MSFT · 10-Q · 2026Q1 · Full report

FX / Currency Headwinds

MICROSOFT CORP · 2026-04-29 · Importance 24 · Surprise 14

Microsoft reports that international operations represent a significant portion of its total revenue and expenses and that many items are denominated in non‑U.S. dollar currencies. Fluctuations in the U.S. dollar increased reported revenue and expenses from international operations for the three and nine months ended March 31, 2026, and the company reported a favorable foreign currency impact of 3% on revenue and 4% on operating income for the quarter. Cost of revenue included an unfavorable foreign currency impact of 2% for the current period in certain segment disclosures. Management highlights FX as a source of both reported revenue and expense volatility across periods.

Key facts

• Revenue, gross margin, and operating income included a favorable foreign currency impact of 3%, 3%, and 4%, respectively, for the three months ended March 31, 2026; cost of revenue included an unfavorable foreign currency impact of 2%. source
• We use derivative instruments to manage foreign currency, interest rate, equity price, and credit risks and gains and losses from derivatives not designated as hedging instruments are primarily recognized in other income (expense), net. source