Microsoft has released its financial results for the second quarter of fiscal year 2026, showing strong overall growth fueled by cloud services and artificial intelligence. The company reported total revenue of USD 81.3 billion and net income of USD 30.9 billion, marking a 17% year-on-year increase. Cloud computing and AI once again proved to be the company’s primary growth engines as global demand for digital transformation continues to rise.
The most notable highlight from the report is Microsoft Cloud revenue surpassing USD 50 billion for the first time. Azure remained the key driver, recording 39% growth as enterprises worldwide accelerate cloud adoption and AI integration. CEO Satya Nadella stated that AI has already grown into a business larger than some of Microsoft’s traditional core services, despite the massive infrastructure investments required to support it.
While enterprise services are thriving, the More Personal Computing segment was the only division to see a decline, with revenue dropping 3% to USD 14.3 billion. The downturn was largely attributed to the gaming business, where Xbox hardware revenue fell sharply by 32%. This decline reflects a slowdown in console sales and a lack of major first-party game releases during the quarter, a challenge often seen as hardware platforms approach the later stages of their market cycle.
On a more positive note, Windows continues to show resilience, with Windows 11 users surpassing one billion, representing 45% growth compared to the previous year. The upcoming end of support for Windows 10 has encouraged both consumers and businesses to upgrade their systems, contributing to a 5% increase in Windows OEM revenue, which helped offset some of the losses from the gaming hardware segment.
The Surface device lineup experienced a quieter quarter, with no major new product launches following earlier releases of updated Surface Pro and Surface Laptop models. As a result, hardware revenue declined modestly. Analysts suggest this is a temporary pause ahead of a new wave of AI-powered devices expected to arrive later in the year.
Overall, Microsoft continues to position itself as a cloud and AI powerhouse, with Azure and AI services carrying the company’s financial momentum. While Xbox hardware faces short-term challenges, the strength of Windows and the ongoing shift toward AI-focused computing suggest that Microsoft’s financial outlook remains solid through the remainder of the fiscal year.
Source: The Verge
