Transforming the workplace to deliver new modern, modular business applications to improve how people communicate, collaborate, learn, work, play, and interact with one another. Nearly 250 million people use Teams every month. The earnings provide a further lift to Microsoft after it agreed to acquire gaming giant Activision Blizzard in a $68.7 billion, all-cash deal. Our sales force performs a variety of functions, including working directly with commercial enterprises and public-sector organizations worldwide to identify and meet their technology and digital transformation requirements; managing OEM relationships; and supporting system integrators, independent software vendors, and other partners who engage directly with our customers to perform sales, consulting, and fulfillment functions for our products and services. General Partner, Greylock Partners, Penny S. Pritzker 4 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. Finally, our Occupational Health and Safety program helps ensure employees can stay safe while they are working. Our responsibility is to express an opinion on the Companys financial statements based on our audits. 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. Net Recognized Gains (Losses) on Investments. Our commercial metrics allow management and investors to assess the overall health of our commercial business and include leading indicators of future performance. We record a receivable related to revenue recognized for multi-year on-premises licenses as we have an unconditional right to invoice and receive payment in the future related to those licenses. 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. Inventories are stated at average cost, subject to the lower of cost or net realizable value. However, just like how . Sales and marketing included an unfavorable foreign currency impact of 2%. And as I write this, we are tracking more than 140 groups that pose an active threat to global cybersecurity. Income taxes paid, net of refunds, were $13.4 billion, $12.5 billion, and $8.4 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. We also help our suppliers and customers around the world use Microsoft technology to reduce their own carbon footprint. Executive Vice President, Chief Commercial Officer, Bradford L. Smith Cash from operations increased $16.1 billion to $76.7 billion for fiscal year 2021, mainly due to an increase in cash received from customers, offset in part by an increase in cash paid to suppliers and employees. China State Administration for Market Regulation Investigation. Microsoft. Okta, Proofpoint, and Symantec provide security solutions across email security, information protection, identity, and governance. Revenue related to cloud services provided on a subscription basis is recognized ratably over the contract period. 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 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. This share repurchase program commenced in December 2016 and was completed in February 2020. As of June 30, 2021 and 2020, our financing receivables, net were $4.4 billion and $5.2 billion, respectively, for short-term and long-term financing receivables, which are included in other current assets and other long-term assets in our consolidated balance sheets. We conducted our audit in accordance with the standards of the PCAOB. Current year net income and diluted EPS were positively impacted by the tax benefit related to the India Supreme Court decision on withholding taxes, which resulted in an increase to net income and diluted EPS of $620 million and $0.08, respectively. Source:Microsoft. Their net earnings came in at $2,407 Million, a decrease of 5.6% YoY. 6,600. And it underlies our approach to diversity and inclusion. In fiscal year 2021, we delivered $168 billion in revenue, up 18 percent year-over-year. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. Enterprise Services, including Premier Support Services and Microsoft Consulting Services, assist customers in developing, deploying, and managing Microsoft server and desktop solutions and provide training and certification to developers and IT professionals on various Microsoft products. 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. The figure also lagged the Zacks Consensus Estimate of $255 million. As of June 30, 2021 and 2020, accumulated goodwill impairment was $11.3 billion. ESAs are also typically authorized as LSPs and operate as resellers for our other volume licensing programs. The following Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand the results of operations and financial condition of Microsoft Corporation. For derivative instruments that are not designated as hedges, gains and losses from changes in fair values are primarily recognized in other income (expense), net. The adoption of the standard did not have a material impact on our consolidated financial statements. A Reporting Pricing Level is the established level for Budget/Forecast to Actual revenue comparisons possible. Our fixed-income portfolio is diversified and consists primarily of investment-grade securities. 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Premium Subscriptions enables professionals to manage their professional identity, grow their network, and connect with talent through additional services like premium search. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Enterprise Services revenue increased $534 million or 8% driven by growth in Premier Support Services. To foster their and our success, we seek to create an environment where people can do their best work a place where they can proudly be their authentic selves, guided by our values, and where they know their needs can be met. We issue new shares of Microsoft common stock to satisfy vesting of awards granted under our stock plans. 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. Partners in this program can easily package their own products and services to directly provision, manage, and support their customer subscriptions. 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. Our exclusive game content is created through Xbox Game Studios, a collection of first-party studios creating iconic and differentiated gaming experiences. Internal development allows us to maintain competitive advantages that come from product differentiation and closer technical control over our products and services. Ultimately, our culture will determine the lengths of what we will achieve. It also gives us the freedom to decide which modifications and enhancements are most important and when they should be implemented. During the reported quarter, revenues from the Engine Management segment totaled $242.4 million, down 1.3% year over year. We applied a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align our credit loss methodology with the new standard. Our EEO-1 report (equal employment opportunity). Cloud usage and demand benefited as customers accelerate their digital transformation priorities. We also deliver relevant online advertising to a global audience. Every organization is looking to digitize their end-to-end operationsfrom sales and customer service to supply chain managementso they can rapidly adapt to changing market dynamics. Returns and credits are estimated at contract inception and updated at the end of each reporting period if additional information becomes available. Revenue growth was led by its search segment . 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. In July 2020, we completed an assessment of the useful lives of our server and network equipment and determined we should increase the estimated useful life of server equipment from three years to four years and increase the estimated useful life of network equipment from two years to four years. The federal and state net operating loss carryforwards will expire in various years from fiscal 2022 through 2041, if not utilized. With more than 60 datacenter regionsincluding 15 new regions added this year on five continentswe are delivering faster access to data and cloud services while addressing critical data residency requirements. No one company, industry, or country can solve these challenges alone. The pandemic has underscored that without it, people lack access to education, healthcare, economic opportunity, and more. We report our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. LinkedIn revenue increased $2.2 billion or 27% driven by advertising demand in our Marketing Solutions business. The ten-month claims period commenced on November 23, 2020 and will close on September 23, 2021. GO RESET FILTER. As of June 30, 2021 and 2020, other receivables due from suppliers were $965 million and $442 million, respectively, and are included in accounts receivable, net in our consolidated balance sheets. Over 42 million people across every continent have accessed free training through our skills initiative. 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. In that division, server products and cloud services revenue increased 20 percent from a year ago, boosted by a 31 percent rise . To use individual functions (e.g., mark statistics as favourites, set And we continue to improve the representation of our ecosystem by engaging with diverse suppliers, financial institutions, and channel partners. On September 20, 2016, our Board of Directors approved a share repurchase program authorizing up to $40.0 billion in share repurchases. Debt investments with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values were as follows: Unrealized losses from fixed-income securities are primarily attributable to changes in interest rates. Among Microsoft Corporation, the S&P 500 Index and the NASDAQ Computer Index. Padmasree Warrior 2 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. Microsoft MSFT is set to report second-quarter fiscal 2022 results on Jan 25. Microsoft revenue for the twelve months ending December 31, 2022 was $204.094B, a 10.38% increase year-over-year. These manufacturers, many of which are also current or potential partners and customers, include Apple and our Windows OEMs. $1,152B. Microsoft's revenue from 2012 to 2022 financial years, by segment (in billion U.S. dollars) [Graph]. 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. Changes to our estimated variable consideration were not material for the periods presented. Other news and announcements that we may post from time to time that investors might find useful or interesting. The consolidated financial statements include the accounts of Microsoft Corporation and its subsidiaries. We determine if an arrangement is a lease at inception. 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. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP. Certain corporate-level activity is not allocated to our segments. Microsoft is committed to supporting our employees well-being and safety while they are at work and in their personal lives. 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. In cases where we allocate revenue to software updates, primarily because the updates are provided at no additional charge, revenue is recognized as the updates are provided, which is generally ratably over the estimated life of the related device or license. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Companys internal control over financial reporting 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 and our report dated July 29, 2021, expressed an unqualified opinion on the Companys internal control over financial reporting. 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. 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. Our CSR Reports Hub provides detailed information on law enforcement access to data, our environmental data, our political activities, our workforce demographics, and our human rights work. By segment, Microsoft earnings figures generally showed healthy growth in Q2. In addition to the extraordinary steps and programs relating to COVID-19, our comprehensive benefits package includes many physical, emotional, and financial wellness programs including counseling through the Microsoft CARES Employee Assistance Program, flexible fitness benefits, savings and investment tools, adoption assistance, and back-up care for children and elders. Our success is highly dependent on our ability to attract and retain qualified employees. Chief Executive Officer and Changes in the carrying amount of goodwill were as follows: The measurement periods for the valuation of assets acquired and liabilities assumed end as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available, but do not exceed 12 months. Equity investments without readily determinable fair values are written down to fair value if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than carrying value. Azure is a trusted cloud with comprehensive compliance coverage and AI-based security built in. Build the Intelligent Cloud and Intelligent Edge Platform. 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. We test goodwill for impairment annually on May 1 at the reporting unit level, primarily using a discounted cash flow methodology with a peer-based, risk-adjusted weighted average cost of capital. Growth depends on our ability to reach new users in new markets such as frontline workers, small and medium businesses, and growth markets, as well as add value to our core product and service offerings to span productivity categories such as communication, collaboration, analytics, security, and compliance. We have lease agreements with lease and non-lease components, which are generally accounted for separately. For access to additional financial information, visit the Investor Relations website online at: www.microsoft.com/investor. Equity investments were $6.0 billion and $3.0 billion as of June 30, 2021 and 2020, respectively. We market and distribute our products and services through the following channels: OEMs, direct, and distributors and resellers. Office Consumer is designed to increase personal productivity through a range of products and services. We believe these non-GAAP measures aid investors by providing additional insight into our operational performance and help clarify trends affecting our business. 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. SA conveys rights to new software and upgrades for perpetual licenses released over the contract period. Satya Nadella July 26, 2022. We conducted our audits in accordance with the standards of the PCAOB. We continue to open new opportunities for gamers to engage both on- and off-console with both the launch of Xbox Cloud Gaming, our game streaming service, and continued investment in gaming hardware. 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. Server products and cloud services, including Azure; SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs); and GitHub. Microsoft annual revenue for 2020 was $143.015B, a 13.65% increase from 2019. Level 3 investments are valued using internally-developed models with unobservable inputs. We account for certain assets and liabilities at fair value. Certain of our counterparty agreements for derivative instruments contain provisions that require our issued and outstanding long-term unsecured debt to maintain an investment grade credit rating and require us to maintain minimum liquidity of $1.0 billion. However, due to the integrated structure of our business, certain revenue recognized and costs incurred by one segment may benefit other segments. In June 2021, Microsoft announced the next generation of Windows Windows 11. The Board of Directors, through its Audit Committee, consisting solely of independent directors of the Company, meets periodically with management, internal auditors, and our independent registered public accounting firm to ensure that each is meeting its responsibilities and to discuss matters concerning internal controls and financial reporting. Assets Recognized from Costs to Obtain a Contract with a Customer. Both numbers easily beat analyst estimates. And Im excited to see new PCs from Surface and our OEM ecosystem ship with Windows 11 this holiday season that include the latest innovations in touch, pen, and voice, as well as new breakthroughs in both accessibility and sustainability. With Azure Arc, customers can deploy Azure data services on-premises, at the edge, or in multicloud environments. Satisfy vesting of awards granted under our stock plans like premium search range of products and services to provision... Business and include leading indicators of future performance linkedin revenue increased 20 percent from a ago! Its subsidiaries 42 million people across every continent have accessed free training through our skills.! Level for Budget/Forecast to Actual revenue comparisons possible primarily of investment-grade securities of Directors approved a share program! 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