Microsoft Earnings Analysis: Hide Me The Money ⭐

With its latest quarterly report, Microsoft gave up all pretense of explaining where the money is going. This should scare everyone.

A quick recap: Yesterday, Microsoft reported that it earned a net income of $35.8 billion on revenues of $90 billion in the quarter ending June 30, 2026. Those figures are double-digit gains on the same quarter a year ago, but this quarter also marked the end of Microsoft's fiscal year 2026. And it set all kinds of records, both good and bad.

In the good column, Microsoft earned revenues of $133.7 billion, up 31 percent from the $101.8 billion it earned the previous fiscal year.

But Microsoft also spent an astonishing $145.3 billion on capital expenditures (CAPEX) related to its AI infrastructure buildout in that fiscal year, also a record, of course. But the real miracle here is that Microsoft found a way to lower the perceived cost of this spending going forward. And you are never going to believe what happens next.
The seven stages of reinventing accounting
Microsoft has spent the past two decades or more steadily reducing the transparency of its financial reports, obscuring the data that potential and existing shareholders need, and ignoring its disclosure requirements. The strategy has worked: Microsoft talks in ever vaguer numbers, Wall Street analysts who should have the backs of us, all investors, and the economy play along but do not ask the difficult questions that are their literal responsibility, and it just gets worse every quarter. Microsoft isn't alone in doing this, I know. But I cover Microsoft more closely than others, and I see this clearly and have for a long time.

In the past several quarters, I dug into each question these financial analysts asked of Microsoft and relayed the astonishing suck-up nature of that relationship. But this time, I saw a curious thing in the questions, which came off as a sort of greatest hits of the questions from the past few years.

There was the question about Azure growth, the question about the volatility of hardware costs and Microsoft's CAPEX spending. The question about Microsoft 365 Copilot growth, which in the suckiest suck-upedness I've seen in, oh, a quarter, was "obviously, very strong." The question about cybersecurity. And yes, the question that should have been at the center of your Microsoft financial results Bingo card, about ROI. It was all there.

And it was mostly uneventful. But there were a few interesting remarks in there that led us inevitably to yet another accounting change, another shenanigan, that should have had Wall Street reeling--to be clear, in a bad way--but was instead met with a collegial and congratulatory "well done, Microsoft, well done."

But first, a bit of insanity that leads directly to the financial shenanigans Microsoft slowly unveiled. When asked about all the hardware costs and Microsoft's ever-expanding CAPEX spending, CFO Amy Hood answered first, and we'll get to that. But then CEO Satya...