Microsoft’s diluted earnings per share rose 32% year over year in its first quarter of fiscal 2027. After Microsoft adjusted for gains and losses on one investment, the increase was 18%. Both figures describe the same quarter and answer different questions about it.

Knowing how to read a quarterly earnings report helps you separate changes in the business from accounting adjustments and market expectations. During earnings season, many public companies announce results within a few weeks of each other. Check the actual period before comparing results. Microsoft’s fiscal 2027 first quarter ended September 30, 2026.

Where to Find a Quarterly Earnings Report

Start on the company’s investor relations page, where companies typically post the earnings release and call details. Open the release for headline numbers and management’s explanation of what drove them. Keep the call handy for the outlook and for questions analysts ask about the results.

Earnings Release, Form 8-K, and Form 10-Q

Many U.S. companies furnish the release under Item 2.02 of Form 8-K. The SEC’s EDGAR database also carries Form 10-Q, which contains unaudited financial statements and accompanying notes. In the filing, look for Management’s Discussion and Analysis (MD&A), where management explains changes in results, liquidity, and known trends. When a headline number jumps, start with the corresponding financial statement and use MD&A to investigate why.

How to Read a Quarterly Earnings Report’s Headline Numbers

Start with revenue, operating income, and diluted earnings per share (EPS). Compare each figure with the same fiscal quarter a year earlier to reduce the effect of seasonal patterns, such as holiday demand.

Revenue and Operating Margin

Revenue measures sales while operating margin shows how much of each sales dollar remains after operating costs. Calculate it by dividing operating income by revenue. Then check the business segments to see where the changes came from. Microsoft’s total revenue rose 19% even as revenue in its Devices and Consumer segment fell 3%. The company attributed overall growth to its Agents and Infra segment, where Azure drove the increase.

Reported EPS and Adjusted EPS

Diluted EPS measures profit per common share after accounting for potential shares from instruments such as stock options. Reported EPS follows U.S. generally accepted accounting principles (GAAP). When a company presents adjusted EPS, check the reconciliation to see what management excluded and whether it treated both periods consistently.

Microsoft excluded gains and losses on its OpenAI investments from adjusted EPS. The investment added $0.03 to reported EPS in the latest quarter and reduced it by $0.41 a year earlier. That earlier loss lowered the starting point for the year-over-year comparison. Removing both effects brought diluted EPS growth from 32% to 18%, as shown in Microsoft’s earnings release.

What the Cash Flow Statement and Balance Sheet Reveal

The cash flow statement shows how much cash moved during the period. The balance sheet shows what the company owned and owed on a specific date. Check those labels before comparing figures across statements or quarters.

Operating Cash Flow and Capital Spending

Operating cash flow can diverge from profit because earnings include noncash expenses and because payments can fall in different periods. For example, a company may recognize revenue from a sale before the customer pays the invoice.

Microsoft’s operating cash flow rose from $45.1 billion to $58.0 billion year over year. Over the same period, cash additions to property and equipment rose from $19.4 billion to $39.4 billion. Cash spending on those assets increased by more than operating cash flow did, as shown in Microsoft’s Form 10-Q.

Cash, Debt, and Near-Term Obligations

Compare cash and short-term investments with liabilities due within a year. Look for the current portion of long-term debt to see how much borrowing comes due soon. Check the notes for maturity dates and read the liquidity discussion for management’s account of upcoming cash needs.

How to Interpret an Earnings Beat, a Miss, and Guidance

The prior-year quarter shows how the business changed. Analyst consensus, a combined estimate from analysts, shows whether results beat or missed expectations. Management guidance describes what the company expects in a future period. Before comparing actual EPS with consensus, confirm that both cover the same quarter and use the same GAAP or adjusted basis.

Why a Stock Can Fall After an Earnings Beat

A company might beat this quarter’s adjusted EPS estimate and issue guidance below what analysts expected for next quarter. The stock can fall as investors revise their expectations for future earnings. If the release leaves out guidance, check the earnings call for the forecast and its assumptions. Microsoft’s release directed readers to its earnings webcast for the outlook.

FAQ

Do companies file a Form 10-Q for the fourth quarter?

U.S. domestic issuers generally file Form 10-Q for their first three fiscal quarters. The annual Form 10-K covers year-end results and may accompany a separate fourth-quarter earnings release. Look for the annual filing when checking the company’s full-year financial statements.

Can adjusted EPS be lower than reported EPS?

Removing a gain can lower adjusted EPS, as Microsoft’s figures illustrate. The company reported $4.92 in diluted EPS and $4.89 after excluding the investment gain. The reconciliation shows the direction and size of the adjustment.

Where can I read quarterly earnings reports for free?

Search the company’s investor relations site for the release and webcast. Search by company name or ticker and filter by Form 10-Q in the SEC’s EDGAR database.

Conclusion

To read a quarterly earnings report, start by asking what changed in the business. Then check what explains the gap between profit and cash flow and what management expects next.

This material is for general education about investing.