Beyond our products, our operational security posture and threat intelligence help customers defend themselves. But the most notable thing is what will happen to the other 90 percent. Price Quote as of 2/17/2023 4:00:00 PM - ET. Okta, Proofpoint, and Symantec provide security solutions across email security, information protection, identity, and governance. Introduced in November 2020, the new Xbox Series S and X are our fastest-selling consoles ever. We strive to make computing more personal by putting people at the core of the experience, enabling them to interact with technology in more intuitive, engaging, and dynamic ways. Opportunities include: Our employees embrace the growth mindset and take advantage of the formal learning opportunities as well as thousands of informal and on-the-job learning opportunities. Extended disruptions at these suppliers could lead to a similar disruption in our ability to manufacture devices on time to meet consumer demand. We are continuing our efforts to extend broadband access to millions of people in rural and underserved communities in the United States and around the globe. 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. Select Plus agreements are designed for government and academic organizations to acquire on-premises licenses at any affiliate or department level, while realizing advantages as one organization. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Companys internal control over financial reporting 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 and our report dated July 29, 2021, expressed an unqualified opinion on the Companys internal control over financial reporting. 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. SA is included. Xbox revenue is mainly affected by subscriptions and sales of first- and third-party content, as well as advertising. 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. We design and sell devices, including Surface and PC accessories. 35.40%. We believe potential can be nurtured and is not pre-determined, and we should always be learning and curious trying new things without fear of failure. 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. This year, we expanded our hybrid capabilities to enable organizations to build, manage, and deploy applications anywhere. 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. Windows OEM and devices revenue was particularly . As we have diversity of target audiences and sales motions within the Windows business, we monitor metrics that are reflective of those varying motions. Assets Recognized from Costs to Obtain a Contract with a Customer. Windows Commercial products and cloud services revenue increased 14%. $256.02 $259.13 10am 12pm 2pm 4pm. Windows OEM Pro revenue decreased 9% and Windows OEM non-Pro revenue grew 21%. The threat landscape has never been more complex or challenging, and security has never been more critical for our customers or society as a whole. 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. 16,375. Management does not believe any remaining unrealized losses represent impairments based on our evaluation of available evidence. 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. Fourth-quarter revenue rose 33% to $209.7 million, driving adjusted earnings per share up 45% to $0.90. 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. The valuation allowance disclosed in the table above relates to the foreign net operating loss carryforwards and other net deferred tax assets that may not be realized. Server products and cloud services, including Azure; SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs); and GitHub. Clayton, Dubilier & Rice, John W. Thompson 3,4 Our goal is to lead the industry in several distinct areas of technology over the long-term, which we expect will translate to sustained growth. We acknowledge we have more work ahead of us to address racial injustice and inequity, and are applying many of the programs above to help other underrepresented communities. We strive to obtain information as early as possible about changing usage patterns and hardware advances that may affect software and hardware design. We settled a portion of the Internal Revenue Service (IRS) audit for tax years 2004 to 2006 in fiscal year 2011. Cash from operations increased $16.1 billion to $76.7 billion for fiscal year 2021, mainly due to an increase in cash received from customers, offset in part by an increase in cash paid to suppliers and employees. Through our Democracy Forward Program, were working across sectors to safeguard electoral processes and defend against disinformation. Returns and credits are estimated at contract inception and updated at the end of each reporting period if additional information becomes available. For example, through LinkedIns new Skills Path pilot, were providing tools to help businesses source job candidates in a more equitable waybased on their proven proficiencies. Property and equipment is stated at cost less accumulated depreciation, and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for separately. . Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. 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. In a separate 2009 decision, the Court of Appeals for the District of Columbia held that adverse health effect claims arising from the use of cellular handsets that operate within the U.S. Federal Communications Commission radio frequency emission guidelines (FCC Guidelines) are pre-empted by federal law. Azure enables customers to devote more resources to development and use of applications that benefit their organizations, rather than managing on-premises hardware and software. We develop most of our products and services internally through the following engineering groups. SA is included with certain volume licensing agreements and is an optional purchase with others. Statista. There were 63 patent infringement cases pending against Microsoft as of June 30, 2021, none of which are material individually or in aggregate. 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. Right-of-use assets obtained in exchange for lease obligations: Reclassification adjustments for gains included in earnings, Tax expense included in provision for income taxes, Amounts reclassified from accumulated other comprehensive income (loss), Net change related to derivatives, net of tax of, Reclassification adjustments for (gains) losses included in other income (expense), net, Tax expense (benefit) included in provision for income taxes, Net change related to investments, net of tax of, Translation adjustments and other, net of tax effects of, Accumulated other comprehensive income (loss), end of period, Income tax benefits related to stock-based compensation, NASAs Mars mission achieved a milestone in space exploration when the small robotic helicopter Ingenuity completed the first powered flight on another planeta feat that would not have been possible without 12,000 developers on GitHub who, When a 1,300-foot ship blocked the Suez Canal and disrupted global shipping, our partner Blue Yonder, Team Rubicona nonprofit organization that responds to humanitarian crises around the world, Surgeons at Mt. LinkedIn revenue is mainly affected by demand from enterprises and professional organizations for subscriptions to Talent Solutions, Learning Solutions, Sales Solutions, and Premium Subscriptions offerings, as well as member engagement and the quality of the sponsored content delivered to those members to drive Marketing Solutions. At Microsoft, were providing technology and resources to help our customers navigate a remote environment. Current Price. Judgment is required in assessing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. In March 2021, the India Supreme Court ruled favorably in the case of Engineering Analysis Centre of Excellence Private Limited vs The Commissioner of Income Tax for companies in 86 separate appeals, some dating back to 2012, holding that software sales are not subject to India withholding taxes. The better we represent that diversity inside Microsoft, the more effectively we can innovate for those we seek to empower. All differences between our internal management reporting basis and accounting principles generally accepted in the United States of America (GAAP), along with certain corporate-level and other activity, are included in Corporate and Other. REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. The COVID-19 pandemic may continue to impact our business operations and financial operating results, and there is uncertainty in the nature and degree of its continued effects over time. Changes in inventory levels in the OEM channel. 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. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. 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. Our international operations provide a significant portion of our total revenue and expenses. Long-lived assets, excluding financial instruments and tax assets, classified by the location of the controlling statutory company and with countries over 10% of the total shown separately, were as follows: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, To the Stockholders and the Board of Directors of Microsoft Corporation. If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis through a charge to cost of revenue. Microsoft is committed to supporting our employees well-being and safety while they are at work and in their personal lives. 4 min read. 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. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. The ideal entry-level account for individual users. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. 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. Our most significant expenses are related to compensating employees; designing, manufacturing, marketing, and selling our products and services; datacenter costs in support of our cloud-based services; and income taxes. New employee orientation covering a range of topics including company values, culture, and Standards of Business Conduct, as well as ongoing onboarding program. Unearned revenue also includes payments for consulting services to be performed in the future, LinkedIn subscriptions, Office 365 subscriptions, Xbox subscriptions, Windows 10 post-delivery support, Dynamics business solutions, and other offerings for which we have been paid in advance and earn the revenue when we transfer control of the product or service. Microsoft's Intelligent Cloud segment, which includes the Azure public cloud for application hosting, SQL Server, Windows Server and enterprise services generated $20.91 billion in revenue. 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 We have not received a proposed assessment for the unresolved key transfer pricing issues and do not expect a final resolution of these issues in the next 12 months. 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. We encourage investors, the media, and others interested in Microsoft to review the information we post on the social media channels listed on our Investor Relations website. In the five years since Microsoft acquired LinkedIn, revenue has nearly tripled and growth has accelerated. To serve the needs of customers around the world and to improve the quality and usability of products in international markets, we localize many of our products to reflect local languages and conventions. The financial results of ZeniMax have been included in our consolidated financial statements since the date of the acquisition. With Xbox Game Pass, we are transforming how people discover, connect, and engage with games. This amounted to an increase of 19.3% from the year-ago quarter . With Azure Stack, organizations can extend Azure into their own datacenters to create a consistent stack across the public cloud and the intelligent edge. This is not possible without trust. 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. Finally, we believe transparency is the foundation of trust, so we continue to offer clear information on how we run our business and work with customers and partners. Highlights from fiscal year 2021 compared with fiscal year 2020 included: On March 9, 2021, we completed our acquisition of ZeniMax Media Inc. (ZeniMax), the parent company of Bethesda Softworks LLC, for a total purchase price of $8.1 billion, consisting primarily of cash. Our cloud and AI services and datacenters help businesses cut energy consumption, reduce physical footprints, and design sustainable products. Refer to Risk Factors in our fiscal year 2021 Form 10-K for a discussion of these factors and other risks. With Azure Arc, customers can deploy Azure data services on-premises, at the edge, or in multicloud environments. We record a receivable when revenue is recognized prior to invoicing, or unearned revenue when revenue is recognized subsequent to invoicing. We offer organizations the ability to ensure their data is being used only for their benefit. Operating income increased $17.0 billion or 32% driven by growth across each of our segments and the change in estimated useful lives of our server and network equipment. If market, industry, and/or investee conditions deteriorate, we may incur future impairments. The purchase price included $768 million of cash and cash equivalents acquired. Nine of these cases were filed in 2002 and are consolidated for certain pre-trial proceedings; the remaining cases are stayed. 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