We have served as the Companys auditor since 1983. Last year, we intercepted 30 billion email threats and 31 billion authentication attacks. From GitHub to Visual Studio, we provide a developer tool chain for everyone, no matter the technical experience, across all platforms, whether Azure, Windows, or any other cloud or client platform. For derivative instruments designated as cash flow hedges, gains and losses are initially reported as a component of other comprehensive income and subsequently recognized in earnings with the corresponding hedged item. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. Such costs related to software development are included in research and development expense until the point that technological feasibility is reached, which for our software products, is generally shortly before the products are released to production. 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. Dollars). 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. Microsoft Product and Services Agreements are designed for medium and large organizations that want to license cloud services and on-premises software as needed, with no organization-wide commitment, under a single, non-expiring agreement. Diversity and inclusion continues to be a core priority for every employee at Microsoft and is incorporated into our performance and career development approach. 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. We monitor our foreign currency exposures daily to maximize the economic effectiveness of our foreign currency hedge positions. Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements. Xbox Cloud Gaming is now available on PCs, as well as phones and tablets, and later this year will come to the console. During fiscal year 2021, our Daily Pulse surveys gave us invaluable insights into ways we could support employees through the COVID-19 pandemic and addressing racial injustice. Our Enterprise Services business competes with a wide range of companies that provide strategy and business planning, application development, and infrastructure services, including multinational consulting firms and small niche businesses focused on specific technologies. We use a forward-looking expected credit loss model for accounts receivable, loans, and other financial instruments. SA is optional for customers that purchase perpetual licenses. 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. Surface revenue increased $302 million or 5%. Marketing Solutions help companies reach, engage, and convert their audiences at scale. At the platform as a service (PaaS) level, new Azure Communication Services enable developers to integrate rich communications APIs into their applications using the same infrastructure that powers Microsoft Teams. The following table outlines maturities of our long-term debt, including the current portion, as of June 30, 2021: On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted into law, which significantly changed existing U.S. tax law and included numerous provisions that affect our business. We distribute our products and services through OEMs that pre-install our software on new devices and servers they sell. Microsoft 365 Consumer subscribers increased 22% to 51.9 million. 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. Equity investments were $6.0 billion and $3.0 billion as of June 30, 2021 and 2020, respectively. The major classes of assets and liabilities to which we allocated the purchase price were as follows: The goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies from future growth and is not expected to be deductible for tax purposes. 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. As of June 30, 2021, we had federal, state, and foreign net operating loss carryforwards of $304 million, $1.3 billion, and $2.0 billion, respectively. While were proud of our progress, we know we have much more work to do to help our communities, increase representation, and strengthen our culture of inclusion to influence broader, systemic change. Refer to Managements Discussion and Analysis of Financial Condition and Results of Operations for further discussion regarding the impact of COVID-19 on our fiscal year 2021 financial results. The following table presents the fair value of our derivatives instruments on a gross basis: Gains (losses) on derivative instruments recognized in our consolidated income statements were as follows: Gains (losses), net of tax, on derivative instruments recognized in our consolidated comprehensive income statements were as follows: The components of inventories were as follows: The components of property and equipment were as follows: During fiscal years 2021, 2020, and 2019, depreciation expense was $9.3 billion, $10.7 billion, and $9.7 billion, respectively. Our goal is to maintain the Investor Relations website as a portal through which investors can easily find or navigate to pertinent information about us, including: We publish a variety of reports and resources related to our Corporate Social Responsibility programs and progress on our Reports hub website, www.microsoft.com/corporate-responsibility/reports-hub, including reports on sustainability, responsible sourcing, accessibility, digital trust, and public policy engagement. Dynamics 365 for Talent with LinkedIn Recruiter and Learning gives human resource professionals a complete solution to compete for talent. We generally fund research at the corporate level to ensure that we are looking beyond immediate product considerations to opportunities further in the future. Our gaming platform is designed to provide a variety of entertainment through a unique combination of content, community, and cloud. In 2019 the growth curve flattened and brought almost $7 billion, and in 2020 the revenue was $8 billion. 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. LVMH Revenue By Segment. This pricing methodology applies to our Level 1 investments, such as U.S. government securities, common and preferred stock, and mutual funds. 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. 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 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. We have audited the internal control over financial reporting of Microsoft Corporation and subsidiaries (the Company) 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 (COSO). 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. Revenue increased $25.1 billion or 18% driven by growth across each of our segments. 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 can be contacted between the hours of 9:00 a.m. to 5:00 p.m. Pacific Time to answer investment oriented questions about Microsoft. The Zacks Consensus Estimate for revenues is pegged at $50.32 billion, implying growth of 16.82 . We also pledged a $50 million investment in AI for Earth to accelerate innovation by putting AI in the hands of those working to directly address sustainability challenges. , Jan 12, 2023. Microsoft aims to recruit, develop, and retain diverse, world-changing talent. Cost of revenue includes: manufacturing and distribution costs for products sold and programs licensed; operating costs related to product support service centers and product distribution centers; costs incurred to include software on PCs sold by original equipment manufacturers (OEM), to drive traffic to our websites, and to acquire online advertising space; costs incurred to support and maintain online products and services, including datacenter costs and royalties; warranty costs; inventory valuation adjustments; costs associated with the delivery of consulting services; and the amortization of capitalized software development costs. Through our Democracy Forward Program, were working across sectors to safeguard electoral processes and defend against disinformation. Product and Service Development, and Intellectual Property. 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. Certain volume licensing programs, including Enterprise Agreements, include on-premises licenses combined with Software Assurance (SA). While we employ much of our internally-developed intellectual property exclusively in our products and services, we also engage in outbound licensing of specific patented technologies that are incorporated into licensees products. 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. revenue growth, Revenue from Dynamics products and cloud services, including Dynamics 365, comprising a set of intelligent, cloud-based applications across ERP, CRM, Customer Insights, Power Apps, and Power Automate; and on-premises ERP and CRM applications, Revenue from LinkedIn, including Talent Solutions, Marketing Solutions, Premium Subscriptions, Sales Solutions, and Learning Solutions, Server products and cloud services revenue growth, Revenue from Server products and cloud services, including Azure; SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs); and GitHub. In April 2021, we entered into a definitive agreement to acquire Nuance Communications, Inc., a cloud and AI software provider with healthcare and enterprise AI experience. Microsoft Corporation, Reid G. Hoffman We distribute our devices through third-party retailers. 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. REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entitys financial statements or tax returns. The company's Xbox Game Pass gaming subscription revenue during the year was . More Personal Computing revenue increased driven by Gaming. We have historically paid India withholding taxes on software sales through distributor withholding and tax audit assessments in India. 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. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We evaluated the appropriateness and consistency of managements methods and assumptions used in the identification, recognition, measurement, and disclosure of uncertain tax positions, which included testing the effectiveness of the related internal controls. Our practice is to ship our products promptly upon receipt of purchase orders from customers; consequently, backlog is not significant. While our own actions are important, our most critical contribution will come from sharing our learnings and helping other organizations achieve their own goals for a better future too. We are investing significant resources in: Our future growth depends on our ability to transcend current product category definitions, business models, and sales motions. 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. We know that as we become more representative of the communities where we live and work, and the people around the world who we aspire to serve, we become better at helping everyone on the planet achieve more. Debt in the table above is comprised of senior unsecured obligations and ranks equally with our other outstanding obligations. Our other current financial assets and current financial liabilities have fair values that approximate their carrying values. Reinvent productivity and business processes. Inventing new gaming experiences that bring people together around their shared love for games on any devices and pushing the boundaries of innovation with console and PC gaming by creating the next wave of entertainment. 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. 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. Analysts had expected a 41.4% growth in Azure, according to consensus data from . By combining the Internet of Things, AI, and mixed reality, this platform layer enables the creation of rich digital twin simulations of real-world processes, places, and things so organizations can monitor complex systems in real time, interact within them using mixed reality, and run simulations to model, analyze, and predict performance. If we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in other income (expense), net and a new cost basis in the investment is established. Under the terms of the ESPP that were approved in 2012, the plan will terminate on December 31, 2022. 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. Returns and credits are estimated at contract inception and updated at the end of each reporting period if additional information becomes available. Founded in 1975, we develop and support software, services, devices, and solutions that deliver new value for customers and help people and businesses realize their full potential. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in earnings. To ensure our AI technologies are used responsibly and to avoid unintended consequences, we take a principled approach built on fairness, reliability and safety, privacy and security, inclusiveness, transparency, and accountability. These forward-looking statements generally are identified by the words believe, project, expect, anticipate, estimate, intend, strategy, future, opportunity, plan, may, should, will, would, will be, will continue, will likely result, and similar expressions. We have determined that technological feasibility for our software products is reached after all high-risk development issues have been resolved through coding and testing. [Online]. For full-year FY 2021, analysts forecast that adjusted EPS will rise 34.1% as annual revenue climbs 16.2%. We have recast certain prior period amounts to conform to the current period presentation. $1,152B. Certain cloud services, primarily Office 365, depend on a significant level of integration, interdependency, and interrelation between the desktop applications and cloud services, and are accounted for together as one performance obligation. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital. In October 2016, the Court of Appeals issued its decision adopting the standard advocated by the defendants and remanding the cases to the trial court for further proceedings under that standard. The estimated useful lives of our property and equipment are generally as follows: computer software developed or acquired for internal use, three to seven years; computer equipment, two to four years; buildings and improvements, five to 15 years; leasehold improvements, three to 20 years; and furniture and equipment, one to 10 years. And Microsoft Mesh enables developers to build immersive, multiuser, cross-platform mixed reality apps. These programs reinforce our culture and values such as collaboration and growth mindset. Compensation cost for RSUs is recognized using the straight-line method and for PSUs is recognized using the accelerated method. The global pandemic has accelerated our capabilities and culture with respect to flexible work. ESAs are also typically authorized as LSPs and operate as resellers for our other volume licensing programs. Refer to Risk Factors in our fiscal year 2021 Form 10-K for a discussion of these factors and other risks. 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. "Microsoft's Revenue from 2012 to 2022 Financial Years, by Segment (in Billion U.S. Azure Space is extending Azure capabilities through worldwide satellite-based connectivity. 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. 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Historically paid India withholding taxes on software sales through distributor withholding and tax audit in! These investments based on similar assets without applying significant adjustments our financial results reported accordance...

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