The outage affecting services including Outlook emails, instant messaging service Teams and AI service Copilot stretched into Asia-Pacific business hours on Friday after affecting thousands of users in the United States.
It hit government agencies in Australia and Japan, as well as companies including OpenAI and Anthropic.
It is the second disruption to Microsoft's 365 services this year, raising concerns that repeated failures could push corporate clients to question the tech titan's reliability.
Microsoft executive vice-president Charles Lamanna said the company would continue to share more information about the outage as soon as possible.
"We regret that today's outages caused disruptions for our customers, and we are working to address the issue," he wrote on X.
"For now I can confirm that there is no indication this is the result of malicious or cyber activity."
Microsoft initially said some servers had been unexpectedly unavailable and crashed after it managed to get them operating.
In its latest update, Microsoft said it was observing partial recovery across regions where it had applied adjustments but efforts to improve serviceability were not progressing as expected.
Actions weren't resulting in sustained recovery, the company said.
"We're reviewing what additional actions we can take to improve overall infrastructure stability," Microsoft said on X.
Monitoring website Downdetector said service disruptions had been reported in 74 countries and territories within about an hour of the outage beginning, around 4pm GMT on Thursday (3am AEDT on Friday).
"Outlook reports alone peaked at more than 2,000 times their normal level," it said on X.
Australian Cyber Security Minister Tony Burke told reporters Microsoft believed it was an update that had "gone awry", similar to the 2024 CrowdStrike outage.
That was one of the largest internet disruptions, hobbling technology systems in hospitals, banks and airports, highlighting the vulnerability of the world's interconnected technologies.
Australia's spy agency and federal police were among organisations caught up in the Microsoft outage, while the US House of Representatives said its users were affected.
In Japan, deputy chief cabinet secretary Masanao Ozaki told reporters the outage was affecting the government's information system infrastructure.
Indian airlines IndiGo and Akasa Air said their email support services were hit, while Immigration New Zealand was forced to pause the processing of all visa applications.
In Canada, Unity Health Toronto said its email system was down, but patient and resident care was not affected.
The outage also disrupted fund management at Taiwanese securities firms, life insurers and investment trust companies.
One company went as far as cancelling a bond repurchase agreement transaction it had already scheduled, a source familiar with the situation told Reuters.
US-based electric truck maker Workhorse Group bumped its third-quarter results by four days.
Josh Gilbert, market analyst at trading platform eToro, said investors would likely look past the outage but repeated disruptions could hurt Microsoft over time.
"I think investors will take this in their stride for now, because very few of these customers can realistically walk away from the Microsoft ecosystem overnight," Gilbert said.
"The bigger worry is that this isn't the first 365 outage this year, and if reliability starts to look like a recurring problem, it hands every IT department a reason to think twice before putting even more of their business in one provider's hands.
"The market will want to see Microsoft prove it can keep the lights on before it asks customers to spend more on Copilot."
Reports to Downdetector of problems with Outlook in Australia peaked at 5505 on Friday morning but had fallen to 1380 about nine hours later.
Microsoft also had an outage of its 365 services in October 2025.
With DPA, PA
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