The purchase price included $768 million of cash and cash equivalents acquired. Gross margin increased $18.9 billion or 20% driven by growth across each of our segments and the change in estimated useful lives of our server and network equipment. Our ecosystem of customers and partners has stepped up to help people and organizations in every country use technology to be resilient and transform during the most trying of circumstances. We have operating and finance leases for datacenters, corporate offices, research and development facilities, Microsoft Experience Centers, and certain equipment. 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. The allocation of the purchase price to goodwill was completed as of June 30, 2019. We provide for the estimated costs of fulfilling our obligations under hardware and software warranties at the time the related revenue is recognized. We must also protect the institutions and processes of democracy. We work actively in the U.S. and internationally to ensure the enforcement of copyright, trademark, trade secret, and other protections that apply to our software and hardware products, services, business plans, and branding. We distribute our products and services through OEMs that pre-install our software on new devices and servers they sell. Based on this evaluation, management concluded that the Companys internal control over financial reporting was effective as of June 30, 2021. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with or furnish it to the Securities and Exchange Commission (SEC) at www.sec.gov. Xbox content and services revenue increased 23%. Azure Space is extending Azure capabilities through worldwide satellite-based connectivity. 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. We recorded over $200 million in adjusted EBITDA for the quarter, an improvement of . and cloud services revenue. We disclose metrics to enable investors to evaluate progress against our ambitions, provide transparency into performance trends, and reflect the continued evolution of our products and services. Continuing . Growth of our Gaming business is determined by the overall active user base through Xbox enabled content, availability of games, providing exclusive game content that gamers seek, the computational power and reliability of the devices used to access our content and services, and the ability to create new experiences through first-party content creators. A persons experience with technology spans a multitude of devices and has become increasingly more natural and multi-sensory with voice, ink, and gaze interactions. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Quarterly smartphone market share worldwide by vendor 2009-2022, Apple iPhone unit sales worldwide 2007-2018, by quarter, Global market share held by smartphone operating systems 2009-2018, by quarter, Virtual reality (VR) - statistics & facts, Research expert covering the consumer electronics industry, Profit from additional features with an Employee Account. Our EEO-1 report (equal employment opportunity). As a result of the TCJA, we are required to pay a one-time transition tax on deferred foreign income not previously subject to U.S. income tax. Contribution in Q2 2022. The components of other income (expense), net were as follows: We use derivative instruments to manage risks related to foreign currencies, equity prices, interest rates, and credit; enhance investment returns; and facilitate portfolio diversification. 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. 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. Unearned revenue comprises mainly unearned revenue related to volume licensing programs, which may include SA and cloud services. We use metrics in assessing the performance of our business and to make informed decisions regarding the allocation of resources. Okta, Proofpoint, and Symantec provide security solutions across email security, information protection, identity, and governance. Examples include invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period, and multi-year on-premises licenses that are invoiced annually with revenue recognized upfront. Azure faces diverse competition from companies such as Amazon, Google, IBM, Oracle, VMware, and open source offerings. Full-year fiscal '23 estimates today expect Microsoft to earn $9.55 in EPS on $212.2 billion in revenue for expected growth in the next 6 months of 4% in EPS and 7% in revenue. We invest in a range of emerging technology trends and breakthroughs that we believe offer significant opportunities to deliver value to our customers and growth for the Company. We record a receivable when revenue is recognized prior to invoicing, or unearned revenue when revenue is recognized subsequent to invoicing. Although each type of reselling partner may reach organizations of all sizes, LSPs are primarily engaged with large organizations, distributors resell primarily to VARs, and VARs typically reach small and medium organizations. Founder and Chairman, DetailPricingLevelName. At Microsoft we have an inherently inclusive mission: to empower every person and every organization on the planet to achieve more. Diversity and inclusion continues to be a core priority for every employee at Microsoft and is incorporated into our performance and career development approach. Acquisition Blizzard. Our increasing engagement with open source software will also cause us to license our intellectual property rights broadly in certain situations. Revenue from Starlink is also expected to grow substantially, from $1.9 billion last year to $5.4 billion in 2023. Enterprise Services, including Premier Support Services and Microsoft Consulting Services. From Visual Studio to GitHub, we deliver the best tools for moving quickly from idea to code and from code to the cloud. Timing of revenue recognition may differ from the timing of invoicing to customers. Service and other revenue includes sales from cloud-based solutions that provide customers with software, services, platforms, and content such as Office 365, Azure, Dynamics 365, and Xbox; solution support; and consulting services. 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 . In fiscal year 2019, in response to the TCJA and recently issued regulations, we transferred certain intangible properties held by our foreign subsidiaries to the U.S. and Ireland. In fiscal year 2021, we delivered $168 billion in revenue, up 18 percent year-over-year. Judgment is required in determining when technological feasibility of a product is established. And yet, as I reflect on what has been a very challenging year for so manyone that will be forever remembered as a heartbreaking chapter in our historyI find reasons to be hopeful. Microsoft posted the first quarter of its 2022 financial results today, reporting revenue of $45.3 billion and a net income of $20.5 billion (GAAP). The federal and state net operating loss carryforwards will expire in various years from fiscal 2022 through 2041, if not utilized. Growth was driven by content and services for its Xbox gaming console. Many of these revenue and expenses are denominated in currencies other than the U.S. dollar. Revenue is up 19 percent, and net income has increased . CALs provide access rights to certain server products, including SQL Server and Windows Server, and revenue is reported along with the associated server product. Devices, including Surface and PC accessories. 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. Interest is paid semi-annually, except for the Euro-denominated debt, which is paid annually. Inventories are stated at average cost, subject to the lower of cost or net realizable value. We announced in June 2020 that we are expanding access to the digital skills that have become increasingly vital to many of the worlds jobs, and especially to individuals hardest hit by recent job losses. For those uncertain tax positions that had not been effectively settled, we evaluated whether management had appropriately considered new information that could significantly change the recognition, measurement or disclosure of the uncertain tax positions. The second broad category of OEMs are system builders consisting of lower-volume PC manufacturers, which source Microsoft software for pre-installation and local redistribution primarily through the Microsoft distributor channel rather than through a direct agreement or relationship with Microsoft. 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 . More broadly, we are leading the way with solutions tailored to the needs of key industries. 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. Our ambition for Windows 10 monetization opportunities includes gaming, services, subscriptions, and search advertising. To determine credit losses, we employ a systematic methodology that considers available quantitative and qualitative evidence. Dear shareholders, colleagues, customers, and partners: As I write this, people and organizations everywhere continue to struggle with the uncertainty of a pandemic that continues to cause so much suffering. 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. Our growth depends on securely delivering continuous innovation and advancing our leading productivity and collaboration tools and services, including Office, Dynamics, and LinkedIn. 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. You can contact Microsoft Investor Relations at any time to order financial documents such as annual reports and Form 10-Ks free of charge. Operating income increased $5.6 billion or 30%. Please create an employee account to be able to mark statistics as favorites. In January 2020, we announced a bold commitment and detailed plan to be carbon negative by 2030, and to remove from the environment by 2050 all the carbon we have emitted since our founding in 1975. 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. A hearing on general causation is scheduled for January and February of 2022. Our responsibility is to express an opinion on the Companys financial statements based on our audits. In March 2021, the India Supreme Court ruled favorably for companies in 86 separate appeals, some dating back to 2012, holding that software sales are not subject to India withholding taxes. We use different programs designed to provide flexibility for organizations of various sizes. 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. Google provides a hosted messaging and productivity suite. We have lease agreements with lease and non-lease components, which are generally accounted for separately. Following a mediation, the parties agreed to a global settlement of all three Canadian actions and submitted the proposed settlement agreement to the courts in all three jurisdictions for approval. dollars)." We have committed $9.5 billion for the construction of new buildings, building improvements, and leasehold improvements as of June 30, 2021. Windows OEM and devices revenue was particularly . Over 42 million people across every continent have accessed free training through our skills initiative. Managers holding conversations about employees career and development plans, coaching on career opportunities, and programs like mentoring and sponsorship. 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. The resolution of each of these audits is not expected to be material to our consolidated financial statements. These obligations did not have a material impact in our consolidated financial statements during the periods presented. 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. 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. Breaking down Microsoft's earnings by operational segment. Intercompany transactions and balances have been eliminated. I have had the honor to see how the hard work and commitment of Microsofts employees, the ingenuity of our partners, the trust of our customers, and the support of our shareholders translate into strong results. In December 2019, the FASB issued a new standard to simplify the accounting for income taxes. 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. Our hybrid infrastructure consistency spans security, compliance, identity, and management, helping to support the real-world needs and evolving regulatory requirements of commercial customers and enterprises. We have a network of field sales representatives and field support personnel that solicit orders from distributors and resellers, and provide product training and sales support. Microsoft Key . We implemented a global Paid Pandemic School and Childcare Closure Leave to support working parents, added wellbeing days for those who needed to take time off for mental health and wellness, implemented on-demand COVID-19 testing and vaccinations on our Redmond, Washington campus, and extended full medical plan coverage for coronavirus testing, treatment, and telehealth services. 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. 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. The financial results of GitHub have been included in our consolidated financial statements since the date of the acquisition. As of June 30, 2021, an aggregate of 251 million shares were authorized for future grant under our stock plans. All repurchases were made using cash resources. 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. The gamer remains at the heart of the Xbox ecosystem. LinkedIn, including Talent Solutions, Marketing Solutions, Premium Subscriptions, Sales Solutions, and Learning Solutions. AI is technologys most important priority, and healthcare is its most urgent application. Quarter. Organizations of all sizes have digitized business-critical functions, redefining what they can expect from their business applications. To build a more inclusive economy, we also have a responsibility to help close the Disability Divide, which impacts more than 1 billion people with disabilities around the world. 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