Microsoft reported its fourth-quarter 2026 earnings, showing that its search and advertising revenue was up 10%, indicating its ad growth was 2 points lower than the previous quarter. The previous quarter it was up 12%, before that up 10% before that, up 16% and the one before that was 21% and this quarter, it is only up 10%.
Microsoft wrote, “Search advertising revenue excluding traffic acquisition costs increased 10% (up 9% in constant currency).” The 10% year-over-year ex-TAC growth reflects steady performance, down slightly from the 12% growth reported in Q3 FY26, but in line with the 10% rate seen in earlier quarters this fiscal year.
Search sits within the More Personal Computing division which total revenue was down 4% overall to $12.9B due to lower Windows OEM and Xbox performance. Search advertising was the primary growth driver in this segment. Windows OEM and devices was down 7%, Xbox was down 10% but Search advertising was up 10%.
Microsoft reports Q3 revenue up 18% YoY to $90 billion, operating income up 18% to $40.6 billion, and net income up 31% to $35.8 billion. Microsoft stock price is up over 3% in after-hours trading within 10 minutes of the earnings report being out, but it is fluctuating. After 6pm, the stock soared up over 7%. Year-to-date, Microsoft’s stock price is down over 17%.
Here is the chart I made showing just the ad dollar change from quarter to quarter, so you can see just that:
Here are the highlights from the earnings release:
- Revenue was $90.0 billion and increased 18% (up 17% in constant currency)
- Operating income was $40.6 billion and increased 18%
- Net income was $35.8 billion and increased 31% on a GAAP basis, and was $35.3 billion and increased 22% on a non-GAAP basis
- Diluted earnings per share was $4.81 and increased 32% on a GAAP basis, and was $4.74 and increased 23% on a non-GAAP basis
- Non-GAAP results exclude the impact from investments in OpenAI, explained in the Non-GAAP Definition section below
Microsoft beat on the top and bottom line but the company is losing some top leaders, with two senior execs announcing plans to retire during the quarter.
Satya Nadella, Microsoft’s CEO, said:
We are advancing the frontier on the cost-to-outcome curve, ensuring every customer can turn tokens into business results.
This year, Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation.
Forum discussion at X.
