Thank you, Satya, and good afternoon, everyone. This year, we delivered over $281 billion in revenue, up 15% year-over-year, which reflects the broad strength of our products and services. Operating income was over $128 billion, up 17% year-over-year as we invested against the expansive opportunity ahead. And in our largest quarter of the year, we significantly exceeded expectations with strong execution by our sales and partner teams. As Satya shared, we're innovating faster than ever to deliver new value to our customers.
This quarter, revenue was $76.4 billion, up 18%, and 17% in constant currency. Gross margin dollars increased 16%, and 15% in constant currency, while operating income increased 23%, and 22% in constant currency. And earnings per share was $3.65, an increase of 24%, and 22% in constant currency. For the first time, commercial bookings were over $100 billion, increasing 37%, and 30% in constant currency, on a strong prior year comparable. Strong execution across our core annuity sales motions, including healthy renewals, as well as an increase in the number of $10 million and $100 million-plus contracts for both Azure and Microsoft 365 helped drive these results. Commercial remaining performance obligation increased to $368 billion, up 37% and 35% in constant currency.
Roughly 35% will be recognized in revenue in the next 12 months, up 21% year-over-year. The remaining portion, recognized beyond the next 12 months, increased 49%. And this quarter, our annuity mix was again 98%. FX was roughly in line with expectations on total company revenue, segment level revenue, COGS and operating expense growth.
Microsoft Cloud revenue was $46.7 billion, ahead of expectations, and grew 27%, and 25% in constant currency. Microsoft Cloud gross margin percentage was slightly better than expected at 68%, down 2 points year-over-year from the impact of scaling our AI infrastructure, partially offset by continued efficiency gains in Azure and M365 Commercial Cloud. Company gross margin percentage was 69%, down 1 point year-over-year, driven by sales mix shift to Azure and the lower Microsoft Cloud gross margin noted earlier. Operating expenses increased 6% and 5% in constant currency, and operating margins increased 2 points year-over-year to 45%. Better-than-expected revenue growth coupled with a focus on operating efficiently drove the margin expansion. At a total company level, head count at the end of June was relatively unchanged year-over-year. Now to our segment results.
Revenue from Productivity and Business Processes was $33.1 billion and grew 16%, and 14% in constant currency, better than expected, driven by M365 Commercial products in cloud services and M365 Consumer products in cloud services. M365 Commercial Cloud revenue was ahead of expectations and increased 18%, and 16% in constant currency, with 2 points of benefit from in-period revenue recognition. Business trends remained relatively stable to the prior quarter when excluding the in-period revenue recognition, with ARPU growth again driven by E5 and M365 Copilot. Paid M365 commercial seats grew 6% year-over-year with installed base expansion across all customer segments, though primarily in our small and medium business and frontline worker offerings. M365 Commercial Products revenue increased 9% and 7% in constant currency, ahead of expectations due higher-than-expected Office 2024 transactional purchasing. M365 Consumer cloud revenue was better than expected, increasing 20% driven by ARPU growth following the January price increase and subscriber growth of 8%.
LinkedIn revenue increased 9%, and 8% in constant currency, with growth across all businesses, though Talent Solutions continues to be impacted by weakness in the hiring market. Dynamics 365 revenue increased 23%, and 21% in constant currency, with strong execution in our core annuity sales motions leading to growth across all workloads. Segment gross margin dollars increased 16% and 15% in constant currency, and gross margin percentage increased slightly, driven by the efficiency gains noted earlier, even as we deliver more AI features across our products and scale our AI infrastructure. Operating expenses increased 7%, and 6% in constant currency. And operating income increased 21%, and 19% in constant currency. Next, the Intelligent Cloud segment.
Revenue was $29.9 billion and grew 26%, and 25% in constant currency, ahead of expectations, driven by Azure and our on-premises server business. In Azure and other cloud services, revenue grew 39%, significantly ahead of expectations, driven by accelerated growth in our core infrastructure business, primarily from our largest customers.
As a reminder, new cloud and AI workloads are built and scaled using the breadth of our services. Revenue from Azure AI services was generally in line with expectations. And while we brought additional data center capacity online this quarter, demand remains higher than supply.
In our on-premises server business, revenue decreased 2%, and 3% in constant currency, ahead of expectations, primarily driven by transactional purchasing which also has higher in-period revenue recognition. Enterprise and Partner Services revenue increased 7%, and 6% in constant currency, with growth in Enterprise Support Services partially offset by a decline in Industry Solutions. Segment gross margin dollars increased 17%, and 16% in constant currency, and gross margin percentage decreased 4 points year- over-year driven by scaling our AI infrastructure, partially offset by Azure efficiency gains noted earlier. Operating expenses increased 6%, and 4% in constant currency. And operating income grew 23%.
Now to More Personal Computing. Revenue was $13.5 billion and grew 9%, exceeding expectations, primarily due to Windows OEM as well as Xbox content and services. Windows OEM and Devices revenue increased 3% year-over-year, ahead of expectations, as inventory levels remained elevated. Search and news advertising revenue ex TAC increased 21% and 20% in constant currency, driven by continued growth in both volume and revenue per search, as well as roughly 8 points of favorable impact from third-party partnerships, including the benefit of a low prior-year comparable. And in Gaming, revenue increased 10%. Xbox content and services revenue increased 13%, and 12% in constant currency, driven by better-than-expected performance from first-party content and Xbox Game Pass. Segment gross margin dollars increased 15%. Gross margin percentage increased 3 points year-over-year with improvement across all businesses. Operating expenses increased 4%, and 3% in constant currency. Operating income increased 34%, and 33% in constant currency, driven by continued prioritization of higher margin opportunities. Now back to total company results.
Capital expenditures were $24.2 billion, including $6.5 billion of finance leases where we recognize the full value at the time of lease commencement. Cash paid for PP&E was $17.1 billion. The difference is primarily due to finance leases. More than half our spend was on long-lived assets that will support monetization over the next 15 years and beyond. The remaining spend was primarily for servers, both CPUs and GPUs, and driven by strong demand signals. Cash flow from operations was $42.6 billion, up 15%, driven by strong cloud billings and collections, partially offset by higher supplier payments. And this quarter, free cash flow was $25.6 billion. Other income and expense was negative $1.7 billion, primarily due to losses on investments accounted for under the equity method. Our effective tax rate was approximately 17%. And finally, we returned $9.4 billion to shareholders through dividends and share repurchases, bringing our total cash return to shareholders to over $37 billion for the full fiscal year.
Now moving to our outlook. My commentary for both the full year and next quarter is on a U.S. dollar basis, unless specifically noted otherwise. Let me start with some full year commentary for FY '26. First, FX. Assuming current rates remain stable, we expect FX to increase full year revenue growth and COGS growth by approximately 2 points and to increase operating expense growth by 1 point. Next, building on the strong momentum we saw this past year, we expect to deliver another year of double-digit revenue and operating income growth in FY '26. We will continue to invest against the expansive opportunity ahead across both capital expenditures and operating expenses given our leadership position in commercial cloud, strong demand signals for our cloud and AI offerings, and significant contracted backlog. Capital expenditure growth, as we shared last quarter, will moderate compared to FY '25 with a greater mix of short-lived assets. Due to the timing of delivery of additional capacity in H1, including large finance lease sites, we expect growth rates in H1 will be higher than in H2. We remain focused on delivering revenue growth and increasing our operational agility. And as a result, we expect operating margins to be relatively unchanged year-over-year. And finally, we expect our FY '26 effective tax rate to be between 19% and 20%. Now to our outlook for the first quarter.
Based on current rates, we expect FX to increase total revenue growth by 2 points. Within the segments, we expect FX to increase revenue growth by roughly 3 points in Productivity and Business Processes and roughly 1 point in Intelligent Cloud and More Personal Computing. We expect FX to increase COGS and operating expense growth by roughly 1 point.
In Commercial bookings, we expect healthy growth on a growing expiry base. Bookings growth will again be driven by strong execution across our core annuity sales motions and long-term commitments to our platform. As a reminder, larger long-term Azure contracts, which are more unpredictable on their timing, drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should be roughly 67%, down year-over-year, driven by the impact of continuing to scale our AI infrastructure. We expect Q1 capital expenditures to be over $30 billion, driven by the continued strong demand signals we see. As a reminder, there can be quarterly spend variability from cloud infrastructure build-outs and the timing of delivery of finance leases. Next, to segment guidance. In Productivity and Business Processes, we expect revenue of USD 32.2 billion to USD 32.5 billion, or growth of 14% to 15%, with roughly 3 points of benefit from FX as noted earlier. In M365 Commercial Cloud, we expect revenue growth to be between 13% and 14% in constant currency, with business trends that remain relatively stable compared to the prior quarter.
ARPU growth will again be driven by E5 and M365 Copilot. M365 Commercial Products revenue growth should be in the mid- to high single digits. As a reminder, M365 Commercial Products includes both the Windows Commercial on-premises components of M365 suites and Office transactional purchasing, both of which can be variable due to in-period revenue recognition dynamics. M365 Consumer Cloud revenue growth should be in the low 20s, driven by the January price increase.
For LinkedIn, we expect revenue growth in the high single digits. And in Dynamics 365, we expect revenue growth to be in the high teens with continued growth across all workloads. For Intelligent Cloud, we expect revenue of USD 30.1 billion to USD 30.4 billion, or growth of 25% to 26%, with roughly 1 point of benefit from FX as noted earlier. Revenue will continue to be driven by Azure, which can have quarterly variability in year-on-year growth rates depending on the timing of capacity delivery and when it comes online, as well as from in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q1 revenue growth of approximately 37% in constant currency, driven by strong demand for our portfolio of services on a significant base. Even as we continue bringing more data center capacity online, we currently expect to remain capacity- constrained through the first half of our fiscal year. In our on-premises server business, we expect revenue to decline in the low to mid-single digits with the ongoing customer shift to cloud offerings. In More Personal Computing, we expect revenue to be USD 12.4 billion to USD 12.9 billion. Windows OEM and Devices revenue should decline in the mid- to high single digits. We expect the elevated inventory levels at the end of Q4 to come down through the quarter in Windows OEM, although the range of potential outcomes remains wider than normal. Devices revenue should decline.
Search and news advertising ex TAC revenue growth should be in the low to mid-teens, down sequentially as growth rates normalize following the benefit from third-party partnerships noted earlier. Growth will continue to be driven by volume and revenue per search across Edge and Bing. Overall search and news advertising revenue growth should be in the low double digits.
And in Gaming, we expect revenue to decline in the mid to high single digits. Against a strong prior year comparable, we expect Xbox content and services revenue to decline in the mid-single digits. Now back to company guidance.
We expect COGS of USD 24.3 billion to USD 24.5 billion, or growth of 21% to 22%, and operating expense of USD 15.7 billion to USD 15.8 billion, or growth of 5% to 6%. Other income and expense is estimated to be negative $1.3 billion, primarily due to investments accounted for under the equity method. As a reminder, we do not recognize mark-to-market gains or losses on equity method investments. And lastly, we expect our Q1 effective tax rate to be between 19% and 20%.
In closing, we finished the year with double-digit revenue and operating income growth and exceeded the FY '25 operating margin commitment we shared a year ago. Our focus remains on investing in security, quality and AI platform and product innovation that delivers value and opportunity to our customers. We are excited for FY '26. With that, let's go to Q&A, Jonathan.