Our Productivity and Business Processes segment consists of products and services in our portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. These allocated costs include legal, including settlements and fines, information technology, human resources, finance, excise taxes, field selling, shared facilities services, and customer service and support. And it underlies our approach to diversity and inclusion. Intercompany transactions and balances have been eliminated. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. We took a wide variety of measures to protect the health and well-being of our employees, suppliers, and customers during the COVID-19 pandemic. The allocation of the purchase price to goodwill was completed as of June 30, 2019. For access to additional financial information, visit the Investor Relations website online at: www.microsoft.com/investor. We believe our allowances for income tax contingencies are adequate. Microsoft's revenue 2008-2023, by fiscal quarter. 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. 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). Apple distributes versions of its pre-installed application software, such as email and calendar products, through its PCs, tablets, and phones. Organizations purchase perpetual licenses and SA is optional. 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. Refer to Risk Factors in our fiscal year 2021 Form 10-K for a discussion of these factors and other risks. We contribute fifty cents for each dollar a participant contributes into the plans, with a maximum employer contribution of 50% of the IRS contribution limit for the calendar year. Unearned revenue is generally invoiced annually at the beginning of each contract period for multi-year agreements and recognized ratably over the coverage period. For the majority of our products, we have the ability to use other manufacturers if a current vendor becomes unavailable or unable to meet our requirements. The better we represent that diversity inside Microsoft, the more effectively we can innovate for those we seek to empower. Commercial cloud revenue was up 33% over last year. LVMH Revenue By Segment. We also are subject to a variety of other claims and suits that arise from time to time in the ordinary course of our business. Advertising costs are expensed as incurred. We have not engaged in any related party transactions or arrangements with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity or the availability of capital resources. During the periods presented, we reported our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. We offer options for organizations that want to purchase our cloud services, on-premises software, and SA. This means everyone is on a continuous journey to learn and grow. We strive to create local opportunity, growth, and impact in every country around the world. Definition and Limitations of Internal Control over Financial Reporting. In 2019, the SAMR presented preliminary views as to certain possible violations of Chinas Anti-Monopoly Law. The transfers of intangible properties resulted in a $2.6 billion net income tax benefit recorded in the fourth quarter of fiscal year 2019, as the value of future tax deductions exceeded the current tax liability from foreign jurisdictions and U.S. global intangible low-taxed income (GILTI) tax. Enterprise Services, including Premier Support Services and Microsoft Consulting Services. Revenue from certain contracts is allocated among the segments based on the relative value of the underlying products and services, which can include allocation based on actual prices charged, prices when sold separately, or estimated costs plus a profit margin. Office Commercial products and cloud services revenue increased $4.0 billion or 13%. Microsoft Cloud Solution Provider is our main partner program for reselling cloud services. Microsoft annual revenue for 2021 was $168.088B, a 17.53% increase from 2020. Our consumer businesses also benefited from the remote environment, with continued demand for PCs and productivity tools, as well as strong engagement across our Gaming platform. Office Consumer, including Microsoft 365 Consumer subscriptions and Office licensed on-premises, and Office Consumer Services, including Skype, Outlook.com, and OneDrive. Growth will depend on our ability to increase the number of LinkedIn members and our ability to continue offering services that provide value for our members and increase their engagement. Our Office of Responsible AI ensures that we put these principles into practice, and our Responsible AI Resources Center shares guidelines and tools to help our customers and the developer community do the same. 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. Second quarter revenue is driven by corporate year-end spending trends in our major markets and holiday season spending by consumers, and fourth quarter revenue is driven by the volume of multi-year on-premises contracts executed during the period. Microsoft has posted at least 16 consecutive quarters of YOY earnings growth since Q3 FY 2018. This segment primarily comprises: Azure is a comprehensive set of cloud services that offer developers, IT professionals, and enterprises freedom to build, deploy, and manage applications on any platform or device. The mix of income before income taxes between the U.S. and foreign countries impacted our effective tax rate as a result of the geographic distribution of, and customer demand for, our products and services. Microsoft's other revenue segment, "Productivity and Business Processes," reported revenue of $16.5 billion, up from $15.04 billion a year ago and higher than the average analyst estimate of . Certain volume licensing programs, including Enterprise Agreements, include on-premises licenses combined with Software Assurance (SA). Our cloud business benefits from three economies of scale: datacenters that deploy computational resources at significantly lower cost per unit than smaller ones; datacenters that coordinate and aggregate diverse customer, geographic, and application demand patterns, improving the utilization of computing, storage, and network resources; and multi-tenancy locations that lower application maintenance labor costs. Advertising expense was $1.5 billion, $1.6 billion, and $1.6 billion in fiscal years 2021, 2020, and 2019, respectively. 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. Our revenue fluctuates quarterly and is generally higher in the second and fourth quarters of our fiscal year. The plaintiffs allege that their handsets either operated outside the FCC Guidelines or were manufactured before the FCC Guidelines went into effect. Refer to Note 16 Stockholders Equity of the Notes to Financial Statements for further discussion. We have completed our assessment and concluded that adoption of the new standard will not have a material impact on our consolidated financial statements. Our products for software developers compete against offerings from Adobe, IBM, Oracle, and other companies, and also against open-source projects, including Eclipse (sponsored by CA Technologies, IBM, Oracle, and SAP), PHP, and Ruby on Rails. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. 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. All deferred income taxes are classified as long-term in our consolidated balance sheets. Talent Solutions provide insights for workforce planning and tools to hire, nurture, and develop talent. Net gains on derivatives decreased due to lower gains on foreign currency contracts. The TCJA significantly changes existing U.S. tax law and includes numerous provisions that affect our business. Corporate governance information including our articles of incorporation, bylaws, governance guidelines, committee charters, codes of conduct and ethics, global corporate social responsibility initiatives, and other governance-related policies. The past year has also made clear how essential PCs are to work, learning, and life at home. Windows IoT extends the power of Windows and the cloud to intelligent systems by delivering specialized operating systems, tools, and services for use in embedded devices. and cloud services revenue. Applying AI to drive insights and act on our customers behalf by understanding and interpreting their needs using natural methods of communication. $90.88. Intelligent cloud. We may also purchase or license technology that we incorporate into our products and services. Our approach to hybrid work starts with Teamsthe only all-in-one solution that supports meetings, calls, chat, collaboration, and business process automation in day-to-day workflow. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. 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 Windows original equipment manufacturer licensing (Windows OEM) revenue increased slightly. We develop most of our products and services internally through the following engineering groups. GitHub provides a collaboration platform and code hosting service for developers. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. The strong success of LinkedIn is a clear indicator of how important this is. We expect capital expenditures to increase in coming years to support growth in our cloud offerings. "Microsoft's Revenue from 2012 to 2022 Financial Years, by Segment (in Billion U.S. Organizations also license our products and services indirectly, primarily through licensing solution partners (LSP), distributors, value-added resellers (VAR), and retailers. This statistic is not included in your account. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact in our consolidated financial statements for the period in which the effects become reasonably estimable. Sempra Energy's (SRE Quick Quote SRE - Free Report) fourth-quarter 2022 adjusted earnings per share (EPS) came in at $2.35, which beat the Zacks Consensus Estimate of $2.06 by 14.1%. Revenue, classified by the major geographic areas in which our customers were located, was as follows: Revenue from external customers, classified by significant product and service offerings, was as follows: Our commercial cloud revenue, which includes Azure, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties, was $69.1 billion, $51.7 billion and $38.1 billion in fiscal years 2021, 2020, and 2019, respectively. Any change in the goodwill amounts resulting from foreign currency translations and purchase accounting adjustments are presented as Other in the table above. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs. Revenue is up 19 percent, and net income has increased . Attachment of Windows to devices shipped. For software warranties, we estimate the costs to provide bug fixes, such as security patches, over the estimated life of the software. Chief Financial Officer, Gap, Inc. John W. Stanton 1,4 In determining whether a loss should be accrued we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Individual consumers obtain these products primarily through retail outlets. Cactus' Rental revenues were $27.3 million, up from $19.2 million in the year-ago quarter. We continue to develop complete, intelligent solutions for our customers that empower people to stay productive and collaborate, while safeguarding businesses and simplifying IT management. We offer organizations the ability to ensure their data is being used only for their benefit. These non-GAAP financial measures presented should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. Principal currencies hedged included the Euro, Japanese yen, British pound, Canadian dollar, and Australian dollar. The metrics reflect our cloud and on-premises product strategies and trends. In 2021, Microsoft's total annual Xbox gaming revenue amounted to 16.28 billion U.S. dollars. In 2014, the trial court granted in part and denied in part the defendants motion to exclude the plaintiffs general causation experts. Our commercial metrics allow management and investors to assess the overall health of our commercial business and include leading indicators of future performance. We manage credit exposures relative to broad-based indices and to facilitate portfolio diversification. Computing architecture is undergoing radical transformation as the number of connected devices and the volume of data generated at the edge increase dramatically. Accumulated Other Comprehensive Income (Loss), New integrations between Dynamics 365 and Teams, pending acquisition of Nuance Communications, we will invest $20 billion over the next five years, our acquisition this year of ZeniMax Media, 25 million people connect to the digital skills for in-demand roles, Racial Equity Initiative: Strengthening Our Communities report, humanitarian action and emergency response, http://www.microsoft.com/investor/AnnualReports/default.aspx, Adjusted diluted earnings per share (non-GAAP), Net gains (losses) on foreign currency remeasurements, Net income tax benefit related to India Supreme Court decision on withholding taxes, Operating leases, including imputed interest, Finance leases, including imputed interest, 100 basis point increase in U.S. treasury interest rates, 100 basis point increase in credit spreads. Chairman and Chief Executive Officer, Microsoft's recent Q3 earnings uncovered several crucial trends that will drive its Dynamics software products and LinkedIn revenue higher. Our principal audit procedures to evaluate managements estimates of uncertain tax positions related to unresolved transfer pricing issues included the following: /s/DELOITTE& TOUCHE LLP Critical accounting policies for us include revenue recognition, impairment of investment securities, goodwill, research and development costs, contingencies, income taxes, and inventories. Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development.
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