How does Microsoft (MSFT) make money?

Microsoft (MSFT) primarily makes money through Server Products And Cloud Services, which accounts for 37.8% of total revenue. For TTM through Q1 2026, Microsoft generated $318.27B in total revenue with a net profit margin of 39.3%.

What is Microsoft (MSFT) gross profit margin?

Microsoft (MSFT) reported a gross profit margin of 68.3% for TTM through Q1 2026, equivalent to $217.41B in gross profit. This means Microsoft retains 68.3% of each revenue unit after direct costs of production.

What is Microsoft (MSFT) operating profit margin?

Microsoft (MSFT) reported an operating profit margin of 46.8% for TTM through Q1 2026, equivalent to $148.96B in operating profit. This reflects profitability after operating expenses such as R&D, sales, and administration, but before taxes and non-operating items.

What is Microsoft (MSFT) net profit margin?

Microsoft (MSFT) reported a net profit margin of 39.3% for TTM through Q1 2026, equivalent to $125.22B in net profit. This is the share of revenue that remains as profit after all expenses, taxes, and non-operating items.

How much does Microsoft (MSFT) invest in R&D?

Microsoft (MSFT) invested $34.39B in research and development in TTM through Q1 2026 (10.8% of total revenue). R&D spending reflects investment in future products, services, and technologies.

How much does Microsoft (MSFT) spend on capital expenditures?

Microsoft (MSFT) spent $97.22B on capital expenditures in TTM through Q1 2026 (30.5% of total revenue). Capital expenditures represent investments in physical assets such as property, equipment, and infrastructure.

What is Microsoft (MSFT) free cash flow?

Microsoft (MSFT) generated $72.92B in free cash flow for TTM through Q1 2026 (22.9% of total revenue). Free cash flow is the cash remaining after capital expenditures and represents the company's ability to fund growth, pay dividends, or reduce debt.

What is Microsoft (MSFT) effective tax rate?

Microsoft (MSFT) had an effective tax rate of 19% for TTM through Q1 2026. This is the actual percentage of pre-tax income paid as income taxes.

How Microsoft (MSFT) Makes Money: A Visual Guide

Microsoft (MSFT) generated $318.27B in revenue, earning $125.22B in net profit (39.3% margin). Its largest revenue source is Server Products And Cloud Services (37.8% of revenue). Below is an interactive breakdown of how revenue flows through the income statement.

Microsoft (MSFT) Income Statement Flow — TTM through Q1 2026

Calculated from the four most recent reported quarters, ending March 31, 2026 (reported April 29, 2026).

Frequently asked questions

How does Microsoft (MSFT) make money?: Microsoft (MSFT) primarily makes money through Server Products And Cloud Services, which accounts for 37.8% of total revenue. For TTM through Q1 2026, Microsoft generated $318.27B in total revenue with a net profit margin of 39.3%.
What is Microsoft (MSFT) gross profit margin?: Microsoft (MSFT) reported a gross profit margin of 68.3% for TTM through Q1 2026, equivalent to $217.41B in gross profit. This means Microsoft retains 68.3% of each revenue unit after direct costs of production.
What is Microsoft (MSFT) operating profit margin?: Microsoft (MSFT) reported an operating profit margin of 46.8% for TTM through Q1 2026, equivalent to $148.96B in operating profit. This reflects profitability after operating expenses such as R&D, sales, and administration, but before taxes and non-operating items.
What is Microsoft (MSFT) net profit margin?: Microsoft (MSFT) reported a net profit margin of 39.3% for TTM through Q1 2026, equivalent to $125.22B in net profit. This is the share of revenue that remains as profit after all expenses, taxes, and non-operating items.
How much does Microsoft (MSFT) invest in R&D?: Microsoft (MSFT) invested $34.39B in research and development in TTM through Q1 2026 (10.8% of total revenue). R&D spending reflects investment in future products, services, and technologies.
How much does Microsoft (MSFT) spend on capital expenditures?: Microsoft (MSFT) spent $97.22B on capital expenditures in TTM through Q1 2026 (30.5% of total revenue). Capital expenditures represent investments in physical assets such as property, equipment, and infrastructure.
What is Microsoft (MSFT) free cash flow?: Microsoft (MSFT) generated $72.92B in free cash flow for TTM through Q1 2026 (22.9% of total revenue). Free cash flow is the cash remaining after capital expenditures and represents the company's ability to fund growth, pay dividends, or reduce debt.
What is Microsoft (MSFT) effective tax rate?: Microsoft (MSFT) had an effective tax rate of 19% for TTM through Q1 2026. This is the actual percentage of pre-tax income paid as income taxes.

Data & methodology

What is a Sankey diagram?: A Sankey diagram shows how money flows through a company from revenue to net profit. The width of each flow represents its proportion.
How is the data calculated?: We use the income statement from company filings. For TTM (Trailing Twelve Months), we use a pre-aggregated twelve-month view aligned with our latest four quarterly periods. Revenue flows to cost of revenue and gross profit, then to operating expenses (R&D, S&M, G&A) and operating profit.
When was this data last updated?: Based on company filings through TTM through Q1 2026.