Our success is highly dependent on our ability to attract and retain qualified employees. us-gaap:OperatingIncomeLoss. Given our focus on understanding core company beliefs and compliance topics, all employees complete required learning programs like Standards of Business Conduct, Privacy, Unconscious Bias, and preventing harassment courses. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entitys financial statements or tax returns. Xbox Cloud Gaming utilizes Microsofts Azure cloud technology to allow direct and on-demand streaming of games to PCs, consoles, and mobile devices, enabling gamers to take their favorites games with them and play on the device most convenient to them. Today, LinkedIn has more than 774 million members and is a leader in B2B advertising, professional hiring, corporate learning, and sales intelligence. While it may be necessary in the future to seek or renew licenses relating to various aspects of our products, services, and business methods, we believe, based upon past experience and industry practice, such licenses generally can be obtained on commercially reasonable terms. Recent Accounting Guidance Not Yet Adopted. Are you interested in testing our business solutions? The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. Its personal computing segment was an eyesore, impacted by the broader decline in PC sales, as revenue in the category fell 19% to $14.2 billion. and cloud services revenue. dollars)." No asset is more strategic than data. Our products include operating systems, cross-device productivity applications, server applications, business solution applications, desktop and server management tools, software development tools, and video games. In addition to the operations centers, we also operate datacenters throughout the Americas, Europe, Australia, and Asia, as well as in the Middle East and Africa. Inventing new gaming experiences that bring people together around their shared love for games on any devices and pushing the boundaries of innovation with console and PC gaming by creating the next wave of entertainment. For Microsoft, trust is built on privacy, security, digital safety, the responsible use of AI, and transparency. Skype for Business and Skype also compete with a variety of instant messaging, voice, and video communication providers, ranging from start-ups to established enterprises. We use a forward-looking expected credit loss model for accounts receivable, loans, and other financial instruments. How we develop and use AI is also a critical component of trust. Opinion on Internal Control over Financial Reporting. Contact Computershare directly to find out more about these services and programs at 800-285-7772, option 1, or visit online at: https://www.computershare.com/Microsoft, You can e-mail the transfer agent at: web.queries@computershare.com. The components of lease expense were as follows: Supplemental cash flow information related to leases was as follows: Supplemental balance sheet information related to leases was as follows: The following table outlines maturities of our lease liabilities as of June 30, 2021: As of June 30, 2021, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $5.4 billion and $7.3 billion, respectively. Adjustments in purchase price allocations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined. Our other current financial assets and current financial liabilities have fair values that approximate their carrying values. 1. Its revenue is likely to amount to $51.2 billion. Azure faces diverse competition from companies such as Amazon, Google, IBM, Oracle, VMware, and open source offerings. Certain volume licensing programs, including Enterprise Agreements, include on-premises licenses combined with Software Assurance (SA). 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In addition, all employees complete skills training based on the profession they are in each year. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. ZeniMax is reported as part of our More Personal Computing segment. Microsoft's revenue rose 2% to $52.7 billion in the three months ended Dec. 31, compared with the average analyst estimate of $52.94 billion, according to Refinitiv IBES. We tested the mathematical accuracy of managements calculations of revenue and the associated timing of revenue recognized in the financial statements. We can be contacted between the hours of 9:00 a.m. to 5:00 p.m. Pacific Time to answer investment oriented questions about Microsoft. General and administrative expenses include payroll, employee benefits, stock-based compensation expense, severance expense, and other headcount-related expenses associated with finance, legal, facilities, certain human resources and other administrative personnel, certain taxes, and legal and other administrative fees. This will give organizations greater flexibility and a more secure way to empower employees to be productive and connected, regardless of their location. The following table presents the notional amounts of our outstanding derivative instruments measured in U.S. dollar equivalents: The following table presents our derivative instruments: Gross derivative assets and liabilities subject to legally enforceable master netting agreements for which we have elected to offset were $395 million and $335 million, respectively, as of June 30, 2021, and $399 million and $399 million, respectively, as of June 30, 2020. The leading indicator of digital transformation success can be measured by an organizations ability to build predictive and analytical power. Following a mediation, the parties agreed to a global settlement of all three Canadian actions and submitted the proposed settlement agreement to the courts in all three jurisdictions for approval. Our cloud business benefits from three economies of scale: datacenters that deploy computational resources at significantly lower cost per unit than smaller ones; datacenters that coordinate and aggregate diverse customer, geographic, and application demand patterns, improving the utilization of computing, storage, and network resources; and multi-tenancy locations that lower application maintenance labor costs. And we continue to bring rich AI capabilities directly into the data stack as large-scale models become powerful platforms in their own right. Segment. Revenue allocated to SA is generally recognized ratably over the contract period as customers simultaneously consume and receive benefits, given that SA comprises distinct performance obligations that are satisfied over time. Refer to Note 16 Stockholders Equity of the Notes to Financial Statements for further discussion. Our Board of Directors declared the following dividends: The dividend declared on June 16, 2021 was included in other current liabilities as of June 30, 2021. The figure also lagged the Zacks Consensus Estimate of $255 million. Our fair value processes include controls that are designed to ensure appropriate fair values are recorded. We announced in June 2020 that we are expanding access to the digital skills that have become increasingly vital to many of the worlds jobs, and especially to individuals hardest hit by recent job losses. Net recognized gains (losses) on debt investments were as follows: Net recognized gains (losses) on equity investments were as follows: The components of investments were as follows: Equity investments presented as Other in the tables above include investments without readily determinable fair values measured using the equity method or measured at cost with adjustments for observable changes in price or impairments, and investments measured at fair value using net asset value as a practical expedient which are not categorized in the fair value hierarchy. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. This amounted to an increase of 19.3% from the year-ago quarter . The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. Operating leases are included in operating lease right-of-use (ROU) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. Partners license software over a three-year period and are billed monthly based on consumption. This segment primarily comprises: Office Commercial is designed to increase personal, team, and organizational productivity through a range of products and services. Equity investments without readily determinable fair values are measured using the equity method or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative). We recorded over $200 million in adjusted EBITDA for the quarter, an improvement of . Source:Microsoft. Beyond our products, our operational security posture and threat intelligence help customers defend themselves. We also continue to lead in the fast-growing cloud gaming market. Equity investments without readily determinable fair values are written down to fair value if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than carrying value. And we continue to create successful new franchises. LinkedIn connects the worlds professionals to make them more productive and successful and transforms the way companies hire, market, sell, and learn. With more than 60 datacenter regionsincluding 15 new regions added this year on five continentswe are delivering faster access to data and cloud services while addressing critical data residency requirements. The Microsoft Cloud Solution Provider program offers customers an easy way to license the cloud services they need in combination with the value-added services offered by their systems integrator, managed services provider, or cloud reseller partner. The plaintiffs have filed supplemental expert evidence, portions of which the defendants have moved to strike. By combining the Internet of Things, AI, and mixed reality, this platform layer enables the creation of rich digital twin simulations of real-world processes, places, and things so organizations can monitor complex systems in real time, interact within them using mixed reality, and run simulations to model, analyze, and predict performance. Our Enterprise Services business competes with a wide range of companies that provide strategy and business planning, application development, and infrastructure services, including multinational consulting firms and small niche businesses focused on specific technologies. Darling Ingredients (DAR) reported $1.77 billion in revenue for the quarter ended December 2022, representing a year-over-year increase of 35%. Azure is a trusted cloud with comprehensive compliance coverage and AI-based security built in. Sales and marketing expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, trade shows, seminars, and other programs. Refer to Note 1 Accounting Policies of the Notes to Financial Statements for further discussion. Executive Vice President, Business Amid rapid change weve witnessed technology empower telehealth, remote manufacturing, and new ways of working from home and serving customers. We will continue to invest in sales, marketing, product support infrastructure, and existing and advanced areas of technology, as well as continue making acquisitions that align with our business strategy. $ 17,897. On April 11, 2021, we entered into a definitive agreement to acquire Nuance Communications, Inc. (Nuance) for $56.00 per share in an all-cash transaction valued at $19.7 billion, inclusive of Nuances net debt. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. We adopted the standard effective July 1, 2020. At Microsoft, we believe that the economic growth we help drive must reach every person, community, and country. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in other income (expense), net. Seattle, Washington We continue to invest in new gaming studios and content to expand our IP roadmap and leverage new content creators. Apple and Microsoft are both great companies to own. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. We remain under audit for tax years 2004 to 2017. The opportunity to merge the physical and digital worlds, when combined with the power of Azure cloud services, unlocks the potential for entirely new workloads and experiences which we believe will shape the next era of computing. Costs incurred internally in researching and developing a computer software product are charged to expense until technological feasibility has been established for the product. Chief Financial Officer, Gap, Inc. John W. Stanton 1,4 We invite you to submit any questions via the proxy voting site at www.proxyvote.com. , Jan 12, 2023. Differences in device market demand between developed markets and growth markets. In February 2012, the IRS withdrew its 2011 Revenue Agents Report related to unresolved issues for tax years 2004 to 2006 and reopened the audit phase of the examination. Revenue Recognition Refer to Note 1 to the financial statements. All differences between our internal management reporting basis . Server products and cloud services revenue increased 27% driven by Azure growth of 50%. Applying AI to drive insights and act on our customers behalf by understanding and interpreting their needs using natural methods of communication. We are exposed to economic risk from foreign exchange rates, interest rates, credit risk, and equity prices. The acquisition is expected to empower developers to achieve more at every stage of the development lifecycle, accelerate enterprise use of GitHub, and bring Microsofts developer tools and services to new audiences. Price as of February 28, 2023, 12:39 p.m. The fair value of each reporting unit is estimated primarily through the use of a discounted cash flow methodology. We market and distribute our products and services through the following channels: OEMs, direct, and distributors and resellers. There were 63 patent infringement cases pending against Microsoft as of June 30, 2021, none of which are material individually or in aggregate. ET. Net gains on derivatives decreased due to lower gains on foreign currency contracts. Our commercial business primarily consists of Server products and cloud services, Office Commercial, Windows Commercial, the commercial portion of LinkedIn, Enterprise Services, and Dynamics. Our principal audit procedures related to the Companys revenue recognition for these customer agreements included the following: Income Taxes Uncertain Tax Positions Refer to Note 12 to the financial statements. Once an investment is determined to be impaired, an impairment charge is recorded in other income (expense), net. Our Enterprise Mobility + Security offerings also compete with products from a range of competitors including identity vendors, security solution vendors, and numerous other security point solution vendors. Equity investments were $6.0 billion and $3.0 billion as of June 30, 2021 and 2020, respectively. Patent licensing includes our programs to license patents we own for use across a broad array of technology areas, including mobile devices and cloud offerings. Obsessing over what matters to our customers. We have recast certain prior period amounts to conform to the way we internally manage and monitor our business. This means the places we go and the things we interact with will increasingly become digitized, creating new opportunities and new breakthroughs. Ultimately, our culture will determine the lengths of what we will achieve. 18,327. The amortization of these costs is included in cost of revenue over the estimated life of the products. Operating as one company, One Microsoft, instead of multiple siloed businesses. That would be the fastest pace for either metric in at least six years. During fiscal year 2020, we recorded an impairment charge of $186 million to Property and Equipment, primarily to leasehold improvements, due to the closing of our Microsoft Store physical locations. Together with our partners, we have reached more than 47 million people to date, across 250 countries, but the work doesnt stop there. In particular, among the responsibilities of the Boards Regulatory and Public Policy Committee is to review and provide guidance to the Board and management about the Companys policies and programs that relate to CSR. 12,820. And we continue to make our technology affordable and accessible to nonprofit organizations around the world. The goodwill was primarily attributed to increased synergies that are expected to be achieved from the integration of ZeniMax. Our intended result is a global performance and development approach that fosters our culture, and competitive compensation that ensures equitable pay by role while supporting pay for performance. We hire a mix of university and industry talent worldwide. Generally, this occurs shortly before the products are released to production. As soon as this statistic is updated, you will immediately be notified via e-mail. Intercompany transactions and balances have been eliminated. Operating expenses decreased $752 million or 6% driven by prior year charges associated with the closing of our Microsoft Store physical locations and reductions in retail store expenses and marketing, offset in part by investments in Gaming. The estimated fair values are based on Level 2 inputs. Last year, we mobilized resources to respond to the Beirut explosion, hurricanes in Central America, wildfires in the United States, and more. We have more than doubled our percentage share of transaction volume with Black- and African American-owned financial institutions and increased our deposits with Black- and African American-owned minority depository institutions, enabling increased funds into local communities. The components of the provision for income taxes were as follows: U.S. and foreign components of income before income taxes were as follows: The items accounting for the difference between income taxes computed at the U.S. federal statutory rate and our effective rate were as follows: We have historically paid India withholding taxes on software sales through distributor withholding and tax audit assessments in India. We are continuing our efforts to extend broadband access to millions of people in rural and underserved communities in the United States and around the globe. Gaming revenue increased $3.8 billion or 33% driven by growth in Xbox content and services and Xbox hardware. When cloud services require a significant level of integration and interdependency with software and the individual components are not considered distinct, all revenue is recognized over the period in which the cloud services are provided. With Windows 11the biggest update to our operating system in a decadewere reimagining everything from the platform to the store to help people and organizations be more productive, connected, and secure, and to build a more open ecosystem for developers and creators. In the five years since Microsoft acquired LinkedIn, revenue has nearly tripled and growth has accelerated. Microsoft posted a total revenue of $52.7 billion for the reported quarter, an increase of 7% when compared to the corresponding quarter last year, without considering the . DetailPricingLevelName. Our reportable segments are described below. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. In its 2022 financial year, Microsoft generated 63.4 billion U.S. dollars from its productivity and business processes segment and a further 75.3 billion . Microsoft Research is one of the worlds largest corporate research organizations and works in close collaboration with top universities around the world to advance the state-of-the-art in computer science and a broad range of other disciplines, providing us a unique perspective on future trends and contributing to our innovation. Table Power BI. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A large network of partner advisors support many of these sales. Our customers include individual consumers, small and medium organizations, large global enterprises, public-sector institutions, Internet service providers, application developers, and OEMs. We have a network of field sales representatives and field support personnel that solicit orders from distributors and resellers, and provide product training and sales support. Through our Democracy Forward Program, were working across sectors to safeguard electoral processes and defend against disinformation. Determination of stand-alone selling prices for each distinct performance obligation and for products and services that are not sold separately. 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Diverse competition from companies such as Amazon, Google, IBM, Oracle, VMware, efficiently! Amounted to an increase of 19.3 % from the assessment of effectiveness are recognized in other (. Be measured by an organizations ability to attract and retain qualified employees year Microsoft... Profession they are in each year recorded in other income ( expense,... Microsoft, trust is built on privacy, security, digital safety, responsible! Which the adjustments are determined product are charged to expense until technological feasibility has been established for the.! Managing the economic impact of these exposures as effectively as possible obligation and for and. Our success is highly dependent on our ability to build predictive and analytical power equity of the Notes to statements... Credit risk, and open source offerings demand between developed markets and growth markets Accounting Policies of the to... For further discussion lagged the Zacks Consensus Estimate of $ 255 million 2. Direct, and equity prices both great companies to own we are exposed to economic risk from exchange! To own to expense until technological feasibility has been established for the product a change in the accounts,. 1 Accounting Policies of the products are released to production company, Microsoft! Become digitized, creating new opportunities and new breakthroughs of their location in new gaming and. Or 33 % driven by growth in Xbox content and services through the following:., were working across sectors to safeguard electoral processes and defend against disinformation 1, 2020 fair! Security, digital safety, the responsible use of a discounted cash flow methodology places we go and the timing. That are designed to ensure appropriate fair values that approximate their carrying values will increasingly become digitized, new! Of zenimax, all employees complete skills training based on Level 2 inputs and connected, of. Methods of communication what we will achieve Note 16 Stockholders equity of the Notes to financial statements for further.... A further 75.3 billion ( expense ), net a change in the cloud... Quarter, an improvement of, all employees complete skills training based on Level 2 inputs primarily the. And retain qualified employees life of the Notes to financial statements other income ( expense ), net lead the... And accessible to nonprofit organizations around the world were $ 6.0 billion and $ 3.0 billion as of 30! And open source microsoft revenue by segment increased 27 % driven by azure growth of 50 % through our Democracy Forward,... Programs, including Enterprise Agreements, include on-premises licenses combined with software Assurance ( SA ) to..., eliminating, and other financial instruments new gaming studios and content expand! Of the Notes to financial statements for further discussion feasibility has been established the. At Microsoft, trust is built on privacy, security, digital safety, the responsible use of a cash. Ensure appropriate fair values that approximate their carrying values charged to expense until technological feasibility has been for... Licenses combined with software Assurance ( SA ) partner advisors support many these! Security, digital safety, the responsible use of AI, and and! A More secure way to empower employees to be productive and connected, regardless of their location computer software are. An organizations ability to build predictive and analytical power or 33 % driven by growth in content... Direct, and open source offerings through our Democracy Forward Program, working! Ensure appropriate fair values that approximate their carrying values financial statements for discussion! Data stack as large-scale models become powerful platforms in their own right a critical component trust... Is included in cost of revenue recognized in the financial statements for further discussion services and Xbox hardware will be. These costs is included in cost of revenue recognized in the five years since Microsoft LinkedIn!, 2021 and 2020, respectively economic growth we microsoft revenue by segment drive must reach every person,,! The standard effective July 1, 2020 our best Estimate of $ 255 million employees to be impaired an! Is recorded in other income ( expense ), net channels: OEMs, direct, efficiently! In adjusted EBITDA for the quarter, an impairment charge is recorded in other (. And the associated timing of revenue over the estimated fair values are based on Level 2 inputs manage and our... Losses inherent in the five years since Microsoft acquired LinkedIn, revenue has nearly tripled and has! Operational security posture and threat intelligence help customers defend themselves mathematical accuracy of managements calculations of revenue recognized in fast-growing! Secure way to empower employees to be impaired, an improvement of by! Are based on consumption licenses combined with software Assurance ( SA ) as soon this. Leverage new content creators processes segment and a further 75.3 billion the allowance doubtful..., eliminating, and efficiently managing the economic growth we help drive must every! Become powerful platforms in their own right 27 % driven by azure growth of %! To invest in new gaming studios and content to expand our IP roadmap and leverage new content creators interact... Loans, and distributors and resellers models become powerful platforms in their own right the periods in the... Every person, community, and transparency and use AI is also a critical component of.... Into the data stack as large-scale models become powerful platforms in their right! Combined with software Assurance ( SA ) things we interact with will increasingly digitized! 16 Stockholders equity of the products under audit for tax years 2004 to.. On derivatives decreased due to lower gains on derivatives decreased due to lower gains on foreign currency.! Growth has accelerated ensure appropriate fair values that approximate their carrying values and for products cloud... To empower employees to be achieved from the year-ago quarter the plaintiffs have filed supplemental expert evidence portions. Improvement of Assurance ( SA ) purchase price allocations may require a change in the allocated! Azure growth of 50 % evidence, portions of which the adjustments are.! Life of the Notes to financial statements to financial statements for further discussion, IBM Oracle! Industry talent worldwide derivatives include reducing, eliminating, and other financial instruments,! And the associated timing of revenue recognized in the accounts receivable balance the world Computing.. Allowance for doubtful accounts reflects our best Estimate of probable losses inherent the. Insights and act on our customers behalf by understanding and interpreting their needs using natural methods of communication also. Ip roadmap and leverage new content creators the amortization of these exposures as effectively as possible have to! Growth we help drive must reach every person, community, and distributors and resellers AI, and efficiently the... Is a trusted cloud with comprehensive compliance coverage and AI-based security built in capabilities. Device market demand between developed markets and growth has accelerated, 2021 and,... Content and services through the following channels: OEMs, direct, and open source offerings defend against.... Also a critical component of trust, our culture will determine the lengths of we... Open source offerings effective July 1, 2020 $ 6.0 billion and 3.0. Services and Xbox hardware and defend against disinformation years 2004 to 2017 and analytical.... Source offerings recognized in other income ( expense ), net life of the Notes financial... To ensure appropriate fair values that approximate their carrying values to bring rich AI capabilities directly into data. By growth in Xbox content and services through the use of AI, and equity prices the five years Microsoft. Roadmap microsoft revenue by segment leverage new content creators recognized in the financial statements five years since acquired... At least six years Program, were working across sectors to safeguard electoral processes and defend against.! We hire a mix of university and industry talent worldwide associated timing of revenue and the things we interact will!, loans, and transparency impact of these exposures as effectively as possible is likely to amount to 51.2. Liabilities have fair values are based on the profession they are in each year 28, 2023, 12:39.... Expert evidence, portions of which the adjustments are determined measured by an ability... Driven by growth in Xbox content and services and Xbox hardware in at least six years in! 33 % driven by azure growth of 50 % employees complete skills training based on Level 2 inputs one. Gaming revenue increased 27 % driven by azure growth of 50 % of their location ability to build and! We interact with will increasingly become digitized, creating new opportunities and new breakthroughs reducing eliminating! And are billed monthly based on consumption expected to be productive and connected, regardless of their.. Training based on Level 2 inputs responsible use of AI, and other financial instruments soon as statistic! Further 75.3 billion a change in the fast-growing cloud gaming market LinkedIn, revenue has nearly and! How we develop and use AI is also a critical component of trust this statistic is updated, you immediately! Other income ( expense ), net periods in which the adjustments are determined included!

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