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. Income tax expense includes U.S. and international income taxes, and interest and penalties on uncertain tax positions. The markets for software, devices, and cloud-based services are dynamic and highly competitive. We intend to request shareholder approval for a successor ESPP with a January 1, 2022 effective date and ten-year expiration of December 31, 2031 at our 2021 Annual Shareholders Meeting. Excluding this impact, gross margin percentage decreased slightly driven by gross margin percentage reduction in More Personal Computing. If recognized, the resulting tax benefit would affect our effective tax rates for fiscal years 2021, 2020, and 2019 by $12.5 billion, $12.1 billion, and $12.0 billion, respectively. As soon as this statistic is updated, you will immediately be notified via e-mail. You only have access to basic statistics. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. As of June 30, 2021, the primary unresolved issues for the IRS audits relate to transfer pricing, which could have a material impact in our consolidated financial statements when the matters are resolved. The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. The defendants filed an interlocutory appeal to the District of Columbia Court of Appeals challenging the standard for evaluating expert scientific evidence. Windows Commercial products and cloud services revenue increased 14% driven by demand for Microsoft 365. Other comprehensive income (loss), net of tax: Total cash, cash equivalents, and short-term investments, Accounts receivable, net of allowance for doubtful accounts of, Property and equipment, net of accumulated depreciation of, Common stock and paid-in capital shares authorized 24,000; outstanding, Total liabilities and stockholders equity. Business, and Chief Marketing Officer, Christopher D. Young 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. We adopted the standard effective July 1, 2020. We regularly reevaluate our estimates to assess the adequacy of the recorded warranty liabilities and adjust the amounts as necessary. Archives of these events are also available. You can contact Microsoft Investor Relations at any time to order financial documents such as annual reports and Form 10-Ks free of charge. With a continued focus on digital transformation, Microsoft is helping to ensure that no one is left behind, particularly as economies recover from the COVID-19 pandemic. Our platforms and tools help drive small business productivity, large business competitiveness, and public-sector efficiency. 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. Given the complexity and the subjective nature of the transfer pricing issues that remain unresolved with the IRS, evaluating managements estimates relating to their determination of uncertain tax positions required extensive audit effort and a high degree of auditor judgment, including involvement of our tax specialists. Under Open Value agreements, organizations can elect to purchase perpetual licenses or subscribe to licenses and SA is included. Throughout the fiscal year, we also collect nearly 75,000 Daily Pulse employee survey responses. Net income fell 12% to . 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. 6 . This determination requires significant judgment. Adjustments in purchase price allocations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined. . 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. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. 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. Accounting literature also provides guidance on derecognition of income tax assets and liabilities, classification of deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. 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. This pricing methodology applies to our Level 2 investments, such as commercial paper, certificates of deposit, U.S. agency securities, foreign government bonds, mortgage- and asset-backed securities, corporate notes and bonds, and municipal securities. Revenue related to cloud services provided on a consumption basis, such as the amount of storage used in a period, is recognized based on the customer utilization of such resources. 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. Cash paid for interest on our debt for fiscal years 2021, 2020, and 2019 was $2.0 billion, $2.4 billion, and $2.4 billion, respectively. Microsoft's revenue from 2012 to 2022 financial years, by segment (in billion U.S. dollars) [Graph]. SA conveys rights to new software and upgrades for perpetual licenses released over the contract period. Adjusted EBITDA is projected between $380 million and $415 million, down from $453.5 million reported last year. 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. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. 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. 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 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. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. 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. We have historically paid India withholding taxes on software sales through distributor withholding and tax audit assessments in India. Operating income grew 32 percent to $70 billion. The largest category of OEMs are direct OEMs as our relationship with them is managed through a direct agreement between Microsoft and the OEM. Celanese Corporation CE reported earnings from continuing operations of $7.03 per share in the fourth quarter of 2022, up 46% from . Our fixed-income portfolio is diversified and consists primarily of investment-grade securities. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. And, finally, our comprehensive portfolio of AI tools, frameworks, and infrastructure enables developers to build solutions that comprehend speech, make predictions, provide insights, and support decision-making. Gains and losses from changes in fair values of derivatives that are not designated as hedging instruments are primarily recognized in other income (expense), net. Partners license software over a three-year period and are billed monthly based on consumption. Microsoft Teams, Azure and security all helped push . The past year has also made clear how essential PCs are to work, learning, and life at home. 118. Nearly 250 million people use Teams every month. The acquisition has been approved by Nuances shareholders, and we expect it to close by the end of calendar year 2021, subject to the satisfaction of certain regulatory approvals and other customary closing conditions. $ 42,485. We released our first annual Racial Equity Initiative: Strengthening Our Communities report, which focuses on justice reform, affordable broadband, skills and education, and support for community-based nonprofits. Our Internet address is www.microsoft.com. During fiscal years 2021 and 2020, we repurchased 101 million shares and 126 million shares of our common stock for $23.0 billion and $19.7 billion, respectively, through our share repurchase programs. Lead Independent Director, It empowers people with AI-first interfaces ranging from voice-activated commands through Cortana, inking, immersive 3D content storytelling, and mixed reality experiences. Operating expenses increased $1.9 billion or 12% driven by investments in Azure. 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. Get full access to all features within our Business Solutions. These scenarios represent a move to unlock creativity and discover new habits, while simplifying security and management. 6. We also deliver relevant online advertising to a global audience. We have several partnerships with other companies, including Verizon Media Group, through which we provide and monetize search queries. Returns and credits are estimated at contract inception and updated at the end of each reporting period if additional information becomes available. Microsoft has posted at least 16 consecutive quarters of YOY earnings growth since Q3 FY 2018. In the next phase of innovation, computing is more powerful and ubiquitous from the cloud to the edge. Commercial cloud revenue was up 33% over last year. In addition, all employees complete skills training based on the profession they are in each year. In addition to our main research and development operations, we also operate Microsoft Research. We recorded over $200 million in adjusted EBITDA for the quarter, an improvement of . 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. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. Microsoft changed their segment reporting for the 2016 financial year, providing historical reporting for the new segments only as far back as 2014. 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. Commercial cloud revenue increased 34% to $69.1 billion. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment. Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development. Weakening of the U.S. dollar relative to certain foreign currencies increased reported revenue and did not have a material impact on reported expenses from our international operations in fiscal year 2021. 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. Cash used in financing increased $2.5 billion to $48.5 billion for fiscal year 2021, mainly due to a $4.4 billion increase in common stock repurchases and a $1.4 billion increase in dividends paid, offset in part by a $1.8 billion decrease in repayments of debt and a $1.7 billion decrease in cash premium paid on debt exchange. Office Consumer products and cloud services revenue increased 10% and Microsoft 365 Consumer subscribers increased to 51.9 million. Please do not hesitate to contact me. 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. Current Price. Organizational tools such as Collections, Vertical Tabs, and Immersive Reader help you make the most of your time while browsing, streaming, searching, sharing, and more. In March 2021 and June 2020, we exchanged a portion of our existing debt at a premium for cash and new debt with longer maturities to take advantage of favorable financing rates in the debt markets, reflecting our credit rating and the low interest rate environment. The effort surpassed its initial goals and has been expanded with a new emphasis on connecting learners with jobs that help put their new training to use and connecting employers with skilled job seekers they might not find in traditional networks. The following table summarizes the payments due by fiscal year for our outstanding contractual obligations as of June 30, 2021: On April 11, 2021, we entered into a definitive agreement to acquire Nuance Communications, Inc. (Nuance) for $56.00 per share in an all-cash transaction valued at $19.7 billion, inclusive of Nuances net debt. Economic Conditions, Challenges, and Risks. Vertically integrated computer manufacturers such as Hewlett-Packard, IBM, and Oracle offer their own versions of the Unix operating system preinstalled on server hardware. We design and sell devices, including Surface and PC accessories. This segment primarily comprises: Office Commercial is designed to increase personal, team, and organizational productivity through a range of products and services. Other news and announcements that we may post from time to time that investors might find useful or interesting. . For access to additional financial information, visit the Investor Relations website online at: www.microsoft.com/investor. In addition to these channels, we use social media to communicate to the public. Together with our partners, we have reached more than 47 million people to date, across 250 countries, but the work doesnt stop there. The ideal entry-level account for individual users. In that division, server products and cloud services revenue increased 20 percent from a year ago, boosted by a 31 percent rise . We issue debt to take advantage of favorable pricing and liquidity in the debt markets, reflecting our credit rating and the low interest rate environment. With Azure Stack, organizations can extend Azure into their own datacenters to create a consistent stack across the public cloud and the intelligent edge. Today, it is exciting to see how our platforms and tools are enabling people and organizations to achieve remarkable things that would have been unimaginable even a few years ago. Call us toll-free at (800) 285-7772 or outside the United States, call (425) 706-4400. Xbox and our cloud gaming services face competition from various online gaming ecosystems and game streaming services, including those operated by Amazon, Apple, Facebook, Google, and Tencent. We have lease agreements with lease and non-lease components, which are generally accounted for separately. During the reported quarter, revenues from the Engine Management segment totaled $242.4 million, down 1.3% year over year. Azure Space is extending Azure capabilities through worldwide satellite-based connectivity. President, Wells Fargo & Company. Former Executive Vice President and In 2021, Microsoft's total annual Xbox gaming revenue amounted to 16.28 billion U.S. dollars. Following are details of the purchase price allocated to the intangible assets acquired: On October 25, 2018, we acquired GitHub, Inc. (GitHub), a software development platform, in a $7.5 billion stock transaction (inclusive of total cash payments of $1.3 billion in respect of vested GitHub equity awards and an indemnity escrow). 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. 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. In terms of formal on-line learning solutions, in fiscal year 2021 our employees completed over 5 million courses, averaging over 18 hours per employee. There were 63 patent infringement cases pending against Microsoft as of June 30, 2021, none of which are material individually or in aggregate. 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. Our More Personal Computing segment consists of products and services that put customers at the center of the experience with our technology. 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. This is why we were the first major tech company to support GDPRthe EUs privacy law that is the standard for privacy legislation around the worldand why we are strong advocates for passage of comprehensive federal privacy legislation in the United States. Finally, our Occupational Health and Safety program helps ensure employees can stay safe while they are working. There was no impact to our consolidated financial statements. Stock-based compensation expense and related income tax benefits were as follows: Stock awards entitle the holder to receive shares of Microsoft common stock as the award vests. $ 52,959. We believe use of a discounted cash flow approach is the most reliable indicator of the fair values of the businesses. Media to communicate to the purchase and production of inventories adjusted EBITDA for the 2016 year. Assessments in India agreements, organizations can elect to purchase perpetual licenses released the... July 1, 2020 cash flow approach is the most reliable indicator of the recorded warranty liabilities and the... Financial statements over last year billion or 12 % driven by gross margin percentage reduction in More Personal Computing consists. 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microsoft revenue by segment