Microsoft Revenue by Segment. 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. 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. We expect capital expenditures to increase in coming years to support growth in our cloud offerings. Other reconciling items, net consists primarily of tax credits and GILTI tax, and in fiscal year 2021, includes tax benefits from the India Supreme Court decision on withholding taxes. Therefore, we recorded a net income tax benefit of $620 million in the third quarter of fiscal year 2021 to reflect the results of the India Supreme Court decision impacting fiscal year 1996 through fiscal year 2016. The service gets you the information you need faster and also gives you the power and convenience of online proxy voting. To help people and organizations everywhere achieve more, we are focused on four interconnected pillars. Our goal is to help every organization strengthen its security capabilities through a Zero Trust architecture built on our comprehensive solutions that span identity, security, compliance, and device management across all clouds and platforms. Likewise, Microsoft's revenue has grown by 74% to US$168.1 billion, and its net profit has grown by 140% to US$61.2 billion over the same period. Gaming, including Xbox hardware and Xbox content and services, comprising digital transactions, Xbox Game Pass and other subscriptions, video games, third-party video game royalties, cloud services, and advertising. In Q2 FY 2022, productivity and business processes generated $15.9 billion in revenue, comprising 31% of Microsoft's total revenue. Our CSR Reports Hub provides detailed information on law enforcement access to data, our environmental data, our political activities, our workforce demographics, and our human rights work. Revenue is up 22 percent, and net income has . 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. Directly accessible data for 170 industries from 50 countries and over 1 million facts: Get quick analyses with our professional research service. Microsofts Board of Directors provides insight, feedback, and oversight across a broad range of environmental and social matters. The devices and form factors customers prefer evolve rapidly, and influence how users access services in the cloud, and in some cases, the users choice of which suite of cloud-based services to use. 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. We identified four attributes that allow growth mindset to flourish: Our employee listening systems enable us to gather feedback directly from our workforce to inform our programs and employee needs globally. We evaluate our reporting units on an annual basis and, if necessary, reassign goodwill using a relative fair value allocation approach. 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. The settlement risk related to these investments is insignificant given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities. That would be the fastest pace for either metric in at least six years. When a cloud-based service includes both on-premises software licenses and cloud services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the cloud service and recognized over time. As of June 30, 2021, we employed approximately 181,000 people on a full-time basis, 103,000 in the U.S. and 78,000 internationally. Open agreements are designed for small and medium organizations that want to license cloud services and on-premises software over a one- to three-year period. An estimated loss from a loss contingency such as a legal proceeding or claim is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Research and development expenses increased $1.4 billion or 8% driven by investments in cloud engineering. Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. These forward-looking statements generally are identified by the words believe, project, expect, anticipate, estimate, intend, strategy, future, opportunity, plan, may, should, will, would, will be, will continue, will likely result, and similar expressions. We conducted our audits in accordance with the standards of the PCAOB. The largest category of OEMs are direct OEMs as our relationship with them is managed through a direct agreement between Microsoft and the OEM. The remaining transition tax of $13.6 billion is payable over the next five years with a final payment in fiscal year 2026. Azure SQL Database makes it possible for customers to take SQL Server from their on-premises datacenter to a fully managed instance in the cloud to utilize built-in AI. The largest component of the OEM business is the Windows operating system pre-installed on devices. Internal development allows us to maintain competitive advantages that come from product differentiation and closer technical control over our products and services. Our vision is to create economic opportunity for every member of the global workforce through the ongoing development of the worlds first Economic Graph, a digital representation of the global economy. Due to the various benefits from and the nature of our SA program, judgment is required to assess the pattern of delivery, including the exercise pattern of certain benefits across our portfolio of customers. Satya Nadella . The above table excludes shares repurchased to settle employee tax withholding related to the vesting of stock awards of $4.4 billion, $3.3 billion, and $2.7 billion for fiscal years 2021, 2020, and 2019, respectively. This is why we introduced Microsoft Viva, which brings the information, resources, and support employees need to stay connected to each other and their companys mission directly into the flow of work. 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. Definition and Limitations of Internal Control over Financial Reporting. Revenue related to cloud services provided on a subscription basis is recognized ratably over the contract period. 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. Certain volume licensing programs, including Enterprise Agreements, include on-premises licenses combined with Software Assurance (SA). We have audited the internal control over financial reporting of Microsoft Corporation and subsidiaries (the Company) as of June 30, 2021, based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Furthermore, we shared a commitment to transparency by subjecting the data in our annual sustainability report to third-party review and to accountability by including progress on sustainability goals as a factor in determining executive pay. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital. The following table reconciles our financial results reported in accordance with GAAP to non-GAAP financial results: Cash, cash equivalents, and short-term investments totaled $130.3 billion and $136.5 billion as of June 30, 2021 and 2020. Unearned revenue is generally invoiced annually at the beginning of each contract period for multi-year agreements and recognized ratably over the coverage period. Foreign currency risks related to certain Euro-denominated debt are hedged using foreign exchange forward contracts that are designated as cash flow hedging instruments. Search advertising revenue, excluding traffic acquisition costs, increased 13%. This statistic is not included in your account. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (May 1 for us) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Premium Subscriptions enables professionals to manage their professional identity, grow their network, and connect with talent through additional services like premium search. Shares repurchased during the third quarter of fiscal year 2020 were under the share repurchase programs approved on both September 20, 2016 and September 18, 2019. Growth depends on our ability to attract new users, understand intent, and match intent with relevant content and advertiser offerings. We have distribution agreements covering one or more of our products with virtually all the multinational OEMs, including Dell, Hewlett-Packard, Lenovo, and with many regional and local OEMs. $ 35,058. Founder and Chairman, Microsoft was built for this moment. Windows OEM and devices revenue was particularly . A majority of our investments are priced by pricing vendors and are generally Level 1 or Level 2 investments as these vendors either provide a quoted market price in an active market or use observable inputs for their pricing without applying significant adjustments. We have an ESPP for all eligible employees. Microsoft Key . Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Revenue from search advertising is recognized when the advertisement appears in the search results or when the action necessary to earn the revenue has been completed. In addition, we consider specific adverse conditions related to the financial health of, and business outlook for, the investee. We adopted the standard effective July 1, 2020. In, Microsoft. The company's Intelligent Cloud segment continued to lead revenue growth, up 25.5% compared to the year-ago quarter. Through our Democracy Forward Program, were working across sectors to safeguard electoral processes and defend against disinformation. A persons experience with technology spans a multitude of devices and has become increasingly more natural and multi-sensory with voice, ink, and gaze interactions. 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 earnings provide a further lift to Microsoft after it agreed to acquire gaming giant Activision Blizzard in a $68.7 billion, all-cash deal. Operating income increased $7.8 billion or 43%. Executive Vice President, Human Resources. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. Gross margin increased $9.7 billion or 29% driven by growth in Azure and the change in estimated useful lives of our server and network equipment. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. 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. We applied a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align our credit loss methodology with the new standard. Based on this evaluation, management concluded that the Companys internal control over financial reporting was effective as of June 30, 2021. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America. We work to ensure that technology is inclusive, trusted, and increases sustainability. Refer to the Non-GAAP Financial Measures section below for a reconciliation of our financial results reported in accordance with GAAP to non-GAAP financial results. Net gains on derivatives decreased due to lower gains on foreign currency contracts. 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. 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. We record a receivable related to revenue recognized for multi-year on-premises licenses as we have an unconditional right to invoice and receive payment in the future related to those licenses. We also fund research and development activities at the operating segment level. Office Consumer products and cloud services revenue increased 10% and Microsoft 365 Consumer subscribers increased to 51.9 million. Revenue increased $25.1 billion or 18% driven by growth across each of our segments. Commercial cloud gross margin percentage increased 4 points to 71% driven by gross margin percentage improvement in Azure and the change in estimated useful lives of our server and network equipment, offset in part by sales mix shift to Azure. Office Consumer revenue is mainly affected by the percentage of customers that buy Office with their new devices and the continued shift from Office licensed on-premises to Microsoft 365 Consumer subscriptions. I have had the honor to see how the hard work and commitment of Microsofts employees, the ingenuity of our partners, the trust of our customers, and the support of our shareholders translate into strong results. Compensation cost for RSUs is recognized using the straight-line method and for PSUs is recognized using the accelerated method. The major classes of assets and liabilities to which we allocated the purchase price were as follows: The goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies from future growth and is not expected to be deductible for tax purposes. We offer integrated, end-to-end capabilities to protect people and organizations. Chairman and Chief Executive Officer, Amy E. Hood Excluding this impact, gross margin percentage decreased slightly driven by a sales mix shift to cloud offerings, on a low prior year comparable impacted by increased usage. LinkedIn has over 750 million members and has offices around the globe. In evaluating estimated losses on these obligations, we consider factors such as the degree of probability of an unfavorable outcome and our ability to make a reasonable estimate of the amount of loss. SA is included with certain volume licensing agreements and is an optional purchase with others. The consolidated financial statements, which include amounts based on managements estimates and judgments, have been prepared in conformity with accounting principles generally accepted in the United States of America. Billionaires like Microsoft Corp. co-founder Bill Gates likely saw an opportunity through . Tackling security from all angles with our integrated, end-to-end solutions spanning security, compliance, identity, and management, across all clouds and platforms. services revenue growth, Revenue from Windows Commercial products and cloud services, comprising volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings, Revenue from Surface devices and accessories, Revenue from Xbox content and services, comprising digital transactions, Xbox Game Pass and other subscriptions, video games, third-party video game royalties, cloud services, and advertising, Search advertising revenue, excluding TAC, growth, Revenue from search advertising excluding traffic acquisition costs (TAC) paid to Bing Ads network publishers. Certain income and expenses are not reported in tax returns and financial statements in the same year. Executive Vice President, Chief Commercial Officer, Bradford L. Smith Based on its revenue breakdown, Microsoft's Productivity and Business Processes segment is its second-largest segment accounting for 32.1% of revenue in 2021. Refer to Note 13 Unearned Revenue for further information, including unearned revenue by segment and changes in unearned revenue during the period. 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. Our commercial business primarily consists of Server products and cloud services, Office Commercial, Windows Commercial, the commercial portion of LinkedIn, Enterprise Services, and Dynamics. We regularly review inventory quantities on hand, future purchase commitments with our suppliers, and the estimated utility of our inventory. 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. As of June 30, 2021 and 2020, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $3.3 billion and $1.4 billion, respectively. Any shareholder can join the Annual Meeting, while shareholders of record as of September 30, 2021, will be able to vote and submit questions during the meeting. 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. We support the fundamental rights of all people. We provide for the estimated costs of fulfilling our obligations under hardware and software warranties at the time the related revenue is recognized. We recorded over $200 million in adjusted EBITDA for the quarter, an improvement of . Together with our partners, we have reached more than 47 million people to date, across 250 countries, but the work doesnt stop there. Price as of February 28, 2023, 12:39 p.m. And as I write this, we are tracking more than 140 groups that pose an active threat to global cybersecurity. Vice Chairman and Executive Vice Our corporate learning portal has over 100,000 average monthly active users. 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. Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products. We have committed $9.5 billion for the construction of new buildings, building improvements, and leasehold improvements as of June 30, 2021. Download as image Embed. Sales and marketing included an unfavorable foreign currency impact of 2%. 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. In 2013, the defendants in the consolidated cases moved to exclude the plaintiffs expert evidence of general causation on the basis of flawed scientific methodologies. The information found on these websites is not part of, or incorporated by reference into, this or any other report we file with, or furnish to, the SEC. Clayton, Dubilier & Rice, John W. Thompson 3,4 Table Power BI. Cactus' Rental revenues were $27.3 million, up from $19.2 million in the year-ago quarter. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP. Would be the fastest pace for either metric in at least six years facts: quick! An annual basis and, if necessary, reassign goodwill using a relative fair value allocation approach with. 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