MSFT · Forward model · Productivity and Business Processes
What has to happen in Productivity and Business Processes
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Productivity and Business Processes
The profit engine, and until this quarter the largest segment: $37.8B of revenue at a 57.9% operating margin, which is the highest of the three by twenty points. Microsoft 365 Commercial and Consumer, LinkedIn and Dynamics - software sold by the seat, where the incremental seat costs almost nothing to serve. Microsoft 365 Copilot passed 30 million paid seats, roughly half again what it had in April, and it is sold as an uplift on seats Microsoft already owns rather than as a new product to a new buyer. That is why this segment can grow 14% while carrying the margin it does.
Latest: $59.18B (2031Q2E)
| Period | Value |
|---|---|
| 2024Q3 | $28.32B |
| 2024Q4 | $29.44B |
| 2025Q1 | $29.94B |
| 2025Q2 | $33.11B |
| 2025Q3 | $33.02B |
| 2025Q4 | $34.12B |
| 2026Q1 | $35.01B |
| 2026Q2 | $37.85B |
| 2026Q3E | $38.98B |
| 2026Q4E | $40.10B |
| 2027Q1E | $41.19B |
| 2027Q2E | $42.27B |
| 2027Q3E | $43.33B |
| 2027Q4E | $44.39B |
| 2028Q1E | $45.43B |
| 2028Q2E | $46.47B |
| 2028Q3E | $47.51B |
| 2028Q4E | $48.55B |
| 2029Q1E | $49.58B |
| 2029Q2E | $50.62B |
| 2029Q3E | $51.66B |
| 2029Q4E | $52.71B |
| 2030Q1E | $53.77B |
| 2030Q2E | $54.83B |
| 2030Q3E | $55.90B |
| 2030Q4E | $56.98B |
| 2031Q1E | $58.08B |
| 2031Q2E | $59.18B |
Assumptions & reasoning
- Revenue AND operating income are both disclosed for this segment every quarter. Nothing on this line is apportioned, which is the reverse of most models on this site - here the economics are given and the volumes are not.
- Microsoft publishes Microsoft 365 Commercial seat GROWTH but never the seat count, and it removed Microsoft 365 Consumer subscribers as a metric in the first quarter of fiscal 2026. There is therefore no absolute volume anywhere in this segment to build a driver on.
- The 70.1% margin here is operating income with depreciation and amortisation added back at the company-wide rate. Microsoft says in the 10-K that identifying D&A by segment is impracticable, so the add-back is uniform and this segment - which uses far less infrastructure than Intelligent Cloud - is understated by it.
- Copilot is sold as a per-seat uplift on an existing Microsoft 365 seat, so it raises revenue per user rather than user count. That is why this segment's growth can accelerate without any change in the seat metric Microsoft reports.