Microsoft’s big financial bet on artificial intelligence got even bigger in the December quarter, but it also showed continued signs of paying off for its cloud business.
The company spent $37.5 billion on capital expenditures during the second quarter of its 2026 fiscal year, up 66% from a year ago, with roughly two-thirds going toward GPUs and other hardware to power its AI and cloud offerings.
Revenue rose 17% to $81.3 billion, topping the $80.3 billion analyst consensus, and adjusted earnings per share jumped 24% to $4.14, well ahead of the $3.85 expected by Wall Street.
Azure, Microsoft’s cloud computing platform, which is increasingly driven by AI demand, posted revenue growth of 39% in the quarter, or 38% in constant currency. That exceeded the company’s previous guidance of 37% growth.
The broader Microsoft Cloud business, which also includes commercial subscriptions to Microsoft 365, LinkedIn, and Dynamics 365, topped $50 billion in quarterly revenue for the first time.
The results come with an accounting quirk tied to Microsoft’s OpenAI investment. Under generally accepted accounting principles, Microsoft recorded a $10 billion gain this quarter stemming from OpenAI’s October recapitalization. That boosted Microsoft’s GAAP earnings per share to $5.16, translating into a 60% jump that doesn’t really reflect its underlying business.
Microsoft’s adjusted earnings ($4.14/share) strip out the OpenAI impact for clarity. On the flip side, the company expects to record accounting losses in future quarters as OpenAI spends down its cash.
Meanwhile, he company’s remaining performance obligations (RPO), a closely watched measure of contracted future revenue, more than doubled to $625 billion. OpenAI accounts for roughly 45% of that backlog, reflecting the AI company’s long-term commitments to use Microsoft’s Azure cloud infrastructure under their renegotiated partnership.
The rest of Microsoft’s RPO balance grew 28%, which the company said was aided by a commitment from Anthropic, another leading AI company that has become an Azure customer.
Microsoft shares were down 4% in initial after-hours trading.
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