We evaluate our reporting units on an annual basis and, if necessary, reassign goodwill using a relative fair value allocation approach. We manage the average maturity of our fixed-income portfolio to achieve economic returns that correlate to certain broad-based fixed-income indices using exchange-traded option and futures contracts and over-the-counter swap and option contracts. Windows Commercial products and cloud services revenue increased 14% driven by demand for Microsoft 365. We support multiple highly active Employee Resource Groups for women, families, racial and ethnic minorities, military, people with disabilities, or who identify as LGBTQI+, where employees can go for support, networking, and community-building. What you need to know. Search advertising revenue excluding traffic acquisition costs increased 13% driven by higher revenue per search and search volume. Digital transformation that was projected to happen over the next 10 years is happening today. July 26, 2022. Windows 11 builds on the strengths of productivity, versatility, and security on Windows 10 today and adds in new experiences that include powerful task switching tools like new snap layouts, snap groups, and desktops; new ways to stay connected through chat; the information you want at your fingertips; and more. Based on the information currently available, we do not anticipate a significant increase or decrease to our tax contingencies for these issues within the next 12 months. Productivity and business processes. Nine of these cases were filed in 2002 and are consolidated for certain pre-trial proceedings; the remaining cases are stayed. The Company designs and maintains accounting and internal control systems to provide reasonable assurance at reasonable cost that assets are safeguarded against loss from unauthorized use or disposition, and that the financial records are reliable for preparing consolidated financial statements and maintaining accountability for assets. Bethesda is one of the largest, privately held game developers and publishers in the world, and brings a broad portfolio of games, technology, and talent to Xbox. Changes in fair value, excluding credit losses and impairments, are recorded in other comprehensive income. Intelligent Cloud revenue increased driven by Azure. 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. $ 52,959. The plaintiffs allege that their handsets either operated outside the FCC Guidelines or were manufactured before the FCC Guidelines went into effect. Assets are not allocated to segments for internal reporting presentations. We are subject to income tax in many jurisdictions outside the U.S. Our operations in certain jurisdictions remain subject to examination for tax years 1996 to 2020, some of which are currently under audit by local tax authorities. PepsiCo, Charles W. Scharf 2,3 The financial performance of NDS is now reported in the Phone Hardware segment. In fiscal year 2021, we closed our Microsoft Store physical locations and opened our Microsoft Experience Centers. 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. Virtual Shareholder Meeting: www.virtualshareholdermeeting.com/MSFT21. 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. 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. 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. We use derivatives instruments to manage these risks, however, they may still impact our consolidated financial statements. (July 26, 2022). We exclusively licensed GPT-3, allowing us to leverage its technical innovations to deliver advanced AI solutions for our customers, as well as create new solutions that harness the power of advanced natural language generation. Lead Independent Director, 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. To achieve our vision, our research and development efforts focus on three interconnected ambitions: Reinvent Productivity and Business Processes. The gamer remains at the heart of the Xbox ecosystem. To the extent we fail to meet these requirements, we will be required to post collateral, similar to the standard convention related to over-the-counter derivatives. 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. Our contracts with customers often include promises to transfer multiple products and services to a customer. 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. Securities held in our fixed-income portfolio are subject to different interest rate risks based on their maturities. Level 3 investments are valued using internally-developed models with unobservable inputs. Capitalized software development costs are amortized over the estimated lives of the products. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* The segment amounts included in MD&A are presented on a basis consistent with our internal management reporting. Unearned revenue also includes payments for other offerings for which we have been paid in advance and earn the revenue when we transfer control of the product or service. We evaluate the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. Gross income from the Rental . The trial of the British Columbia action commenced in May 2016. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP. We expect to recognize approximately 50% of this revenue over the next 12 months and the remainder thereafter. It is impracticable for us to separately identify the amount of amortization and depreciation by segment that is included in the measure of segment profit or loss. Generally, this occurs shortly before the products are released to production. They consist predominantly of highly liquid investment-grade fixed-income securities, diversified among industries and individual issuers. Competitors to Office include software and global application vendors, such as Apple, Cisco Systems, Facebook, Google, IBM, Okta, Proofpoint, Slack, Symantec, Zoom, and numerous web-based and mobile application competitors as well as local application developers. Okta, Proofpoint, and Symantec provide security solutions across email security, information protection, identity, and governance. And it underlies our approach to diversity and inclusion. Revenue in Microsoft's "Intelligent Cloud" segment rose 30% to $17.4 billion, with growth in Azure revenues handily surpassing the 43.1% jump projected by analysts, according to consensus data . Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in other income (expense), net. 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. Earnings Release FY23 Q1. The mix of income before income taxes between the U.S. and foreign countries impacted our effective tax rate as a result of the geographic distribution of, and customer demand for, our products and services. The goodwill was primarily attributed to increased synergies that are expected to be achieved from the integration of ZeniMax. We strive to include others by holding ourselves accountable for diversity, driving global systemic change in our workplace and workforce, and creating an inclusive work environment. 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. and cloud services revenue. The TCJA significantly changes existing U.S. tax law and includes numerous provisions that affect our business. Product and Service Development, and Intellectual Property. Refer to Note 12 Income Taxes of the Notes to Financial Statements for further discussion. Server products and cloud services revenue increased $11.2 billion or 27% driven by Azure. If market, industry, and/or investee conditions deteriorate, we may incur future impairments. Extended disruptions at these suppliers could lead to a similar disruption in our ability to manufacture devices on time to meet consumer demand. Nearly 250 million people use Teams every month. 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. These allocated costs include legal, including settlements and fines, information technology, human resources, finance, excise taxes, field selling, shared facilities services, and customer service and support. We will include as many of your questions as possible during the Q&A session of the meeting and will provide answers to questions on the Microsoft Investor Relations website under the Annual Meeting page. We manage the average maturity of the fixed-income portfolio to achieve economic returns that correlate to certain global fixed-income indices. 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. And with Azure for Operators, we provide telecom operators and enterprises with the ultra-low latency cloud computing power at the edge needed for breakthrough scenarios like precision inventory tracking at ports and production lines that automatically adjust to changing demand. Gross unrecognized tax benefits related to uncertain tax positions as of June 30, 2021, 2020, and 2019, were $14.6 billion, $13.8 billion, and $13.1 billion, respectively, which were primarily included in long-term income taxes in our consolidated balance sheets. LinkedIn and our security business both passed $10 billion in annual revenue for the first time. Sure enough, Microsoft says its "more personal computing" business, including Windows and Xbox, was up 11 percent to $14.5 billion in Q3 and "Windows OEM revenue growth," which should . 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. Both numbers easily beat analyst estimates. Intelligent cloud. $ 33,773. We continue to invest in new gaming studios and content to expand our IP roadmap and leverage new content creators. We remain under audit for tax years 2004 to 2017. 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. Operating expenses increased $1.9 billion or 12% driven by investments in Azure. Conclusions on recognizing and measuring uncertain tax positions involve significant estimates and management judgment and include complex considerations of the Internal Revenue Code, related regulations, tax case laws, and prior-year audit settlements. These metrics provide strategic product insights which allow us to assess the performance across our commercial and consumer businesses. Vertically integrated computer manufacturers such as Hewlett-Packard, IBM, and Oracle offer their own versions of the Unix operating system preinstalled on server hardware. DetailPricingLevelName. Last year, we mobilized resources to respond to the Beirut explosion, hurricanes in Central America, wildfires in the United States, and more. Customers can use Azure through our global network of datacenters for computing, networking, storage, mobile and web application services, AI, IoT, cognitive services, and machine learning. Microsoft Key . We test goodwill for impairment annually on May 1 at the reporting unit level, primarily using a discounted cash flow methodology with a peer-based, risk-adjusted weighted average cost of capital. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets in our consolidated balance sheets. Revenue and costs are generally directly attributed to our segments. Enterprise Agreements offer large organizations a manageable volume licensing program that gives them the flexibility to buy cloud services and software licenses under one agreement. Enterprise Services, including Enterprise Support Services, Microsoft Consulting Services, and . Our approach to hybrid work starts with Teamsthe only all-in-one solution that supports meetings, calls, chat, collaboration, and business process automation in day-to-day workflow. CALs provide access rights to certain server products, including SQL Server and Windows Server, and revenue is reported along with the associated server product. In addition, we consider specific adverse conditions related to the financial health of, and business outlook for, the investee. Computing architecture is undergoing radical transformation as the number of connected devices and the volume of data generated at the edge increase dramatically. Office Commercial products and cloud services revenue growth, Revenue from Office Commercial products and cloud services (Office 365 subscriptions, the Office 365 portion of Microsoft 365 Commercial subscriptions, and Office licensed on-premises), comprising Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business, Office Consumer products and cloud services revenue growth, Revenue from Office Consumer products and cloud services, including Microsoft 365 Consumer subscriptions and Office licensed on-premises, The number of Office 365 Commercial seats at end of period where seats are paid users covered by an Office 365 Commercial subscription, The number of Microsoft 365 Consumer (formerly Office 365 Consumer) subscribers at end of period, Dynamics products and cloud services Revenue in Q2 2022. In fiscal years 2019, our foreign regional operating centers in Ireland, Singapore, and Puerto Rico, which are taxed at rates lower than the U.S. rate, generated 82% of our foreign income before tax, respectively. Use Ask Statista Research Service, On April 25, 2014, Microsoft completed the transaction to acquire substantially all of Nokia Corporations Devices and Services Business (NDS). It empowers people with AI-first interfaces ranging from voice-activated commands through Cortana, inking, immersive 3D content storytelling, and mixed reality experiences. 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. Surface is designed to help organizations, students, and consumers be more productive. As of June 30, 2021, an aggregate of 251 million shares were authorized for future grant under our stock plans. LVMH Revenue By Segment. That compared with a Wall Street . We have several partnerships with other companies, including Verizon Media Group, through which we provide and monetize search queries. Partnering with organizations on their digital transformation during this period is one of our largest opportunities and we are uniquely positioned to become the strategic digital transformation platform and partner of choice; their success is our success. Certain corporate-level activity is not allocated to our segments. As a result, changes in foreign exchange rates may significantly affect revenue and expenses. Our devices are designed to enable people and organizations to connect to the people and content that matter most using Windows and integrated Microsoft products and services. LinkedIn connects the worlds professionals to make them more productive and successful and transforms the way companies hire, market, sell, and learn. Summary. 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. On-the-job stretch and advancement opportunities. The standard will be effective for us beginning July 1, 2021. Our mission to empower every person and every organization on the planet to achieve more has never been more urgent or more needed. $100 invested on 6/30/16 in stock or index, including reinvestment of dividends. For these components, we have limited near-term flexibility to use other manufacturers if a current vendor becomes unavailable or is unable to meet our requirements. In that division, server products and cloud services revenue increased 20 percent from a year ago, boosted by a 31 percent rise . In these cases, the hardware and software license are accounted for as a single performance obligation and revenue is recognized at the point in time when ownership is transferred to resellers or directly to end customers through retail stores and online marketplaces. 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. The segment amounts included in MD&A are presented on a basis consistent with our internal management reporting. The metrics reflect our cloud and on-premises product strategies and trends. Enterprise Services, including Premier Support Services and Microsoft Consulting Services, assist customers in developing, deploying, and managing Microsoft server and desktop solutions and provide training and certification to developers and IT professionals on various Microsoft products. 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 largest component of the OEM business is the Windows operating system pre-installed on devices. Operating as one company, One Microsoft, instead of multiple siloed businesses. We are a leader among technology companies in pursuing patents and currently have a portfolio of over 65,000 U.S. and international patents issued and over 21,000 pending worldwide. 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. Our Intelligent Cloud segment consists of our public, private, and hybrid server products and cloud services that can power modern business and developers. 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