Three segments carry the group
Microsoft is a software group based in Redmond in the US state of Washington. The company reports its figures in three segments. “Productivity and Business Processes” bundles Microsoft 365 with Word, Excel and Teams, plus LinkedIn and the business software Dynamics. “Intelligent Cloud” contains the cloud platform Azure, classic server products and the developer platform GitHub. “More Personal Computing” covers Windows, devices, the Xbox division and the advertising business around the search engine Bing.
Microsoft’s financial year ends in June. The 2026 financial year therefore ran from July 2025 to June 2026. In the final quarter, the weighting of the three areas was clearly visible. According to the earnings release for the fourth quarter, Productivity and Business Processes generated revenue of $37.8 billion, an increase of 14%. Intelligent Cloud grew by 32% to $39.3 billion. More Personal Computing declined by 4% to $12.9 billion.
For you as an investor, this means that Microsoft has long since stopped being a pure Windows company. Today, the share price depends above all on Azure, on subscription revenue from Microsoft 365 and on whether the huge AI investments pay off.
The 2026 financial year in figures
In the 2026 financial year, Microsoft generated revenue of $331.8 billion, an increase of 18%. Operating income rose by 21% to $155.2 billion. Net profit climbed by 31% to $133.7 billion. Microsoft earned $17.95 per share.
Part of this jump in profit is a one-off effect. Valuation gains from the OpenAI stake contributed around $5 billion to net profit. Items like these have little to do with the operating business. When you compare financial years, you should mentally strip them out.
The most important single item remains Azure. In the 2026 financial year, the cloud platform passed the mark of $100 billion in annual revenue for the first time. In the final quarter, Azure grew by 43%. According to management, demand continues to exceed the available computing capacity. The stock market rewarded this: according to CNBC, the stock was up by as much as 8% at times after the results.
AI strategy: Copilot, OpenAI and its own chips
Microsoft earns money from artificial intelligence on several levels. The most visible level is Copilot, the AI assistant in Windows and Microsoft 365. According to the earnings release, the paid enterprise version reached more than 30 million licenses. Each license costs extra on top of the normal Microsoft 365 subscription. Copilot thus turns the existing business into a second source of revenue.
The second level is the partnership with OpenAI. In October 2025, the two companies restructured their agreement. According to the Microsoft blog, Microsoft has since held around 27% of OpenAI Group, valued at about $135 billion. In return, OpenAI committed to purchasing Azure services worth $250 billion. Microsoft may use OpenAI’s models in its own products until 2032. The relationship is no longer exclusive, however. OpenAI may now also obtain computing power from other providers.
The third level is its own foundation. The new agreement allows Microsoft, under AI chief Mustafa Suleyman, to conduct its own research on frontier models. At its Build developer conference in June 2026, the group presented seven of its own MAI models, including models for reasoning, coding, images and speech. On top of this comes its own hardware: according to CNBC, the AI chip Maia 200 is already running in Microsoft data centers and is meant to reduce dependence on Nvidia.
This strategy costs an enormous amount of money. In the final quarter alone, Microsoft invested $41 billion in property and equipment, 70% more than a year earlier. For calendar year 2026, the group plans capital spending of around $175 billion, mainly on data centers.
Dividend and share buybacks
Microsoft pays a dividend four times a year. It currently stands at $0.91 per share per quarter, and the next payment follows on September 10, 2026. On an annual basis, that comes to $3.64 per share. Measured against the share price, the dividend yield at the end of July 2026 was around 0.8%, according to Aktienfinder (in German).
The low yield tells only part of the story. Microsoft has raised its payout regularly for many years and also buys back its own shares. In the final quarter, a total of $10.2 billion went to shareholders through dividends and buybacks. For German residents: US dividends are subject to withholding tax, and the German capital gains tax (Abgeltungsteuer) covers the rest.
Risks you should know about
The investments still have to earn a return. Capital spending of around $175 billion in a single calendar year creates high depreciation over many years. If AI demand falls short of expectations, expensive data centers with low utilization will sit on the books. This very concern has weighed on the share price again and again in recent quarters.
The cloud market remains fiercely contested. In Amazon Web Services and Google Cloud, two financially strong rivals compete for the same customers. All three are building up capacity on a massive scale. In the long run, this could push down prices and margins. Since the new agreement, OpenAI is also freer and in some areas competes with Microsoft itself.
Regulators are looking more closely. In the EU, the Commission accepted binding commitments in September 2025 under which Microsoft decouples the Teams software from the Office suite. In the US, according to The Register, the FTC is examining the licensing terms in the cloud and the bundling of AI products. Proceedings like these run for years and can lead to remedies or fines.
The valuation leaves little room for error. At the beginning of August 2026, the market capitalization was around $3.7 trillion according to Stock Analysis, with a price-to-earnings ratio of just under 28. At times, the value had even passed the mark of $4 trillion. A price like this assumes that cloud and AI will keep growing strongly for many years. Even a slight disappointment at Azure can then trigger significant price moves.
The OpenAI stake fluctuates too. The valuation gains of around $5 billion in the 2026 financial year can reverse in weak phases. For Microsoft, OpenAI is at the same time an investment, a major customer and a competitor. This mix makes the income statement harder to read.
How I assess the stock
Record figures and pressure on the share price are not mutually exclusive. Microsoft delivered a strong financial year, yet in August 2026 its market value was below its high. The reason rarely lies in the business itself. Usually, it is only the expectations about the future that change. That is why I keep the two levels strictly apart.
First, I check the business. Is Azure still growing at a high pace, and are margins holding up despite the investments? Next, I look at the long-term trend. If the price is trading above its rising moving averages, I am acting with the market rather than against it. Finally, I check short-term momentum, for example with the Relative Strength Index. None of these points is a signal on its own. Together, however, they form a sequence that protects against hasty decisions.
My conclusion on Microsoft stock
Microsoft combines a broad, high-margin software business with the biggest investment bet in its history. Azure delivers more than $100 billion in annual revenue, Copilot turns existing customers into additional revenue, and with its own models and chips the group is reducing its dependencies. That is the strength of this stock.
The open question is: will the data centers earn back the capital invested? Around $175 billion in a single year is a statement that still has to prove itself in future profits. On top of that come competition, antitrust proceedings and a valuation that assumes sustained growth.
This analysis is not a recommendation to buy or sell. It gives you the facts against which you can measure the stock. Check the business, the trend and your own portfolio. Only then does a decision make sense.