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1、 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30,2024 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF

2、 1934 For the Transition Period From toCommission File Number 001-37845 MICROSOFT CORPORATION WASHINGTON 91-1144442(STATE OF INCORPORATION)(I.R.S.ID)ONE MICROSOFT WAY,REDMOND,WASHINGTON 98052-6399(425)882- Securities registered pursuant to Section 12(b)of the Act:Title of each class Trading Symbol N

3、ame of exchange on which registered Common stock,$0.00000625 par value per share MSFT NASDAQ3.125%Notes due 2028 MSFT NASDAQ2.625%Notes due 2033 MSFT NASDAQIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act

4、of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data Fi

5、le required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated

6、 filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large Accelerated Filer Accelerated Filer Non-acceler

7、ated Filer Smaller Reporting Company Emerging Growth Company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exch

8、ange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No Indicate the number of shares outstanding of each of the issuers classes of common stock,as of the latest practicable date.Class Outstanding as of October 24,2024 Common Sto

9、ck,$0.00000625 par value per share 7,434,880,776 shares 2MICROSOFT CORPORATION FORM 10-Q For the Quarter Ended September 30,2024INDEX PagePART I.FINANCIAL INFORMATION Item 1.Financial Statements a)Income Statements for the Three Months Ended September 30,2024 and 20233 b)Comprehensive Income Stateme

10、nts for the Three Months Ended September 30,2024 and 20234 c)Balance Sheets as of September 30,2024 and June 30,20245 d)Cash Flows Statements for the Three Months Ended September 30,2024 and 20236 e)Stockholders Equity Statements for the Three Months Ended September 30,2024 and 20237 f)Notes to Fina

11、ncial Statements8 g)Report of Independent Registered Public Accounting Firm30 Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations31 Item 3.Quantitative and Qualitative Disclosures About Market Risk44 Item 4.Controls and Procedures44 PART II.OTHER INFORMATION I

12、tem 1.Legal Proceedings45 Item 1A.Risk Factors45 Item 2.Unregistered Sales of Equity Securities and Use of Proceeds60 Item 5.Other Information61 Item 6.Exhibits62 SIGNATURE63 PART IItem 1 3PART I.FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTSINCOME STATEMENTS (In millions,except per share amounts)

13、(Unaudited)Three Months Ended September 30,2024 2023 Revenue:Product$15,272$15,535 Service and other 50,313 40,982 Total revenue 65,585 56,517 Cost of revenue:Product 3,294 3,531 Service and other 16,805 12,771 Total cost of revenue 20,099 16,302 Gross margin 45,486 40,215 Research and development 7

14、,544 6,659 Sales and marketing 5,717 5,187 General and administrative 1,673 1,474 Operating income 30,552 26,895 Other income(expense),net (283)389 Income before income taxes 30,269 27,284 Provision for income taxes 5,602 4,993 Net income$24,667$22,291 Earnings per share:Basic$3.32$3.00 Diluted$3.30

15、$2.99 Weighted average shares outstanding:Basic 7,433 7,429 Diluted 7,470 7,462 Refer to accompanying notes.PART IItem 1 4COMPREHENSIVE INCOME STATEMENTS(In millions)(Unaudited)Three Months Ended September 30,2024 2023 Net income$24,667$22,291 Other comprehensive income(loss),net of tax:Net change r

16、elated to derivatives (10)21 Net change related to investments 1,114 (260)Translation adjustments and other 304 (355)Other comprehensive income(loss)1,408 (594)Comprehensive income$26,075$21,697 Refer to accompanying notes.PART IItem 1 5BALANCE SHEETS (In millions)(Unaudited)September 30,2024 June 3

17、0,2024 Assets Current assets:Cash and cash equivalents$20,840$18,315 Short-term investments 57,588 57,228 Total cash,cash equivalents,and short-term investments 78,428 75,543 Accounts receivable,net of allowance for doubtful accounts of$647 and$830 44,148 56,924 Inventories 1,626 1,246 Other current

18、 assets 25,724 26,021 Total current assets 149,926 159,734 Property and equipment,net of accumulated depreciation of$80,517 and$76,421 152,863 135,591 Operating lease right-of-use assets 20,528 18,961 Equity and other investments 15,778 14,600 Goodwill 119,374 119,220 Intangible assets,net 26,751 27

19、,597 Other long-term assets 37,793 36,460 Total assets$523,013$512,163 Liabilities and stockholders equity Current liabilities:Accounts payable$22,768$21,996 Short-term debt 0 6,693 Current portion of long-term debt 2,249 2,249 Accrued compensation 8,326 12,564 Short-term income taxes 9,717 5,017 Sh

20、ort-term unearned revenue 53,026 57,582 Other current liabilities 19,114 19,185 Total current liabilities 115,200 125,286 Long-term debt 42,868 42,688 Long-term income taxes 24,452 27,931 Long-term unearned revenue 2,663 2,602 Deferred income taxes 2,581 2,618 Operating lease liabilities 16,361 15,4

21、97 Other long-term liabilities 31,165 27,064 Total liabilities 235,290 243,686 Commitments and contingencies Stockholders equity:Common stock and paid-in capital shares authorized 24,000;outstanding 7,436 and 7,434 102,976 100,923 Retained earnings 188,929 173,144 Accumulated other comprehensive los

22、s (4,182)(5,590)Total stockholders equity 287,723 268,477 Total liabilities and stockholders equity$523,013$512,163 Refer to accompanying notes.PART IItem 1 6CASH FLOWS STATEMENTS (In millions)(Unaudited)Three Months Ended September 30,2024 2023 Operations Net income$24,667$22,291 Adjustments to rec

23、oncile net income to net cash from operations:Depreciation,amortization,and other 7,383 3,921 Stock-based compensation expense 2,832 2,507 Net recognized losses(gains)on investments and derivatives (125)14 Deferred income taxes (1,433)(568)Changes in operating assets and liabilities:Accounts receiva

24、ble 14,037 11,034 Inventories (373)(505)Other current assets (82)(796)Other long-term assets (1,761)(2,013)Accounts payable (916)1,214 Unearned revenue (5,553)(4,126)Income taxes 1,016 1,425 Other current liabilities (5,479)(4,106)Other long-term liabilities (33)291 Net cash from operations 34,180 3

25、0,583 Financing Proceeds from issuance(repayments)of debt,maturities of 90 days or less,net (5,746)18,692 Proceeds from issuance of debt 0 7,073 Repayments of debt (966)(1,500)Common stock issued 706 685 Common stock repurchased (4,107)(4,831)Common stock cash dividends paid (5,574)(5,051)Other,net

26、(889)(307)Net cash from(used in)financing (16,576)14,761 Investing Additions to property and equipment (14,923)(9,917)Acquisition of companies,net of cash acquired,and purchases of intangible and other assets (1,849)(1,186)Purchases of investments (1,620)(8,460)Maturities of investments 2,136 15,718

27、 Sales of investments 1,968 5,330 Other,net (913)(982)Net cash from(used in)investing (15,201)503 Effect of foreign exchange rates on cash and cash equivalents 122 (99)Net change in cash and cash equivalents 2,525 45,748 Cash and cash equivalents,beginning of period 18,315 34,704 Cash and cash equiv

28、alents,end of period$20,840$80,452 Refer to accompanying notes.PART IItem 1 7STOCKHOLDERS EQUITY STATEMENTS (In millions,except per share amounts)(Unaudited)Three Months Ended September 30,2024 2023 Common stock and paid-in capital Balance,beginning of period$100,923$93,718 Common stock issued 706 6

29、85 Common stock repurchased (1,485)(1,401)Stock-based compensation expense 2,832 2,507 Other,net 0 (1)Balance,end of period 102,976 95,508 Retained earnings Balance,beginning of period 173,144 118,848 Net income 24,667 22,291 Common stock cash dividends (6,171)(5,571)Common stock repurchased (2,711)

30、(3,425)Balance,end of period 188,929 132,143 Accumulated other comprehensive loss Balance,beginning of period (5,590)(6,343)Other comprehensive income(loss)1,408 (594)Balance,end of period (4,182)(6,937)Total stockholders equity$287,723$220,714 Cash dividends declared per common share$0.83$0.75 Refe

31、r to accompanying notes.PART IItem 1 8NOTES TO FINANCIAL STATEMENTS(Unaudited)NOTE 1 ACCOUNTING POLICIESAccounting Principles Our unaudited interim consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States o

32、f America(“GAAP”).In the opinion of management,the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented.Interim results are not necessarily indicative of re

33、sults for a full year.The information included in this Form 10-Q should be read in conjunction with information included in the Microsoft Corporation fiscal year 2024 Form 10-K filed with the U.S.Securities and Exchange Commission on July 30,2024.Principles of Consolidation The consolidated financia

34、l statements include the accounts of Microsoft Corporation and its subsidiaries.Intercompany transactions and balances have been eliminated.Recast of Certain Prior Period InformationIn August 2024,we announced changes to the composition of our segments.These changes align our segments with how we cu

35、rrently manage our business,most notably bringing the commercial components of Microsoft 365 together in the Productivity and Business Processes segment.Beginning in fiscal year 2025,the information that our chief operating decision maker is regularly provided and reviews for purposes of allocating

36、resources and assessing performance reflects these segment changes.Prior period segment information has been recast to conform to the way we internally manage and monitor our business during fiscal year 2025.These changes impacted Note 8 Goodwill,Note 12 Unearned Revenue,and Note 17 Segment Informat

37、ion and Geographic Data.The recast of prior period information had no impact on our consolidated balance sheets,consolidated income statements,or consolidated cash flows statements.Estimates and Assumptions Preparing financial statements requires management to make estimates and assumptions that aff

38、ect the reported amounts of assets,liabilities,revenue,and expenses.Examples of estimates and assumptions include:for revenue recognition,determining the nature and timing of satisfaction of performance obligations,and determining the standalone selling price of performance obligations,variable cons

39、ideration,and other obligations such as product returns and refunds;loss contingencies;product warranties;the fair value of and/or potential impairment of goodwill and intangible assets for our reporting units;product life cycles;useful lives of our tangible and intangible assets;allowances for doub

40、tful accounts;the market value of,and demand for,our inventory;stock-based compensation forfeiture rates;when technological feasibility is achieved for our products;the potential outcome of uncertain tax positions that have been recognized in our consolidated financial statements or tax returns;and

41、determining the timing and amount of impairments for investments.Actual results and outcomes may differ from managements estimates and assumptions due to risks and uncertainties.Financial InstrumentsInvestmentsWe consider all highly liquid interest-earning investments with a maturity of three months

42、 or less at the date of purchase to be cash equivalents.The fair values of these investments approximate their carrying values.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.Investme

43、nts with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.PART IItem 1 9Debt investments are classified as available-for-sale and realized ga

44、ins and losses are recorded using the specific identification method.Changes in fair value,excluding credit losses and impairments,are recorded in other comprehensive income.Fair value is calculated based on publicly available market information or other estimates determined by management.If the cos

45、t 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.To determine credit losses,we employ a systematic methodology that considers available quantitative a

46、nd qualitative evidence.In addition,we consider specific adverse conditions related to the financial health of,and business outlook for,the investee.If we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery,then a decline in fai

47、r value below cost is recorded as an impairment charge in other income(expense),net and a new cost basis in the investment is established.If market,industry,and/or investee conditions deteriorate,we may incur future impairments.Equity investments with readily determinable fair values are measured at

48、 fair value.Equity investments without readily determinable fair values are measured using the equity method or measured at cost with adjustments for observable changes in price or impairments(referred to as the measurement alternative).We perform a qualitative assessment on a periodic basis and rec

49、ognize an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value.Changes in value are recorded in other income(expense),net.Investments that are considered variable interest entities(“VIEs”)are evaluated to determine whether we are the primary

50、 beneficiary of the VIE,in which case we would be required to consolidate the entity.We evaluate whether we have(1)the power to direct the activities that most significantly impact the VIEs economic performance,and(2)the obligation to absorb losses or the right to receive benefits from the VIE that

51、could potentially be significant to the VIE.We have determined we are not the primary beneficiary of any of our VIE investments.Therefore,our VIE investments are not consolidated and the majority are accounted for under the equity method of accounting.We have an investment in OpenAI Global,LLC(“Open

52、AI”)and have made total funding commitments of$13 billion.The investment is accounted for under the equity method of accounting.DerivativesDerivative instruments are recognized as either assets or liabilities and measured at fair value.The accounting for changes in the fair value of a derivative dep

53、ends on the intended use of the derivative and the resulting designation.For derivative instruments designated as fair value hedges,gains and losses are recognized in other income(expense),net with offsetting gains and losses on the hedged items.Gains and losses representing hedge components exclude

54、d from the assessment of effectiveness are recognized in other income(expense),net.For derivative instruments designated as cash flow hedges,gains and losses are initially reported as a component of other comprehensive income and subsequently recognized in other income(expense),net with the correspo

55、nding hedged item.Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in other income(expense),net.For derivative instruments that are not designated as hedges,gains and losses from changes in fair values are primarily recognized in other incom

56、e(expense),net.Fair Value MeasurementsWe account for certain assets and liabilities at fair value.The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market.We categorize each of our fair value measurements in on

57、e of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.These levels are:Level 1 inputs are based upon unadjusted quoted prices for identical instruments in active markets.Our Level 1 investments include U.S.government securities,comm

58、on and preferred stock,and mutual funds.Our Level 1 derivative assets and liabilities include those actively traded on exchanges.PART IItem 1 10Level 2 inputs are based upon quoted prices for similar instruments in active markets,quoted prices for identical or similar instruments in markets that are

59、 not active,and model-based valuation techniques(e.g.the Black-Scholes model)for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.Where applicable,these models project future cash f

60、lows and discount the future amounts to a present value using market-based observable inputs including interest rate curves,credit spreads,foreign exchange rates,and forward and spot prices for currencies.Our Level 2 investments include commercial paper,certificates of deposit,U.S.agency securities,

61、foreign government bonds,mortgage-and asset-backed securities,corporate notes and bonds,and municipal securities.Our Level 2 derivative assets and liabilities include certain cleared swap contracts and over-the-counter forward,option,and swap contracts.Level 3 inputs are generally unobservable and t

62、ypically reflect managements estimates of assumptions that market participants would use in pricing the asset or liability.The fair values are therefore determined using model-based techniques,including option pricing models and discounted cash flow models.Our Level 3 assets and liabilities include

63、investments in corporate notes and bonds,municipal securities,and goodwill and intangible assets,when they are recorded at fair value due to an impairment charge.Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.We measure equity investments with

64、out readily determinable fair values on a nonrecurring basis.The fair values of these investments are determined based on valuation techniques using the best information available,and may include quoted market prices,market comparables,and discounted cash flow projections.Our other current financial

65、 assets and current financial liabilities have fair values that approximate their carrying values.Contract Balances and Other Receivables As of September 30,2024 and June 30,2024,long-term accounts receivable,net of allowance for doubtful accounts,was$4.8 billion and$4.9 billion,respectively,and is

66、included in other long-term assets in our consolidated balance sheets.As of September 30,2024 and June 30,2024,other receivables related to activities to facilitate the purchase of server components were$11.4 billion and$10.5 billion,respectively,and are included in other current assets in our conso

67、lidated balance sheets.We record financing receivables when we offer certain of our customers the option to acquire our software products and services offerings through a financing program in a limited number of countries.As of September 30,2024 and June 30,2024,our financing receivables,net were$4.

68、3 billion and$4.5 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 record an allowance to cover expected losses based on troubled accounts,historical experience,and othe

69、r currently available evidence.Related Party TransactionsIn March 2024,we entered into an agreement with Inflection AI,Inc.(“Inflection”),pursuant to which we obtained a non-exclusive license to Inflections intellectual property.Reid Hoffman,a member of our Board of Directors,is a co-founder of and

70、serves on the board of directors of Inflection.As of the date of the agreement with Inflection,Reprogrammed Interchange LLC(“Reprogrammed”)and entities affiliated with Greylock Ventures(“Greylock”)each held less than a 10%equity interest in Inflection.Mr.Hoffman may be deemed to beneficially own the

71、 shares held by Reprogrammed and Greylock by virtue of his relationship with such entities.Mr.Hoffman did not participate in any portions of the meetings of our Board of Directors or any committee thereof to review and approve the transaction with Inflection.PART IItem 1 11Recent Accounting Guidance

72、Segment Reporting Improvements to Reportable Segment DisclosuresIn November 2023,the Financial Accounting Standards Board(“FASB”)issued a new standard to improve reportable segment disclosures.The guidance expands the disclosures required for reportable segments in our annual and interim consolidate

73、d financial statements,primarily through enhanced disclosures about significant segment expenses.The standard will be effective for us beginning with our annual reporting for fiscal year 2025 and interim periods thereafter,with early adoption permitted.We are currently evaluating the impact of this

74、standard on our segment disclosures.Income Taxes Improvements to Income Tax DisclosuresIn December 2023,the FASB issued a new standard to improve income tax disclosures.The guidance requires disclosure of disaggregated income taxes paid,prescribes standardized categories for the components of the ef

75、fective tax rate reconciliation,and modifies other income tax-related disclosures.The standard will be effective for us beginning with our annual reporting for fiscal year 2026,with early adoption permitted.We are currently evaluating the impact of this standard on our income tax disclosures.NOTE 2

76、EARNINGS PER SHAREBasic earnings per share(“EPS”)is computed based on the weighted average number of shares of common stock outstanding during the period.Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstan

77、ding during the period using the treasury stock method.Dilutive potential common shares include outstanding stock options and stock awards.The components of basic and diluted EPS were as follows:(In millions,except earnings per share)Three Months Ended September 30,2024 2023 Net income available for

78、 common shareholders(A)$24,667$22,291 Weighted average outstanding shares of common stock(B)7,433 7,429 Dilutive effect of stock-based awards 37 33 Common stock and common stock equivalents(C)7,470 7,462 Earnings Per Share Basic(A/B)$3.32$3.00 Diluted(A/C)$3.30$2.99 Anti-dilutive stock-based awards

79、excluded from the calculations of diluted EPS were immaterial during the periods presented.PART IItem 1 12NOTE 3 OTHER INCOME(EXPENSE),NET The components of other income(expense),net were as follows:(In millions)Three Months Ended September 30,2024 2023 Interest and dividends income$681$1,166 Intere

80、st expense (582)(525)Net recognized gains(losses)on investments 463 (107)Net gains(losses)on derivatives (338)93 Net gains(losses)on foreign currency remeasurements 176 (101)Other,net (683)(137)Total$(283)$389 Other,net primarily reflects net recognized losses on equity method investments,including

81、OpenAI.Net Recognized Gains(Losses)on Investments Net recognized gains(losses)on debt investments were as follows:(In millions)Three Months Ended September 30,2024 2023 Realized gains from sales of available-for-sale securities$8$2 Realized losses from sales of available-for-sale securities (15)(25)

82、Impairments and allowance for credit losses 12 (6)Total$5$(29)Net recognized gains(losses)on equity investments were as follows:(In millions)Three Months Ended September 30,2024 2023 Net realized gains on investments sold$65$45 Net unrealized gains(losses)on investments still held 412 (123)Impairmen

83、ts of investments (19)0 Total$458$(78)PART IItem 1 13NOTE 4 INVESTMENTSInvestment ComponentsThe components of investments were as follows:(In millions)FairValueLevel AdjustedCostBasis UnrealizedGains UnrealizedLosses RecordedBasis Cash and CashEquivalents Short-termInvestments Equity and OtherInvest

84、ments September 30,2024 Changes in Fair Value Recorded in Other Comprehensive Income Commercial paper Level 2$6,513$0$0$6,513$6,513$0$0 Certificates of deposit Level 2 2,899 0 0 2,899 2,855 44 0 U.S.government securities Level 1 48,764 16 (1,828)46,952 0 46,952 0 U.S.agency securities Level 2 17 0 0

85、 17 0 17 0 Foreign government bonds Level 2 288 8 (9)287 0 287 0 Mortgage-and asset-backed securities Level 2 937 10 (22)925 0 925 0 Corporate notes and bonds Level 2 8,932 114 (166)8,880 0 8,880 0 Corporate notes and bonds Level 3 1,639 0 (1)1,638 0 138 1,500 Municipal securities Level 2 263 2 (8)2

86、57 0 257 0 Municipal securities Level 3 104 0 (15)89 0 89 0 Total debt investments$70,356$150$(2,049)$68,457$9,368$57,589$1,500 Changes in Fair Value Recorded in Net Income Equity investments Level 1$4,252$884$0$3,368 Equity investments Other 10,910 0 0 10,910 Total equity investments$15,162$884$0$1

87、4,278 Cash$10,588$10,588$0$0 Derivatives,net (1)0 (1)0 Total$94,206$20,840$57,588$15,778 (a)PART IItem 1 14(In millions)FairValueLevel AdjustedCostBasis UnrealizedGains UnrealizedLosses RecordedBasis Cashand CashEquivalents Short-termInvestments Equity and OtherInvestments June 30,2024 Changes in Fa

88、ir Value Recorded in Other Comprehensive Income Commercial paper Level 2$4,666$0$0$4,666$4,666$0$0 Certificates of deposit Level 2 1,547 0 0 1,547 1,503 44 0 U.S.government securities Level 1 49,603 4 (2,948)46,659 14 46,645 0 U.S.agency securities Level 2 17 0 0 17 0 17 0 Foreign government bonds L

89、evel 2 319 3 (16)306 0 306 0 Mortgage-and asset-backed securities Level 2 944 3 (35)912 0 912 0 Corporate notes and bonds Level 2 9,106 28 (318)8,816 0 8,816 0 Corporate notes and bonds Level 3 1,641 0 (1)1,640 0 140 1,500 Municipal securities Level 2 262 0 (13)249 0 249 0 Municipal securities Level

90、 3 104 0 (17)87 0 87 0 Total debt investments$68,209$38$(3,348)$64,899$6,183$57,216$1,500 Changes in Fair Value Recorded in Net Income Equity investments Level 1$3,547$561$0$2,986 Equity investments Other 10,114 0 0 10,114 Total equity investments$13,661$561$0$13,100 Cash$11,571$11,571$0$0 Derivativ

91、es,net 12 0 12 0 Total$90,143$18,315$57,228$14,600 (a)Refer to Note 5 Derivatives for further information on the fair value of our derivative instruments.Equity investments presented as“Other”in the tables above include investments without readily determinable fair values measured at cost with adjus

92、tments for observable changes in price or impairments,measured using the equity method,or measured at fair value using net asset value as a practical expedient which are not categorized in the fair value hierarchy.As of September 30,2024 and June 30,2024,equity investments without readily determinab

93、le fair values measured at cost with adjustments for observable changes in price or impairments were$3.8 billion and$3.9 billion,respectively,and equity investments measured using the equity method were$6.8 billion and$6.0 billion,respectively.(a)PART IItem 1 15Unrealized Losses on Debt Investments

94、Debt investments with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values were as follows:Less than 12 Months 12 Months or Greater TotalUnrealizedLosses (In millions)Fair Value UnrealizedLosses Fair Value UnrealizedLosses TotalFair Value Septem

95、ber 30,2024 U.S.government and agency securities$146$(2)$46,240$(1,826)$46,386$(1,828)Foreign government bonds 12 (1)144 (8)156 (9)Mortgage-and asset-backed securities 0 0 287 (22)287 (22)Corporate notes and bonds 134 (1)4,963 (166)5,097 (167)Municipal securities 0 0 242 (23)242 (23)Total$292$(4)$51

96、,876$(2,045)$52,168$(2,049)Less than 12 Months 12 Months or Greater TotalUnrealizedLosses (In millions)Fair Value UnrealizedLosses Fair Value UnrealizedLosses TotalFair Value June 30,2024 U.S.government and agency securities$529$(12)$45,821$(2,936)$46,350$(2,948)Foreign government bonds 79 (2)180 (1

97、4)259 (16)Mortgage-and asset-backed securities 201 (1)409 (34)610 (35)Corporate notes and bonds 1,310 (9)5,779 (310)7,089 (319)Municipal securities 38 (1)243 (29)281 (30)Total$2,157$(25)$52,432$(3,323)$54,589$(3,348)Unrealized losses from fixed-income securities are primarily attributable to changes

98、 in interest rates.Management does not believe any remaining unrealized losses represent impairments based on our evaluation of available evidence.Debt Investment Maturities The following table outlines maturities of our debt investments as of September 30,2024:(In millions)AdjustedCost Basis Estima

99、tedFair Value September 30,2024 Due in one year or less$24,446$24,331 Due after one year through five years 37,153 35,927 Due after five years through 10 years 7,338 6,865 Due after 10 years 1,419 1,334 Total$70,356$68,457 NOTE 5 DERIVATIVESWe use derivative instruments to manage risks related to fo

100、reign currencies,interest rates,equity prices,and credit;to enhance investment returns;and to facilitate portfolio diversification.Our objectives for holding derivatives include reducing,eliminating,and efficiently managing the economic impact of these exposures as effectively as possible.Our deriva

101、tive programs include strategies that both qualify and do not qualify for hedge accounting treatment.Foreign Currencies Certain forecasted transactions,assets,and liabilities are exposed to foreign currency risk.We monitor our foreign currency exposures daily to maximize the economic effectiveness o

102、f our foreign currency hedge positions.PART IItem 1 16Foreign currency risks related to certain Euro-denominated debt are hedged using foreign exchange forward contracts that are designated as cash flow hedging instruments.Certain options and forwards not designated as hedging instruments are also u

103、sed to manage the variability in foreign exchange rates on certain balance sheet amounts and to manage other foreign currency exposures.Interest Rate Interest rate risks related to certain fixed-rate debt are hedged using interest rate swaps that are designated as fair value hedging instruments to e

104、ffectively convert the fixed interest rates to floating interest rates.Securities held in our fixed-income portfolio are subject to different interest rate risks based on their maturities.We manage the average maturity of our fixed-income portfolio to achieve economic returns that correlate to certa

105、in broad-based fixed-income indices using option,futures,and swap contracts.These contracts are not designated as hedging instruments and are included in“Other contracts”in the tables below.Equity Securities held in our equity investments portfolio are subject to market price risk.At times,we may ho

106、ld options,futures,and swap contracts.These contracts are not designated as hedging instruments.Credit Our fixed-income portfolio is diversified and consists primarily of investment-grade securities.We use credit default swap contracts to manage credit exposures relative to broad-based indices and t

107、o facilitate portfolio diversification.These contracts are not designated as hedging instruments and are included in“Other contracts”in the tables below.Credit-Risk-Related Contingent Features Certain counterparty agreements for derivative instruments contain provisions that require our issued and o

108、utstanding long-term unsecured debt to maintain an investment grade credit rating and require us to maintain minimum liquidity of$1.0 billion.To the extent we fail to meet these requirements,we will be required to post collateral,similar to the standard convention related to over-the-counter derivat

109、ives.As of September 30,2024,our long-term unsecured debt rating was AAA,and cash investments were in excess of$1.0 billion.As a result,no collateral was required to be posted.The following table presents the notional amounts of our outstanding derivative instruments measured in U.S.dollar equivalen

110、ts:(In millions)September 30,2024 June 30,2024 Designated as Hedging Instruments Foreign exchange contracts purchased$1,492$1,492 Interest rate contracts purchased 1,144 1,100 Not Designated as Hedging Instruments Foreign exchange contracts purchased 8,438 7,167 Foreign exchange contracts sold 22,55

111、9 31,793 Equity contracts purchased 4,290 4,016 Equity contracts sold 2,165 2,165 Other contracts purchased 2,829 2,113 Other contracts sold 1,121 811 PART IItem 1 17Fair Values of Derivative InstrumentsThe following table presents our derivative instruments:(In millions)DerivativeAssets DerivativeL

112、iabilities DerivativeAssets DerivativeLiabilities September 30,2024 June 30,2024 Designated as Hedging Instruments Foreign exchange contracts$50$(65)$24$(76)Interest rate contracts 5 0 19 0 Not Designated as Hedging Instruments Foreign exchange contracts 189 (615)213 (230)Equity contracts 68 (804)63

113、 (491)Other contracts 6 (6)12 (3)Gross amounts of derivatives 318 (1,490)331 (800)Gross amounts of derivatives offset in the balance sheets (196)198 (151)152 Cash collateral received 0 (18)0 (104)Net amounts of derivatives$122$(1,310)$180$(752)Reported as Short-term investments$(1)$0$12$0 Other curr

114、ent assets 118 0 149 0 Other long-term assets 5 0 19 0 Other current liabilities 0 (900)0 (401)Other long-term liabilities 0 (410)0 (351)Total$122$(1,310)$180$(752)Gross derivative assets and liabilities subject to legally enforceable master netting agreements for which we have elected to offset wer

115、e$306 million and$1.5 billion,respectively,as of September 30,2024,and$304 million and$800 million,respectively,as of June 30,2024.The following table presents the fair value of our derivatives instruments on a gross basis:(In millions)Level 1 Level 2 Level 3 Total September 30,2024 Derivative asset

116、s$0$313$5$318 Derivative liabilities (1)(1,489)0 (1,490)June 30,2024 Derivative assets 0 327 4 331 Derivative liabilities (1)(799)0 (800)PART IItem 1 18Gains(losses)on derivative instruments recognized in other income(expense),net were as follows:(In millions)Three Months Ended September 30,2024 202

117、3 Designated as Fair Value Hedging Instruments Interest rate contracts Derivatives$20$(16)Hedged items (32)3 Designated as Cash Flow Hedging Instruments Foreign exchange contracts Amount reclassified from accumulated other comprehensive loss 49 (46)Not Designated as Hedging Instruments Foreign excha

118、nge contracts (383)206 Equity contracts (348)113 Other contracts 24 (33)Gains(losses),net of tax,on derivative instruments recognized in our consolidated comprehensive income statements were as follows:(In millions)Three Months Ended September 30,2024 2023 Designated as Cash Flow Hedging Instruments

119、 Foreign exchange contracts Included in effectiveness assessment$29$(15)NOTE 6 INVENTORIESThe components of inventories were as follows:(In millions)September 30,2024 June 30,2024 Raw materials$488$394 Work in process 11 7 Finished goods 1,127 845 Total$1,626$1,246 NOTE 7 BUSINESS COMBINATIONSActivi

120、sion Blizzard,Inc.On October 13,2023,we completed our acquisition of Activision Blizzard,Inc.(“Activision Blizzard”)for a total purchase price of$75.4 billion,consisting primarily of cash.Activision Blizzard is a leader in game development and an interactive entertainment content publisher.The acqui

121、sition will accelerate the growth in our gaming business across mobile,PC,console,and cloud gaming.The financial results of Activision Blizzard have been included in our consolidated financial statements since the date of the acquisition.Activision Blizzard is reported as part of our More Personal C

122、omputing segment.PART IItem 1 19The allocation of the purchase price to the assets acquired and liabilities assumed was completed as of September 30,2024.The major classes of assets and liabilities to which we have allocated the purchase price were as follows:(In millions)Cash and cash equivalents$1

123、2,976 Goodwill 51,001 Intangible assets 21,969 Other assets 2,503 Long-term debt (2,799)Long-term income taxes (1,946)Deferred income taxes (4,676)Other liabilities (3,620)Total purchase price$75,408 Goodwill was assigned to our More Personal Computing segment.The goodwill was primarily attributed t

124、o increased synergies that are expected to be achieved from the integration of Activision Blizzard.Substantially all of the goodwill is expected to be non-deductible for income tax purposes.Following are the details of the purchase price allocated to the intangible assets acquired:(In millions,excep

125、t average life)Amount WeightedAverage Life Marketing-related$11,619 24 years Technology-based 9,689 4 years Customer-related 661 4 years Fair value of intangible assets acquired$21,969 15 years Following are the supplemental consolidated financial results of Microsoft Corporation on an unaudited pro

126、 forma basis,as if the acquisition had been consummated on July 1,2022:(In millions,except per share amounts)Three Months Ended September 30,2023 Revenue$58,561 Net income 22,314 Diluted earnings per share 2.99 These pro forma results were based on estimates and assumptions,which we believe are reas

127、onable.They are not the results that would have been realized had we been a combined company during the periods presented and are not necessarily indicative of our consolidated results of operations in future periods.The pro forma results include adjustments related to purchase accounting,primarily

128、amortization of intangible assets.Acquisition costs and other nonrecurring charges were immaterial and are included in the earliest period presented.NOTE 8 GOODWILLChanges in the carrying amount of goodwill were as follows:(In millions)June 30,2024 Acquisitions Other September 30,2024 Productivity a

129、nd Business Processes$31,361$0$44$31,405 Intelligent Cloud 25,648 0 22 25,670 More Personal Computing 62,211 0 88 62,299 Total$119,220$0$154$119,374 We have recast certain prior period amounts to conform to the way we internally manage and monitor our business.Refer to Note 1 Accounting Policies for

130、 further information.PART IItem 1 20The 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.Adjustments in purchase price allo

131、cations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined.Any change in the goodwill amounts resulting from foreign currency translations and purchase accounting adjustments are presented as“Other”in the table above.Also included in“

132、Other”are business dispositions and transfers between segments due to reorganizations,as applicable.As discussed in Note 1 Accounting Policies,during the first quarter of fiscal year 2025 we made changes to our segments.These segment changes also resulted in changes to our reporting units.We realloc

133、ated goodwill across impacted reporting units using a relative fair value approach.In addition,we completed an assessment of any potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment existed.NOTE 9 INTANGIBLE ASSETS The componen

134、ts of intangible assets,all of which are finite-lived,were as follows:(In millions)GrossCarryingAmount AccumulatedAmortization NetCarryingAmount GrossCarryingAmount AccumulatedAmortization NetCarryingAmount September 30,2024 June 30,2024 Marketing-related$16,490$(3,296)$13,194$16,500$(3,101)$13,399

135、Technology-based 22,426 (11,709)10,717 21,913 (10,741)11,172 Customer-related 6,039 (3,261)2,778 6,038 (3,051)2,987 Contract-based 81 (19)62 58 (19)39 Total$45,036$(18,285)$26,751$44,509$(16,912)$27,597 Intangible assets amortization expense was$1.4 billion and$636 million for the three months ended

136、 September 30,2024 and 2023,respectively.The following table outlines the estimated future amortization expense related to intangible assets held as of September 30,2024:(In millions)Year Ending June 30,2025(excluding the three months ended September 30,2024)$4,563 2026 4,538 2027 2,847 2028 1,961 2

137、029 1,780 Thereafter 11,062 Total$26,751 NOTE 10 DEBT Short-term DebtAs of September 30,2024,we had no commercial paper issued or outstanding.As of June 30,2024,we had$6.7 billion of commercial paper issued and outstanding,with a weighted average interest rate of 5.4%and maturities ranging from 28 d

138、ays to 152 days.The estimated fair value of this commercial paper approximates its carrying value.PART IItem 1 21Long-term DebtThe components of long-term debt were as follows:(In millions,issuance by calendar year)Maturities(calendar year)Stated InterestRate Effective InterestRate September 30,2024

139、 June 30,2024 2009 issuance of$3.8 billion 2039 5.20%5.24%$520$520 2010 issuance of$4.8 billion 2040 4.50%4.57%486 486 2011 issuance of$2.3 billion 2041 5.30%5.36%718 718 2012 issuance of$2.3 billion 2042 3.50%3.57%454 454 2013 issuance of$5.2 billion 2043 3.75%4.88%3.83%4.92%314 314 2013 issuance o

140、f 4.1 billion 20282033 2.63%3.13%2.69%3.22%2,567 2,465 2015 issuance of$23.8 billion 20252055 2.70%4.75%2.77%4.78%9,805 9,805 2016 issuance of$19.8 billion 20262056 2.40%3.95%2.46%4.03%7,930 7,930 2017 issuance of$17.1 billion 20262057 3.30%4.50%3.38%5.49%6,833 6,833 2020 issuance of$10.1 billion 20

141、302060 1.35%2.68%2.53%5.43%10,111 10,111 2021 issuance of$8.2 billion 20522062 2.92%3.04%2.92%3.04%8,185 8,185 2023 issuance of$0.1 billion 20262050 1.35%4.50%5.16%5.49%56 56 2024 issuance of$3.3 billion 20262050 1.35%4.50%5.16%5.49%3,344 3,344 Total face value 51,323 51,221 Unamortized discount and

142、 issuance costs (1,209)(1,227)Hedge fair value adjustments (49)(81)Premium on debt exchange (4,948)(4,976)Total debt 45,117 44,937 Current portion of long-term debt (2,249)(2,249)Long-term debt$42,868$42,688 (a)Refer to Note 5 Derivatives for further information on the interest rate swaps related to

143、 fixed-rate debt.As of September 30,2024 and June 30,2024,the estimated fair value of long-term debt,including the current portion,was$44.6 billion and$42.3 billion,respectively.The estimated fair values are based on Level 2 inputs.Debt in the table above is comprised of senior unsecured obligations

144、 and ranks equally with our other outstanding obligations.Interest is paid semi-annually,except for the Euro-denominated debt,which is paid annually.The following table outlines maturities of our long-term debt,including the current portion,as of September 30,2024:(In millions)Year Ending June 30,20

145、25(excluding the three months ended September 30,2024)$2,250 2026 3,000 2027 9,250 2028 0 2029 1,953 Thereafter 34,870 Total$51,323 (a)PART IItem 1 22NOTE 11 INCOME TAXESEffective Tax RateOur effective tax rate was 19%and 18%for the three months ended September 30,2024 and 2023,respectively.The incr

146、ease in our effective tax rate for the current quarter compared to the prior year was primarily due to tax benefits from tax law changes in the first quarter of fiscal year 2024,including the impact from the issuance of Notice 2023-55 by the Internal Revenue Service(“IRS”)and U.S.Treasury Department

147、,which delayed the effective date of final foreign tax credit regulations to fiscal year 2024 for Microsoft.Notice 2023-80,issued in the second quarter of fiscal year 2024,further delayed the effective date of final foreign tax credit regulations indefinitely.Our effective tax rate was lower than th

148、e U.S.federal statutory rate for the three months ended September 30,2024,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 center in Ireland.Uncertain Tax PositionsAs of

149、 September 30,2024 and June 30,2024,unrecognized tax benefits and other income tax liabilities were$25.9 billion and$24.9 billion,respectively,and are included in long-term income taxes in our consolidated balance sheets.We remain under audit by the IRS for tax years 2014 to 2017.With respect to the

150、 audit for tax years 2004 to 2013,on September 26,2023,we received Notices of Proposed Adjustment(“NOPAs”)from the IRS.The primary issues in the NOPAs relate to intercompany transfer pricing.In the NOPAs,the IRS is seeking an additional tax payment of$28.9 billion plus penalties and interest.As of S

151、eptember 30,2024,we believe our allowances for income tax contingencies are adequate.We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRSs administrative appeals office and,if necessary,judicial proceedings.We do not expect a final resolution of these issue

152、s in the next 12 months.Based on the information currently available,we do not anticipate a significant increase or decrease to our income tax contingencies for these issues within the next 12 months.We are subject to income tax in many jurisdictions outside the U.S.Our operations in certain jurisdi

153、ctions remain subject to examination for tax years 1996 to 2024,some of which are currently under audit by local tax authorities.The resolution of each of these audits is not expected to be material to our consolidated financial statements.NOTE 12 UNEARNED REVENUE Unearned revenue by segment was as

154、follows:(In millions)September 30,2024 June 30,2024 Productivity and Business Processes$40,429$43,599 Intelligent Cloud 12,397 13,683 More Personal Computing 2,863 2,902 Total$55,689$60,184 We have recast certain prior period amounts to conform to the way we internally manage and monitor our busines

155、s.Refer to Note 1 Accounting Policies for further information.Changes in unearned revenue were as follows:(In millions)Three Months Ended September 30,2024 Balance,beginning of period$60,184 Deferral of revenue 37,642 Recognition of unearned revenue (42,137)Balance,end of period$55,689 PART IItem 1

156、23Revenue allocated to remaining performance obligations,which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods,was$266 billion as of September 30,2024,of which$259 billion is related to the commercial portion of revenue.We expect to recognize a

157、pproximately 45%of our total company remaining performance obligation revenue over the next 12 months and the remainder thereafter.NOTE 13 LEASESWe have operating and finance leases for datacenters,corporate offices,research and development facilities,Microsoft Experience Centers,and certain equipme

158、nt.Our leases have remaining lease terms of less than 1 year to 17 years,some of which include options to extend the leases for up to 5 years,and some of which include options to terminate the leases within 1 year.The components of lease expense were as follows:(In millions)Three Months Ended Septem

159、ber 30,2024 2023 Operating lease cost$1,161$775 Finance lease cost:Amortization of right-of-use assets$696$380 Interest on lease liabilities 275 149 Total finance lease cost$971$529 Supplemental cash flow information related to leases was as follows:(In millions)Three Months Ended September 30,2024

160、2023 Cash paid for amounts included in the measurement of lease liabilities:Operating cash flows from operating leases$1,207$795 Operating cash flows from finance leases 275 149 Financing cash flows from finance leases 802 285 Right-of-use assets obtained in exchange for lease obligations:Operating

161、leases 1,892 1,804 Finance leases 4,332 1,704 PART IItem 1 24Supplemental balance sheet information related to leases was as follows:(In millions,except lease term and discount rate)September 30,2024 June 30,2024 Operating Leases Operating lease right-of-use assets$20,528$18,961 Other current liabil

162、ities$4,009$3,580 Operating lease liabilities 16,361 15,497 Total operating lease liabilities$20,370$19,077 Finance Leases Property and equipment,at cost$37,186$32,248 Accumulated depreciation (7,070)(6,386)Property and equipment,net$30,116$25,862 Other current liabilities$2,504$2,349 Other long-ter

163、m liabilities 28,847 24,796 Total finance lease liabilities$31,351$27,145 Weighted Average Remaining Lease Term Operating leases 7 years 7 years Finance leases 12 years 12 years Weighted Average Discount Rate Operating leases 3.4%3.3%Finance leases 4.0%3.9%The following table outlines maturities of

164、our lease liabilities as of September 30,2024:(In millions)Year Ending June 30,Operating Leases Finance Leases 2025(excluding the three months ended September 30,2024)$3,386$2,742 2026 4,122 3,697 2027 3,411 3,720 2028 2,754 3,706 2029 2,124 3,099 Thereafter 7,174 22,745 Total lease payments 22,971

165、39,709 Less imputed interest (2,601)(8,358)Total$20,370$31,351 As of September 30,2024,we had additional operating and finance leases,primarily for datacenters,that had not yet commenced of$7.4 billion and$108.7 billion,respectively.These operating and finance leases will commence between fiscal yea

166、r 2025 and fiscal year 2030 with lease terms of 1 year to 20 years.PART IItem 1 25NOTE 14 CONTINGENCIESU.S.Cell Phone LitigationMicrosoft Mobile Oy,a subsidiary of Microsoft,along with other handset manufacturers and network operators,is a defendant in 45 lawsuits filed in the Superior Court for the

167、 District of Columbia by individual plaintiffs who allege that radio emissions from cellular handsets caused their brain tumors and other adverse health effects.We assumed responsibility for these claims in our agreement to acquire Nokias Devices and Services business and have been substituted for t

168、he Nokia defendants.Twelve of these cases were consolidated for certain pre-trial proceedings;the remaining cases are stayed.In a separate 2009 decision,the Court of Appeals for the District of Columbia held that adversehealth effect claims arising from the use of cellular handsets that operate with

169、in the U.S.Federal Communications Commission radio frequency emission guidelines(“FCC Guidelines”)are pre-empted by federal law.The plaintiffs allege that their handsets either operated outside the FCC Guidelines or were manufactured before the FCC Guidelines went into effect.The lawsuits also alleg

170、e an industry-wide conspiracy to manipulate the science and testing around emission guidelines.In 2013,the defendants in the consolidated cases moved to exclude the plaintiffs expert evidence of general causation on the basis of flawed scientific methodologies.In 2014,the trial court granted in part

171、 and denied in part the defendants motion to exclude the plaintiffs general causation experts.The defendants filed an interlocutory appeal to the District of Columbia Court of Appeals challenging the standard for evaluating expert scientific evidence.In October 2016,the Court of Appeals issued its d

172、ecision adopting the standard advocated by the defendants and remanding the cases to the trial court for further proceedings under that standard.The plaintiffs have filed supplemental expert evidence,portions of which were stricken by the court.A hearing on general causation took place in September

173、of 2022.In April of 2023,the court granted defendants motion to strike the testimony of plaintiffs experts that cell phones cause brain cancer and entered an order excluding all of plaintiffs experts from testifying.The parties agreed to a stipulated dismissal of the consolidated cases to allow plai

174、ntiffs to appeal the expert testimony order.Plaintiffs appealed the courts order in August of 2023,and the parties have filed their briefs on the appeal.A hearing on the status of the stayed cases occurred in December of 2023.In July 2024,the court entered summary judgment in nine of the stayed case

175、s on the grounds that plaintiffs had agreed to be bound by the general causation outcome in the consolidated cases.Irish Data Protection Commission MatterIn 2018,the Irish Data Protection Commission(“IDPC”)began investigating a complaint against LinkedIn as to whether LinkedIns targeted advertising

176、practices violated the recently implemented European Union General Data Protection Regulation(“GDPR”).Microsoft cooperated throughout the period of inquiry.In April 2023,the IDPC provided LinkedIn with a non-public preliminary draft decision alleging GDPR violations and proposing a fine.In July 2024

177、,the IDPC provided LinkedIn with a revised non-public draft decision.In October 2024,the IDPC provided LinkedIn with a final decision,and LinkedIn is considering its options to appeal.Other ContingenciesWe also are subject to a variety of other claims and suits that arise from time to time in the or

178、dinary course of our business.Although management currently believes that resolving claims against us,individually or in aggregate,will not have a material adverse impact in our consolidated financial statements,these matters are subject to inherent uncertainties and managements view of these matter

179、s may change in the future.As of September 30,2024,we accrued aggregate legal liabilities of$492 million.While we intend to defend these matters vigorously,adverse outcomes that we estimate could reach approximately$600 million in aggregate beyond recorded amounts are reasonably possible.Were unfavo

180、rable 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.PART IItem 1 26NOTE 15 STOCKHOLDERS EQUITYShare RepurchasesOn September 14,2021,our Board of Directors appr

181、oved a share repurchase program authorizing up to$60.0 billion in share repurchases.This share repurchase program commenced in November 2021,has no expiration date,and may be terminated at any time.As of September 30,2024,$7.5 billion remained of this$60.0 billion share repurchase program.On Septemb

182、er 16,2024,our Board of Directors approved a share repurchase program authorizing up to$60.0 billion in share repurchases.This share repurchase program will commence following completion of the program approved on September 14,2021,has no expiration date,and may be terminated at any time.We repurcha

183、sed the following shares of common stock under the share repurchase program:(In millions)Shares Amount Shares Amount Fiscal Year 2025 2024 First Quarter 7$2,800 11$3,560 All repurchases were made using cash resources.All shares repurchased were under the share repurchase program approved on Septembe

184、r 14,2021.The above table excludes shares repurchased to settle employee tax withholding related to the vesting of stock awards of$1.3 billion for the first quarter of both fiscal years 2025 and 2024.DividendsOur Board of Directors declared the following dividends:Declaration Date Record Date Paymen

185、t Date DividendPer Share Amount Fiscal Year 2025 (In millions)September 16,2024 November 21,2024 December 12,2024$0.83$6,172 Fiscal Year 2024 September 19,2023 November 16,2023 December 14,2023$0.75$5,574 The dividend declared on September 16,2024 was included in other current liabilities as of Sept

186、ember 30,2024.PART IItem 1 27NOTE 16 ACCUMULATED OTHER COMPREHENSIVE INCOME(LOSS)The following table summarizes the changes in accumulated other comprehensive income(loss)by component:(In millions)Three Months Ended September 30,2024 2023 Derivatives Balance,beginning of period$(3)$(27)Unrealized ga

187、ins(losses),net of tax of$7 and$(4)29 (15)Reclassification adjustments for(gains)losses included in other income(expense),net (49)46 Tax expense(benefit)included in provision for income taxes 10 (10)Amounts reclassified from accumulated other comprehensive loss (39)36 Net change related to derivativ

188、es,net of tax of$(3)and$6 (10)21 Balance,end of period$(13)$(6)Investments Balance,beginning of period$(2,625)$(3,582)Unrealized gains(losses),net of tax of$297 and$(75)1,118 (283)Reclassification adjustments for(gains)losses included in other income(expense),net (5)29 Tax expense(benefit)included i

189、n provision for income taxes 1 (6)Amounts reclassified from accumulated other comprehensive loss (4)23 Net change related to investments,net of tax of$296 and$(69)1,114 (260)Balance,end of period$(1,511)$(3,842)Translation Adjustments and Other Balance,beginning of period$(2,962)$(2,734)Translation

190、adjustments and other,net of tax of$0 and$0 304 (355)Balance,end of period$(2,658)$(3,089)Accumulated other comprehensive loss,end of period$(4,182)$(6,937)NOTE 17 SEGMENT INFORMATION AND GEOGRAPHIC DATAIn its operation of the business,management,including our chief operating decision maker,who is a

191、lso our Chief Executive Officer,reviews certain financial information,including segmented internal profit and loss statements prepared on a basis not consistent with GAAP.During the periods presented,we reported our financial performance based on the following segments:Productivity and Business Proc

192、esses,Intelligent Cloud,and More Personal Computing.We have recast certain prior period amounts to conform to the way we internally manage and monitor our business.Refer to Note 1 Accounting Policies for further information.Our reportable segments are described below.Productivity and Business Proces

193、sesOur 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.This segment primarily comprises:Microsoft 365 Commercial products and cloud services,including Mic

194、rosoft 365 Commercial cloud,comprising Microsoft 365 Commercial,Enterprise Mobility+Security,the cloud portion of Windows Commercial,the per-user portion of Power BI,Exchange,SharePoint,Microsoft Teams,Microsoft 365 Security and Compliance,Microsoft Viva,and Microsoft 365 Copilot;and Microsoft 365 C

195、ommercial products,comprising Windows Commercial on-premises and Office licensed on-premises.PART IItem 1 28Microsoft 365 Consumer products and cloud services,including Microsoft 365 Consumer subscriptions,Office licensed on-premises,and other consumer services.LinkedIn,including Talent Solutions,Ma

196、rketing Solutions,Premium Subscriptions,and Sales Solutions.Dynamics products and cloud services,including Dynamics 365,comprising a set of intelligent,cloud-based applications across ERP,CRM,Power Apps,and Power Automate;and on-premises ERP and CRM applications.Intelligent CloudOur Intelligent Clou

197、d segment consists of our public,private,and hybrid server products and cloud services that can power modern business and developers.This segment primarily comprises:Server products and cloud services,including Azure and other cloud services,comprising cloud and AI consumption-based services,GitHub

198、cloud services,Nuance Healthcare cloud services,virtual desktop offerings,and other cloud services;and Server products,comprising SQL Server,Windows Server,Visual Studio,System Center,related Client Access Licenses(“CALs”),and other on-premises offerings.Enterprise and partner services,including Ent

199、erprise Support Services,Industry Solutions,Nuance professional services,Microsoft Partner Network,and Learning Experience.More Personal ComputingOur More Personal Computing segment consists of products and services that put customers at the center of the experience with our technology.This segment

200、primarily comprises:Windows and Devices,including Windows,comprising Windows OEM licensing(Windows Pro and non-Pro licenses sold through the OEM channel),Windows Internet of Things,and patent licensing;and Devices,comprising Surface,HoloLens,and PC accessories.Gaming,including Xbox hardware and Xbox

201、 content and services,comprising first-and third-party content(including games and in-game content),Xbox Game Pass and other subscriptions,Xbox Cloud Gaming,advertising,third-party disc royalties,and other cloud services.Search and news advertising,comprising Bing(including Copilot),Microsoft News,M

202、icrosoft Edge,and third-party affiliates.Revenue and costs are generally directly attributed to our segments.However,due to the integrated structure of our business,certain revenue recognized and costs incurred by one segment may benefit other segments.Revenue from certain contracts is allocated amo

203、ng 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.Cost of revenue is allocated in certain cases based on a relative revenue methodology.Op

204、erating expenses that are allocated primarily include those relating to marketing of products and services from which multiple segments benefit and are generally allocated based on relative gross margin.In addition,certain costs are incurred at a corporate level and allocated to our segments.These a

205、llocated costs generally include legal,including settlements and fines,information technology,human resources,finance,excise taxes,field selling,shared facilities services,customer service and support,and severance incurred as part of a corporate program.Each allocation is measured differently based

206、 on the specific facts and circumstances of the costs being allocated and is generally based on relative gross margin or relative headcount.PART IItem 1 29Segment revenue and operating income were as follows during the periods presented:(In millions)Three Months Ended September 30,2024 2023 Revenue

207、Productivity and Business Processes$28,317$25,226 Intelligent Cloud 24,092 20,013 More Personal Computing 13,176 11,278 Total$65,585$56,517 Operating Income Productivity and Business Processes$16,516$14,297 Intelligent Cloud 10,503 8,908 More Personal Computing 3,533 3,690 Total$30,552$26,895 No sal

208、es to an individual customer or country other than the United States accounted for more than 10%of revenue for the three months ended September 30,2024 or 2023.Revenue,classified by the major geographic areas in which our customers were located,was as follows:(In millions)Three Months Ended Septembe

209、r 30,2024 2023 United States$33,913$28,812 Other countries 31,672 27,705 Total$65,585$56,517 (a)Includes billings to OEMs and certain multinational organizations because of the nature of these businesses and the impracticability of determining the geographic source of the revenue.Revenue,classified

210、by significant product and service offerings,was as follows:(In millions)Three Months Ended September 30,2024 2023 Server products and cloud services$22,155$18,062 Microsoft 365 Commercial products and cloud services 20,449 18,044 Gaming 5,621 3,919 Windows and Devices 4,329 4,340 LinkedIn 4,292 3,9

211、13 Search and news advertising 3,225 3,018 Enterprise and partner services 1,928 1,944 Dynamics products and cloud services 1,849 1,626 Microsoft 365 Consumer products and cloud services 1,727 1,643 Other 10 8 Total$65,585$56,517 Our Microsoft Cloud revenue,which includes Microsoft 365 Commercial cl

212、oud,Azure and other cloud services,the commercial portion of LinkedIn,and Dynamics 365,was$38.9 billion and$31.9 billion for the three months ended September 30,2024 and 2023,respectively.These amounts are primarily included in Microsoft 365 Commercial products and cloud services,Server products and

213、 cloud services,LinkedIn,and Dynamics products and cloud services in the table above.Assets are not allocated to segments for internal reporting presentations.A portion of amortization and depreciation is included with various other costs in an overhead allocation to each segment.It is impracticable

214、 for us to separately identify the amount of amortization and depreciation by segment that is included in the measure of segment profit or loss.(a)PART IItem 1 30REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors of Microsoft Corporation Results of

215、Review of Interim Financial InformationWe have reviewed the accompanying consolidated balance sheet of Microsoft Corporation and subsidiaries(the Company)as of September 30,2024,the related consolidated statements of income,comprehensive income,cash flows,and stockholders equity for the three-month

216、periods ended September 30,2024 and 2023,and the related notes(collectively referred to as the“interim financial information”).Based on our reviews,we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with acc

217、ounting principles generally accepted in the United States of America.We have previously audited,in accordance with the standards of the Public Company Accounting Oversight Board(United States)(PCAOB),the consolidated balance sheet of the Company as of June 30,2024,and the related consolidated state

218、ments of income,comprehensive income,cash flows,and stockholders equity for the year then ended(not presented herein);and in our report dated July 30,2024,we expressed an unqualified opinion on those consolidated financial statements.In our opinion,the information set forth in the accompanying conso

219、lidated balance sheet as of June 30,2024,is fairly stated,in all material respects,in relation to the consolidated balance sheet from which it has been derived.Basis for Review ResultsThis interim financial information is the responsibility of the Companys management.We are a public accounting firm

220、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.We conducted our reviews in accordance with standards of the PC

221、AOB.A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB,the objective

222、of which is the expression of an opinion regarding the financial statements taken as a whole.Accordingly,we do not express such an opinion./S/DELOITTE&TOUCHE LLP Seattle,WashingtonOctober 30,2024PART IItem 2 31ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

223、SNote About Forward-Looking StatementsThis report includes estimates,projections,statements relating to our business plans,objectives,and expected operating results that are“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995,Section 27A of the Secur

224、ities Act of 1933,and Section 21E of the Securities Exchange Act of 1934.Forward-looking statements may appear throughout this report,including the following sections:“Managements Discussion and Analysis of Financial Condition and Results of Operations”and“Risk Factors”(Part II,Item 1A of this Form

225、10-Q).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.Forward-looking stat

226、ements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially.We describe risks and uncertainties that could cause actual results and events to differ materially in“Managements Discussion and Analysis of Financ

227、ial Condition and Results of Operations,”“Quantitative and Qualitative Disclosures About Market Risk”(Part I,Item 3 of this Form 10-Q),and“Risk Factors”.We undertake no obligation to update or revise publicly any forward-looking statements,whether because of new information,future events,or otherwis

228、e.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.MD&A is provided as a supplement to,and should be read in conjunction with,

229、our Annual Report on Form 10-K for the year ended June 30,2024,and our financial statements and the accompanying Notes to Financial Statements(Part I,Item 1 of this Form 10-Q).OVERVIEWMicrosoft is a technology company committed to making digital technology and artificial intelligence(“AI”)available

230、broadly and doing so responsibly,with a mission to empower every person and every organization on the planet to achieve more.We create platforms and tools,powered by AI,that deliver innovative solutions that meet the evolving needs of our customers.We generate revenue by offering a wide range of clo

231、ud-based solutions,content,and other services to people and businesses;licensing and supporting an array of software products;delivering relevant online advertising to a global audience;and designing and selling devices.Our most significant expenses are related to compensating employees;supporting a

232、nd investing in our cloud-based services,including datacenter operations;designing,manufacturing,marketing,and selling our other products and services;and income taxes.Highlights from the first quarter of fiscal year 2025 compared with the first quarter of fiscal year 2024 included:Microsoft Cloud r

233、evenue increased 22%to$38.9 billion.Microsoft 365 Commercial products and cloud services revenue increased 13%driven by Microsoft 365 Commercial cloud revenue growth of 15%.Microsoft 365 Consumer products and cloud services revenue increased 5%driven by Microsoft 365 Consumer cloud revenuegrowth of

234、6%.LinkedIn revenue increased 10%.Dynamics products and cloud services revenue increased 14%driven by Dynamics 365 revenue growth of 18%.Server products and cloud services revenue increased 23%driven by Azure and other cloud services revenue growth of 33%.Windows OEM and Devices revenue increased 2%

235、.Xbox content and services revenue increased 61%driven by 53 points of net impact from the Activision Blizzard Inc.(“Activision Blizzard”)acquisition.The net impact reflects the change of Activision Blizzard content from third-party to first-party.Search and news advertising revenue excluding traffi

236、c acquisition costs increased 18%.PART IItem 2 32Industry TrendsOur industry is dynamic and highly competitive,with frequent changes in both technologies and business models.Each industry shift is an opportunity to conceive new products,new technologies,or new ideas that can further transform the in

237、dustry and our business.At Microsoft,we push the boundaries of what is possible through a broad range of research and development activities that seek to identify and address the changing demands of customers and users,industry trends,and competitive forces.Economic Conditions,Challenges,and RisksTh

238、e markets for software,devices,and cloud-based services are dynamic and highly competitive.Our competitors are developing new software and devices,while also deploying competing cloud-based services for consumers and businesses.The devices and form factors customers prefer evolve rapidly,influencing

239、 how users access services in the cloud and,in some cases,the users choice of which suite of cloud-based services to use.Aggregate demand for our software,services,and devices is also correlated to global macroeconomic and geopolitical factors,which remain dynamic.We must continue to evolve and adap

240、t over an extended time in pace with this changing environment.The investments we are making in cloud and AI infrastructure and devices will continue to increase our operating costs and may decrease our operating margins.We continue to identify and evaluate opportunities to expand our datacenter loc

241、ations and increase our server capacity to meet the evolving needs of our customers,particularly given the growing demand for AI services.Our datacenters depend on the availability of permitted and buildable land,predictable energy,networking supplies,and servers,including graphics processing units(

242、“GPUs”)and other components.Our devices are primarily manufactured by third-party contract manufacturers.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.However,some of our products contain cer

243、tain components for which there are very few qualified suppliers.Extended disruptions at these suppliers could impact our ability to manufacture devices on time to meet consumer demand.Our success is highly dependent on our ability to attract and retain qualified employees.We hire a mix of universit

244、y and industry talentworldwide.We compete for talented individuals globally by offering an exceptional working environment,broad customer reach,scale in resources,the ability to grow ones career across many different products and businesses,and competitive compensation and benefits.Our international

245、 operations provide a significant portion of our total revenue and expenses.Many of these revenue and expenses are denominated in currencies other than the U.S.dollar.As a result,changes in foreign exchange rates may significantly affect revenue and expenses.Fluctuations in the U.S.dollar relative t

246、o certain foreign currencies did not have a material impact on reported revenue and expenses from our international operations in the first quarter of fiscal year 2025.Refer to Risk Factors(Part II,Item 1A of this Form 10-Q)for a discussion of these factors and other risks.SeasonalityOur revenue flu

247、ctuates quarterly and is generally higher in the fourth quarter of our fiscal year.Fourth quarter revenue is driven by a higher volume of multi-year contracts executed during the period.Reportable SegmentsWe report our financial performance based on the following segments:Productivity and Business P

248、rocesses,Intelligent Cloud,and More Personal Computing.The segment amounts included in MD&A are presented on a basis consistent with our internal management reporting.In August 2024,we announced changes to the composition of our segments.These changes align our segments with how we currently manage

249、our business,most notably bringing the commercial components of Microsoft 365 together in the Productivity and Business Processes segment.Beginning in fiscal year 2025,the information that our chief operating decision maker is regularly provided and reviews for purposes of allocating resources and a

250、ssessing performance reflects these segment changes.Prior period segment information has been recast to conform to the way we internally manage and monitor our business during fiscal year 2025.PART IItem 2 33Additional information on our reportable segments is contained in Note 17 Segment Informatio

251、n and Geographic Data of the Notes to Financial Statements(Part I,Item 1 of this Form 10-Q).MetricsWe use metrics in assessing the performance of our business and to make informed decisions regarding the allocation of resources.We disclose metrics to enable investors to evaluate progress against our

252、 ambitions,provide transparency into performance trends,and reflect the continued evolution of our products and services.Our commercial and other business metrics are fundamentally connected based on how customers use our products and services.The metrics are disclosed in the MD&A or the Notes to Fi

253、nancial Statements(Part I,Item 1 of this Form 10-Q).Financial metrics are calculated based on financial results prepared in accordance with accounting principles generally accepted in the United States of America(“GAAP”),and growth comparisons relate to the corresponding period of last fiscal year.I

254、n the first quarter of fiscal year 2025,we made updates to our metrics in connection with the segment changes described above.These changes align our metrics with how we manage and monitor certain businesses.The key change was bringing the commercial components of Microsoft 365 together and creating

255、 a new Microsoft 365 Commercial cloud revenue growth metric.Other changes include combining Windows OEM and Devices into a single revenue growth metric that brings revenue from PC market-driven businesses together,as well as elevating our cloud revenue growth metrics to align to our strategic focus

256、on cloud growth.CommercialOur commercial business primarily consists of Server products and cloud services,Microsoft 365 Commercial products and cloud services,the commercial portion of LinkedIn,Enterprise and partner services,and Dynamics products and cloud services.Our commercial metrics allow man

257、agement and investors to assess the overall health of our commercial business and include leading indicators of future performance.Commercial remaining performance obligation Commercial portion of revenue allocated to remaining performance obligations,which includes unearned revenue and amounts that

258、 will be invoiced and recognized as revenue in future periods Microsoft Cloud revenue and revenue growth Revenue from Microsoft 365 Commercial cloud,Azure and other cloud services,the commercial portion of LinkedIn,and Dynamics 365 Microsoft Cloud gross margin percentage Gross margin percentage for

259、our Microsoft Cloud business PART IItem 2 34Productivity and Business Processes and Intelligent CloudMetrics related to our Productivity and Business Processes and Intelligent Cloud segments assess the health of our core businesses within these segments.The metrics primarily reflect growth across ou

260、r cloud services.Microsoft 365 Commercial cloud revenue growth Revenue from Microsoft 365 Commercial subscriptions,comprising Microsoft 365 Commercial,Enterprise Mobility+Security,the cloud portion of Windows Commercial,the per-user portion of Power BI,Exchange,SharePoint,Microsoft Teams,Microsoft 3

261、65 Security and Compliance,Microsoft Viva,and Microsoft 365 Copilot Microsoft 365 Commercial seat growth The number of Microsoft 365 Commercial seats at end of period where seats are paid users covered by a Microsoft 365 Commercial subscription Microsoft 365 Consumer cloud revenue growth Revenue fro

262、m Microsoft 365 Consumer subscriptions and other consumer services Microsoft 365 Consumer subscribers The number of Microsoft 365 Consumer subscribers at end of period LinkedIn revenue growth Revenue from LinkedIn,including Talent Solutions,Marketing Solutions,Premium Subscriptions,and Sales Solutio

263、ns Dynamics 365 revenue growth Revenue from Dynamics 365,including a set of intelligent,cloud-based applications across ERP,CRM,Power Apps,and Power Automate Azure and other cloud services revenue growth Revenue from Azure and other cloud services,including cloud and AI consumption-based services,Gi

264、tHub cloud services,Nuance Healthcare cloud services,virtual desktop offerings,and other cloud services More Personal ComputingMetrics related to our More Personal Computing segment assess the performance of our key consumer businesses.Windows OEM and Devices revenue growth Revenue from sales of Win

265、dows Pro and non-Pro licenses sold through the OEM channel and sales of first-party Devices,including Surface,HoloLens,and PC accessories Xbox content and services revenue growth Revenue from Xbox content and services,comprising first-and third-party content(including games and in-game content),Xbox

266、 Game Pass and other subscriptions,Xbox Cloud Gaming,advertising,third-party disc royalties,and other cloud services Search and news advertising revenue(ex TAC)growth Revenue from search and news advertising excluding traffic acquisition costs(“TAC”)paid to Bing Ads network publishers and news partn

267、ers SUMMARY RESULTS OF OPERATIONS(In millions,except percentages and per share amounts)Three Months EndedSeptember 30,PercentageChange 2024 2023 Revenue$65,585$56,517 16%Gross margin 45,486 40,215 13%Operating income 30,552 26,895 14%Net income 24,667 22,291 11%Diluted earnings per share 3.30 2.99 1

268、0%PART IItem 2 35Three Months Ended September 30,2024 Compared with Three Months Ended September 30,2023Revenue increased$9.1 billion or 16%driven by growth across each of our segments.Intelligent Cloud revenue increased driven by Azure.Productivity and Business Processes revenue increased driven by

269、 Microsoft 365 Commercial cloud.More Personal Computing revenue increased driven by Gaming.Cost of revenue increased$3.8 billion or 23%driven by growth in Microsoft Cloud and Gaming.Gross margin increased$5.3 billion or 13%driven by growth across each of our segments.Gross margin percentage decrease

270、d driven by Intelligent Cloud.Microsoft Cloud gross margin percentage decreased to 71%driven by scaling our AI infrastructure.Operating expenses increased$1.6 billion or 12%driven by Gaming,with 9 points of growth from the Activision Blizzard acquisition,and investments in cloud engineering.Operatin

271、g income increased$3.7 billion or 14%driven by growth in Productivity and Business Processes and Intelligent Cloud.SEGMENT RESULTS OF OPERATIONS(In millions,except percentages)Three Months EndedSeptember 30,PercentageChange 2024 2023 Revenue Productivity and Business Processes$28,317$25,226 12%Intel

272、ligent Cloud 24,092 20,013 20%More Personal Computing 13,176 11,278 17%Total$65,585$56,517 16%Operating Income Productivity and Business Processes$16,516$14,297 16%Intelligent Cloud 10,503 8,908 18%More Personal Computing 3,533 3,690 (4)%Total$30,552$26,895 14%Reportable SegmentsThree Months Ended S

273、eptember 30,2024 Compared with Three Months Ended September 30,2023Productivity and Business ProcessesRevenue increased$3.1 billion or 12%.Microsoft 365 Commercial products and cloud services revenue increased$2.4 billion or 13%.Microsoft 365 Commercial cloud revenue grew 15%with seat growth of 8%dr

274、iven by small and medium business and frontline worker offerings,as well as growth in revenue per user.Microsoft 365 Commercial products revenue grew 2%driven by the on-premises components of Microsoft 365 suite sales,offset in part by continued shift from Office Commercial products to Microsoft 365

275、 Commercial cloud.Microsoft 365 Consumer products and cloud services revenue increased$84 million or 5%.Microsoft 365 Consumer cloud revenue grew 6%with Microsoft 365 Consumer subscriber growth of 10%to 84.4 million.LinkedIn revenue increased$379 million or 10%driven by growth across all lines of bu

276、siness Talent Solutions,Marketing Solutions,Premium Subscriptions,and Sales Solutions.Dynamics products and cloud services revenue increased$223 million or 14%driven by growth in Dynamics 365,offset in part by a decline in Dynamics on-premises products.Dynamics 365 revenue grew 18%driven by growth a

277、cross all workloads.PART IItem 2 36Operating income increased$2.2 billion or 16%.Gross margin increased$2.3 billion or 11%driven by growth in Microsoft 365 Commercial cloud.Gross margin percentage decreased slightly driven by scaling our AI infrastructure.Operating expenses increased$101 million or

278、2%primarily driven by investments in commercial sales and cloud engineering.Intelligent CloudRevenue increased$4.1 billion or 20%.Server products and cloud services revenue increased$4.1 billion or 23%driven by Azure and other cloud services.Azure andother cloud services revenue grew 33%driven by de

279、mand for our portfolio of services,including 12 points from our AI services.Server products revenue decreased 1%driven by lower transactional purchasing ahead of the Windows Server 2025 launch,as well as lower purchasing of licenses running in multi-cloud environments.Enterprise and partner services

280、 revenue decreased$16 million or 1%.Operating income increased$1.6 billion or 18%.Gross margin increased$2.0 billion or 15%driven by growth in Azure.Gross margin percentage decreased driven by scaling our AI infrastructure.Operating expenses increased$372 million or 8%driven by investments in Azure.

281、More Personal ComputingRevenue increased$1.9 billion or 17%.Windows and Devices revenue decreased slightly.Windows OEM and Devices revenue increased 2%driven by growth in Windows OEM,offset in part by a decline in Devices.Gaming revenue increased$1.7 billion or 43%driven by growth in Xbox content an

282、d services.Xbox content and services revenue increased 61%driven by 53 points of net impact from the Activision Blizzard acquisition.Xbox hardware revenue decreased 29%driven by lower volume of consoles sold.Search and news advertising revenue increased$207 million or 7%.Search and news advertising

283、revenue excluding traffic acquisition costs increased 18%driven by higher search volume and higher revenue per search.Operating income decreased$157 million or 4%.Gross margin increased$984 million or 16%driven by growth in Gaming,with 12 points of net impact from the Activision Blizzard acquisition

284、.Gross margin percentage was relatively unchanged as improvement in Gaming and Search and news advertising was offset by sales mix shift to those businesses.Operating expenses increased$1.1 billion or 49%driven by Gaming,with 51 points of growth from the Activision Blizzard acquisition.OPERATING EXP

285、ENSESResearch and Development(In millions,except percentages)Three Months EndedSeptember 30,PercentageChange 2024 2023 Research and development$7,544$6,659 13%As a percent of revenue 12%12%0ppt PART IItem 2 37Research and development expenses include payroll,employee benefits,stock-based compensatio

286、n expense,and other headcount-related expenses associated with product development.Research and development expenses also include third-party development and programming costs and the amortization of purchased software code and services content.Three Months Ended September 30,2024 Compared with Thre

287、e Months Ended September 30,2023Research and development expenses increased$885 million or 13%driven by Gaming,with 8 points of growth from the Activision Blizzard acquisition,and investments in cloud engineering.Sales and Marketing(In millions,except percentages)Three Months EndedSeptember 30,Perce

288、ntageChange 2024 2023 Sales and marketing$5,717$5,187 10%As a percent of revenue 9%9%0ppt Sales and marketing expenses include payroll,employee benefits,stock-based compensation expense,and other headcount-related expenses associated with sales and marketing personnel,and the costs of advertising,pr

289、omotions,trade shows,seminars,and other programs.Three Months Ended September 30,2024 Compared with Three Months Ended September 30,2023Sales and marketing expenses increased$530 million or 10%driven by Gaming,with 9 points of growth from the Activision Blizzard acquisition,and investments in commer

290、cial sales.General and Administrative(In millions,except percentages)Three Months EndedSeptember 30,PercentageChange 2024 2023 General and administrative$1,673$1,474 14%As a percent of revenue 3%3%0ppt General and administrative expenses include payroll,employee benefits,stock-based compensation exp

291、ense,employee severance expense incurred as part of a corporate program,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.Three Months Ended September 30,2024

292、Compared with Three Months Ended September 30,2023General and administrative expenses increased$199 million or 14%driven by Gaming,with 11 points of growth from the Activision Blizzard acquisition.PART IItem 2 38OTHER INCOME(EXPENSE),NETThe components of other income(expense),net were as follows:(In

293、 millions)Three Months Ended September 30,2024 2023 Interest and dividends income$681$1,166 Interest expense (582)(525)Net recognized gains(losses)on investments 463 (107)Net gains(losses)on derivatives (338)93 Net gains(losses)on foreign currency remeasurements 176 (101)Other,net (683)(137)Total$(2

294、83)$389 We use derivative instruments to manage risks related to foreign currencies,interest rates,equity prices,and credit;to enhance investment returns;and to facilitate portfolio diversification.Gains and losses from changes in fair values of derivatives that are not designated as hedging instrum

295、ents are primarily recognized in other income(expense),net.Three Months Ended September 30,2024 Compared with Three Months Ended September 30,2023Interest and dividends income decreased primarily due to lower portfolio balances.Interest expense increased primarily due to higher finance lease interes

296、t expense.Net recognized gains on investments increased primarily due to gains on equity investments in the current period as compared to losses in the prior period.Net losses on derivatives increased primarily due to losses on equity derivatives in the current period as compared to gains in the pri

297、or period.Other,net primarily reflects net recognized losses on equity method investments,including OpenAI.INCOME TAXESEffective Tax RateOur effective tax rate was 19%and 18%for the three months ended September 30,2024 and 2023,respectively.The increase in our effective tax rate for the current quar

298、ter compared to the prior year was primarily due to tax benefits from tax law changes in the first quarter of fiscal year 2024,including the impact from the issuance of Notice 2023-55 by the Internal Revenue Service(“IRS”)and U.S.Treasury Department,which delayed the effective date of final foreign

299、tax credit regulations to fiscal year 2024 for Microsoft.Notice 2023-80,issued in the second quarter of fiscal year 2024,further delayed the effective date of final foreign tax credit regulations indefinitely.Our effective tax rate was lower than the U.S.federal statutory rate for the three months e

300、nded September 30,2024,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 center in Ireland.The Organisation for Economic Co-operation and Development(“OECD”)published its

301、 model rules“Tax Challenges Arising From the Digitalisation of the Economy-Global Anti-Base Erosion Model Rules(Pillar Two)”which established a global minimum corporate tax rate of 15%for certain multinational enterprises.Many countries have implemented or are in the process of implementing the Pill

302、ar Two legislation,which applies to Microsoft beginning in fiscal year 2025.While we do not currently estimate a material impact to our consolidated financial statements,we continue to monitor the impact as countries implement legislation and the OECD provides additional guidance.PART IItem 2 39Unce

303、rtain Tax PositionsWe remain under audit by the IRS for tax years 2014 to 2017.With respect to the audit for tax years 2004 to 2013,on September 26,2023,we received Notices of Proposed Adjustment(“NOPAs”)from the IRS.The primary issues in the NOPAs relate to intercompany transfer pricing.In the NOPA

304、s,the IRS is seeking an additional tax payment of$28.9 billion plus penalties and interest.As of September 30,2024,we believe our allowances for income tax contingencies are adequate.We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRSs administrative appea

305、ls office and,if necessary,judicial proceedings.We do not expect a final resolution of these issues in the next 12 months.Based on the information currently available,we do not anticipate a significant increase or decrease to our income tax contingencies for these issues within the next 12 months.We

306、 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 2024,some of which are currently under audit by local tax authorities.The resolution of each of these audits is not expected to be material to

307、our consolidated financial statements.LIQUIDITY AND CAPITAL RESOURCESWe expect existing cash,cash equivalents,short-term investments,cash flows from operations,and access to capital markets to continue to be sufficient to fund our operating activities and cash commitments for investing and financing

308、 activities,such as dividends,share repurchases,debt maturities,material capital expenditures,and the transition tax related to the Tax Cuts and Jobs Act(“TCJA”),for at least the next 12 months and thereafter for the foreseeable future.Cash,Cash Equivalents,and InvestmentsCash,cash equivalents,and s

309、hort-term investments totaled$78.4 billion and$75.5 billion as of September 30,2024 and June 30,2024,respectively.Equity and other investments were$15.8 billion and$14.6 billion as of September 30,2024 and June 30,2024,respectively.Our short-term investments are primarily intended to facilitate liqu

310、idity and capital preservation.They consist predominantly of highly liquid investment-grade fixed-income securities,diversified among industries and individual issuers.The investments are predominantly U.S.dollar-denominated securities,but also include foreign currency-denominated securities to dive

311、rsify risk.Our fixed-income investments are exposed to interest rate risk and credit risk.The credit risk and average maturity of our fixed-income portfolio are managed to achieve economic returns that correlate to certain fixed-income indices.The settlement risk related to these investments is insi

312、gnificant given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities.ValuationIn general,and where applicable,we use quoted prices in active markets for identical assets or liabilities to determine the fair value of ourfinancial instruments.This p

313、ricing methodology applies to our Level 1 investments,such as U.S.government securities,common and preferred stock,and mutual funds.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 liabil

314、ities or inputs other than the quoted prices that are observable either directly or indirectly.This pricing methodology applies to our Level 2 investments,such as commercial paper,certificates of deposit,U.S.agency securities,foreign government bonds,mortgage-and asset-backed securities,corporate no

315、tes and bonds,and municipal securities.Level 3 investments are valued using internally-developed models with unobservable inputs.Assets and liabilities measured at fair value on a recurring basis using unobservable inputs are an immaterial portion of our portfolio.A majority of our investments are p

316、riced by pricing vendors and are generally Level 1 or Level 2 investments as these vendors either provide a quoted market price in an active market or use observable inputs for their pricing without applying significant adjustments.Broker pricing isused mainly when a quoted price is not available,th

317、e investment is not priced by our pricing vendors,or when a broker price is more reflective of fair values in the market in which the investment trades.Our broker-priced investments are generally classified as Level 2 investments because the broker prices these investments based on similar assets wi

318、thout applying significant adjustments.In addition,all our broker-priced investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments.Our fair value processes include controls that are designed to ensure appropriate fair values

319、are recorded.These controls include model validation,review of key model inputs,analysis of period-over-period fluctuations,and independent recalculation of prices where appropriate.PART IItem 2 40Cash FlowsCash from operations increased$3.6 billion to$34.2 billion for the three months ended Septemb

320、er 30,2024,primarily due to an increase in cash received from customers,offset in part by an increase in cash paid to suppliers and employees.Cash used in financing increased$31.3 billion to$16.6 billion for the three months ended September 30,2024,primarily due to a$31.0 billion increase in cash us

321、ed for repayments of debt,net of proceeds.Cash used in investing increased$15.7 billion to$15.2 billion for the three months ended September 30,2024,primarily due to a$10.1 billion decrease in cash from net investment purchases,sales,and maturities and a$5.0 billion increase in additions to property

322、 and equipment.Debt ProceedsWe issue debt to take advantage of favorable pricing and liquidity in the debt markets,reflecting our credit rating.The proceeds of these issuances were or will be used for general corporate purposes,which may include,among other things,funding for working capital,capital

323、 expenditures,repurchases of capital stock,acquisitions,and repayment of existing debt.Refer to Note 10 Debt of the Notes to Financial Statements(Part I,Item 1 of this Form 10-Q)for further discussion.Unearned RevenueUnearned revenue comprises mainly unearned revenue related to volume licensing prog

324、rams,which may include Software Assurance(“SA”)and cloud services.Unearned revenue is generally invoiced annually at the beginning of each contract period for multi-year agreements and recognized ratably over the coverage period.Unearned revenue also includes payments for other offerings for which w

325、e have been paid in advance and earn the revenue when we transfer control of the product or service.The following table outlines the expected future recognition of unearned revenue as of September 30,2024:(In millions)Three Months Ending December 31,2024$24,279 March 31,2025 16,953 June 30,2025 9,62

326、0 September 30,2025 2,174 Thereafter 2,663 Total$55,689 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 r

327、ecognized over the subscription period or upon consumption,as applicable.Refer to Note 12 Unearned Revenue of the Notes to Financial Statements(Part I,Item 1 of this Form 10-Q)for further discussion.Material Cash Requirements and Other ObligationsIncome TaxesAs a result of the TCJA,we are required t

328、o pay a one-time transition tax on deferred foreign income not previously subject to U.S.income tax.Under the TCJA,the transition tax is payable in interest-free installments over eight years,with 8%due in each of the first five years,15%in year six,20%in year seven,and 25%in year eight.As of Septem

329、ber 30,2024,our eighth transition tax installment of$4.4 billion is short-term and payable in the first quarter of fiscal year 2026.PART IItem 2 41Share RepurchasesFor the three months ended September 30,2024 and 2023,we repurchased 7 million shares and 11 million shares of our common stock for$2.8

330、billion and$3.6 billion,respectively,through our share repurchase program.All repurchases were made using cash resources.As of September 30,2024,$7.5 billion remained of our$60 billion share repurchase program.Refer to Note 15 Stockholders Equity of the Notes to Financial Statements(Part I,Item 1 of

331、 this Form 10-Q)for further discussion.DividendsFor the three months ended September 30,2024 and 2023,our Board of Directors declared dividends totaling$6.2 billion and$5.6 billion,respectively.We intend to continue returning capital to shareholders in the form of dividends,subject to declaration by

332、 our Board of Directors.Refer to Note 15 Stockholders Equity of the Notes to Financial Statements(Part I,Item 1 of this Form 10-Q)for further discussion.Other Planned Uses of CapitalWe will continue to invest in sales,marketing,product support infrastructure,and existing and advanced areas of techno

333、logy,as well as acquisitions that align with our business strategy.Additions to property and equipment will continue,including new facilities,datacenters,and computer systems for research and development,sales and marketing,support,and administrative staff.We expect capital expenditures to increase in coming years to support growth in our cloud offerings and our investments in AI infrastructure an