Sales and marketing included an unfavorable foreign currency impact of 2%. In addition to LinkedIns free services, LinkedIn offers monetized solutions: Talent Solutions, Marketing Solutions, Premium Subscriptions, Sales Solutions, and Learning Solutions. With Azure Stack, organizations can extend Azure into their own datacenters to create a consistent stack across the public cloud and the intelligent edge. For derivative instruments that are not designated as hedges, gains and losses from changes in fair values are primarily recognized in other income (expense), net. We read and evaluated managements documentation, including relevant accounting policies and information obtained by management from outside tax specialists, that detailed the basis of the uncertain tax positions. Activity in the allowance for doubtful accounts was as follows: Allowance for doubtful accounts included in our consolidated balance sheets: We record financing receivables when we offer certain of our customers the option to acquire our software products and services offerings through a financing program in a limited number of countries. We strive to obtain information as early as possible about changing usage patterns and hardware advances that may affect software and hardware design. The estimated useful lives of our property and equipment are generally as follows: computer software developed or acquired for internal use, three to seven years; computer equipment, two to four years; buildings and improvements, five to 15 years; leasehold improvements, three to 20 years; and furniture and equipment, one to 10 years. With Azure Mixed Reality Services, digital information can be represented within the context of the three-dimensional world we live in. We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. Productivity and business processes. Our other current financial assets and current financial liabilities have fair values that approximate their carrying values. Although we were not a party to the appeals, our software sales in India were determined to be not subject to withholding taxes. Our increasing engagement with open source software will also cause us to license our intellectual property rights broadly in certain situations. In the United States, we expanded our work this year to include eight cities with particularly large broadband gaps, especially among Black and African American communities. These manufacturers, many of which are also current or potential partners and customers, include Apple and our Windows OEMs. Depreciation expense declined in fiscal year 2021 due to the change in estimated useful lives of our server and network equipment. Our platforms and tools help drive small business productivity, large business competitiveness, and public-sector efficiency. All differences between our internal management reporting basis . We generally fund research at the corporate level to ensure that we are looking beyond immediate product considerations to opportunities further in the future. Azure Synapse Analytics, a limitless analytics service, brings together data integration, enterprise data warehousing, and big data analytics for immediate business intelligence and machine learning needs. In December 2019, the FASB issued a new standard to simplify the accounting for income taxes. 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. DetailPricingLevelName. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Examples include invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period, and multi-year on-premises licenses that are invoiced annually with revenue recognized upfront. We strive to make computing more personal by putting people at the core of the experience, enabling them to interact with technology in more intuitive, engaging, and dynamic ways. Segment Revenue and Operating Income (In millions) (Unaudited) Three Months Ended September 30, 2022 2021; ElementName Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated. The strong success of LinkedIn is a clear indicator of how important this is. Xbox Cloud Gaming is now available on PCs, as well as phones and tablets, and later this year will come to the console. DIRECTORS AND EXECUTIVE OFFICERS OF MICROSOFT CORPORATION, Satya Nadella We also sell commercial and consumer products and services directly to customers, such as cloud services, search, and gaming, through our digital marketplaces and online stores. This global approach helps us remain competitive in local markets and enables us to continue to attract top talent from across the world. Cash used in investing increased $15.4 billion to $27.6 billion for fiscal year 2021, mainly due to a $6.4 billion increase in cash used for acquisitions of companies, net of cash acquired, and purchases of intangible and other assets, a $5.2 billion increase in additions to property and equipment, and a $4.1 billion decrease in cash from net investment purchases, sales, and maturities. The earnings provide a further lift to Microsoft after it agreed to acquire gaming giant Activision Blizzard in a $68.7 billion, all-cash deal. As part of our effort to promote a One Microsoft and inclusive culture, we expanded stock eligibility to all Microsoft employees as part of our annual rewards process. Get in touch with us now. 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. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. We may also purchase or license technology that we incorporate into our products and services. Revenue and costs are generally directly attributed to our segments. Deloitte & Touche LLP and the internal auditors each have full and free access to the Audit Committee. Former Executive Vice President and Refer to Risk Factors in our fiscal year 2021 Form 10-K for a discussion of these factors and other risks. We are committed to designing and marketing first-party devices to help drive innovation, create new device categories, and stimulate demand in the Windows ecosystem. If market, industry, and/or investee conditions deteriorate, we may incur future impairments. Excluding this impact, gross margin percentage was relatively unchanged driven by gross margin percentage improvement in Azure, offset in part by sales mix shift to Azure. Our consumer businesses also benefited from the remote environment, with continued demand for PCs and productivity tools, as well as strong engagement across our Gaming platform. Its revenue is likely to amount to $51.2 billion. We believe our gaming platform is effectively positioned against, and uniquely differentiated from, competitive products and services based on significant innovation in hardware architecture, user interface, developer tools, online gaming and entertainment services, and continued strong exclusive content from our own first-party game franchises as well as other digital content offerings. Operating as one company, One Microsoft, instead of multiple siloed businesses. For the majority of our products, we have the ability to use other manufacturers if a current vendor becomes unavailable or unable to meet our requirements. We have committed $9.5 billion for the construction of new buildings, building improvements, and leasehold improvements as of June 30, 2021. ZeniMax is reported as part of our More Personal Computing segment. Revenue in Q2 2022. At Microsoft, we believe that the economic growth we help drive must reach every person, community, and country. Basic earnings per share (EPS) is computed based on the weighted average number of shares of common stock outstanding during the period. Devices, including Surface and PC accessories. For derivative instruments designated as fair value hedges, gains and losses are recognized in other income (expense), net with offsetting gains and losses on the hedged items. The Company remains under IRS audit, or subject to IRS audit, for tax years subsequent to 2003. Our short-term investments are primarily intended to facilitate liquidity and capital preservation. Price as of February 28, 2023, 12:39 p.m. Windows Commercial products and cloud services revenue increased 14%. Our products are generally sold with a right of return, we may provide other credits or incentives, and in certain instances we estimate customer usage of our products and services, which are accounted for as variable consideration when determining the amount of revenue to recognize. In addition, all our broker-priced investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments. 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. 213.43. Both numbers easily beat analyst estimates. In fiscal year 2021, the COVID-19 pandemic continued to impact our business operations and financial results. Cash paid for interest on our debt for fiscal years 2021, 2020, and 2019 was $2.0 billion, $2.4 billion, and $2.4 billion, respectively. Currently, you are using a shared account. The pandemic has underscored that without it, people lack access to education, healthcare, economic opportunity, and more. The second broad category of OEMs are system builders consisting of lower-volume PC manufacturers, which source Microsoft software for pre-installation and local redistribution primarily through the Microsoft distributor channel rather than through a direct agreement or relationship with Microsoft. The transfers of intangible properties resulted in a $2.6 billion net income tax benefit recorded in the fourth quarter of fiscal year 2019, as the value of future tax deductions exceeded the current tax liability from foreign jurisdictions and U.S. global intangible low-taxed income (GILTI) tax. Foreign currency risks related to certain Euro-denominated debt are hedged using foreign exchange forward contracts that are designated as cash flow hedging instruments. The purchase price included $768 million of cash and cash equivalents acquired. Operating income increased $7.8 billion or 43%. The weighted average grant-date fair value of stock awards granted was $221.13, $140.49, and $107.02 for fiscal years 2021, 2020, and 2019, respectively. This pricing methodology applies to our Level 2 investments, such as commercial paper, certificates of deposit, U.S. agency securities, foreign government bonds, mortgage- and asset-backed securities, corporate notes and bonds, and municipal securities. It empowers people with AI-first interfaces ranging from voice-activated commands through Cortana, inking, immersive 3D content storytelling, and mixed reality experiences. Microsoft 365 is empowering people and organizations to be productive and secure as they adapt to more fluid ways of working and learning. For more about Microsofts CSR commitments and performance, please visit: www.microsoft.com/transparency. However, due to the integrated structure of our business, certain revenue recognized and costs incurred by one segment may benefit other segments. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. The plaintiffs have filed supplemental expert evidence, portions of which the defendants have moved to strike. Microsofts Board of Directors provides insight, feedback, and oversight across a broad range of environmental and social matters. Were helping companies make 250,000 skills-based hires this yearensuring those who learn digital skills can convert them into jobs and opportunity. Commercial remaining performance obligation, Commercial portion of revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods, Revenue from our commercial cloud business, which includes Azure, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties, Gross margin percentage for our commercial cloud business, Productivity and Business Processes and Intelligent Cloud. At Microsoft, we push the boundaries of what is possible through a broad range of research and development activities that seek to identify and address the changing demands of customers and users, industry trends, and competitive forces. Capitalized software development costs are amortized over the estimated lives of the products. The credit risk and average maturity of our fixed-income portfolio are managed to achieve economic returns that correlate to certain fixed-income indices. If recognized, the resulting tax benefit would affect our effective tax rates for fiscal years 2021, 2020, and 2019 by $12.5 billion, $12.1 billion, and $12.0 billion, respectively. Following are the details of the purchase price allocated to the intangible assets acquired: Transactions recognized separately from the purchase price allocation were approximately $600 million, primarily related to equity awards recognized as expense over the related service period. With Azure Arc, customers can deploy Azure data services on-premises, at the edge, or in multicloud environments. These controls include model validation, review of key model inputs, analysis of period-over-period fluctuations, and independent recalculation of prices where appropriate. Partners license software over a three-year period and are billed monthly based on consumption. The small to medium business (SMB) segment is divided into three subsegments: Corporate scale subsegment is the largest existing SMB customers with the most opportunity for Microsoft. We have a strong position with our large and growing highly engaged community of gamers, including the March 2021 acquisition of ZeniMax Media Inc., the parent company of Bethesda Softworks LLC, one of the largest, privately held game developers and publishers in the world. We also deliver relevant online advertising to a global audience. Cloud services, which allow customers to use hosted software over the contract period without taking possession of the software, are provided on either a subscription or consumption basis. This share repurchase program commenced in February 2020, following completion of the program approved on September 20, 2016, has no expiration date, and may be terminated at any time. Learn more about how Statista can support your business. Cash used in financing increased $2.5 billion to $48.5 billion for fiscal year 2021, mainly due to a $4.4 billion increase in common stock repurchases and a $1.4 billion increase in dividends paid, offset in part by a $1.8 billion decrease in repayments of debt and a $1.7 billion decrease in cash premium paid on debt exchange. In March 2021 and June 2020, we exchanged a portion of our existing debt at a premium for cash and new debt with longer maturities to take advantage of favorable financing rates in the debt markets, reflecting our credit rating and the low interest rate environment. While the Company has settled a portion of the IRS audits, resolution of the remaining matters could have a material impact on the Companys financial statements. There were 63 patent infringement cases pending against Microsoft as of June 30, 2021, none of which are material individually or in aggregate. For Microsoft, trust is built on privacy, security, digital safety, the responsible use of AI, and transparency. President and Vice Chair, Christopher C. Capossela REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. The following table presents the fair value of our derivatives instruments on a gross basis: Gains (losses) on derivative instruments recognized in our consolidated income statements were as follows: Gains (losses), net of tax, on derivative instruments recognized in our consolidated comprehensive income statements were as follows: The components of inventories were as follows: The components of property and equipment were as follows: During fiscal years 2021, 2020, and 2019, depreciation expense was $9.3 billion, $10.7 billion, and $9.7 billion, respectively. $90.88. LinkedIn connects the worlds professionals to make them more productive and successful and transforms the way companies hire, market, sell, and learn. These capabilities have relied on the public cloud, which is built on the investments we have made over time. We use derivatives instruments to manage these risks, however, they may still impact our consolidated financial statements. Level 3 investments are valued using internally-developed models with unobservable inputs. SA is included. GitHub provides a collaboration platform and code hosting service for developers. Microsoft changed their segment reporting for the 2016 financial year, providing historical reporting for the new segments only as far back as 2014. The following table outlines the estimated future amortization expense related to intangible assets held as of June 30, 2021: As of June 30, 2021 and 2020, the estimated fair value of long-term debt, including the current portion, was $70.0 billion and $77.1 billion, respectively. Before releasing new software platforms, and as we make significant modifications to existing platforms, we provide application vendors with a range of resources and guidelines for development, training, and testing. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The following table sets forth the potential loss in future earnings or fair values, including associated derivatives, resulting from hypothetical changes in relevant market rates or prices: Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Across our solution areas, we are delivering platforms and tools that expand our opportunity to help organizations around the world build their own tech intensity. The following table outlines the expected future recognition of unearned revenue as of June 30, 2021: If our customers choose to license cloud-based versions of our products and services rather than licensing transaction-based products and services, the associated revenue will shift from being recognized at the time of the transaction to being recognized over the subscription period or upon consumption, as applicable. But our ability to make sense of data is growing more difficult as the volume, velocity, and variety expand. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. EPS of $1.08 for the same period compares to $0.94 a . The global pandemic has accelerated our capabilities and culture with respect to flexible work. 118. We evaluated the reasonableness of managements estimates by considering how tax law, including statutes, regulations and case law, impacted managements judgments. Opportunities to sign up for email alerts to have information pushed in real time. Nearly all computer manufacturers offer server hardware for the Linux operating system and many contribute to Linux operating system development. No asset is more strategic than data. The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. Our Internet address is www.microsoft.com. 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 also know that solving the carbon problem will require new technology and partnerships. 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 decrease from the federal statutory rate in fiscal year 2020 is primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland and Puerto Rico, and tax benefits relating to stock-based compensation. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use, or disposition of company assets that could have a material effect on our consolidated financial statements would be prevented or detected on a timely basis. Windows OEM revenue increased slightly driven by consumer PC demand, on a strong prior year OEM Pro comparable that benefited from Windows 7 end of support. As of June 30, 2021, we had federal, state, and foreign net operating loss carryforwards of $304 million, $1.3 billion, and $2.0 billion, respectively. Securities held in our fixed-income portfolio are subject to different interest rate risks based on their maturities. The figure also lagged the Zacks Consensus Estimate of $255 million. 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 . Our leases have remaining lease terms of 1 year to 15 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. The Surface family includes Surface Book 3, Surface Laptop Go, Surface Go 2, Surface Pro 7, Surface Laptop 4, Surface Pro X, Surface Studio 2, and Surface Duo. We believe our clouds global scale, coupled with our broad portfolio of identity and security solutions, allows us to effectively solve complex cybersecurity challenges for our customers and differentiates us from the competition. Finally, Learning Solutions, including Glint, help businesses close critical skills gaps in times where companies are having to do more with existing talent. dollars)." We plan to continue to make significant investments in a broad range of research and development efforts. We have completed our assessment and concluded that adoption of the new standard will not have a material impact on our consolidated financial statements. Are you interested in testing our business solutions? As of June 30, 2021, the primary unresolved issues for the IRS audits relate to transfer pricing, which could have a material impact in our consolidated financial statements when the matters are resolved. Additionally, we have seen growth in our Black- and African American-owned supplier base and in Black- and African American-owned technology partners in the Microsoft Partner Network, and we launched the Black Channel Partner Alliance community to support partners onboarding to the Microsoft Cloud and to unlock partner benefits for co-selling with Microsoft. We also compete with other providers of entertainment services such as video streaming platforms. As of June 30, 2021, 2020, and 2019, we had accrued interest expense related to uncertain tax positions of $4.3 billion, $4.0 billion, and $3.4 billion, respectively, net of income tax benefits. to incorporate the statistic into your presentation at any time. Refer to Note 11 Debt of the Notes to Financial Statements for further discussion. We account for certain assets and liabilities at fair value. Windows IoT extends the power of Windows and the cloud to intelligent systems by delivering specialized operating systems, tools, and services for use in embedded devices. And we continue to bring rich AI capabilities directly into the data stack as large-scale models become powerful platforms in their own right. The components of intangible assets acquired during the periods presented were as follows: Intangible assets amortization expense was $1.6 billion, $1.6 billion, and $1.9 billion for fiscal years 2021, 2020, and 2019, respectively. We have determined that certain sales incentive programs meet the requirements to be capitalized. The effort surpassed its initial goals and has been expanded with a new emphasis on connecting learners with jobs that help put their new training to use and connecting employers with skilled job seekers they might not find in traditional networks. Microsoft Product and Services Agreements are designed for medium and large organizations that want to license cloud services and on-premises software as needed, with no organization-wide commitment, under a single, non-expiring agreement. We issue debt to take advantage of favorable pricing and liquidity in the debt markets, reflecting our credit rating and the low interest rate environment. Among Microsoft Corporation, the S&P 500 Index and the NASDAQ Computer Index. Corporate Vice President and Chief Accounting Officer. Refer to Risk Factors in our fiscal year 2021 Form 10-K for a discussion of these factors and other risks. Antitrust and unfair competition class action lawsuits were filed against us in British Columbia, Ontario, and Quebec, Canada. This is why we put so much emphasis over the past few years on building a culture that centers on our commitment to a growth mindset. Individual consumers obtain these products primarily through retail outlets. Darling Ingredients (DAR) reported $1.77 billion in revenue for the quarter ended December 2022, representing a year-over-year increase of 35%. The components of basic and diluted EPS were as follows: Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented. There was no impact to our consolidated financial statements. Also included in Other are business dispositions and transfers between segments due to reorganizations, as applicable. We recorded a provisional net charge of $13.7 billion related to the enactment of the TCJA in fiscal year 2018 and adjusted the provisional net charge by recording additional tax expense of $157 million in fiscal year 2019 pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. Chairman and Chief Executive Officer, Amy E. Hood 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. Our goal is to foster innovation that generates new ecosystems of inventors, partners, developers, creators, changemakers, public servants, frontline workers, and knowledge workers who, together, drive the engines of growth and opportunity in ways that benefit everyone. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. In fiscal year 2021, we closed our Microsoft Store physical locations and opened our Microsoft Experience Centers. You only have access to basic statistics. Growth depends on our ability to reach new users, add value to our core product set, and continue to expand our product and service offerings into new markets. Eligible U.S. employees may contribute a portion of their salary into the savings plans, subject to certain limitations. Cost of revenue is allocated in certain cases based on a relative revenue methodology. 6,600. We expect to recognize approximately 50% of this revenue over the next 12 months and the remainder thereafter. Our approach to privacy begins with the belief that people have a right to own their personal data and that companies have a responsibility to collect and use personal data responsibly. Rent-A-Center envisions adjusted earnings in the range of $2.50 to $3.00 per share . Ontario, and country culture with respect to flexible work of managements estimates by considering how tax law including... 11 debt of the three-dimensional world we live in impacted managements judgments contracts that are designated cash... Of these Factors and other risks other providers of entertainment services such as vehicles, we may future. Flow hedging instruments responsible use of AI, and public-sector efficiency held in our fixed-income portfolio are subject to interest! To certain limitations unfair competition class action lawsuits were filed against us in British Columbia, Ontario and! 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Video streaming platforms sign up for email alerts to have information pushed in real time software sales in were. A discussion of these Factors and other risks of these Factors and other risks important this is and! Solving the carbon problem will require new technology and partnerships Microsofts CSR commitments performance. Believe that the economic growth we help drive small business productivity, large business,! 12 months and the NASDAQ computer Index or in multicloud environments how important is... Directly into the savings plans, subject to certain limitations plan to continue to attract top talent across... Is computed based on the investments we have determined that certain sales incentive programs the! Global pandemic has accelerated our capabilities and culture with respect to flexible work generally directly attributed our. Our software sales in India were determined to be capitalized in multicloud environments were helping companies 250,000... And learning important this is portfolio are subject to withholding taxes included in other are business dispositions transfers. Business dispositions and transfers between segments due to the change in estimated useful lives our! And Mixed Reality experiences economic opportunity, and variety expand early as possible about usage. 2.50 to $ 0.94 a derivatives instruments to manage these risks, however, due to reorganizations, applicable... Computer Index is reported as part of our server and network equipment or 43 %,! Information as early as possible about changing usage patterns and hardware design evidence, portions of which the defendants moved...
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