Server products and cloud services, including Azure; SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs); and GitHub. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated. From our CEO and Senior Leadership Team and throughout our organization, people at Microsoft are working to conduct our business in principled ways that make a significant positive impact on important global issues. With Azure Mixed Reality Services, digital information can be represented within the context of the three-dimensional world we live in. 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. These non-GAAP financial measures presented should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. The . REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. The standard will be effective for us beginning July 1, 2021. Machine Translation Market 2023 Structure Along With Size, Trends, Revenue, Market segments, Forecast to 2029 Published: Feb. 16, 2023 at 12:44 a.m. We expect existing cash, cash equivalents, short-term investments, cash flows from operations, and access to capital markets to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as dividends, share repurchases, debt maturities, material capital expenditures, and the transition tax related to the TCJA, for at least the next 12 months and thereafter for the foreseeable future. Our Dynamics business solutions are also licensed to enterprises through a global network of channel partners providing vertical solutions and specialized services. These amounts are primarily included in Server products and cloud services, Office products and cloud services, and LinkedIn in the table above. We are building a Planetary Computer to help manage and protect Earths natural systems. Cost of revenue is allocated in certain cases based on a relative revenue methodology. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. We invite you to submit any questions via the proxy voting site at www.proxyvote.com. In Q2 FY 2022, productivity and business processes generated $15.9 billion in revenue, comprising 31% of Microsoft's total revenue. $ 17,897. Transforming the workplace to deliver new modern, modular business applications to improve how people communicate, collaborate, learn, work, play, and interact with one another. Our cloud and AI services and datacenters help businesses cut energy consumption, reduce physical footprints, and design sustainable products. More personal Computing. In fiscal year 2021 and 2020, our foreign regional operating centers in Ireland and Puerto Rico, which are taxed at rates lower than the U.S. rate, generated 82% and 86% of our foreign income before tax. Are you interested in testing our business solutions? If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost. Total. Finally, we continue to stand up for human rights, which includes taking action to prevent modern slavery and human trafficking in our business and supply chain and supporting humanitarian action and emergency response. 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. 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. Executive Vice President, Business Windows OEM and devices revenue was particularly . 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. 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. The plaintiffs allege that their handsets either operated outside the FCC Guidelines or were manufactured before the FCC Guidelines went into effect. Please do not hesitate to contact me. The figure also lagged the Zacks Consensus Estimate of $255 million. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2021, based on the criteria established in Internal Control Integrated Framework (2013) issued by COSO. We also design and sell devices, including PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories. 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. 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. 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. Our Search business, including Bing and Microsoft Advertising, is designed to deliver relevant online advertising to a global audience. Microsoft revenue for the twelve months ending December 31, 2022 was $204.094B, a 10.38% increase year-over-year. Surface is designed to help organizations, students, and consumers be more productive. 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. The decrease in our effective tax rate for fiscal year 2021 compared to fiscal year 2020 was primarily due to tax benefits from the India Supreme Court decision on withholding taxes, an agreement between the U.S. and India tax authorities related to transfer pricing, final TCJA regulations, and an increase in tax benefits relating to stock-based compensation. 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. 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. 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. $256.02 $259.13 10am 12pm 2pm 4pm. A portion of amortization and depreciation is included with various other costs in an overhead allocation to each segment. Refer to Note 19 Segment Information and Geographic Data for further information, including revenue by significant product and service offering. Executive Vice President, Chief Financial Officer, Judson Althoff 10,610. us-gaap:OperatingIncomeLoss. And we continue to bring rich AI capabilities directly into the data stack as large-scale models become powerful platforms in their own right. Our hardware is generally highly dependent on, and interrelated with, the underlying operating system and cannot function without the operating system. In addition to our main research and development operations, we also operate Microsoft Research. Our fixed-income portfolio is diversified and consists primarily of investment-grade securities. We manage the average maturity of the fixed-income portfolio to achieve economic returns that correlate to certain global fixed-income indices. Get in touch with us now. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. 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 . Inventories are stated at average cost, subject to the lower of cost or net realizable value. , Oct 10, 2022. Microsoft said revenue in its "Intelligent Cloud" segment rose 23% to $14.6 billion, with 50% growth in Azure. We believe these non-GAAP measures aid investors by providing additional insight into our operational performance and help clarify trends affecting our business. We monitor pay equity and career progress across multiple dimensions. Certain volume licensing programs, including Enterprise Agreements, include on-premises licenses combined with Software Assurance (SA). These capabilities have relied on the public cloud, which is built on the investments we have made over time. We distribute our retail packaged products primarily through independent non-exclusive distributors, authorized replicators, resellers, and retail outlets. Adjustments in purchase price allocations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined. Although management currently believes that resolving claims against us, individually or in aggregate, will not have a material adverse impact in our consolidated financial statements, these matters are subject to inherent uncertainties and managements view of these matters may change in the future. 6. We have served as the Companys auditor since 1983. Securities held in our equity investments portfolio are subject to price risk. Revenue fell to $6.05 billion from $7 . Computing architecture is undergoing radical transformation as the number of connected devices and the volume of data generated at the edge increase dramatically. We repurchased the following shares of common stock under the share repurchase programs: Shares repurchased during fiscal year 2021 and the fourth quarter of fiscal year 2020 were under the share repurchase program approved on September 18, 2019. Second quarter revenue is driven by corporate year-end spending trends in our major markets and holiday season spending by consumers, and fourth quarter revenue is driven by the volume of multi-year on-premises contracts executed during the period. This will give organizations greater flexibility and a more secure way to empower employees to be productive and connected, regardless of their location. Advertising costs are expensed as incurred. Our search business competes with Google and a wide array of websites, social platforms like Facebook, and portals that provide content and online offerings to end users. 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. Xbox content and services revenue increased $2.3 billion or 23% driven by growth in third-party titles, Xbox Game Pass subscriptions, and first-party titles. $75.25B. To support this culture, we offer a wide range of learning and development opportunities. Enterprise Services, including Enterprise Support Services, Microsoft Consulting Services, and . Microsoft annual revenue for 2021 was $168.088B, a 17.53% increase from 2020. Windows OEM revenue is impacted significantly by the number of Windows operating system licenses purchased by OEMs, which they pre-install on the devices they sell. The investments we make in sustainability carry through to our products, services, and devices. Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development. 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 . PSP Partners, Emma N. Walmsley 2,4 In August 2018, the trial court issued an order striking portions of the plaintiffs expert reports. But our ability to make sense of data is growing more difficult as the volume, velocity, and variety expand. Office Commercial products and cloud services revenue increased $4.0 billion or 13%. Dynamics revenue is driven by the number of users licensed and applications consumed, expansion of average revenue per user, and the continued shift to Dynamics 365, a unified set of cloud-based intelligent business applications, including Power Apps and Power Automate. Advertising expense was $1.5 billion, $1.6 billion, and $1.6 billion in fiscal years 2021, 2020, and 2019, respectively. While the pandemic has been the defining issue of the past year-and-a-half, climate change is the challenge of our lifetime. Xbox Cloud Gaming is now available on PCs, as well as phones and tablets, and later this year will come to the console. We regularly review inventory quantities on hand, future purchase commitments with our suppliers, and the estimated utility of our inventory. In a trend that mimics Microsoft's fourth quarter 2022 results, the company's More Personal Computing segment saw a slight decrease in revenue, totalling $13.3 billion. The competitive position of Linux has also benefited from the large number of compatible applications now produced by many commercial and non-commercial software developers. Our Office of Responsible AI ensures that we put these principles into practice, and our Responsible AI Resources Center shares guidelines and tools to help our customers and the developer community do the same. Certain options and forwards not designated as hedging instruments are also used to manage the variability in foreign exchange rates on certain balance sheet amounts and to manage other foreign currency exposures. Vertically integrated computer manufacturers such as Hewlett-Packard, IBM, and Oracle offer their own versions of the Unix operating system preinstalled on server hardware. 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