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. Intelligent cloud. In 2014, Microsoft was informed that Chinas State Agency for Market Regulation (SAMR) (formerly State Administration for Industry and Commerce) had begun a formal investigation relating to Chinas Anti-Monopoly Law, and the SAMR conducted onsite inspections of Microsoft offices in Beijing, Shanghai, Guangzhou, and Chengdu. In December 2019, the FASB issued a new standard to simplify the accounting for income taxes. We use a single amount to estimate SSP for items that are not sold separately, including on-premises licenses sold with SA or software updates provided at no additional charge. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. Our broker-priced investments are generally classified as Level 2 investments because the broker prices these investments based on similar assets without applying significant adjustments. The remaining transition tax of $13.6 billion is payable over the next five years with a final payment in fiscal year 2026. The COVID-19 pandemic continues to have widespread and unpredictable impacts on global society, economies, financial markets, and business practices, and continues to impact our business operations, including our employees, customers, partners, and communities. In 2014, the trial court granted in part and denied in part the defendants motion to exclude the plaintiffs general causation experts. In middleware, we compete against Java vendors. The regional center in Ireland supports the European, Middle Eastern, and African region; the center in Singapore supports the Japan, India, Greater China, and Asia-Pacific region; and the centers in Fargo, North Dakota, Fort Lauderdale, Florida, Puerto Rico, Redmond, Washington, and Reno, Nevada support Latin America and North America. More broadly, we are leading the way with solutions tailored to the needs of key industries. Growth will depend on our ability to increase the number of LinkedIn members and our ability to continue offering services that provide value for our members and increase their engagement. Azure faces diverse competition from companies such as Amazon, Google, IBM, Oracle, VMware, and open source offerings. Gross margin increased $6.5 billion or 18% driven by growth in Office 365 Commercial and LinkedIn, and the change in estimated useful lives of our server and network equipment. Product and Service Development, and Intellectual Property. Revenue in Q2 2022. Credit losses relating to available-for-sale debt securities are recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. Windows Commercial products and cloud services revenue increased 14%. We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. Revenue for Microsoft's entire More Personal Computing segment, which includes its gaming, Surface hardware, and search products, grew 15% to $17.5 billion. 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. Server products and cloud services revenue increased 27% driven by Azure growth of 50%. 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. 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. 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. Our consolidated financial statements and accompanying notes are prepared in accordance with GAAP. 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. We must also continue to increase access to digital skills. A paid subscription is required for full access. Assets and liabilities measured at fair value on a recurring basis using unobservable inputs are an immaterial portion of our portfolio. With significant input from employees and leaders who are members of the Black and African American community, our senior leadership team and board of directors announced in June 2020 that we had developed a set of actions to help improve the lived experience at Microsoft and drive change in the communities in which we live and work. Microsoft expects More Personal Computing revenue to rise to between $13.6 billion and $14.0 billion in Q4 FY 2021. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. Analysts had expected a 41.4% growth in Azure, according to consensus data from . For derivative instruments designated as cash flow hedges, gains and losses are initially reported as a component of other comprehensive income and subsequently recognized in earnings with the corresponding hedged item. We believe that our audit provides a reasonable basis for our opinion. 118. We selected a sample of customer agreements and performed the following procedures: Obtained and read contract source documents for each selection, including master agreements, and other documents that were part of the agreement. Revenue of Microsoft broken down by segment 2012-2022; Our other current financial assets and current financial liabilities have fair values that approximate their carrying values. Productivity and business processes. This study bestows revenue data by type, and during the historical period (2017-2023) and forecast period (2023-2028). Definition and Limitations of Internal Control over Financial Reporting. $ 17,897. The purchase price included $768 million of cash and cash equivalents acquired. All differences between our internal management reporting basis . The pandemic has underscored that without it, people lack access to education, healthcare, economic opportunity, and more. Microsoft forecast Intelligent Cloud revenue of $21.1 billion to $21.35 billion for its fiscal fourth quarter, driven by strong growth in its Azure platform. We assumed responsibility for these claims in our agreement to acquire Nokias Devices and Services business and have been substituted for the Nokia defendants. Product Revenue and Service and Other Revenue. From LinkedIn profiles within Office, to LinkedIn Learning courses within Microsoft Viva, and LinkedIn Sales Navigator leads within Dynamics 365, we continue to bring the power of LinkedIn and Microsoft together to transform how people learn, sell, and connect. The fair values of these investments approximate their carrying values. Office Consumer is designed to increase personal productivity through a range of products and services. 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. In fiscal year 2021, the COVID-19 pandemic continued to impact our business operations and financial results. Transforming the workplace to deliver new modern, modular business applications to improve how people communicate, collaborate, learn, work, play, and interact with one another. These systems are augmented by written policies, an organizational structure providing division of responsibilities, careful selection and training of qualified personnel, and a program of internal audits. We determine if an arrangement is a lease at inception. Revenue and expenses are translated at average rates of exchange prevailing during the year. Microsoft MSFT is set to report second-quarter fiscal 2022 results on Jan 25. 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. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Accessed March 01, 2023. https://www.statista.com/statistics/273482/segment-revenue-of-microsoft/, Microsoft. This means everyone is on a continuous journey to learn and grow. Organizations purchase perpetual licenses or subscribe to licenses. 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. Commercial cloud revenue increased 34% to $69.1 billion. How the Critical Audit Matter Was Addressed in the Audit. Personalized, integrated, and relevant views of all learning opportunities on our internal learning portal, our external learning portal MS Learn, and LinkedIn Learning that is available to all employees worldwide. We invite you to submit any questions via the proxy voting site at www.proxyvote.com. There are two broad categories of OEMs. The leading indicator of digital transformation success can be measured by an organizations ability to build predictive and analytical power. Segment Revenue and Operating Income (In millions) (Unaudited) Three Months Ended September 30, 2022 2021; ElementName The PC has been mission-critical across work, school, and life to sustain productivity in a remote everything world. Metrics related to our More Personal Computing segment assess the performance of key lines of business within this segment. Income tax expense includes U.S. and international income taxes, and interest and penalties on uncertain tax positions. To navigate it, organizations will need to embrace flexibility across their entire operating model, including the ways people work, the places they inhabit, and how they manage business process. We also license standalone and software development lifecycle tools for software architects, developers, testers, and project managers. Additions to property and equipment will continue, including new facilities, datacenters, and computer systems for research and development, sales and marketing, support, and administrative staff. What you need to know. They consist predominantly of highly liquid investment-grade fixed-income securities, diversified among industries and individual issuers. In April 2021, we entered into a definitive agreement to acquire Nuance Communications, Inc., a cloud and AI software provider with healthcare and enterprise AI experience. 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. Are you interested in testing our business solutions? Organizations of all sizes have digitized business-critical functions, redefining what they can expect from their business applications. Our strategy requires continued investment in datacenters and other hybrid and edge infrastructure to support our services. Windows OEM Pro revenue decreased 9% and Windows OEM non-Pro revenue grew 21%. (All figures in USD millions, except percentages) The company generates revenue by licensing and supporting an array of software products; offering a diverse portfolio of cloud-based solutions and other services to people and business organizations; designing, manufacturing, and selling devices; and . Corporate Vice President and Chief Accounting Officer. At our Investor Relations website, www.microsoft.com/investor, we make available free of charge a variety of information for investors. Foreign currency risks related to certain non-U.S. dollar-denominated investments are hedged using foreign exchange forward contracts that are designated as fair value hedging instruments. We continue to develop complete, intelligent solutions for our customers that empower people to stay productive and collaborate, while safeguarding businesses and simplifying IT management. The specific hardware warranty terms and conditions vary depending upon the product sold and the country in which we do business, but generally include parts and labor over a period generally ranging from 90 days to three years. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact in our consolidated financial statements for the period in which the effects become reasonably estimable. ESAs are also typically authorized as LSPs and operate as resellers for our other volume licensing programs. Microsoft Mesh enables presence and shared experiences from anywhere through mixed reality applications. The figure also lagged the Zacks Consensus Estimate of $255 million. As of June 30, 2021 and 2020, other receivables due from suppliers were $965 million and $442 million, respectively, and are included in accounts receivable, net in our consolidated balance sheets. We have paid transition tax of $4.7 billion, which included $1.5 billion for fiscal year 2021. Directly accessible data for 170 industries from 50 countries and over 1 million facts: Get quick analyses with our professional research service. And with Windows 365, we are creating a new category: the cloud PC. The investments we are making in infrastructure and devices will continue to increase our operating costs and may decrease our operating margins. Microsoft revenue for the twelve months ending December 31, 2022 was $204.094B, a 10.38% increase year-over-year. During fiscal year 2020, we recorded an impairment charge of $161 million to operating lease right-of-use assets due to the closing of our Microsoft Store physical locations. The fair value of stock awards vested was $13.4 billion, $10.1 billion, and $8.7 billion, for fiscal years 2021, 2020, and 2019, respectively. More Personal Computing. As of June 30, 2021, our long-term unsecured debt rating was AAA, and cash investments were in excess of $1.0 billion. We provide for the estimated costs of fulfilling our obligations under hardware and software warranties at the time the related revenue is recognized. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. No additional shares will be requested at this meeting. The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. Lead Independent Director, This global approach helps us remain competitive in local markets and enables us to continue to attract top talent from across the world. We believe our allowances for income tax contingencies are adequate. During the past year, our partner OpenAI achieved dramatic advances training models like GPT-3the largest and most advanced language model in the worldon our Azure AI supercomputer. Under the TCJA, the transition tax is payable in interest-free installments over eight years, with 8% due in each of the first five years, 15% in year six, 20% in year seven, and 25% in year eight. The decrease from the federal statutory rate in fiscal year 2019 is primarily due to a $2.6 billion net income tax benefit related to intangible property transfers, and 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, Singapore, and Puerto Rico. The Microsoft Cloud is the most comprehensive and trusted cloud, providing the best integration across the technology stack while offering openness, improving time to value, reducing costs, and increasing agility. Chief Executive Officer, The purchase price included $768 million of cash and cash equivalents acquired. We generate revenue by offering a wide range of cloud-based and other services to people and businesses; licensing and supporting an array of software products; designing, manufacturing, and selling devices; and delivering relevant online advertising to a global audience. Server products revenue increased 6% driven by hybrid and premium solutions, on a strong prior year comparable that benefited from demand related to SQL Server 2008 and Windows Server 2008 end of support. Marketing Solutions help companies reach, engage, and convert their audiences at scale. 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