How does Microsoft (MSFT) make money?

Microsoft (MSFT) generates revenue primarily from Server Products And Cloud Services, which accounted for 37.8% of total revenue in TTM through Q1 2026. The company reported $318.27B in revenue and converted 39.3% of it into net profit, equivalent to roughly $125.22B in net income — what's left after the cost of revenue, operating expenses, interest, and income taxes.

What is the gross profit margin of Microsoft (MSFT)?

Microsoft (MSFT) reported a gross profit margin of 68.3% in TTM through Q1 2026, equivalent to $217.41B in gross profit on $318.27B in revenue. Gross margin measures how much of each dollar of revenue remains after the direct cost of producing or delivering the product — a higher figure typically signals pricing power, scale, or a less capital-intensive business model.

What is the operating profit margin of Microsoft (MSFT)?

Microsoft (MSFT) reported an operating profit margin of 46.8% in TTM through Q1 2026, equivalent to $148.96B in operating income. Operating margin captures profitability after research & development, sales & marketing, and general & administrative expenses — but before interest, taxes, and one-off items — and is the cleanest single read on the underlying business's efficiency.

What is the net profit margin of Microsoft (MSFT)?

Microsoft (MSFT) reported a net profit margin of 39.3% in TTM through Q1 2026, equivalent to $125.22B in net income. Net margin is the bottom-line share of revenue that survives every expense — operating costs, interest, and income taxes — and is the figure that flows directly into earnings per share.

Is Microsoft (MSFT) profitable?

Yes. Microsoft (MSFT) reported $125.22B in net income for TTM through Q1 2026, with a net profit margin of 39.3%. The company earned more from its operations than it paid out in costs, interest, and income taxes, leaving positive earnings on the bottom line.

How much does Microsoft (MSFT) invest in research and development?

Microsoft (MSFT) invested $34.39B in research and development during TTM through Q1 2026, roughly 10.8% of total revenue. R&D spending funds the company's future product pipeline and is expensed in full on the income statement rather than capitalised, which makes the operating margin sensitive to how aggressively management chooses to reinvest in innovation.

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

Microsoft (MSFT) spent $97.22B on capital expenditures (CapEx) during TTM through Q1 2026, roughly 30.5% of total revenue. CapEx represents long-lived investment in property, equipment, data centres, and other physical infrastructure, and is subtracted from operating cash flow to arrive at free cash flow.

How much free cash flow does Microsoft (MSFT) generate?

Microsoft (MSFT) generated $72.92B in free cash flow during TTM through Q1 2026, a free-cash-flow margin of 22.9%. Free cash flow is the cash left after capital expenditures and represents the discretionary pool the company can use to pay dividends, repurchase shares, repay debt, or fund acquisitions without raising external capital.

What is the effective tax rate of Microsoft (MSFT)?

Microsoft (MSFT) had an effective tax rate of 19% in TTM through Q1 2026. The effective rate is the actual share of pre-tax income paid as income taxes and can differ materially from the statutory rate due to foreign earnings mix, tax credits (such as R&D), share-based compensation deductions, and one-off discrete items.

What are the main business segments of Microsoft (MSFT)?

Microsoft (MSFT) reports revenue across 10 reportable product segments, led by Server & Cloud at 37.8% of total revenue in TTM through Q1 2026. See the revenue-by-segment table on this page for the full breakdown and how each segment feeds into the income-statement waterfall above.

Where does Microsoft (MSFT) generate most of its revenue?

UNITED STATES is the largest geographic market for Microsoft (MSFT), accounting for 51.2% of revenue in the most recent annual filing. The complete regional split — including international markets and any Rest-of-World rollup — is shown in the revenue-by-geography table on this page.

How Microsoft Makes Money: 2026 Visual Revenue Map

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).

Microsoft (MSFT) Revenue by Product Segment — TTM through Q1 2026

Aggregated from the four quarterly disclosures behind this TTM. Minor differences vs the company's annual filing can occur if reported segments changed mid-year.

Revenue contribution by product segment for Microsoft (MSFT) in TTM through Q1 2026.
Segment	Revenue (USD)	% of total
Server & Cloud	$120.21B	37.8%
Microsoft 365 Commercial	$98.40B	30.9%
Gaming	$22.34B	7%
LinkedIn	$19.25B	6%
Windows	$17.40B	5.5%
Search Ads	$14.91B	4.7%
Microsoft 365 Consumer	$8.84B	2.8%
Dynamics	$8.77B	2.8%
Other segments	$8.16B	2.6%
Total	$318.27B	100%

Server & Cloud$120.21B
Microsoft 365 Commercial$98.40B
Gaming$22.34B
LinkedIn$19.25B
Windows$17.40B
Search Ads$14.91B
Microsoft 365 Consumer$8.84B
Dynamics$8.77B
Other segments$8.16B
Total$318.27B

Microsoft (MSFT) Revenue by Geography — TTM through Q1 2026

Aggregated from the four quarterly disclosures behind this TTM. Minor differences vs the company's annual filing can occur if reported regions changed mid-year.

Revenue contribution by geographic region for Microsoft (MSFT), TTM through Q1 2026
Region	Revenue (USD)	% of total
UNITED STATES	$162.84B	51.2%
Non Us	$155.44B	48.8%
Total	$318.27B	100%

UNITED STATES
Non Us
Total

Revenue Breakdown — TTM through Q1 2026

In TTM through Q1 2026, Microsoft (MSFT) reports revenue across 10 operating segments; the largest segment was Server & Cloud at 37.8%, followed by Microsoft 365 Commercial (30.9%) and Gaming (7%). Separately, by end-market geography, UNITED STATES accounted for 51.2% of revenue, followed by Non Us (48.8%).

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