MSFT · 10-K · 2026A · Full report

Operating Expense Trends

MICROSOFT CORP · 2026-07-29 · Importance 42 · Surprise 14 · From source text

Total operating expenses increased 7% to $70.228 billion in fiscal 2026 from $65.365 billion in fiscal 2025. Research and development expense increased 9% to $35.562 billion, driven by compute capacity, AI talent, data, and XBOX impairment and related expenses. Sales and marketing expense increased 4% to $26.710 billion because of commercial sales investment and higher Copilot advertising expenses. General and administrative expense increased 10% to $7.956 billion because of higher legal expenses and gains on divestitures in the prior period.

Key facts

• Research and development expenses were $35,562 million in fiscal year 2026, an increase of $3,074 million or 9% from $32,488 million in fiscal year 2025, and were 11% of revenue (down from 12%). source
• Operating income was $155,237 million in fiscal year 2026 compared with $128,528 million in fiscal year 2025, a 21% increase. source
• Sales and marketing expenses were $26,710 million in fiscal year 2026, an increase of $1,056 million or 4% from $25,654 million in fiscal year 2025, and were 8% of revenue (down from 9%). source
• Operating expenses increased $4.9 billion or 7% in fiscal year 2026 driven by investments in research and development compute capacity, AI talent, and data, impairment and other related expenses in XBOX, investments in commercial sales, and higher Copilot advertising expenses. source
• General and administrative expenses were $7,956 million in fiscal year 2026, an increase of $733 million or 10% from $7,223 million in fiscal year 2025, and were 2% of revenue (down from 3%). source
• The Company designs and maintains accounting and internal control systems to provide reasonable assurance at reasonable cost that assets are safeguarded against loss from unauthorized use or disposition, and that the financial records are reliable for preparing consolidated financial statements and maintaining accountability for assets. source
• These systems are augmented by written policies, an organizational structure providing division of responsibilities, careful selection and training of qualified personnel, and a program of internal audits. source
• The Board of Directors, through its Audit Committee, consisting solely of independent directors of the Company, meets periodically with management, internal auditors, and our independent registered public accounting firm to ensure that each is meeting its responsibilities and to discuss matters concerning internal controls and financial reporting. source

Impact estimates