Ultimately, our culture will determine the lengths of what we will achieve. We perform a qualitative assessment on a periodic basis. Executive Vice President, Human Resources. We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company offers customers the ability to acquire multiple licenses of software products and services, including cloud-based services, in its customer agreements through its volume licensing programs. 118. We distribute our devices through third-party retailers. We see more emerging use cases and needs for compute and security at the edge and are accelerating our innovation across the spectrum of intelligent edge devices, from IoT sensors to gateway devices and edge hardware to build, manage, and secure edge workloads. We design and sell devices, including Surface and PC accessories. However, due to the integrated structure of our business, certain revenue recognized and costs incurred by one segment may benefit other segments. "Microsoft's Revenue from 2012 to 2022 Financial Years, by Segment (in Billion U.S. Cost of revenue increased $6.2 billion or 13% driven by growth in commercial cloud and Gaming, offset in part by a reduction in depreciation expense due to the change in estimated useful lives of our server and network equipment. Microsoft's recent Q3 earnings uncovered several crucial trends that will drive its Dynamics software products and LinkedIn revenue higher. We are subject to income tax in many jurisdictions outside the U.S. Our operations in certain jurisdictions remain subject to examination for tax years 1996 to 2020, some of which are currently under audit by local tax authorities. Operating expenses decreased $752 million or 6% driven by prior year charges associated with the closing of our Microsoft Store physical locations and reductions in retail store expenses and marketing, offset in part by investments in Gaming. There are two broad categories of OEMs. We think of diversity and inclusion as core to our business model, informing our actions to impact economies and people around the world. We must also continue to increase access to digital skills. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Excluding this impact, gross margin percentage decreased slightly driven by gross margin percentage reduction in More Personal Computing. July 29, 2021. Shares of common stock outstanding were as follows: The following table summarizes the changes in accumulated other comprehensive income (loss) by component: We grant stock-based compensation to employees and directors. Our vision is to create economic opportunity for every member of the global workforce through the ongoing development of the worlds first Economic Graph, a digital representation of the global economy. 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. Cactus' Rental revenues were $27.3 million, up from $19.2 million in the year-ago quarter. 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. Chairman and Chief Executive Officer, Amy E. Hood In addition to our main research and development operations, we also operate Microsoft Research. Slack provides teamwork and collaboration software. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. In fiscal year 2021 and 2020, our foreign regional operating centers in Ireland and Puerto Rico, which are taxed at rates lower than the U.S. rate, generated 82% and 86% of our foreign income before tax. Inventories are stated at average cost, subject to the lower of cost or net realizable value. 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. The components of intangible assets acquired during the periods presented were as follows: Intangible assets amortization expense was $1.6 billion, $1.6 billion, and $1.9 billion for fiscal years 2021, 2020, and 2019, respectively. A paid subscription is required for full access. to incorporate the statistic into your presentation at any time. ESAs are also typically authorized as LSPs and operate as resellers for our other volume licensing programs. We have distribution agreements covering one or more of our products with virtually all the multinational OEMs, including Dell, Hewlett-Packard, Lenovo, and with many regional and local OEMs. To support this culture, we offer a wide range of learning and development opportunities. In the next three years, well create more data than we did in the past 10. In the first fiscal quarter of 2023, revenue in the Microsoft Intelligent Cloud segment, which includes the Azure public cloud, Windows Server, SQL Server, Nuance, and Enterprise Services, was $20 . Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected. We regularly review inventory quantities on hand, future purchase commitments with our suppliers, and the estimated utility of our inventory. Antitrust and unfair competition class action lawsuits were filed against us in British Columbia, Ontario, and Quebec, Canada. We are accelerating our development of mixed reality solutions with new Azure services and devices. Through our Democracy Forward Program, were working across sectors to safeguard electoral processes and defend against disinformation. Gaming, including Xbox hardware and Xbox content and services, comprising digital transactions, Xbox Game Pass and other subscriptions, video games, third-party video game royalties, cloud services, and advertising. Refer to Note 1 Accounting Policies of the Notes to Financial Statements for further discussion. Marketing Solutions help companies reach, engage, and convert their audiences at scale. Commercial cloud revenue increased 34% to $69.1 billion. New integrations between Dynamics 365 and Teams enable everyone across an organization to view and collaborate on customer records seamlessly within Teams, and to meet, chat, and collaborate within Dynamics 365. The pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance obligation. We will include as many of your questions as possible during the Q&A session of the meeting and will provide answers to questions on the Microsoft Investor Relations website under the Annual Meeting page. With Windows 11the biggest update to our operating system in a decadewere reimagining everything from the platform to the store to help people and organizations be more productive, connected, and secure, and to build a more open ecosystem for developers and creators. This change in accounting estimate was effective beginning fiscal year 2021. We have an ESPP for all eligible employees. Finally, our Occupational Health and Safety program helps ensure employees can stay safe while they are working. Significant judgment is exercised by the Company in determining revenue recognition for these customer agreements, and includes the following: Given these factors and due to the volume of transactions, the related audit effort in evaluating managements judgments in determining revenue recognition for these customer agreements was extensive and required a high degree of auditor judgment. The following table outlines the expected future recognition of unearned revenue as of June 30, 2021: If our customers choose to license cloud-based versions of our products and services rather than licensing transaction-based products and services, the associated revenue will shift from being recognized at the time of the transaction to being recognized over the subscription period or upon consumption, as applicable. This amounted to an increase of 19.3% from the year-ago quarter . Our approach to privacy begins with the belief that people have a right to own their personal data and that companies have a responsibility to collect and use personal data responsibly. 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. It has helped us become more empathetic toward our colleagues and enabled us to work together as a teamas One Microsoft. We strive to create local opportunity, growth, and impact in every country around the world. We have operating and finance leases for datacenters, corporate offices, research and development facilities, Microsoft Experience Centers, and certain equipment. The decrease from the federal statutory rate in fiscal year 2019 is primarily due to a $2.6 billion net income tax benefit related to intangible property transfers, and earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland, Singapore, and Puerto Rico. Revenue and costs are generally directly attributed to our segments. 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. Product and Service Development, and Intellectual Property. In a time of great disruption and uncertainty, customers are looking to us to accelerate their own digital transformations as software and cloud computing play a huge role across every industry and around the world. 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. Microsoft Corporation, Sandra E. Peterson 2,3 Opportunities to sign up for email alerts to have information pushed in real time. We hire a mix of university and industry talent worldwide. Operating expenses increased $1.9 billion or 12% driven by investments in Azure. The company's shares . Revenue from Starlink is also expected to grow substantially, from $1.9 billion last year to $5.4 billion in 2023. 16,375. We record an allowance to cover expected losses based on troubled accounts, historical experience, and other currently available evidence. We have operating and finance leases for datacenters, corporate offices, research and development facilities, Microsoft Experience Centers, and certain equipment. 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