversupply coming, as well as concerns about component pricing increasing, impacting margins. Amy, two related questions. On the flip side of that, how do you manage through the hardware price increases that we're seeing, the component prices? That it doesn't just drive you to either massively drive up the price of your offerings or negatively impact your margins. Thank you.

Thanks, Mark. The questions are a little bit related. I'll start with maybe the first. Currently, the situation is obviously that demand exceeds available supply in a sort of relatively extreme moment. When you start to think about over the duration, I try to remind people, a lot of the expense, especially you see it in CapEx. You've seen our CapEx really pivot toward what I would call and do call short-lived assets, which really, right, that's CPUs and GPUs that have relatively shorter lead times. If the demand environment changes, you just slow down what is, in fact, the largest component, right, and the driver of COGS. The investment into land and data center builds is actually quite flexible, right? It's a smaller percentage of the overall cost structure, and timing can be changed on much of that, especially on the builds.

Microsoft (MSFT) Q4 2026 Earnings Call Transcript

Company Participants