UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended December 31, 2025
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Transition Period From to

Commission File Number 001-37845

MICROSOFT CORPORATION

Washington	91-1144442
(STATE OF INCORPORATION)	(I.R.S. ID)

ONE MICROSOFT WAY, REDMOND, Washington 98052-6399

(425) 882-8080

www.microsoft.com/investor

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of exchange on which registered
Common stock, $0.00000625 par value per share	MSFT	Nasdaq
3.125% Notes due 2028	MSFT	Nasdaq
2.625% Notes due 2033	MSFT	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒	Accelerated Filer ☐
Non-accelerated Filer ☐	Smaller Reporting Company ☐
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of January 22, 2026
Common Stock, $0.00000625 par value per share	7,425,629,076 shares

MICROSOFT CORPORATION

FORM 10-Q

For the Quarter Ended December 31, 2025

INDEX

				Page
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		a)	Income Statements for the Three and Six Months Ended December 31, 2025 and 2024	3
		b)	Comprehensive Income Statements for the Three and Six Months Ended December 31, 2025 and 2024	4
		c)	Balance Sheets as of December 31, 2025 and June 30, 2025	5
		d)	Cash Flows Statements for the Three and Six Months Ended December 31, 2025 and 2024	6
		e)	Stockholders’ Equity Statements for the Three and Six Months Ended December 31, 2025 and 2024	7
		f)	Notes to Financial Statements	8
		g)	Report of Independent Registered Public Accounting Firm	29
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		46
	Item 4.	Controls and Procedures		46
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings		47
	Item 1A.	Risk Factors		47
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		62
	Item 5.	Other Information		63
	Item 6.	Exhibits		64
SIGNATURE				65

2

PART I

Item 1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INCOME STATEMENTS

(In millions, except per share amounts) (Unaudited)	Three Months Ended December 31,						Six Months Ended December 31,
	2025		2024				2025		2024
Revenue:
Product	$	16,451	$	16,219		$	32,373	$	31,491
Service and other		64,822		53,413			126,573		103,726
Total revenue		81,273		69,632			158,946		135,217
Cost of revenue:
Product		3,505		3,856			6,427		7,150
Service and other		22,473		17,943			43,594		34,748
Total cost of revenue		25,978		21,799			50,021		41,898
Gross margin		55,295		47,833			108,925		93,319
Research and development		8,504		7,917			16,650		15,461
Sales and marketing		6,584		6,440			12,301		12,157
General and administrative		1,932		1,823			3,738		3,496
Operating income		38,275		31,653			76,236		62,205
Other income (expense), net		9,971		(2,288	)		6,311		(2,571	)
Income before income taxes		48,246		29,365			82,547		59,634
Provision for income taxes		9,788		5,257			16,342		10,859
Net income	$	38,458	$	24,108		$	66,205	$	48,775
Earnings per share:
Basic	$	5.18	$	3.24		$	8.91	$	6.56
Diluted	$	5.16	$	3.23		$	8.87	$	6.53
Weighted average shares outstanding:
Basic		7,431		7,435			7,432		7,434
Diluted		7,460		7,468			7,463		7,469

Refer to accompanying notes.

3

PART I

Item 1

COMPREHENSIVE INCOME STATEMENTS

(In millions) (Unaudited)	Three Months Ended December 31,						Six Months Ended December 31,
	2025			2024				2025			2024
Net income	$	38,458		$	24,108		$	66,205		$	48,775
Other comprehensive income (loss), net of tax:
Net change related to derivatives		(3	)		34			(6	)		24
Net change related to investments		(161	)		(434	)		526			680
Translation adjustments and other		223			(1,034	)		125			(730	)
Other comprehensive income (loss)		59			(1,434	)		645			(26	)
Comprehensive income	$	38,517		$	22,674		$	66,850		$	48,749

Refer to accompanying notes.

4

PART I

Item 1

BALANCE SHEETS

(In millions) (Unaudited)
	December 31, 2025			June 30, 2025
Assets
Current assets:
Cash and cash equivalents	$	24,296		$	30,242
Short-term investments		65,166			64,323
Total cash, cash equivalents, and short-term investments		89,462			94,565
Accounts receivable, net of allowance for doubtful accounts of $729 and $944		56,535			69,905
Inventories		1,059			938
Other current assets		33,134			25,723
Total current assets		180,190			191,131
Property and equipment, net of accumulated depreciation of $104,950 and $93,653		261,126			204,966
Operating lease right-of-use assets		25,103			24,823
Equity and other investments		21,202			15,405
Goodwill		119,622			119,509
Intangible assets, net		20,289			22,604
Other long-term assets		37,770			40,565
Total assets	$	665,302		$	619,003
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	37,328		$	27,724
Current portion of long-term debt		4,837			2,999
Accrued compensation		10,103			13,709
Short-term income taxes		2,050			7,211
Short-term unearned revenue		51,376			64,555
Other current liabilities		24,311			25,020
Total current liabilities		130,005			141,218
Long-term debt		35,425			40,152
Long-term income taxes		27,256			25,986
Long-term unearned revenue		2,668			2,710
Deferred income taxes		2,876			2,835
Operating lease liabilities		17,345			17,437
Other long-term liabilities		58,852			45,186
Total liabilities		274,427			275,524
Commitments and contingencies
Stockholders’ equity:
Common stock and paid-in capital – shares authorized 24,000; outstanding 7,429 and 7,434		112,788			109,095
Retained earnings		280,789			237,731
Accumulated other comprehensive loss		(2,702	)		(3,347	)
Total stockholders’ equity		390,875			343,479
Total liabilities and stockholders’ equity	$	665,302		$	619,003

Refer to accompanying notes.

5

PART I

Item 1

CASH FLOWS STATEMENTS

(In millions) (Unaudited)	Three Months Ended December 31,							Six Months Ended December 31,
	2025			2024				2025			2024
Operations
Net income	$	38,458		$	24,108		$	66,205		$	48,775
Adjustments to reconcile net income to net cash from operations:
Depreciation, amortization, and other		9,198			5,667			17,345			12,383
Stock-based compensation expense		3,219			3,089			6,202			5,921
Net recognized losses (gains) on investments and derivatives		(9,931	)		2,136			(6,024	)		2,678
Deferred income taxes		4,446			(1,158	)		6,937			(2,591	)
Changes in operating assets and liabilities:
Accounts receivable		(3,436	)		(5,978	)		13,054			8,059
Inventories		70			711			(122	)		338
Other current assets		619			(353	)		(543	)		(435	)
Other long-term assets		(1,288	)		(1,089	)		(1,682	)		(2,850	)
Accounts payable		1,197			958			583			42
Unearned revenue		(7,483	)		(6,338	)		(12,901	)		(11,891	)
Income taxes		(920	)		(3,395	)		(3,864	)		(2,379	)
Other current liabilities		2,802			3,217			(2,705	)		(2,262	)
Other long-term liabilities		(1,193	)		716			(1,670	)		683
Net cash from operations		35,758			22,291			80,815			56,471
Financing
Repayments of debt, maturities of 90 days or less		0			0			0			(5,746	)
Repayments of debt		(3,000	)		0			(3,000	)		(966	)
Common stock issued		259			256			948			962
Common stock repurchased		(7,415	)		(4,986	)		(13,065	)		(9,093	)
Common stock cash dividends paid		(6,762	)		(6,170	)		(12,931	)		(11,744	)
Other, net		(699	)		(343	)		(1,368	)		(1,232	)
Net cash used in financing		(17,617	)		(11,243	)		(29,416	)		(27,819	)
Investing
Additions to property and equipment		(29,876	)		(15,804	)		(49,270	)		(30,727	)
Acquisition of companies, net of cash acquired and divestitures, and purchases of intangible and other assets		(455	)		(1,405	)		(1,033	)		(3,254	)
Purchases of investments		(9,845	)		(2,050	)		(27,516	)		(3,670	)
Maturities of investments		12,417			2,604			18,448			4,740
Sales of investments		5,691			2,559			8,953			4,527
Other, net		(637	)		(16	)		(6,846	)		(929	)
Net cash used in investing		(22,705	)		(14,112	)		(57,264	)		(29,313	)
Effect of foreign exchange rates on cash and cash equivalents		11			(294	)		(81	)		(172	)
Net change in cash and cash equivalents		(4,553	)		(3,358	)		(5,946	)		(833	)
Cash and cash equivalents, beginning of period		28,849			20,840			30,242			18,315
Cash and cash equivalents, end of period	$	24,296		$	17,482		$	24,296		$	17,482

Refer to accompanying notes.

6

PART I

Item 1

STOCKHOLDERS’ EQUITY STATEMENTS

(In millions, except per share amounts) (Unaudited)	Three Months Ended December 31,							Six Months Ended December 31,
	2025			2024				2025			2024
Common stock and paid-in capital
Balance, beginning of period	$	110,964		$	102,976		$	109,095		$	100,923
Common stock issued		259			256			948			962
Common stock repurchased		(1,654	)		(1,491	)		(3,455	)		(2,976	)
Stock-based compensation expense		3,219			3,089			6,202			5,921
Other, net		0			(1	)		(2	)		(1	)
Balance, end of period		112,788			104,829			112,788			104,829
Retained earnings
Balance, beginning of period		254,873			188,929			237,731			173,144
Net income		38,458			24,108			66,205			48,775
Common stock cash dividends		(6,757	)		(6,169	)		(13,521	)		(12,340	)
Common stock repurchased		(5,785	)		(3,386	)		(9,626	)		(6,097	)
Balance, end of period		280,789			203,482			280,789			203,482
Accumulated other comprehensive loss
Balance, beginning of period		(2,761	)		(4,182	)		(3,347	)		(5,590	)
Other comprehensive income (loss)		59			(1,434	)		645			(26	)
Balance, end of period		(2,702	)		(5,616	)		(2,702	)		(5,616	)
Total stockholders’ equity	$	390,875		$	302,695		$	390,875		$	302,695
Cash dividends declared per common share	$	0.91		$	0.83		$	1.82		$	1.66

Refer to accompanying notes.

7

PART I

Item 1

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — ACCOUNTING POLICIES

Accounting Principles

Our unaudited interim consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Microsoft Corporation fiscal year 2025 Form 10-K filed with the U.S. Securities and Exchange Commission on July 30, 2025.

We have recast certain prior period amounts on our consolidated cash flows statements to conform to the current period presentation. The recast of these prior period amounts had no impact on our consolidated balance sheets, consolidated income statements, or net cash from (used in) operations, investing, or financing on our consolidated cash flows statements.

Principles of Consolidation

The consolidated financial statements include the accounts of Microsoft Corporation and its subsidiaries. Intercompany transactions and balances have been eliminated.

Estimates and Assumptions

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Examples of estimates and assumptions include: for revenue recognition, determining the nature and timing of satisfaction of performance obligations, and determining the standalone selling price of performance obligations, variable consideration, and other obligations such as product returns and refunds; loss contingencies; the fair value of and/or potential impairment of goodwill and intangible assets for our reporting units; product life cycles; useful lives of our tangible and intangible assets; allowances for doubtful accounts; stock-based compensation forfeiture rates; when technological feasibility is achieved for our products; the potential outcome of uncertain tax positions that have been recognized in our consolidated financial statements or tax returns; and determining the timing and amount of impairments for investments. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties.

Financial Instruments

Investments

We consider all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair values of these investments approximate their carrying values. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

8

PART I

Item 1

Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in fair value, excluding credit losses and impairments, are recorded in other comprehensive income. Fair value is calculated based on publicly available market information or other estimates determined by management. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost. To determine credit losses, we employ a systematic methodology that considers available quantitative and qualitative evidence. In addition, we consider specific adverse conditions related to the financial health of, and business outlook for, the investee. If we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in other income (expense), net and a new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, we may incur future impairments.

Equity investments with readily determinable fair values are generally measured at fair value. Equity investments that are not recorded at fair value are measured using the equity method of accounting when required or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative). For equity investments recorded at fair value, we perform a qualitative assessment on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value. Changes in fair value are recorded in other income (expense), net. Equity method investments may be recorded on a lag of up to three months when sufficient financial information is not available in a timely manner. For equity method investments recorded on a lag, we recognize the impact of intervening events that have a material impact on our consolidated financial statements in the period in which they occurred.

Investments that are considered variable interest entities (“VIEs”) are evaluated to determine whether we are the primary beneficiary of the VIE, in which case we would be required to consolidate the entity. We evaluate whether we have (1) the power to direct the activities that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. We have determined we are not the primary beneficiary of any of our VIE investments. Therefore, our VIE investments are not consolidated and the majority are accounted for under the equity method of accounting.

We have a long-term strategic partnership with OpenAI. In October 2025, we signed a new definitive agreement with OpenAI that extends this partnership. Additionally, OpenAI formed a public benefit corporation and completed a recapitalization (“OpenAI Recapitalization”). We have an investment of approximately 27 percent of OpenAI on an as-converted basis accounted for under the equity method of accounting. As a result of the OpenAI Recapitalization, we had a decrease in our proportionate ownership of OpenAI and recorded a dilution gain in other income (expense), net. Refer to Note 3 – Other Income (Expense), Net for additional information. We calculate our equity method income or loss using the hypothetical liquidation at book value (“HLBV”) method because our liquidation rights and priorities differ from our underlying ownership interest. Under the HLBV method, we recognize income or loss based on the change in the amount we would receive if the net assets of the investee were distributed at book value. We have made total funding commitments of $13 billion, of which $11.7 billion has been funded as of December 31, 2025.

Derivatives

Derivative instruments are recognized as either assets or liabilities and measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

For derivative instruments designated as fair value hedges, gains and losses are recognized in other income (expense), net with offsetting gains and losses on the hedged items. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in other income (expense), net.

For derivative instruments designated as cash flow hedges, gains and losses are initially reported as a component of other comprehensive income and subsequently recognized in other income (expense), net with the corresponding hedged item. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in other income (expense), net.

For derivative instruments that are not designated as hedges, gains and losses from changes in fair values are primarily recognized in other income (expense), net.

9

PART I

Item 1

Fair Value Measurements

We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

•Level 1 – inputs are based upon unadjusted quoted prices for identical instruments in active markets. Our Level 1 investments include U.S. government securities, common and preferred stock, and mutual funds. Our Level 1 derivative assets and liabilities include those actively traded on exchanges.

•Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit spreads, foreign exchange rates, and forward and spot prices for currencies. Our Level 2 investments include commercial paper, certificates of deposit, U.S. agency securities, foreign government bonds, mortgage- and asset-backed securities, corporate notes and bonds, and municipal securities. Our Level 2 derivative assets and liabilities include certain cleared swap contracts and over-the-counter forward, option, and swap contracts.

•Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. Our Level 3 assets and liabilities include investments in corporate notes and bonds, municipal securities, and goodwill and intangible assets, when they are recorded at fair value due to an impairment charge. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.

We measure equity investments without readily determinable fair values on a nonrecurring basis. The fair values of these investments are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections.

Our other current financial assets and current financial liabilities have fair values that approximate their carrying values.

Contract Balances and Other Receivables

As of December 31, 2025 and June 30, 2025, long-term accounts receivable, net of allowance for doubtful accounts, was $5.3 billion and $5.2 billion, respectively, and is included in other long-term assets in our consolidated balance sheets.

As of December 31, 2025 and June 30, 2025, other receivables related to activities to facilitate the purchase of server components were $15.1 billion and $8.2 billion, respectively, and are included in other current assets in our consolidated balance sheets.

We record financing receivables when we offer certain customers the option to acquire our software products and services offerings through a financing program in a limited number of countries. As of December 31, 2025 and June 30, 2025, our financing receivables, net were $2.7 billion and $4.3 billion, respectively, for short-term and long-term financing receivables, which are included in other current assets and other long-term assets in our consolidated balance sheets.

We record an allowance for doubtful accounts which reflects our best estimate of credit losses inherent in the accounts receivable and financing receivable balances. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence.

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PART I

Item 1

Recent Accounting Guidance

Income Taxes – Improvements to Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (“FASB”) issued a new standard to improve income tax disclosures. The guidance requires additional disclosure of disaggregated income taxes paid and prescribes standardized categories for the components of the effective tax rate reconciliation. We will adopt the standard on the effective date in our annual reporting for fiscal year 2026. The standard can be applied either prospectively or retrospectively.

Income Statement – Disaggregation of Income Statement Expenses

In November 2024, the FASB issued a new standard to expand disclosures about income statement expenses. The guidance requires disaggregation of certain costs and expenses included in each relevant expense caption on our consolidated income statements in a separate note to the financial statements at each interim and annual reporting period, including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The standard will be effective for us beginning with our annual reporting for fiscal year 2028 and interim periods thereafter, with early adoption permitted. We are currently evaluating the impact of this standard on our disclosures.

NOTE 2 — EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and stock awards.

The components of basic and diluted EPS were as follows:

(In millions, except per share amounts)	Three Months Ended December 31,					Six Months Ended December 31,
	2025		2024			2025		2024
Net income available for common shareholders (A)	$	38,458	$	24,108	$	66,205	$	48,775
Weighted average outstanding shares of common stock (B)		7,431		7,435		7,432		7,434
Dilutive effect of stock-based awards		29		33		31		35
Common stock and common stock equivalents (C)		7,460		7,468		7,463		7,469
Earnings Per Share
Basic (A/B)	$	5.18	$	3.24	$	8.91	$	6.56
Diluted (A/C)	$	5.16	$	3.23	$	8.87	$	6.53

Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

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PART I

Item 1

NOTE 3 — OTHER INCOME (EXPENSE), NET

The components of other income (expense), net were as follows:

(In millions)	Three Months Ended December 31,							Six Months Ended December 31,
	2025			2024				2025			2024
Interest and dividends income	$	840		$	600		$	1,816		$	1,281
Interest expense		(736	)		(594	)		(1,434	)		(1,176	)
Net recognized gains (losses) on investments		339			(860	)		(233	)		(397	)
Net gains (losses) on derivatives		37			(116	)		1,616			(454	)
Net gains (losses) on foreign currency remeasurements		(50	)		(153	)		(72	)		23
Other, net		9,541			(1,165	)		4,618			(1,848	)
Total	$	9,971		$	(2,288	)	$	6,311		$	(2,571	)

Other income (expense), net included $10.0 billion and $5.9 billion of net gains for the three and six months ended December 31, 2025, respectively, and $1.2 billion and $1.9 billion of net losses for the three and six months ended December 31, 2024, respectively, from investments in OpenAI, primarily net recognized gains (losses) on our equity method investment reflected in Other, net. The net gains recorded for the three and six months ended December 31, 2025 primarily relate to the dilution gain from the OpenAI Recapitalization.

Net Recognized Gains (Losses) on Investments

Net recognized gains (losses) on debt investments were as follows:

(In millions)	Three Months Ended December 31,							Six Months Ended December 31,
	2025			2024				2025			2024
Realized gains from sales of available-for-sale securities	$	19		$	9		$	35		$	17
Realized losses from sales of available-for-sale securities		(9	)		(19	)		(19	)		(34	)
Impairments and allowance for credit losses		(21	)		(14	)		(17	)		(2	)
Total	$	(11	)	$	(24	)	$	(1	)	$	(19	)

Net recognized gains (losses) on equity investments were as follows:

(In millions)	Three Months Ended December 31,							Six Months Ended December 31,
	2025			2024				2025			2024
Net realized gains (losses) on investments sold	$	3		$	(8	)	$	74		$	57
Net unrealized gains (losses) on investments still held		385			25			(250	)		437
Impairments of investments		(38	)		(853	)		(56	)		(872	)
Total	$	350		$	(836	)	$	(232	)	$	(378	)

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NOTE 4 — INVESTMENTS

Investment Components

The components of investments were as follows:

(In millions)	Fair Value Level	Adjusted Cost Basis		Unrealized Gains		Unrealized Losses			Recorded Basis		Cash and Cash Equivalents		Short-term Investments		Equity and Other Investments
December 31, 2025
Changes in Fair Value Recorded in Other Comprehensive Income
Commercial paper	Level 2	$	8,367	$	0	$	0		$	8,367	$	7,622	$	745	$	0
Certificates of deposit	Level 2		3,506		0		0			3,506		3,062		444		0
U.S. government securities	Level 1		48,194		147		(1,046	)		47,295		2,045		45,250		0
U.S. agency securities	Level 2		2,444		0		0			2,444		0		2,444		0
Foreign government bonds	Level 2		402		18		(6	)		414		0		414		0
Mortgage- and asset-backed securities	Level 2		3,227		19		(21	)		3,225		0		3,225		0
Corporate notes and bonds	Level 2		12,162		176		(55	)		12,283		0		12,283		0
Corporate notes and bonds	Level 3		1,597		120		0			1,717		0		97		1,620
Municipal securities	Level 2		170		1		(6	)		165		0		165		0
Municipal securities	Level 3		105		0		(12	)		93		0		93		0
Total debt investments		$	80,174	$	481	$	(1,146	)	$	79,509	$	12,729	$	65,160	$	1,620
Changes in Fair Value Recorded in Net Income
Equity investments	Level 1								$	4,366	$	1,346	$	0	$	3,020
Equity investments	Other									16,562		0		0		16,562
Total equity investments									$	20,928	$	1,346	$	0	$	19,582
Cash									$	10,221	$	10,221	$	0	$	0
Derivatives, net (a)										6		0		6		0
Total									$	110,664	$	24,296	$	65,166	$	21,202

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(In millions)	Fair Value Level	Adjusted Cost Basis		Unrealized Gains		Unrealized Losses			Recorded Basis		Cash and Cash Equivalents		Short-term Investments		Equity and Other Investments
June 30, 2025
Changes in Fair Value Recorded in Other Comprehensive Income
Commercial paper	Level 2	$	10,880	$	0	$	0		$	10,880	$	9,939	$	941	$	0
Certificates of deposit	Level 2		2,653		0		0			2,653		2,309		344		0
U.S. government securities	Level 1		52,878		71		(1,462	)		51,487		4,742		46,745		0
U.S. agency securities	Level 2		2,686		0		0			2,686		496		2,190		0
Foreign government bonds	Level 2		349		24		(9	)		364		0		364		0
Mortgage- and asset-backed securities	Level 2		2,558		10		(27	)		2,541		0		2,541		0
Corporate notes and bonds	Level 2		10,763		124		(101	)		10,786		0		10,786		0
Corporate notes and bonds	Level 3		2,511		65		(5	)		2,571		0		111		2,460
Municipal securities	Level 2		207		1		(7	)		201		0		201		0
Municipal securities	Level 3		104		0		(14	)		90		0		90		0
Total debt investments		$	85,589	$	295	$	(1,625	)	$	84,259	$	17,486	$	64,313	$	2,460
Changes in Fair Value Recorded in Net Income
Equity investments	Level 1								$	4,577	$	1,045	$	0	$	3,532
Equity investments	Other									9,141		0		0		9,141
Total equity investments									$	13,718	$	1,045	$	0	$	12,673
Cash									$	11,711	$	11,711	$	0	$	0
Derivatives, net (a)										282		0		10		272
Total									$	109,970	$	30,242	$	64,323	$	15,405

(a)Refer to Note 5 – Derivatives for further information on the fair value of our derivative instruments.

Equity investments presented as “Other” in the tables above include investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments, measured using the equity method, or measured at fair value using net asset value as a practical expedient which are not categorized in the fair value hierarchy. As of December 31, 2025 and June 30, 2025, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $5.0 billion and $2.9 billion, respectively, and equity investments measured using the equity method were $11.5 billion and $6.0 billion, respectively.

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Unrealized Losses on Debt Investments

Debt investments with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values were as follows:

	Less than 12 Months					12 Months or Greater								Total Unrealized Losses
(In millions)		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Total Fair Value
December 31, 2025
U.S. government and agency securities	$	350	$	(4	)	$	28,600	$	(1,042	)	$	28,950	$	(1,046	)
Foreign government bonds		48		(3	)		83		(3	)		131		(6	)
Mortgage- and asset-backed securities		0		0			202		(21	)		202		(21	)
Corporate notes and bonds		432		(2	)		2,318		(53	)		2,750		(55	)
Municipal securities		0		0			162		(18	)		162		(18	)
Total	$	830	$	(9	)	$	31,365	$	(1,137	)	$	32,195	$	(1,146	)

	Less than 12 Months					12 Months or Greater								Total Unrealized Losses
(In millions)		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Total Fair Value
June 30, 2025
U.S. government and agency securities	$	2,569	$	(51	)	$	34,608	$	(1,411	)	$	37,177	$	(1,462	)
Foreign government bonds		43		(2	)		106		(7	)		149		(9	)
Mortgage- and asset-backed securities		841		(4	)		189		(23	)		1,030		(27	)
Corporate notes and bonds		1,107		(8	)		3,105		(98	)		4,212		(106	)
Municipal securities		0		0			168		(21	)		168		(21	)
Total	$	4,560	$	(65	)	$	38,176	$	(1,560	)	$	42,736	$	(1,625	)

Unrealized losses from fixed-income securities are primarily attributable to changes in interest rates. Management does not believe any remaining unrealized losses represent impairments based on our evaluation of available evidence.

Debt Investment Maturities

The following table outlines maturities of our debt investments as of December 31, 2025:

(In millions)	Adjusted Cost Basis		Estimated Fair Value
December 31, 2025
Due in one year or less	$	27,582	$	27,509
Due after one year through five years		47,136		46,511
Due after five years through 10 years		4,110		4,213
Due after 10 years		1,346		1,276
Total	$	80,174	$	79,509

NOTE 5 — DERIVATIVES

We use derivative instruments to manage risks related to foreign currencies, interest rates, equity prices, and credit; to enhance investment returns; and to facilitate portfolio diversification. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.

Foreign Currencies

Certain forecasted transactions, assets, and liabilities are exposed to foreign currency risk. We monitor our foreign currency exposures daily to maximize the economic effectiveness of our foreign currency hedge positions.

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Foreign currency risks related to certain Euro-denominated debt are hedged using foreign exchange forward contracts that are designated as cash flow hedging instruments.

Certain options and forwards not designated as hedging instruments are also used to manage the variability in foreign exchange rates on certain balance sheet amounts and to manage other foreign currency exposures.

Interest Rate

Interest rate risks related to certain fixed-rate debt are hedged using interest rate swaps that are designated as fair value hedging instruments to effectively convert the fixed interest rates to floating interest rates.

Securities held in our fixed-income portfolio are subject to different interest rate risks based on their maturities. We manage the average maturity of our fixed-income portfolio to achieve economic returns that correlate to certain broad-based fixed-income indices using option, futures, and swap contracts. These contracts are not designated as hedging instruments and are included in “Other contracts” in the tables below.

Equity

Securities held in our equity investments portfolio are subject to market price risk. At times, we may hold options, futures, and swap contracts. These contracts are not designated as hedging instruments.

Credit

Our fixed-income portfolio is diversified and consists primarily of investment-grade securities. We use credit default swap contracts to manage credit exposures relative to broad-based indices and to facilitate portfolio diversification. These contracts are not designated as hedging instruments and are included in “Other contracts” in the tables below.

Credit-Risk-Related Contingent Features

Certain counterparty agreements for derivative instruments contain provisions that require our issued and outstanding long-term unsecured debt to maintain an investment grade credit rating and require us to maintain minimum liquidity of $1.0 billion. To the extent we fail to meet these requirements, we will be required to post collateral, similar to the standard convention related to over-the-counter derivatives. As of December 31, 2025, our long-term unsecured debt rating was AAA, and cash investments were in excess of $1.0 billion. As a result, no collateral was required to be posted.

The following table presents the notional amounts of our outstanding derivative instruments measured in U.S. dollar equivalents:

(In millions)	December 31, 2025		June 30, 2025
Designated as Hedging Instruments
Foreign exchange contracts purchased	$	1,492	$	1,492
Interest rate contracts purchased		1,166		1,150
Not Designated as Hedging Instruments
Foreign exchange contracts purchased		8,884		15,214
Foreign exchange contracts sold		43,710		43,307
Equity contracts purchased		4,943		5,434
Equity contracts sold		2,189		2,189
Other contracts purchased		2,578		2,769
Other contracts sold		878		1,242

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Fair Values of Derivative Instruments

The following table presents our derivative instruments:

(In millions)	Derivative Assets				Derivative Liabilities		Derivative Assets			Derivative Liabilities
	December 31, 2025						June 30, 2025
Designated as Hedging Instruments
Foreign exchange contracts	$	78		$	(53	)	$	89		$	(44	)
Interest rate contracts		14			0			15			0
Not Designated as Hedging Instruments
Foreign exchange contracts		173			(438	)		248			(809	)
Equity contracts		43			(407	)		385			(983	)
Other contracts		12			(9	)		21			(1	)
Gross amounts of derivatives		320			(907	)		758			(1,837	)
Gross amounts of derivatives offset in the balance sheets		(196	)		197			(258	)		260
Cash collateral received		0			(73	)		0			(99	)
Net amounts of derivatives	$	124		$	(783	)	$	500		$	(1,676	)
Reported as
Short-term investments	$	6		$	0		$	10		$	0
Other current assets		104			0			201			0
Equity and other investments		0			0			272			0
Other long-term assets		14			0			17			0
Other current liabilities		0			(715	)		0			(1,639	)
Other long-term liabilities		0			(68	)		0			(37	)
Total	$	124		$	(783	)	$	500		$	(1,676	)

Gross derivative assets and liabilities subject to legally enforceable master netting agreements for which we have elected to offset were $295 million and $902 million, respectively, as of December 31, 2025, and $452 million and $1.8 billion, respectively, as of June 30, 2025.

The following table presents the fair value of our derivatives instruments on a gross basis:

(In millions)	Level 1			Level 2		Level 3			Total
December 31, 2025
Derivative assets	$	0	$	314		$	6		$	320
Derivative liabilities		0		(907	)		0			(907	)
June 30, 2025
Derivative assets		1		474			283			758
Derivative liabilities		0		(1,832	)		(5	)		(1,837	)

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Gains (losses) on derivative instruments recognized in other income (expense), net were as follows:

(In millions)		Three Months Ended December 31,						Six Months Ended December 31,
		2025			2024			2025			2024
Designated as Fair Value Hedging Instruments
Interest rate contracts
Derivatives	$	(1	)	$	(18	)	$	(2	)	$	2
Hedged items		(7	)		8			(15	)		(24	)
Designated as Cash Flow Hedging Instruments
Foreign exchange contracts
Amount reclassified from accumulated other comprehensive loss		(7	)		(106	)		(12	)		(57	)
Not Designated as Hedging Instruments
Foreign exchange contracts		(54	)		1,138			327			755
Equity contracts		31			(111	)		1610			(459	)
Other contracts		6			(26	)		6			(2	)

Gains (losses), net of tax, on derivative instruments recognized in our consolidated comprehensive income statements were as follows:

(In millions)	Three Months Ended December 31,						Six Months Ended December 31,
	2025			2024			2025			2024
Designated as Cash Flow Hedging Instruments
Foreign exchange contracts
Included in effectiveness assessment	$	(9	)	$	(50	)	$	(16	)	$	(21	)

NOTE 6 — PROPERTY AND EQUIPMENT

The components of property and equipment were as follows:

(In millions)
	December 31, 2025			June 30, 2025
Land	$	9,698		$	9,338
Buildings and improvements		163,986			137,921
Leasehold improvements		14,500			12,117
Servers, network equipment, and software		171,351			132,836
Furniture and equipment		6,541			6,407
Total, at cost		366,076			298,619
Accumulated depreciation		(104,950	)		(93,653	)
Total, net	$	261,126		$	204,966

Depreciation expense was $7.9 billion and $15.0 billion for the three and six months ended December 31, 2025, respectively, and $5.2 billion and $9.9 billion for the three and six months ended December 31, 2024, respectively.

As of December 31, 2025 and June 30, 2025, purchases of property and equipment remaining in accounts payable were $23.1 billion and $6.9 billion, respectively.

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NOTE 7 — GOODWILL

Changes in the carrying amount of goodwill were as follows:

(In millions)	June 30, 2025		Acquisitions		Other		December 31, 2025
Productivity and Business Processes	$	31,457	$	26	$	21	$	31,504
Intelligent Cloud		25,689		36		6		25,731
More Personal Computing		62,363		5		19		62,387
Total	$	119,509	$	67	$	46	$	119,622

The measurement periods for the valuation of assets acquired and liabilities assumed end as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available, but do not exceed 12 months. Adjustments in purchase price allocations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined.

Any change in the goodwill amounts resulting from foreign currency translations and purchase accounting adjustments are presented as “Other” in the table above. Also included in “Other” are business dispositions and transfers between segments due to reorganizations, as applicable.

NOTE 8 — INTANGIBLE ASSETS

The components of intangible assets, all of which are finite-lived, were as follows:

(In millions)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	December 31, 2025							June 30, 2025
Marketing-related	$	16,502	$	(4,300	)	$	12,202	$	16,502	$	(3,901	)	$	12,601
Technology-based		22,726		(16,830	)		5,896		22,560		(14,959	)		7,601
Customer-related		4,278		(2,357	)		1,921		4,278		(2,050	)		2,228
Contract-based		343		(73	)		270		217		(43	)		174
Total	$	43,849	$	(23,560	)	$	20,289	$	43,557	$	(20,953	)	$	22,604

Intangible assets amortization expense was $1.2 billion and $2.6 billion for the three and six months ended December 31, 2025, respectively, and $1.5 billion and $3.0 billion for the three and six months ended December 31, 2024, respectively.

The following table outlines the estimated future amortization expense related to intangible assets held as of December 31, 2025:

(In millions)
Year Ending June 30,
2026 (excluding the six months ended December 31, 2025)	$	2,063
2027		3,000
2028		2,068
2029		1,879
2030		1,412
Thereafter		9,867
Total	$	20,289

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NOTE 9 — DEBT

The components of long-term debt were as follows:

(In millions, issuance by calendar year)	Maturities (calendar year)				Stated Interest Rate				Effective Interest Rate			December 31, 2025			June 30, 2025
2009 issuance of $3.8 billion				2039				5.20%			5.24%	$	520		$	520
2010 issuance of $4.8 billion				2040				4.50%			4.57%		486			486
2011 issuance of $2.3 billion				2041				5.30%			5.36%		718			718
2012 issuance of $2.3 billion				2042				3.50%			3.57%		454			454
2013 issuance of $5.2 billion				2043		3.75%	–	4.88%	3.83%	–	4.92%		314			314
2013 issuance of €4.1 billion		2028	–	2033		2.63%	–	3.13%	2.69%	–	3.22%		2,701			2,700
2015 issuance of $23.8 billion		2035	–	2055		3.50%	–	4.75%	3.60%	–	4.78%		4,555			7,555
2016 issuance of $19.8 billion		2026	–	2056		2.40%	–	3.95%	2.46%	–	4.03%		7,930			7,930
2017 issuance of $17.1 billion		2026	–	2057		3.30%	–	4.50%	3.38%	–	5.49%		6,833			6,833
2020 issuance of $10.1 billion		2030	–	2060		1.35%	–	2.68%	2.53%	–	5.43%		10,111			10,111
2021 issuance of $8.2 billion		2052	–	2062		2.92%	–	3.04%	2.92%	–	3.04%		8,185			8,185
2023 issuance of $0.1 billion		2026	–	2050		1.35%	–	4.50%	5.16%	–	5.49%		56			56
2024 issuance of $3.3 billion		2026	–	2050		1.35%	–	4.50%	5.16%	–	5.49%		3,344			3,344
Total face value													46,207			49,206
Unamortized discount and issuance costs													(1,117	)		(1,155	)
Hedge fair value adjustments (a)													(21	)		(36	)
Premium on debt exchange													(4,807	)		(4,864	)
Total debt													40,262			43,151
Current portion of long-term debt													(4,837	)		(2,999	)
Long-term debt												$	35,425		$	40,152

(a)Refer to Note 5 – Derivatives for further information on the interest rate swaps related to fixed-rate debt.

As of December 31, 2025 and June 30, 2025, the estimated fair value of long-term debt, including the current portion, was $37.3 billion and $40.4 billion, respectively. The estimated fair values are based on Level 2 inputs.

Debt in the table above is comprised of senior unsecured obligations and ranks equally with our other outstanding obligations. Interest is paid semi-annually, except for the Euro-denominated debt, which is paid annually.

The following table outlines maturities of our long-term debt, including the current portion, as of December 31, 2025:

(In millions)
Year Ending June 30,
2026 (excluding the six months ended December 31, 2025)	$	0
2027		9,250
2028		0
2029		2,055
2030		0
Thereafter		34,902
Total	$	46,207

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NOTE 10 — INCOME TAXES

Effective Tax Rate

Our effective tax rate was 20% for both the three and six months ended December 31, 2025, and 18% for both the three and six months ended December 31, 2024. The increase in our effective tax rate for the three and six months ended December 31, 2025 compared to the prior year was primarily due to deferred tax expense attributable to the dilution gain from the OpenAI Recapitalization and changes in the mix of our earnings and tax expenses between the U.S. and foreign countries.

Our effective tax rate was lower than the U.S. federal statutory rate for the three and six months ended December 31, 2025, primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations center in Ireland.

Uncertain Tax Positions

As of December 31, 2025 and June 30, 2025, unrecognized tax benefits and other income tax liabilities were $28.7 billion and $27.4 billion, respectively, and are included in long-term income taxes in our consolidated balance sheets.

We remain under audit by the IRS for tax years 2014 to 2017. With respect to the audit for tax years 2004 to 2013, on September 26, 2023, we received Notices of Proposed Adjustment (“NOPAs”) from the IRS. The primary issues in the NOPAs relate to intercompany transfer pricing. In the NOPAs, the IRS is seeking an additional tax payment of $28.9 billion plus penalties and interest. As of December 31, 2025, we believe our allowances for income tax contingencies are adequate. We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRS’s administrative appeals office and, if necessary, judicial proceedings. We do not expect a final resolution of these issues in the next 12 months. Based on the information currently available, we do not anticipate a significant increase or decrease to our income tax contingencies for these issues within the next 12 months.

We are subject to income tax in many jurisdictions outside the U.S., some of which are currently under audit by local tax authorities. The resolution of these audits is not expected to be material to our consolidated financial statements. Our operations in Ireland remain subject to examination for tax years 2021 and thereafter.

NOTE 11 — UNEARNED REVENUE

Unearned revenue by segment was as follows:

(In millions)
	December 31, 2025		June 30, 2025
Productivity and Business Processes	$	39,721	$	50,567
Intelligent Cloud		11,433		14,022
More Personal Computing		2,890		2,676
Total	$	54,044	$	67,265

Changes in unearned revenue were as follows:

(In millions)
Six Months Ended December 31, 2025
Balance, beginning of period	$	67,265
Deferral of revenue		89,010
Recognition of unearned revenue		(102,231	)
Balance, end of period	$	54,044

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Revenue allocated to remaining performance obligations, which includes unearned revenue and amounts expected to be invoiced and recognized as revenue in future periods, was $631 billion as of December 31, 2025. Estimating revenue that will be allocated to remaining performance obligations can involve significant judgments, including identifying and assessing variable consideration and potential renegotiation of commitments. We consider factors such as the nature of the terms and duration of the contract across our portfolio of contracts. Revenue allocated to remaining performance obligations related to the commercial portion of revenue was $625 billion as of December 31, 2025, with a weighted average duration of approximately 2.5 years. We expect to recognize approximately 25% of both our total company remaining performance obligation revenue and commercial remaining performance obligation revenue over the next 12 months and the remainder thereafter.

NOTE 12 — LEASES

We have operating and finance leases for datacenters, corporate offices, research and development facilities, Microsoft Experience Centers, and certain equipment. Our leases have remaining lease terms of less than 1 year to 20 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.

The components of lease expense were as follows:

(In millions)	Three Months Ended December 31,					Six Months Ended December 31,
		2025		2024		2025		2024
Operating lease cost	$	1,742	$	1,293	$	3,397	$	2,453
Finance lease cost:
Amortization of right-of-use assets	$	1,277	$	830	$	2,450	$	1,524
Interest on lease liabilities		615		337		1,161		611
Total finance lease cost	$	1,892	$	1,167	$	3,611	$	2,135

Supplemental cash flow information related to leases was as follows:

(In millions)	Three Months Ended December 31,					Six Months Ended December 31,
		2025		2024		2025		2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,506	$	962	$	3,161	$	2,169
Operating cash flows from finance leases		615		319		1,161		594
Financing cash flows from finance leases		701		480		1,340		1,282
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		1,477		3,098		2,894		4,991
Finance leases		6,330		6,435		15,477		10,767

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Item 1

Supplemental balance sheet information related to leases was as follows:

(In millions, except lease term and discount rate)
	December 31, 2025			June 30, 2025
Operating Leases
Operating lease right-of-use assets	$	25,103		$	24,823
Other current liabilities	$	5,520		$	5,424
Operating lease liabilities		17,345			17,437
Total operating lease liabilities	$	22,865		$	22,861
Finance Leases
Property and equipment, at cost	$	73,201		$	53,876
Accumulated depreciation		(12,556	)		(9,861	)
Property and equipment, net	$	60,645		$	44,015
Other current liabilities	$	3,738		$	3,172
Other long-term liabilities		56,413			43,000
Total finance lease liabilities	$	60,151		$	46,172
Weighted Average Remaining Lease Term
Operating leases		6 years			6 years
Finance leases		13 years			13 years
Weighted Average Discount Rate
Operating leases		3.6%			3.5%
Finance leases		4.3%			4.2%

The following table outlines maturities of our lease liabilities as of December 31, 2025:

(In millions)
Year Ending June 30,	Operating Leases			Finance Leases
2026 (excluding the six months ended December 31, 2025)	$	3,248		$	3,059
2027		5,811			6,404
2028		4,078			6,467
2029		2,891			5,829
2030		2,361			5,718
Thereafter		7,192			53,590
Total lease payments		25,581			81,067
Less imputed interest		(2,716	)		(20,916	)
Total	$	22,865		$	60,151

As of December 31, 2025, we had additional leases, primarily for datacenters, that had not yet commenced of $155.1 billion. These leases will commence between fiscal year 2026 and fiscal year 2031 with lease terms of 1 year to 20 years.

NOTE 13 — CONTINGENCIES

Irish Data Protection Commission Matter

In 2018, the Irish Data Protection Commission (“IDPC”) began investigating a complaint against LinkedIn as to whether LinkedIn’s targeted advertising practices violated the recently implemented European Union General Data Protection Regulation (“GDPR”). Microsoft cooperated throughout the period of inquiry. In October 2024, the IDPC provided LinkedIn with a final decision alleging GDPR violations and assessing a fine. In November 2024, LinkedIn appealed the final decision to the Irish courts. A preliminary hearing was held in December 2025.

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Other Contingencies

We also are subject to a variety of other claims and suits that arise from time to time in the ordinary course of our business. Although management currently believes that resolving claims against us, individually or in aggregate, will not have a material adverse impact in our consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

As of December 31, 2025, we accrued aggregate legal liabilities of $575 million. While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $400 million in aggregate beyond recorded amounts are reasonably possible. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact in our consolidated financial statements for the period in which the effects become reasonably estimable.

NOTE 14 — STOCKHOLDERS’ EQUITY

Share Repurchases

On September 14, 2021, our Board of Directors approved a share repurchase program authorizing up to $60.0 billion in share repurchases. This share repurchase program commenced in November 2021 and was completed in April 2025.

On September 16, 2024, our Board of Directors approved a share repurchase program authorizing up to $60.0 billion in share repurchases. This share repurchase program commenced in April 2025, following completion of the program approved on September 14, 2021, has no expiration date, and may be terminated at any time. As of December 31, 2025, $47.4 billion remained of this $60.0 billion share repurchase program.

We repurchased the following shares of common stock under the share repurchase programs:

(In millions)	Shares		Amount			Shares		Amount
Fiscal Year				2026					2025
First Quarter		8		$	3,955		7		$	2,800
Second Quarter		12			5,964		8			3,500
Total		20		$	9,919		15		$	6,300

All repurchases were made using cash resources. Shares repurchased during fiscal year 2026 were under the share repurchase program approved on September 16, 2024. Shares repurchased during fiscal year 2025 were under the share repurchase program approved on September 14, 2021. The above table excludes shares repurchased to settle employee tax withholding related to the vesting of stock awards of $1.5 billion and $3.1 billion for the three and six months ended December 31, 2025, respectively, and $1.5 billion and $2.8 billion for the three and six months ended December 31, 2024, respectively.

Dividends

Our Board of Directors declared the following dividends:

Declaration Date	Record Date	Payment Date		Dividend Per Share		Amount
Fiscal Year 2026						(In millions)
September 15, 2025	November 20, 2025	December 11, 2025	$	0.91	$	6,762
December 2, 2025	February 19, 2026	March 12, 2026		0.91		6,760
Total			$	1.82	$	13,522
Fiscal Year 2025
September 16, 2024	November 21, 2024	December 12, 2024	$	0.83	$	6,170
December 3, 2024	February 20, 2025	March 13, 2025		0.83		6,169
Total			$	1.66	$	12,339

The dividend declared on December 2, 2025 was included in other current liabilities as of December 31, 2025.

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NOTE 15 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in accumulated other comprehensive income (loss) by component:

(In millions)	Three Months Ended December 31,							Six Months Ended December 31,
		2025			2024			2025			2024
Derivatives
Balance, beginning of period	$	(11	)	$	(13	)	$	(8	)	$	(3	)
Unrealized losses, net of tax of $(2), $(13), $(4), and $(6)		(9	)		(50	)		(16	)		(21	)
Reclassification adjustments for losses included in other income (expense), net		7			106			12			57
Tax benefit included in provision for income taxes		(1	)		(22	)		(2	)		(12	)
Amounts reclassified from accumulated other comprehensive loss		6			84			10			45
Net change related to derivatives, net of tax of $(1), $9, $(2), and $6		(3	)		34			(6	)		24
Balance, end of period	$	(14	)	$	21		$	(14	)	$	21
Investments
Balance, beginning of period	$	(364	)	$	(1,511	)	$	(1,051	)	$	(2,625	)
Unrealized gains (losses), net of tax of $(45), $(121), $140, and $176		(170	)		(453	)		525			665
Reclassification adjustments for losses included in other income (expense), net		11			24			1			19
Tax benefit included in provision for income taxes		(2	)		(5	)		0			(4	)
Amounts reclassified from accumulated other comprehensive loss		9			19			1			15