$ 42,485. In addition, certain costs incurred at a corporate level that are identifiable and that benefit our segments are allocated to them. The aggregate changes in the gross unrecognized tax benefits related to uncertain tax positions were as follows: Unearned revenue by segment was as follows: Changes in unearned revenue were as follows: Revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods, was $146 billion as of June 30, 2021, of which $141 billion is related to the commercial portion of revenue. In fiscal year 2020, Microsoft reduced its carbon emissions by 587,000 metric tons and purchased the removal of 1.3 million metric tons of carbon. Sales Solutions help companies strengthen customer relationships, empower teams with digital selling tools, and acquire new opportunities. Dynamics 365 for Talent with LinkedIn Recruiter and Learning gives human resource professionals a complete solution to compete for talent. We manage the average maturity of the fixed-income portfolio to achieve economic returns that correlate to certain global fixed-income indices. Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. OEMs also sell devices pre-installed with other Microsoft products and services, including applications such as Office and the capability to subscribe to Office 365. Operating income increased $7.8 billion or 43%. Organizations also license our products and services indirectly, primarily through licensing solution partners (LSP), distributors, value-added resellers (VAR), and retailers. To use individual functions (e.g., mark statistics as favourites, set This year, we expanded our hybrid capabilities to enable organizations to build, manage, and deploy applications anywhere. Our cloud and AI services and datacenters help businesses cut energy consumption, reduce physical footprints, and design sustainable products. 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. Lease expense for lease payments is recognized on a straight-line basis over the lease term. $ 42,959. Shares of our common stock may be purchased by employees at three-month intervals at 90% of the fair market value on the last trading day of each three-month period. 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. These programs reinforce our culture and values such as collaboration and growth mindset. 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. For software warranties, we estimate the costs to provide bug fixes, such as security patches, over the estimated life of the software. Principal currencies hedged included the Euro, Japanese yen, British pound, Canadian dollar, and Australian dollar. 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. Segment Revenue and Operating Income (In millions) (Unaudited) Three Months Ended September 30, 2022 2021; ElementName And as I write this, we are tracking more than 140 groups that pose an active threat to global cybersecurity. In making this judgment, we employ a systematic methodology that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments. Cost of revenue is allocated in certain cases based on a relative revenue methodology. Changes in operating assets and liabilities: Acquisition of companies, net of cash acquired, and purchases of intangible and other assets, Effect of foreign exchange rates on cash and cash equivalents, Cash and cash equivalents, beginning of period, Accounts receivable, net of allowance for doubtful accounts, Net income available for common shareholders (A), Weighted average outstanding shares of common stock (B), Common stock and common stock equivalents (C), Realized gains from sales of available-for-sale securities, Realized losses from sales of available-for-sale securities, Impairments and allowance for credit losses, Net unrealized gains on investments still held, Gross amounts of derivatives offset in the balance sheet, Amount reclassified from accumulated other comprehensive income, Cash, cash equivalents, and short-term investments, Foreign-derived intangible income deduction, State income taxes, net of federal benefit, Excess tax benefits relating to stock-based compensation, Deferred income tax assets, net of valuation allowance, Book/tax basis differences in investments and debt, Long-term deferred income tax liabilities, Increases for tax positions related to the current year, Increases for tax positions related to prior years, Decreases for tax positions related to prior years, Decreases due to lapsed statutes of limitations. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. In our rapidly changing digital economy, people need a platform where they can acquire new skills, expand their networks, and connect with employers. Our effective tax rate for fiscal years 2021 and 2020 was 14% and 17%, respectively. 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. Pricing changes and promotions, pricing variation that occurs when the mix of devices manufactured shifts from local and regional system builders to large multinational OEMs, and different pricing of Windows versions licensed. They also support new startups, improve educational and health outcomes, and empower human ingenuity. 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. This segment primarily comprises: The Windows operating system is designed to deliver a more personal computing experience for users by enabling consistency of experience, applications, and information across their devices. A paid subscription is required for full access. We will continue to invest in sales, marketing, product support infrastructure, and existing and advanced areas of technology, as well as continue making acquisitions that align with our business strategy. Adjusted net income and adjusted diluted EPS are non-GAAP financial measures which exclude the tax benefits related to the India Supreme Court decision on withholding taxes in fiscal year 2021. The proceeds of these issuances were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, repurchases of capital stock, acquisitions, and repayment of existing debt. Microsoft's other revenue segment, "Productivity and Business Processes," reported revenue of $16.5 billion, up from $15.04 billion a year ago and higher than the average analyst estimate of . Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. For hardware warranties, we estimate the costs based on historical and projected product failure rates, historical and projected repair costs, and knowledge of specific product failures (if any). 12,820. The primary drag on earnings was the 19% decrease down to $14.2B the company saw in it's personal computing segment with Windows OEM license revenue falling a massive 39%. Archives of these events are also available. Equity investments were $6.0 billion and $3.0 billion as of June 30, 2021 and 2020, respectively. All of our approximately 23,000 people managers must complete between 25-30 hours of required manager capability and excellence training and are assigned ongoing required training each year. You only have access to basic statistics. You can contact Microsoft Investor Relations at any time to order financial documents such as annual reports and Form 10-Ks free of charge. Our competitors are developing new software and devices, while also deploying competing cloud-based services for consumers and businesses. How we develop and use AI is also a critical component of trust. As a Premium user you get access to the detailed source references and background information about this statistic. Determination of whether products and services are considered distinct performance obligations that should be accounted for separately versus together, such as software licenses and related services that are sold with cloud-based services. In January 2021, we announced that in fiscal year 2020 we reduced Microsofts carbon emissions by 586,683 metric tons. 18,327. Alphabet. Organizations purchase perpetual licenses and SA is optional. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements. This included a commitment to invest $1 billion over four years in new technologies and innovative climate solutions. Microsoft Mobile Oy, a subsidiary of Microsoft, along with other handset manufacturers and network operators, is a defendant in 46 lawsuits, including 45 lawsuits filed in the Superior Court for the District of Columbia by individual plaintiffs who allege that radio emissions from cellular handsets caused their brain tumors and other adverse health effects. Operating expenses increased $839 million or 5% driven by investments in commercial sales, cloud engineering, and LinkedIn. 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. PSP Partners, Emma N. Walmsley 2,4 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. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* The decrease in our effective tax rate was primarily due to tax benefits from a decision by the India Supreme Court on withholding taxes in the case of Engineering Analysis Centre of Excellence Private Limited vs The Commissioner of Income Tax, an agreement between the U.S. and India tax authorities related to transfer pricing, final Tax Cuts and Jobs Act (TCJA) regulations, and an increase in tax benefits relating to stock-based compensation. The investments are predominantly U.S. dollar-denominated securities, but also include foreign currency-denominated securities to diversify risk. If market, industry, and/or investee conditions deteriorate, we may incur future impairments. When cloud services require a significant level of integration and interdependency with software and the individual components are not considered distinct, all revenue is recognized over the period in which the cloud services are provided. From time to time, we enter into broader cross-license agreements with other technology companies covering entire groups of patents. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Web-based offerings competing with individual applications have also positioned themselves as alternatives to our products and services. General and administrative expenses were relatively unchanged, driven by prior year charges associated with the closing of our Microsoft Store physical locations, offset in part by an increase in certain employee-related expenses and business taxes. Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. In Microsoft's fiscal year 2022, spanning from July 2021 to June 2022, the gaming revenue reached 16.23 billion U.S. dollars, up from 15.37 billion U.S . Directly accessible data for 170 industries from 50 countries and over 1 million facts: Get quick analyses with our professional research service. The Automotive Voice Command System market size, estimations, and forecasts are provided in terms of and revenue (USD millions), considering 2023 as the base year, with history and forecast data . Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development. Obsessing over what matters to our customers. In addition to these channels, we use social media to communicate to the public. These obligations did not have a material impact in our consolidated financial statements during the periods presented. Using Windows to fuel our cloud business, grow our share of the PC market, and drive increased engagement with our services like Microsoft 365 Consumer, Teams, Edge, Bing, Xbox Game Pass, and more. We also invested $20 million in key non-profit partnerships through Microsoft Philanthropies to help people from underserved communities that are often excluded by the digital economy. Refer to Note 1 Accounting Policies of the Notes to Financial Statements for further discussion. Office Consumer is designed to increase personal productivity through a range of products and services. Awards that expire or are canceled without delivery of shares generally become available for issuance under the plans. We also fund research and development activities at the operating segment level. Total. 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. The segment amounts included in MD&A are presented on a basis consistent with our internal management reporting. 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. Microsoft posted the third quarter of its 2021 financial results today, reporting revenue of $41.7 billion and a net income of $15.5 billion. Available: https://www.statista.com/statistics/273482/segment-revenue-of-microsoft/, Microsoft's revenue from 2012 to 2022 financial years, by segment, Available to download in PNG, PDF, XLS format, Global IT spending forecast 2012-2023, by segment, Software market revenue worldwide 2016-2027, by segment, Global public IT cloud services revenue 2016-2021, by segment, Most valuable technology brands worldwide in 2021, Apple, Google, and Microsoft: revenue comparison 2008-2022, Microsoft's revenue 2008-2023, by fiscal quarter, Microsoft's net income 2008-2023, by fiscal quarter, Microsoft's expenditure on research and development 2002-2022, Microsoft's yearly sales and marketing spending 2000-2022, Revenue of Microsoft broken down by segment 2012-2022, Microsoft's productivity and business processes revenue worldwide FY 2015-2023, Microsoft's productivity and business processes income worldwide FY 2015-2023, Microsoft's intelligent cloud revenue worldwide 2015-2023, by quarter, Microsoft's intelligent cloud operating income worldwide 2015-2023, by quarter, Microsoft's 'More Personal Computing' segment revenue worldwide FY 2015-2023, Microsoft's 'More Personal Computing' segment operating income worldwide FY 2015-2023, External revenue of Microsoft broken down by major products and services 2016-2022, Top pure-play software and programming companies globally 2017-2022, by sales, Revenue and total expenses of major software companies 2020, Revenue per employee of major software companies worldwide 2020, Total assets and liabilities of major software companies 2020, Number of employees at major software companies 2020, Tablet OS market share worldwide 2016-2022, by quarter, Office productivity software market share worldwide 2022, Global top-10 cloud vendors by total revenue 2022, Global IaaS and PaaS hyperscaler revenue 2018-2021, by vendor, Cloud infrastructure services market share quarterly worldwide 2017-2022, by vendor, Public cloud platform usage and adoption worldwide 2022, by service provider, Private cloud platform service adoption worldwide 2022, by service provider, PC revenue share by vendor worldwide 2018 to 2021, PC vendor shipments worldwide from 2006-2022, Personal computer installed base share worldwide 2018 to 2021, by vendor, Microsoft's commercial revenue distribution by segment 2015-2018, Number of Windows 7 licenses sold worldwide from 2009-2012, Microsoft Windows 8: number of licenses sold 2012-2014, Brand triad: attitude towards Microsoft in Germany 2013-2016, Microsoft's automotive infotainment OS sales worldwide 2011-2020, Number of Microsoft employees 2018-2022, by location, Number of Microsoft employees 2018-2022, by business unit, Number of Microsoft patents by filing year and legal status worldwide 1999-2019, Microsoft's greenhouse gas emissions by scope 2016, Microsoft Exchange Server mailbox deployment share worldwide 2018-2022, Price of selected acquisitions by Microsoft 2022, Windows Phone smartphone users in the United States 2010-2021, Microsoft unique users in Italy 2016-2018, Canada frequency of use of Microsoft products and services 2018, by age group, Open source project growth rates worldwide: leading countries in 2019, Office software market revenue in Europe 2016-2021, Office software market revenue in Spain 2016-2021, Microsoft's revenue from 2012 to 2022 financial years, by segment (in billion U.S. dollars), Find your information in our database containing over 20,000 reports, total figure reaching over 198 billion dollars, invested billions into research and development. Executive Vice President, Human Resources. We have not engaged in any related party transactions or arrangements with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity or the availability of capital resources. Devices, including Surface and PC accessories. Revenue, classified by the major geographic areas in which our customers were located, was as follows: Revenue from external customers, classified by significant product and service offerings, was as follows: Our commercial cloud revenue, which includes Azure, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties, was $69.1 billion, $51.7 billion and $38.1 billion in fiscal years 2021, 2020, and 2019, respectively. Changes in inventory levels in the OEM channel. Microsoft reported its fiscal year 2021 Q3 results today, revealing that it's pulled in a hefty $41.7 billion in revenue over the last quarter . How the Critical Audit Matter Was Addressed in the Audit. Based on our assessment of key technology trends, we maintain our long-term commitment to research and development across a wide spectrum of technologies, tools, and platforms spanning digital work and life experiences, cloud computing, AI, devices, and operating systems. We operate our business and report our financial performance using three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Padmasree Warrior 2 These unique gaming experiences are the cornerstone of Xbox Game Pass, a subscription service and gaming community with access to a curated library of over 100 first- and third-party console and PC titles. We are also at the forefront of the enterprise metaverse, a new infrastructure layer made possible through the convergence of the digital and physical worlds. We distribute our products and services through OEMs that pre-install our software on new devices and servers they sell. Care is the new currency for every leader, and weve built a new framework to help our managers strengthen their teams and deliver success through empowerment and accountability. We believe Windows competes effectively by giving customers choice, value, flexibility, security, an easy-to-use interface, and compatibility with a broad range of hardware and software applications, including those that enable productivity. Transforming the workplace to deliver new modern, modular business applications to improve how people communicate, collaborate, learn, work, play, and interact with one another. Refer to Note 8 Business Combinations of the Notes to Financial Statements for further discussion. Economic Conditions, Challenges, and Risks. We also have an ESPP for all eligible employees. The Company engaged Deloitte & Touche LLP, an independent registered public accounting firm, to audit and render an opinion on the consolidated financial statements and internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). And with our pending acquisition of Nuance Communications, well provide ambient clinical intelligence capabilities for healthcare organizations that improve the patient experience and reduce the overwhelming burden of work that physicians struggle with today. Gross margin and operating income included a favorable foreign currency impact of 2% and 3%, respectively. As of June 30, 2021 and 2020, our financing receivables, net were $4.4 billion and $5.2 billion, respectively, for short-term and long-term financing receivables, which are included in other current assets and other long-term assets in our consolidated balance sheets. Our growth depends on securely delivering continuous innovation and advancing our leading productivity and collaboration tools and services, including Office, Dynamics, and LinkedIn. Although we were not a party to the appeals, our software sales in India were determined to be not subject to withholding taxes. In fiscal year 2021, our U.S. income before income taxes was $35.0 billion and our foreign income before income taxes was $36.1 billion. Office Consumer products and cloud services revenue increased $474 million or 10% driven by Microsoft 365 Consumer subscription revenue, on a strong prior year comparable that benefited from transactional strength in Japan. 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