We estimate that we have no significant residual value related to our intangible assets. Our revenue fluctuates quarterly and is generally higher in the second and fourth quarters of our fiscal year. These financial statements are the responsibility of the Companys management. And we continue to improve the representation of our ecosystem by engaging with diverse suppliers, financial institutions, and channel partners. 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. Marketing Solutions help companies reach, engage, and convert their audiences at scale. Xbox Game Pass is a community with access to a curated library of over 100 first- and third-party console and PC titles. To address this, we provide a complete chain of software development tools across every cloud and client platform. Office Commercial products revenue declined 23% driven by continued customer shift to cloud offerings and transactional weakness. We have determined that certain sales incentive programs meet the requirements to be capitalized. General and administrative expenses include payroll, employee benefits, stock-based compensation expense, severance expense, and other headcount-related expenses associated with finance, legal, facilities, certain human resources and other administrative personnel, certain taxes, and legal and other administrative fees. To sign up for this free service, visit the Annual Report site on the Investor Relations website at: http://www.microsoft.com/investor/AnnualReports/default.aspx. Although we were not a party to the appeals, our software sales in India were determined to be not subject to withholding taxes. 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. For more about Microsofts CSR commitments and performance, please visit: www.microsoft.com/transparency. 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. From our CEO and Senior Leadership Team and throughout our organization, people at Microsoft are working to conduct our business in principled ways that make a significant positive impact on important global issues. In middleware, we compete against Java vendors. Dynamics provides cloud-based and on-premises business solutions for financial management, enterprise resource planning (ERP), customer relationship management (CRM), supply chain management, and other application development platforms for small and medium businesses, large organizations, and divisions of global enterprises. (All figures in USD millions, except percentages) The company generates revenue by licensing and supporting an array of software products; offering a diverse portfolio of cloud-based solutions and other services to people and business organizations; designing, manufacturing, and selling devices; and . 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. We have savings plans in the U.S. that qualify under Section 401(k) of the Internal Revenue Code, and a number of savings plans in international locations. Microsoft 365 is empowering people and organizations to be productive and secure as they adapt to more fluid ways of working and learning. 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. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* It drives our passion to obsess about our customers, and to learn about and from them. We typically have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. Microsoft's Intelligent Cloud segment, which includes the Azure public cloud for application hosting, SQL Server, Windows Server and enterprise services generated $20.91 billion in revenue. In other words, based on revenue, SpaceX is now more a satellite company than a . Azure Synapse Analytics, a limitless analytics service, brings together data integration, enterprise data warehousing, and big data analytics for immediate business intelligence and machine learning needs. As we have diversity of target audiences and sales motions within the Windows business, we monitor metrics that are reflective of those varying motions. Our fixed-income portfolio is diversified and consists primarily of investment-grade securities. 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. 1. Apple distributes versions of its pre-installed application software, such as email and calendar products, through its PCs, tablets, and phones. 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. Great content drives Game Pass growth, and our acquisition this year of ZeniMax Media adds some of the worlds most iconic franchises to the service. Microsoft Teams, Azure and security all helped push . Revenue with cloud products like Azure, Office 365 Commercial and the commercial portion of LinkedIn amounted to $27.1 billion, an increase of $5 billion or 22 percent year over year. ZeniMax is reported as part of our More Personal Computing segment. 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. Seattle, Washington Our short-term investments are primarily intended to facilitate liquidity and capital preservation. Windows OEM revenue is impacted significantly by the number of Windows operating system licenses purchased by OEMs, which they pre-install on the devices they sell. In our 2020 Diversity and Inclusion Report, we reported that all racial and ethnic minority employees in the U.S. combined earn $1.006 for every $1.000 earned by their white counterparts, that women in the U.S. earn $1.001 for every $1.000 earned by their counterparts in the U.S. who are men, and women in the U.S. plus our ten other largest employee geographies (Australia, Canada, China, France, Germany, India, Ireland, Israel, Japan, and United Kingdom) combined earn $1.000 for every $1.000 by men in these countries. A portion of amortization and depreciation is included with various other costs in an overhead allocation to each segment. Depreciation expense declined in fiscal year 2021 due to the change in estimated useful lives of our server and network equipment. Xbox Cloud Gaming is Microsofts game streaming technology that is complementary to our console hardware and gives fans the ultimate choice to play the games they want, with the people they want, on the devices they want. We made substantial modifications to employee travel policies and implemented office closures so non-essential employees could work remotely. At Microsoft we have an inherently inclusive mission: to empower every person and every organization on the planet to achieve more. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. We market and distribute our products and services through the following channels: OEMs, direct, and distributors and resellers. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Commercial cloud revenue was up 33% over last year. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and the related notes (collectively referred to as the financial statements) as of and for the year ended June 30, 2021, of the Company and our report dated July 29, 2021, expressed an unqualified opinion on those financial statements. SA is included with certain volume licensing agreements and is an optional purchase with others. This global approach helps us remain competitive in local markets and enables us to continue to attract top talent from across the world. We are committed to designing and marketing first-party devices to help drive innovation, create new device categories, and stimulate demand in the Windows ecosystem. 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. To navigate it, organizations will need to embrace flexibility across their entire operating model, including the ways people work, the places they inhabit, and how they manage business process. Assets Recognized from Costs to Obtain a Contract with a Customer. Competitors to Office include software and global application vendors, such as Apple, Cisco Systems, Facebook, Google, IBM, Okta, Proofpoint, Slack, Symantec, Zoom, and numerous web-based and mobile application competitors as well as local application developers. Customized manager learning to build people manager capabilities and similar learning solutions to build leadership skills for all employees including differentiated leadership development programs. The figure also lagged the Zacks Consensus Estimate of $255 million. We report our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. President and Chief Financial Officer, We believe learning can be more than formal instruction, and our learning philosophy focuses on providing the right learning, at the right time, in the right way. Microsoft's revenue from 2012 to 2022 financial years, by segment (in billion U.S. dollars) [Graph]. Stock awards generally vest over a service period of four years or five years. 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. $1,152B. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. Many of our shareholders are increasingly focused on the importance of the effective engagement and action on ESG topics. Judgment is required to determine the SSP for each distinct 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. We regularly reevaluate our estimates to assess the adequacy of the recorded warranty liabilities and adjust the amounts as necessary. Property and equipment is stated at cost less accumulated depreciation, and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. Please do not hesitate to contact me. We provide for the estimated costs of fulfilling our obligations under hardware and software warranties at the time the related revenue is recognized. As of June 30, 2021 and 2020, accumulated goodwill impairment was $11.3 billion. 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