filings.toolsItem 8. Dividends
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Item 8. Dividends
Dividends
Our Board of Directors declared the following dividends:
| Declaration Date | Record Date | Payment Date | Dividend Per Share | Amount | ||||||||||||
| Fiscal Year 2025 | (In millions) | |||||||||||||||
| September 16, 2024 | November 21, 2024 | December 12, 2024 | $ | 0.83 | $ | 6,170 | ||||||||||
| December 3, 2024 | February 20, 2025 | March 13, 2025 | 0.83 | 6,169 | ||||||||||||
| March 11, 2025 | May 15, 2025 | June 12, 2025 | 0.83 | 6,169 | ||||||||||||
| June 10, 2025 | August 21, 2025 | September 11, 2025 | 0.83 | 6,170 | ||||||||||||
| Total | $ | 3.32 | $ | 24,678 | ||||||||||||
| Fiscal Year 2024 | ||||||||||||||||
| September 19, 2023 | November 16, 2023 | December 14, 2023 | $ | 0.75 | $ | 5,574 | ||||||||||
| November 28, 2023 | February 15, 2024 | March 14, 2024 | 0.75 | 5,573 | ||||||||||||
| March 12, 2024 | May 16, 2024 | June 13, 2024 | 0.75 | 5,574 | ||||||||||||
| June 12, 2024 | August 15, 2024 | September 12, 2024 | 0.75 | 5,574 | ||||||||||||
| Total | $ | 3.00 | $ | 22,295 | ||||||||||||
The dividend declared on June 10, 2025 was included in other current liabilities as of June 30, 2025.
NOTE 16 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table summarizes the changes in accumulated other comprehensive income (loss) by component:
| (In millions) | ||||||||||||
| Year Ended June 30, | 2025 | 2024 | 2023 | |||||||||
| Derivatives | ||||||||||||
| Balance, beginning of period | $ | **(**3 | ) | $ | (27 | ) | $ | (13 | ) | |||
| Unrealized gains (losses), net of tax of **$**20, $(4), and $9 | 77 | (14 | ) | 34 | ||||||||
| Reclassification adjustments for (gains) losses included in other income (expense), net | **(**103 | ) | 48 | (61 | ) | |||||||
| Tax expense (benefit) included in provision for income taxes | 21 | (10 | ) | 13 | ||||||||
| Amounts reclassified from accumulated other comprehensive loss | **(**82 | ) | 38 | (48 | ) | |||||||
| Net change related to derivatives, net of tax of $(1), $6, and $(4) | **(**5 | ) | 24 | (14 | ) | |||||||
| Balance, end of period | $ | **(**8 | ) | $ | (3 | ) | $ | (27 | ) | |||
| Investments | ||||||||||||
| Balance, beginning of period | $ | **(**2,625 | ) | $ | (3,582 | ) | $ | (2,138 | ) | |||
| Unrealized gains (losses), net of tax of **$**411, $247, and $(393) | 1,560 | 915 | (1,523 | ) | ||||||||
| Reclassification adjustments for losses included in other income (expense), net | 17 | 53 | 99 | |||||||||
| Tax benefit included in provision for income taxes | **(**3 | ) | (11 | ) | (20 | ) | ||||||
| Amounts reclassified from accumulated other comprehensive loss | 14 | 42 | 79 | |||||||||
| Net change related to investments, net of tax of **$**414, $258, and $(373) | 1,574 | 957 | (1,444 | ) | ||||||||
| Balance, end of period | $ | **(**1,051 | ) | $ | (2,625 | ) | $ | (3,582 | ) | |||
| Translation Adjustments and Other | ||||||||||||
| Balance, beginning of period | $ | **(**2,962 | ) | $ | (2,734 | ) | $ | (2,527 | ) | |||
| Translation adjustments and other, net of tax of **$**8, $0, and $0 | 674 | (228 | ) | (207 | ) | |||||||
| Balance, end of period | $ | **(**2,288 | ) | $ | (2,962 | ) | $ | (2,734 | ) | |||
| Accumulated other comprehensive loss, end of period | $ | **(**3,347 | ) | $ | (5,590 | ) | $ | (6,343 | ) | |||
PART II
Item 8
NOTE 17 — EMPLOYEE STOCK AND SAVINGS PLANS
We grant stock-based compensation to employees and directors. Awards that expire or are canceled without delivery of shares generally become available for issuance under the plans. We issue new shares of Microsoft common stock to satisfy vesting of awards granted under our stock plans. We also have an ESPP for all eligible employees.
Stock-based compensation expense and related income tax benefits were as follows:
| (In millions) | ||||||||||||
| Year Ended June 30, | 2025 | 2024 | 2023 | |||||||||
| Stock-based compensation expense | $ | 11,974 | $ | 10,734 | $ | 9,611 | ||||||
| Income tax benefits related to stock-based compensation | 2,027 | 1,826 | 1,651 | |||||||||
Stock Plans
Stock awards entitle the holder to receive shares of Microsoft common stock as the award vests. Stock awards generally vest over a service period of four years or five years.
Executive Incentive Plan
Under the Executive Incentive Plan, the Compensation Committee approves stock awards to executive officers and certain senior executives. RSUs generally vest ratably over a service period of four years. PSUs generally vest over a performance period of three years. The number of shares the PSU holder receives is based on the extent to which the corresponding performance goals have been achieved.
Activity for All Stock Plans
The fair value of stock awards was estimated on the date of grant using the following assumptions:
| Year Ended June 30, | 2025 | 2024 | 2023 | ||||||||||||||||
| Dividends per share (quarterly amounts) | $ | 0.75 – 0.83 | $ | 0.68 – 0.75 | $ | 0.62 – 0.68 | |||||||||||||
| Interest rates | 3.4**% –** 5.5**%** | 3.8% – 5.6% | 2.0% – 5.4% | ||||||||||||||||
During fiscal year 2025, the following activity occurred under our stock plans:
| Shares | Weighted Average Grant-Date Fair Value | |||||||
| (In millions) | ||||||||
| Stock Awards | ||||||||
| Nonvested balance, beginning of year | 88 | $ | 292.28 | |||||
| Granted (a) | 39 | 413.90 | ||||||
| Vested | **(**38 | ) | 293.25 | |||||
| Forfeited | **(**7 | ) | 317.23 | |||||
| Nonvested balance, end of year | 82 | $ | 347.44 | |||||
(a)
Includes 1 million of PSUs granted at target and performance adjustments above target levels for each of the fiscal years 2025, 2024, and 2023.
As of June 30, 2025, total unrecognized compensation costs related to stock awards were $21.6 billion. These costs are expected to be recognized over a weighted average period of three years. The weighted average grant-date fair value of stock awards granted was $413.90, $339.46, and $252.59 for fiscal years 2025, 2024, and 2023, respectively. The fair value of stock awards vested was $16.2 billion, $16.0 billion, and $11.9 billion, for fiscal years 2025, 2024, and 2023, respectively. As of June 30, 2025, an aggregate of 98 million shares were authorized for future grant under our stock plans.
PART II
Item 8
Employee Stock Purchase Plan
We have an ESPP for all eligible employees. Shares of our common stock may be purchased by employees at three-month intervals at 90% of the fair market value on the last trading day of each three-month period. Employees may purchase shares having a value not exceeding 15% of their gross compensation during an offering period.
Employees purchased the following shares during the periods presented:
| (Shares in millions) | ||||||||||||
| Year Ended June 30, | 2025 | 2024 | 2023 | |||||||||
| Shares purchased | 6 | 6 | 7 | |||||||||
| Average price per share | $ | 385.10 | $ | 339.46 | $ | 245.59 | ||||||
As of June 30, 2025, 62 million shares of our common stock were reserved for future issuance through the ESPP.
Savings Plans
We have savings plans in the U.S. that qualify under Section 401(k) of the Internal Revenue Code, and a number of savings plans in international locations. Eligible U.S. employees may contribute a portion of their salary into the savings plans, subject to certain limitations. We match a portion of each dollar a participant contributes into the plans. Employer-funded retirement benefits for all plans were $1.8 billion, $1.7 billion, and $1.6 billion in fiscal years 2025, 2024, and 2023, respectively, and were expensed as contributed.
NOTE 18 — SEGMENT INFORMATION AND GEOGRAPHIC DATA
In its operation of the business, management, including our chief operating decision maker (“CODM”), who is also our Chief Executive Officer, reviews certain financial information, including segmented internal profit and loss statements. The primary profitability measure used by the CODM to review segment operating results is operating income. The CODM uses operating income to allocate resources during our annual planning process and throughout the year, as well as to assess the performance of our segments, primarily by monitoring actual results compared to prior periods and expected results. During the periods presented, we reported our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.
We 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 Processes
Our Productivity and Business Processes segment consists of products and services in our portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. This segment primarily comprises:
Microsoft 365 Commercial products and cloud services, including Microsoft 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, and Microsoft 365 Copilot; and Microsoft 365 Commercial products, comprising Windows Commercial on-premises and Office licensed on-premises.
Microsoft 365 Consumer products and cloud services, including Microsoft 365 Consumer subscriptions, Office licensed on-premises, and other consumer services.
LinkedIn, including Talent Solutions, Marketing 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.
PART II
Item 8
Intelligent Cloud
Our Intelligent Cloud segment consists of our public, private, and hybrid server products and cloud services that 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 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 Enterprise Support Services, Industry Solutions, Nuance professional services, Microsoft Partner Network, and Learning Experience.
More Personal Computing
Our More Personal Computing segment consists of products and services that put customers at the center of the experience with our technology. This segment primarily comprises:
Windows and Devices, including Windows OEM licensing (Windows Pro and non-Pro licenses sold through the OEM channel) and Devices, comprising Surface and PC accessories.
Gaming, including Xbox hardware and Xbox 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, and other cloud services.
Search and news advertising, comprising Bing and Copilot, Microsoft News, Microsoft 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 among the segments based on the relative value of the underlying products and services, which can include allocation based on actual prices charged, prices when sold separately, or estimated costs plus a profit margin. Cost of revenue is allocated in certain cases based on a relative revenue methodology. Operating 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 allocated 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 on the specific facts and circumstances of the costs being allocated and is generally based on relative gross margin or relative headcount.
PART II
Item 8
Segment revenue, cost of revenue, operating expenses, and operating income were as follows during the periods presented:
| (In millions) | ||||||||||||
| Year Ended June 30, | 2025 | 2024 | 2023 | |||||||||
| Productivity and Business Processes | ||||||||||||
| Revenue | $ | 120,810 | $ | 106,820 | $ | 94,151 | ||||||
| Cost of revenue | 22,422 | 19,611 | 17,202 | |||||||||
| Operating expenses | 28,615 | 27,548 | 26,875 | |||||||||
| Operating Income | $ | 69,773 | $ | 59,661 | $ | 50,074 | ||||||
| Intelligent Cloud | ||||||||||||
| Revenue | $ | 106,265 | $ | 87,464 | $ | 72,944 | ||||||
| Cost of revenue | 40,171 | 29,611 | 24,109 | |||||||||
| Operating expenses | 21,505 | 20,040 | 20,424 | |||||||||
| Operating Income | $ | 44,589 | $ | 37,813 | $ | 28,411 | ||||||
| More Personal Computing | ||||||||||||
| Revenue | $ | 54,649 | $ | 50,838 | $ | 44,820 | ||||||
| Cost of revenue | 25,238 | 24,892 | 24,552 | |||||||||
| Operating expenses | 15,245 | 13,987 | 10,230 | |||||||||
| Operating Income | $ | 14,166 | $ | 11,959 | $ | 10,038 | ||||||
| Total | ||||||||||||
| Revenue | $ | 281,724 | $ | 245,122 | $ | 211,915 | ||||||
| Cost of revenue | 87,831 | 74,114 | 65,863 | |||||||||
| Operating expenses | 65,365 | 61,575 | 57,529 | |||||||||
| Operating Income | $ | 128,528 | $ | 109,433 | $ | 88,523 | ||||||
No sales to an individual customer or country other than the United States accounted for more than 10% of revenue for fiscal years 2025, 2024, or 2023. Revenue, classified by the major geographic areas in which our customers were located, was as follows:
| (In millions) | ||||||||||||
| Year Ended June 30, | 2025 | 2024 | 2023 | |||||||||
| United States (a) | $ | 144,546 | $ | 124,704 | $ | 106,744 | ||||||
| Other countries | 137,178 | 120,418 | 105,171 | |||||||||
| Total | $ | 281,724 | $ | 245,122 | $ | 211,915 | ||||||
(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.
PART II
Item 8
Revenue, classified by significant product and service offerings, was as follows:
| (In millions) | ||||||||||||
| Year Ended June 30, | 2025 | 2024 | 2023 | |||||||||
| Server products and cloud services | $ | 98,435 | $ | 79,828 | $ | 65,007 | ||||||
| Microsoft 365 Commercial products and cloud services | 87,767 | 76,969 | 66,949 | |||||||||
| Gaming | 23,455 | 21,503 | 15,466 | |||||||||
| 17,812 | 16,372 | 14,989 | ||||||||||
| Windows and Devices | 17,314 | 17,026 | 17,147 | |||||||||
| Search and news advertising | 13,878 | 12,306 | 12,125 | |||||||||
| Dynamics products and cloud services | 7,827 | 6,831 | 5,796 | |||||||||
| Enterprise and partner services | 7,760 | 7,594 | 7,900 | |||||||||
| Microsoft 365 Consumer products and cloud services | 7,404 | 6,648 | 6,417 | |||||||||
| Other | 72 | 45 | 119 | |||||||||
| Total | $ | 281,724 | $ | 245,122 | $ | 211,915 | ||||||
Our Microsoft Cloud revenue, which includes Microsoft 365 Commercial cloud, Azure and other cloud services, the commercial portion of LinkedIn, and Dynamics 365, was $168.9 billion, $137.7 billion, and $111.6 billion in fiscal years 2025, 2024, and 2023, respectively. These amounts are included in Microsoft 365 Commercial products and cloud services, Server products and 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 for us to separately identify the amount of amortization and depreciation by segment that is included in the measure of segment profit or loss.
Long-lived assets, excluding financial instruments and tax assets, classified by the location of the controlling statutory company and with countries over 10% of the total shown separately, were as follows:
| (In millions) | ||||||||||||
| June 30, | 2025 | 2024 | 2023 | |||||||||
| United States | $ | 230,069 | $ | 186,106 | $ | 114,380 | ||||||
| Other countries | 141,833 | 115,263 | 72,859 | |||||||||
| Total | $ | 371,902 | $ | 301,369 | $ | 187,239 | ||||||
PART II
Item 8
REPORT OF INDEPENDENT REGIST****ERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Microsoft Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Microsoft Corporation and subsidiaries (the "Company") as of June 30, 2025 and 2024, the related consolidated statements of income, comprehensive income, cash flows, and stockholders' equity, for each of the three years in the period ended June 30, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 30, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
PART II
Item 8
Revenue Recognition – Refer to Note 1 to the financial statements
Critical Audit Matter Description
The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company offers customers the ability to acquire multiple licenses of software products and services, including cloud-based services, in its customer agreements through its volume licensing programs.
Significant judgment is exercised by the Company in determining revenue recognition for certain customer agreements, and includes the following:
Determination of whether products and services are considered distinct performance obligations that should be accounted for separately versus together, such as software licenses and related services that are sold with cloud-based services.
The pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance obligation.
Identification and treatment of contract terms that may impact the timing and amount of revenue recognized (e.g., variable consideration, optional purchases, and free services).
Determination of stand-alone selling prices for each distinct performance obligation and for products and services that are not sold separately.
Given these factors and due to the volume of transactions, the related audit effort in evaluating management's judgments in determining revenue recognition for certain customer agreements was extensive and required a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our principal audit procedures related to the Company's revenue recognition for certain customer agreements included the following:
We tested the effectiveness of controls related to the identification of distinct performance obligations, the determination of the timing of revenue recognition, and the estimation of variable consideration.
We evaluated management's significant accounting policies related to certain customer agreements for reasonableness.
We selected a sample of customer agreements and performed the following procedures:
o
Obtained and read contract source documents for each selection, including master agreements, and other documents that were part of the agreement.
o
Tested management's identification and treatment of contract terms.
o
Assessed the terms in the customer agreement and evaluated the appropriateness of management's application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions.
We evaluated the reasonableness of management's estimate of stand-alone selling prices for products and services that are not sold separately.
We tested the mathematical accuracy of management's calculations of revenue and the associated timing of revenue recognized in the financial statements.
PART II
Item 8
Income Taxes – Uncertain Tax Positions – Refer to Note 11 to the financial statements
Critical Audit Matter Description
The Company’s long-term income taxes liability includes uncertain tax positions related to transfer pricing issues that remain unresolved with the Internal Revenue Service (“IRS”). The Company remains under IRS audit, or subject to IRS audit, for tax years subsequent to 2003. During fiscal year 2024, the Company received Notices of Proposed Adjustments (“NOPAs”) for the tax years 2004 to 2013, primarily related to intercompany transfer pricing. While the Company has settled a portion of the IRS audits, resolution of the remaining matters could have a material impact on the Company’s financial statements.
Conclusions on recognizing and measuring uncertain tax positions involve significant estimates and management judgment and include complex considerations of the Internal Revenue Code, related regulations, tax case laws, and prior-year audit settlements. Given the complexity and the subjective nature of certain transfer pricing issues that remain unresolved with the IRS, evaluating management’s estimates relating to their determination of uncertain tax positions required a high degree of auditor judgment, including involvement of our tax specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our principal audit procedures to evaluate management’s estimates of uncertain tax positions related to unresolved transfer pricing issues included the following:
We evaluated management’s methods and assumptions used in the measurement and disclosure of uncertain tax positions, which included testing the effectiveness of the related internal controls.
We tested the reasonableness of management’s judgments regarding the future resolution of uncertain tax positions, as follows:
o
We evaluated whether management had appropriately considered new information that could significantly change the measurement of the uncertain tax positions.
o
We evaluated the reasonableness of management’s estimates by considering how changes in tax law, including statutes, regulations, and recent case law, impacted management’s judgments.
We evaluated the appropriateness of the disclosures in relation to the underlying facts, judgments, and conclusions.
/s/ DELOITTE & TOUCHE LLP
Seattle, Washington
July 30, 2025
We have served as the Company's auditor since 1983.
PART II
Item 9, 9A
Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE