Microsoft’s Sales Spend Held at $5.7B as Revenue Rose 41%

Microsoft’s Form 10-Q, filed on 28 October 2026, puts sales and marketing expense at $5,716 million for the quarter to September 2026, against $5,717 million a year earlier. The year-earlier 10-Q gave $5,717 million for both the September 2025 and September 2024 quarters. Over the same two years, quarterly revenue rose from $65.6 billion to $92.3 billion, up 40.7% by our arithmetic.

This follows our report that Microsoft’s operating margin hit 49.8% as Foundry revenue tripled. Here we look at the cost line that did most of the work in that margin, by our arithmetic from the filings.

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Two Years at $5.7 Billion

Both 10-Qs use the same words for the line: “Sales and marketing expenses were relatively unchanged”.

The filings define the line as payroll, stock-based compensation, employee benefits and “other headcount-related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, trade shows, seminars, and other programs”.

The latest 10-Q shows the line falling from 7% to 6% of revenue. The year-earlier filing showed it falling from 9% to 7%.

Sales Cost per $100 of Revenue

By our arithmetic, Microsoft spent $8.72 on sales and marketing for every $100 of revenue in the September 2024 quarter, $7.36 a year later and $6.19 in the latest quarter.

Had the line stayed at the September 2024 ratio, it would have been about $8.04 billion in the latest quarter, about $2.33 billion more than Microsoft reported, by our arithmetic. Against the September 2025 ratio, the gap is about $1.08 billion.

Where the Margin Came From

Operating income was 46.6% of revenue in the September 2024 quarter and 49.8% in the latest quarter, a gain of 3.2 points, by our arithmetic from the income statements.

Over the same span, gross margin fell from 69.4% to 67.8% of revenue, a loss of 1.6 points. Research and development fell from 11.5% to 9.8% of revenue, general and administrative from 2.6% to 2.0%, and sales and marketing from 8.7% to 6.2%.

By our arithmetic, the 2.5-point fall in the sales and marketing ratio equals about 80% of the 3.2-point gain in operating margin. Over the latest year alone, the sales ratio fell 1.2 points while the operating margin rose 0.9 points.

Chief financial officer Amy Hood’s prepared remarks gave Microsoft’s own explanation: “Operating margins increased slightly year-over-year to 50%, driven by strong revenue growth, platform efficiency gains, and focused investments across our portfolio, partially offset by sales mix shift to Azure”.

The Cloud Margin Line Moved the Other Way

The gross margin side is where the pressure sits. The 10-Qs put Microsoft Cloud gross margin at 68% in the September 2025 quarter, 67% in December, 66% in March and 66% in the latest quarter.

The stated reason changed this quarter. The three earlier 10-Qs cited AI infrastructure; the March 2026 filing said the margin “decreased to 66% driven by continued investments in AI infrastructure and growing AI product usage”. The latest says it “decreased to 66% driven by sales mix shift to Azure, offset in part by product-level margin improvements, primarily in Azure”.

For the December quarter, Hood said “Microsoft Cloud gross margin percentage should be roughly 65%, down year-over-year as continued improvement in product-level margins is more than offset by sales mix shift to Azure”.

What Microsoft Said About Selling

Hood said Microsoft 365 commercial cloud results were “partially offset by weaker sales execution in our M365 E3 and standalone SKUs”, and added: “We continue to evolve our sales motions to balance those more traditional SKU per-seat rhythms with the newer premium E7, M365 Copilot, and usage-based productivity offerings”.

She said paid Microsoft 365 commercial seats “grew 5% with some impact from the weaker sales execution noted earlier”.

For the December quarter, she guided operating expense to $18.5 to $18.6 billion and said “Our cost guidance across both COGS and OpEx includes an estimate for the recently announced employee voluntary exit offer”.

Connecting the Coverage

Foundry, token pricing and fleet efficiency are in our piece on the 49.8% margin. The move from per-seat pricing is in Microsoft takes Copilot past per-seat, the cost of the build-out is in Microsoft’s depreciation bill jumps 56%, and the quarter itself is in Azure grew 48% as free cash flow fell to $18.6 billion. How the pieces fit is in the Microsoft business model.

The Structural Read

As we read the income statements, the margin gain did not come from the gross margin line, which fell 1.6 points of revenue over the two years, but from operating expenses growing more slowly than revenue, with sales and marketing showing the largest fall as a share of revenue.

By our arithmetic, Microsoft spent $6.19 on sales and marketing for every $100 of revenue in the latest quarter, against $8.72 two years earlier.

As we read the 10-Qs, the explanation for the lower Microsoft Cloud gross margin moved from AI infrastructure investment in the three earlier quarters to “sales mix shift to Azure” in the latest one.

Three Implications

FOR INVESTORS By our arithmetic, the sales and marketing ratio fell 1.2 points in the latest year while operating margin rose 0.9 points; Microsoft attributed the margin to revenue growth, platform efficiency gains and focused investments.

FOR ANALYSTS Microsoft guided December-quarter operating expense to $18.5 to $18.6 billion, including an estimate for its voluntary exit offer, and Microsoft Cloud gross margin to roughly 65%.

FOR MICROSOFT’S CUSTOMERS Hood said Microsoft is evolving its sales motions to balance per-seat products with premium E7, Microsoft 365 Copilot and usage-based offerings.

The Business Engineer Lens

This story maps onto the Business Engineer framework Enterprise AI: From Software to Substrate.

The analysis puts it in one line: “Enterprise vendors don’t sell software anymore—they sell irreversibility.”

Microsoft’s 10-Qs show revenue rising 40.7% over two years on level sales and marketing spending. The framework does not discuss Microsoft’s sales costs.

What Is Not Established

Microsoft’s filings do not say why sales and marketing spending stayed level, and do not split it between people, advertising and programs. The ratios, the $2.33 billion and $1.08 billion gaps and the 80% share are our arithmetic, not Microsoft figures.

The comparison uses September quarters only; other quarters carry different amounts. The 10-Q does not give a sales headcount.

The Bottom Line

Microsoft reported sales and marketing expense of $5,717 million, $5,717 million and $5,716 million in the September quarters of 2024, 2025 and 2026, while quarterly revenue rose 40.7%. By our arithmetic, the falling sales ratio equals about 80% of the operating-margin gain over two years, while Microsoft Cloud gross margin fell to 66% and Microsoft guided it to roughly 65%.