These costs include our internal sales force compensation program and certain partner sales incentive programs as we have determined annual compensation is commensurate with annual sales activities. There was no impact to our consolidated financial statements. Changes to our estimated variable consideration were not material for the periods presented. Our Dynamics business solutions are also licensed to enterprises through a global network of channel partners providing vertical solutions and specialized services. The plaintiffs have filed supplemental expert evidence, portions of which the defendants have moved to strike. With Azure Stack, organizations can extend Azure into their own datacenters to create a consistent stack across the public cloud and the intelligent edge. Our Intelligent Cloud segment consists of our public, private, and hybrid server products and cloud services that can power modern business and developers. GitHub is reported as part of our Intelligent Cloud segment. 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. Operating income was $20.4 billion GAAP and $21.6 billion non-GAAP, and decreased 8% and 3% . Last year, we mobilized resources to respond to the Beirut explosion, hurricanes in Central America, wildfires in the United States, and more. 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. When a cloud-based service includes both on-premises software licenses and cloud services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the cloud service and recognized over time. Other reconciling items, net consists primarily of tax credits and GILTI tax, and in fiscal year 2021, includes tax benefits from the India Supreme Court decision on withholding taxes. Nine of these cases were filed in 2002 and are consolidated for certain pre-trial proceedings; the remaining cases are stayed. Our short-term investments are primarily intended to facilitate liquidity and capital preservation. Our goal is to foster innovation that generates new ecosystems of inventors, partners, developers, creators, changemakers, public servants, frontline workers, and knowledge workers who, together, drive the engines of growth and opportunity in ways that benefit everyone. Seattle, Washington The purchase price included $768 million of cash and cash equivalents acquired. To use individual functions (e.g., mark statistics as favourites, set The decrease from the federal statutory rate in fiscal year 2021 is primarily due to 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 and Puerto Rico, tax benefits relating to stock-based compensation, and tax benefits from the India Supreme Court decision on withholding taxes. It empowers people with AI-first interfaces ranging from voice-activated commands through Cortana, inking, immersive 3D content storytelling, and mixed reality experiences. And as a global technology company, we have a particular responsibility to do our part. In February 2012, the IRS withdrew its 2011 Revenue Agents Report related to unresolved issues for tax years 2004 to 2006 and reopened the audit phase of the examination. If you are an admin, please authenticate by logging in again. Advertising expense was $1.5 billion, $1.6 billion, and $1.6 billion in fiscal years 2021, 2020, and 2019, respectively. Judgment is required in determining when technological feasibility of a product is established. 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. All of our approximately 23,000 people managers must complete between 25-30 hours of required manager capability and excellence training and are assigned ongoing required training each year. Operating leases are included in operating lease right-of-use (ROU) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. Thats why in April we announced a new five-year commitment to spur the development of accessible technology, expand opportunities for people with disabilities in the workforce, and build a more inclusive workplace. The largest component of the OEM business is the Windows operating system pre-installed on devices. Market Cap. $ 42,485. Adjusted net income and adjusted diluted EPS are non-GAAP financial measures which exclude the tax benefits related to the India Supreme Court decision on withholding taxes in fiscal year 2021. You need at least a Starter Account to use this feature. Microsoft Mobile Oy, a subsidiary of Microsoft, along with other handset manufacturers and network operators, is a defendant in 46 lawsuits, including 45 lawsuits filed in the Superior Court for the District of Columbia by individual plaintiffs who allege that radio emissions from cellular handsets caused their brain tumors and other adverse health effects. We believe that our audit provides a reasonable basis for our opinion. Office Consumer, including Microsoft 365 Consumer subscriptions and Office licensed on-premises, and Office Consumer Services, including Skype, Outlook.com, and OneDrive. Celanese Corporation CE reported earnings from continuing operations of $7.03 per share in the fourth quarter of 2022, up 46% from . Determination of stand-alone selling prices for each distinct performance obligation and for products and services that are not sold separately. Xbox Game Pass is a community with access to a curated library of over 100 first- and third-party console and PC titles. This is not possible without trust. We have determined that certain sales incentive programs meet the requirements to be capitalized. While the pandemic has been the defining issue of the past year-and-a-half, climate change is the challenge of our lifetime. Although it may be difficult to imagine in this time of immeasurable hardship and deep uncertainty, I see boundless possibility ahead. Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. Revenue in Microsoft's "Intelligent Cloud" segment rose 30% to $17.4 billion, with growth in Azure revenues handily surpassing the 43.1% jump projected by analysts, according to consensus data . 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. In fiscal year 2020, our U.S. income before income taxes was $24.1 billion and our foreign income before income taxes was $28.9 billion. We believe our gaming platform is effectively positioned against, and uniquely differentiated from, competitive products and services based on significant innovation in hardware architecture, user interface, developer tools, online gaming and entertainment services, and continued strong exclusive content from our own first-party game franchises as well as other digital content offerings. Intercompany transactions and balances have been eliminated. Former Executive Vice President and Devices face competition from various computer, tablet, and hardware manufacturers who offer a unique combination of high-quality industrial design and innovative technologies across various price points. Gross margin increased $9.7 billion or 29% driven by growth in Azure and the change in estimated useful lives of our server and network equipment. Net recognized gains (losses) on debt investments were as follows: Net recognized gains (losses) on equity investments were as follows: The components of investments were as follows: Equity investments presented as Other in the tables above include investments without readily determinable fair values measured using the equity method or measured at cost with adjustments for observable changes in price or impairments, and investments measured at fair value using net asset value as a practical expedient which are not categorized in the fair value hierarchy. As of June 30, 2021, we accrued aggregate legal liabilities of $339 million. Segment revenue and operating income were as follows during the periods presented: No sales to an individual customer or country other than the United States accounted for more than 10% of revenue for fiscal years 2021, 2020, or 2019. The segments enable the alignment of strategies and objectives across the development, sales, marketing, and services organizations, and they provide a framework for timely and rational allocation of resources within businesses. Management does not believe any remaining unrealized losses represent impairments based on our evaluation of available evidence. We are required to estimate the fair value of the investment to determine the amount of the impairment loss. Our goal is to help every organization strengthen its security capabilities through a Zero Trust architecture built on our comprehensive solutions that span identity, security, compliance, and device management across all clouds and platforms. During fiscal year 2020, we recorded an impairment charge of $161 million to operating lease right-of-use assets due to the closing of our Microsoft Store physical locations. Certain options and forwards not designated as hedging instruments are also used to manage the variability in foreign exchange rates on certain balance sheet amounts and to manage other foreign currency exposures. Although we were not a party to the appeals, our software sales in India were determined to be not subject to withholding taxes. We adopted the standard effective July 1, 2020. In response, we will invest $20 billion over the next five years to advance our security solutions. This segment primarily comprises: The Windows operating system is designed to deliver a more personal computing experience for users by enabling consistency of experience, applications, and information across their devices. Open agreements are designed for small and medium organizations that want to license cloud services and on-premises software over a one- to three-year period. Our server products are designed to make IT professionals, developers, and their systems more productive and efficient. Definition and Limitations of Internal Control over Financial Reporting. Server products and cloud services revenue increased $11.2 billion or 27% driven by Azure. Cash used in investing increased $15.4 billion to $27.6 billion for fiscal year 2021, mainly due to a $6.4 billion increase in cash used for acquisitions of companies, net of cash acquired, and purchases of intangible and other assets, a $5.2 billion increase in additions to property and equipment, and a $4.1 billion decrease in cash from net investment purchases, sales, and maturities. The effort surpassed its initial goals and has been expanded with a new emphasis on connecting learners with jobs that help put their new training to use and connecting employers with skilled job seekers they might not find in traditional networks. 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. 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 . We use credit default swap contracts to manage credit exposures relative to broad-based indices and to facilitate portfolio diversification. 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. Employees may purchase shares having a value not exceeding 15% of their gross compensation during an offering period. We have lease agreements with lease and non-lease components, which are generally accounted for separately. 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