Microsoft Corporation stock research
FY2026 Q2
Microsoft (MSFT) Gross Margin — Quarter Ended Dec 31, 2025
Revenue increased compared to both the prior quarter and the same quarter last year, while cost of revenue also rose in both comparisons. Gross profit improved, but gross margin weakened slightly from the prior quarter and was lower than the year-ago quarter.
Gross margin takeaway
Quarter ended Dec 31, 2025 · FY2026 Q2
Revenue increased compared to both the prior quarter and the same quarter last year, while cost of revenue also rose in both comparisons. Gross profit improved, but gross margin weakened slightly from the prior quarter and was lower than the year-ago quarter.
- The gross margin declined from the prior quarter despite higher revenue, indicating that cost of revenue grew at a faster pace than revenue. Compared to the same quarter last year, the margin also weakened, with cost of revenue increasing more sharply than gross profit.
- Revenue and gross profit were higher than both the immediately preceding quarter and the same quarter one year earlier. Gross margin was lower than both prior periods, reflecting a relative increase in cost of revenue.
Gross margin snapshot
The selected quarter's reported revenue, gross profit, direct costs, and margin comparisons.
Gross margin
68.0%
Gross profit
$55.3B
Revenue
$81.3B
Cost of revenue
$26.0B
Quarter-over-quarter change
-1.0 pts
Year-over-year change
-0.7 pts
Quarterly gross margin trend
A four-quarter view of the revenue and direct-cost bridge behind gross margin.
| Period | Revenue | Gross profit | Cost of revenue | Gross margin |
|---|---|---|---|---|
| Mar 31, 2025 | $70.1B | $48.1B | $21.9B | 68.7% |
| Jun 30, 2025 | $76.4B | $52.4B | $24.0B | 68.6% |
| Sep 30, 2025 | $77.7B | $53.6B | $24.0B | 69.0% |
| Dec 31, 2025 | $81.3B | $55.3B | $26.0B | 68.0% |
Quarterly comparisons
Compare the selected margin with the preceding quarter and the same fiscal quarter one year earlier.
Previous-quarter change
Sep 30, 2025
-1.0 pts
Year-over-year change
Dec 31, 2024
-0.7 pts
What the margin says
Filing-constrained interpretation of margin direction, comparisons, and what to monitor next.
The gross margin declined from the prior quarter despite higher revenue, indicating that cost of revenue grew at a faster pace than revenue. Compared to the same quarter last year, the margin also weakened, with cost of revenue increasing more sharply than gross profit.
Revenue and gross profit were higher than both the immediately preceding quarter and the same quarter one year earlier. Gross margin was lower than both prior periods, reflecting a relative increase in cost of revenue.
Monitor the trend in cost of revenue relative to revenue, as its faster growth contributed to the margin decline.