filings.toolsCover and table of contents
43K characters. Original on sec.gov · Markdown
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, 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, 2023 | |
| OR | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the Transition Period From to |
Commission File Number 001-37845
MICROSOFT CORPORATION
| Washington | 91-1144442 | |
| (STATE OF INCORPORATION) | (I.R.S. ID) |
ONE MICROSOFT WAY**,** REDMOND**,** Washington 98052-6399
(425) 882-8080
| Securities registered pursuant to Section 12(b) of the Act: | ||||
| Title of each class | Trading Symbol | Name of exchange on which registered | ||
| Common stock, $0.00000625 par value per share | MSFT | Nasdaq | ||
| 3.125% Notes due 2028 | MSFT | Nasdaq | ||
| 2.625% Notes due 2033 | MSFT | Nasdaq |
Indicate 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 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 File 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 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-accelerated 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 Exchange 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 issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding as of October 19, 2023 | |||
| Common Stock, $0.00000625 par value per share | 7,432,262,329 shares |
MICROSOFT CORPORATION
FORM 10-Q
For the Quarter Ended September 30, 2023
INDEX
PART I
Item 1
PART I. FINANCI****AL INFORMATION
ITEM 1. FINANCI****AL STATEMENTS
INCOME STA****TEMENTS
| (In millions, except per share amounts) (Unaudited) | |||||||
| Three Months Ended September 30, | 2023 | 2022 | |||||
| Revenue: | |||||||
| Product | $ | 15,535 | $ | 15,741 | |||
| Service and other | 40,982 | 34,381 | |||||
| Total revenue | 56,517 | 50,122 | |||||
| Cost of revenue: | |||||||
| Product | 3,531 | 4,302 | |||||
| Service and other | 12,771 | 11,150 | |||||
| Total cost of revenue | 16,302 | 15,452 | |||||
| Gross margin | 40,215 | 34,670 | |||||
| Research and development | 6,659 | 6,628 | |||||
| Sales and marketing | 5,187 | 5,126 | |||||
| General and administrative | 1,474 | 1,398 | |||||
| Operating income | 26,895 | 21,518 | |||||
| Other income, net | 389 | 54 | |||||
| Income before income taxes | 27,284 | 21,572 | |||||
| Provision for income taxes | 4,993 | 4,016 | |||||
| Net income | $ | 22,291 | $ | 17,556 | |||
| Earnings per share: | |||||||
| Basic | $ | 3.00 | $ | 2.35 | |||
| Diluted | $ | 2.99 | $ | 2.35 | |||
| Weighted average shares outstanding: | |||||||
| Basic | 7,429 | 7,457 | |||||
| Diluted | 7,462 | 7,485 | |||||
Refer to accompanying notes.
PART I
Item 1
COMPREHENSIVE IN****COME STATEMENTS
| (In millions) (Unaudited) | |||||||
| Three Months Ended September 30, | 2023 | 2022 | |||||
| Net income | $ | 22,291 | $ | 17,556 | |||
| Other comprehensive income (loss), net of tax: | |||||||
| Net change related to derivatives | 21 | 7 | |||||
| Net change related to investments | **(**260 | ) | (1,897 | ) | |||
| Translation adjustments and other | **(**355 | ) | (775 | ) | |||
| Other comprehensive loss | **(**594 | ) | (2,665 | ) | |||
| Comprehensive income | $ | 21,697 | $ | 14,891 | |||
Refer to accompanying notes.
PART I
Item 1
BALANCE SHEETS
| (In millions) (Unaudited) | ||||||||
| September 30, 2023 | June 30, 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 80,452 | $ | 34,704 | ||||
| Short-term investments | 63,499 | 76,558 | ||||||
| Total cash, cash equivalents, and short-term investments | 143,951 | 111,262 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of **$**512 and $650 | 36,953 | 48,688 | ||||||
| Inventories | 3,000 | 2,500 | ||||||
| Other current assets | 23,682 | 21,807 | ||||||
| Total current assets | 207,586 | 184,257 | ||||||
| Property and equipment, net of accumulated depreciation of **$**69,486 and $68,251 | 102,502 | 95,641 | ||||||
| Operating lease right-of-use assets | 15,435 | 14,346 | ||||||
| Equity investments | 11,423 | 9,879 | ||||||
| Goodwill | 67,790 | 67,886 | ||||||
| Intangible assets, net | 8,895 | 9,366 | ||||||
| Other long-term assets | 32,154 | 30,601 | ||||||
| Total assets | $ | 445,785 | $ | 411,976 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 19,307 | $ | 18,095 | ||||
| Short-term debt | 25,808 | 0 | ||||||
| Current portion of long-term debt | 3,748 | 5,247 | ||||||
| Accrued compensation | 6,990 | 11,009 | ||||||
| Short-term income taxes | 8,035 | 4,152 | ||||||
| Short-term unearned revenue | 46,429 | 50,901 | ||||||
| Other current liabilities | 14,475 | 14,745 | ||||||
| Total current liabilities | 124,792 | 104,149 | ||||||
| Long-term debt | 41,946 | 41,990 | ||||||
| Long-term income taxes | 22,983 | 25,560 | ||||||
| Long-term unearned revenue | 2,759 | 2,912 | ||||||
| Deferred income taxes | 470 | 433 | ||||||
| Operating lease liabilities | 13,487 | 12,728 | ||||||
| Other long-term liabilities | 18,634 | 17,981 | ||||||
| Total liabilities | 225,071 | 205,753 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock and paid-in capital – shares authorized 24,000; outstanding 7,431 and 7,432 | 95,508 | 93,718 | ||||||
| Retained earnings | 132,143 | 118,848 | ||||||
| Accumulated other comprehensive loss | **(**6,937 | ) | (6,343 | ) | ||||
| Total stockholders’ equity | 220,714 | 206,223 | ||||||
| Total liabilities and stockholders’ equity | $ | 445,785 | $ | 411,976 | ||||
Refer to accompanying notes.
PART I
Item 1
CASH FLOWS STATEMENTS
| (In millions) (Unaudited) | ||||||||
| Three Months Ended September 30, | 2023 | 2022 | ||||||
| Operations | ||||||||
| Net income | $ | 22,291 | $ | 17,556 | ||||
| Adjustments to reconcile net income to net cash from operations: | ||||||||
| Depreciation, amortization, and other | 3,921 | 2,790 | ||||||
| Stock-based compensation expense | 2,507 | 2,192 | ||||||
| Net recognized losses (gains) on investments and derivatives | 14 | (22 | ) | |||||
| Deferred income taxes | **(**568 | ) | (1,191 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 11,034 | 11,729 | ||||||
| Inventories | **(**505 | ) | (543 | ) | ||||
| Other current assets | **(**796 | ) | (332 | ) | ||||
| Other long-term assets | **(**2,013 | ) | (666 | ) | ||||
| Accounts payable | 1,214 | (1,567 | ) | |||||
| Unearned revenue | **(**4,126 | ) | (3,322 | ) | ||||
| Income taxes | 1,425 | 410 | ||||||
| Other current liabilities | **(**4,106 | ) | (4,024 | ) | ||||
| Other long-term liabilities | 291 | 188 | ||||||
| Net cash from operations | 30,583 | 23,198 | ||||||
| Financing | ||||||||
| Proceeds from issuance of debt, maturities of 90 days or less, net | 18,692 | 0 | ||||||
| Proceeds from issuance of debt | 7,073 | 0 | ||||||
| Repayments of debt | **(**1,500 | ) | (1,000 | ) | ||||
| Common stock issued | 685 | 575 | ||||||
| Common stock repurchased | **(**4,831 | ) | (5,573 | ) | ||||
| Common stock cash dividends paid | **(**5,051 | ) | (4,621 | ) | ||||
| Other, net | **(**307 | ) | (264 | ) | ||||
| Net cash from (used in) financing | 14,761 | (10,883 | ) | |||||
| Investing | ||||||||
| Additions to property and equipment | **(**9,917 | ) | (6,283 | ) | ||||
| Acquisition of companies, net of cash acquired, and purchases of intangible and other assets | **(**1,186 | ) | (349 | ) | ||||
| Purchases of investments | **(**8,460 | ) | (5,013 | ) | ||||
| Maturities of investments | 15,718 | 6,662 | ||||||
| Sales of investments | 5,330 | 2,711 | ||||||
| Other, net | **(**982 | ) | (860 | ) | ||||
| Net cash from (used in) investing | 503 | (3,132 | ) | |||||
| Effect of foreign exchange rates on cash and cash equivalents | **(**99 | ) | (230 | ) | ||||
| Net change in cash and cash equivalents | 45,748 | 8,953 | ||||||
| Cash and cash equivalents, beginning of period | 34,704 | 13,931 | ||||||
| Cash and cash equivalents, end of period | $ | 80,452 | $ | 22,884 | ||||
Refer to accompanying notes.
PART I
Item 1
STOCKHOLDERS’ EQ****UITY STATEMENTS
| (In millions, except per share amounts) (Unaudited) | ||||||||
| Three Months Ended September 30, | 2023 | 2022 | ||||||
| Common stock and paid-in capital | ||||||||
| Balance, beginning of period | $ | 93,718 | $ | 86,939 | ||||
| Common stock issued | 685 | 575 | ||||||
| Common stock repurchased | **(**1,401 | ) | (1,171 | ) | ||||
| Stock-based compensation expense | 2,507 | 2,192 | ||||||
| Other, net | **(**1 | ) | 0 | |||||
| Balance, end of period | 95,508 | 88,535 | ||||||
| Retained earnings | ||||||||
| Balance, beginning of period | 118,848 | 84,281 | ||||||
| Net income | 22,291 | 17,556 | ||||||
| Common stock cash dividends | **(**5,571 | ) | (5,064 | ) | ||||
| Common stock repurchased | **(**3,425 | ) | (4,399 | ) | ||||
| Balance, end of period | 132,143 | 92,374 | ||||||
| Accumulated other comprehensive loss | ||||||||
| Balance, beginning of period | **(**6,343 | ) | (4,678 | ) | ||||
| Other comprehensive loss | **(**594 | ) | (2,665 | ) | ||||
| Balance, end of period | **(**6,937 | ) | (7,343 | ) | ||||
| Total stockholders’ equity | $ | 220,714 | $ | 173,566 | ||||
| Cash dividends declared per common share | $ | 0.75 | $ | 0.68 | ||||
Refer to accompanying notes.
PART I
Item 1
NOTES TO FINANCI****AL STATEMENTS
(Unaudited)
NOTE 1 — ACCOUNTING POLICIES
Accounting Principles
Our unaudited interim consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of 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 results 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 2023 Form 10-K filed with the U.S. Securities and Exchange Commission on July 27, 2023.
We have recast certain prior period amounts to conform to the current period presentation. The recast of these prior period amounts had no impact on our consolidated balance sheets, consolidated income statements, or consolidated cash flows statements.
Principles of Consolidation
The consolidated financial statements include the accounts of Microsoft Corporation and its subsidiaries. Intercompany transactions and balances have been eliminated.
Estimates and Assumptions
Preparing financial statements requires management to make estimates and assumptions that affect 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 consideration, 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 doubtful 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 determining the timing and amount of impairments for investments. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties.
Financial Instruments
Investments
We consider all highly liquid interest-earning investments with a maturity of three months 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. Investments 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.
Debt investments are classified as available-for-sale and realized gains 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 cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost. To determine credit losses, we employ a systematic methodology that considers available quantitative and 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 fair 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.
PART I
Item 1
Equity investments with readily determinable fair values are measured at 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 recognize 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.
Derivatives
Derivative instruments are recognized as either assets or liabilities and measured at fair value. The accounting for changes in the fair value of a derivative depends 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 excluded 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 corresponding 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 income (expense), net.
Fair Value Measurements
We 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 one 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, common and preferred stock, and mutual funds. Our Level 1 derivative assets and liabilities include those actively traded on exchanges.
Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are 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 flows 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, 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 typically reflect management’s 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 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 without 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 assets and current financial liabilities have fair values that approximate their carrying values.
PART I
Item 1
Contract Balances and Other Receivables
As of both September 30, 2023 and June 30, 2023, long-term accounts receivable, net of allowance for doubtful accounts, was $4.5 billion and is included in other long-term assets in our consolidated balance sheets.
As of September 30, 2023 and June 30, 2023, other receivables related to activities to facilitate the purchase of server components were $10.2 billion and $9.2 billion, respectively, and are included in other current assets in our consolidated 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, 2023 and June 30, 2023, our financing receivables, net were $4.8 billion and $5.3 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 other currently available evidence.
NOTE 2 — EARNINGS PER SHARE
Basic 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 outstanding 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, | 2023 | 2022 | ||||||
| Net income available for common shareholders (A) | $ | 22,291 | $ | 17,556 | ||||
| Weighted average outstanding shares of common stock (B) | 7,429 | 7,457 | ||||||
| Dilutive effect of stock-based awards | 33 | 28 | ||||||
| Common stock and common stock equivalents (C) | 7,462 | 7,485 | ||||||
| Earnings Per Share | ||||||||
| Basic (A/B) | $ | 3.00 | $ | 2.35 | ||||
| Diluted (A/C) | $ | 2.99 | $ | 2.35 | ||||
Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.
PART I
Item 1
NOTE 3 — OTHER INCOME (EXPENSE), NET
The components of other income (expense), net were as follows:
| (In millions) | ||||||||
| Three Months Ended September 30, | 2023 | 2022 | ||||||
| Interest and dividends income | $ | 1,166 | $ | 641 | ||||
| Interest expense | **(**525 | ) | (500 | ) | ||||
| Net recognized gains (losses) on investments | **(**107 | ) | 13 | |||||
| Net gains on derivatives | 93 | 9 | ||||||
| Net losses on foreign currency remeasurements | **(**101 | ) | (78 | ) | ||||
| Other, net | **(**137 | ) | (31 | ) | ||||
| Total | $ | 389 | $ | 54 | ||||
Net Recognized Gains (Losses) on Investments
Net recognized gains (losses) on debt investments were as follows:
| (In millions) | ||||||||
| Three Months Ended September 30, | 2023 | 2022 | ||||||
| Realized gains from sales of available-for-sale securities | $ | 2 | $ | 3 | ||||
| Realized losses from sales of available-for-sale securities | **(**25 | ) | (20 | ) | ||||
| Impairments and allowance for credit losses | **(**6 | ) | (18 | ) | ||||
| Total | $ | **(**29 | ) | $ | (35 | ) | ||
Net recognized gains (losses) on equity investments were as follows:
| (In millions) | ||||||||
| Three Months Ended September 30, | 2023 | 2022 | ||||||
| Net realized gains on investments sold | $ | 45 | $ | 83 | ||||
| Net unrealized losses on investments still held | **(**123 | ) | (28 | ) | ||||
| Impairments of investments | 0 | (7 | ) | |||||
| Total | $ | **(**78 | ) | $ | 48 | |||
PART I
Item 1
NOTE 4 — INVESTMENTS
Investment Components
The components of investments were as follows:
| (In millions) | Fair Value Level | Adjusted Cost Basis | Unrealized Gains | Unrealized Losses | Recorded Basis | Cash and Cash Equivalents | Short-term Investments | Equity Investments | |||||||||||||||||
| September 30, 2023 | |||||||||||||||||||||||||
| Changes in Fair Value Recorded in Other Comprehensive Income | |||||||||||||||||||||||||
| Commercial paper | Level 2 | $ | 3,008 | $ | 0 | $ | 0 | $ | 3,008 | $ | 3,005 | $ | 3 | $ | 0 | ||||||||||
| Certificates of deposit | Level 2 | 1,694 | 0 | 0 | 1,694 | 1,650 | 44 | 0 | |||||||||||||||||
| U.S. government securities | Level 1 | 56,210 | 2 | **(**4,147 | ) | 52,065 | 255 | 51,810 | 0 | ||||||||||||||||
| U.S. agency securities | Level 2 | 29 | 0 | 0 | 29 | 0 | 29 | 0 | |||||||||||||||||
| Foreign government bonds | Level 2 | 516 | 1 | **(**24 | ) | 493 | 5 | 488 | 0 | ||||||||||||||||
| Mortgage- and asset-backed securities | Level 2 | 863 | 1 | **(**52 | ) | 812 | 0 | 812 | 0 | ||||||||||||||||
| Corporate notes and bonds | Level 2 | 10,443 | 3 | **(**612 | ) | 9,834 | 0 | 9,834 | 0 | ||||||||||||||||
| Corporate notes and bonds | Level 3 | 122 | 0 | 0 | 122 | 0 | 122 | 0 | |||||||||||||||||
| Municipal securities | Level 2 | 283 | 1 | **(**21 | ) | 263 | 0 | 263 | 0 | ||||||||||||||||
| Municipal securities | Level 3 | 104 | 0 | **(**16 | ) | 88 | 0 | 88 | 0 | ||||||||||||||||
| Total debt investments | $ | 73,272 | $ | 8 | $ | **(**4,872 | ) | $ | 68,408 | $ | 4,915 | $ | 63,493 | $ | 0 | ||||||||||
| Changes in Fair Value Recorded in Net Income | |||||||||||||||||||||||||
| Equity investments | Level 1 | $ | 70,729 | $ | 68,159 | $ | 0 | $ | 2,570 | ||||||||||||||||
| Equity investments | Other | 8,853 | 0 | 0 | 8,853 | ||||||||||||||||||||
| Total equity investments | $ | 79,582 | $ | 68,159 | $ | 0 | $ | 11,423 | |||||||||||||||||
| Cash | $ | 7,378 | $ | 7,378 | $ | 0 | $ | 0 | |||||||||||||||||
| Derivatives, net (a) | 6 | 0 | 6 | 0 | |||||||||||||||||||||
| Total | $ | 155,374 | $ | 80,452 | $ | 63,499 | $ | 11,423 | |||||||||||||||||
PART I
Item 1
| (In millions) | Fair Value Level | Adjusted Cost Basis | Unrealized Gains | Unrealized Losses | Recorded Basis | Cash and Cash Equivalents | Short-term Investments | Equity Investments | |||||||||||||||||
| June 30, 2023 | |||||||||||||||||||||||||
| Changes in Fair Value Recorded in Other Comprehensive Income | |||||||||||||||||||||||||
| Commercial paper | Level 2 | $ | 16,589 | $ | 0 | $ | 0 | $ | 16,589 | $ | 12,231 | $ | 4,358 | $ | 0 | ||||||||||
| Certificates of deposit | Level 2 | 2,701 | 0 | 0 | 2,701 | 2,657 | 44 | 0 | |||||||||||||||||
| U.S. government securities | Level 1 | 65,237 | 2 | (3,870 | ) | 61,369 | 2,991 | 58,378 | 0 | ||||||||||||||||
| U.S. agency securities | Level 2 | 2,703 | 0 | 0 | 2,703 | 894 | 1,809 | 0 | |||||||||||||||||
| Foreign government bonds | Level 2 | 498 | 1 | (24 | ) | 475 | 0 | 475 | 0 | ||||||||||||||||
| Mortgage- and asset-backed securities | Level 2 | 824 | 1 | (39 | ) | 786 | 0 | 786 | 0 | ||||||||||||||||
| Corporate notes and bonds | Level 2 | 10,809 | 8 | (583 | ) | 10,234 | 0 | 10,234 | 0 | ||||||||||||||||
| Corporate notes and bonds | Level 3 | 120 | 0 | 0 | 120 | 0 | 120 | 0 | |||||||||||||||||
| Municipal securities | Level 2 | 285 | 1 | (18 | ) | 268 | 7 | 261 | 0 | ||||||||||||||||
| Municipal securities | Level 3 | 103 | 0 | (16 | ) | 87 | 0 | 87 | 0 | ||||||||||||||||
| Total debt investments | $ | 99,869 | $ | 13 | $ | (4,550 | ) | $ | 95,332 | $ | 18,780 | $ | 76,552 | $ | 0 | ||||||||||
| Changes in Fair Value Recorded in Net Income | |||||||||||||||||||||||||
| Equity investments | Level 1 | $ | 10,138 | $ | 7,446 | $ | 0 | $ | 2,692 | ||||||||||||||||
| Equity investments | Other | 7,187 | 0 | 0 | 7,187 | ||||||||||||||||||||
| Total equity investments | $ | 17,325 | $ | 7,446 | $ | 0 | $ | 9,879 | |||||||||||||||||
| Cash | $ | 8,478 | $ | 8,478 | $ | 0 | $ | 0 | |||||||||||||||||
| Derivatives, net (a) | 6 | 0 | 6 | 0 | |||||||||||||||||||||
| Total | $ | 121,141 | $ | 34,704 | $ | 76,558 | $ | 9,879 | |||||||||||||||||
(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 using the equity method or measured at cost with adjustments for observable changes in price or impairments, and investments measured at fair value using net asset value as a practical expedient which are not categorized in the fair value hierarchy. As of both September 30, 2023 and June 30, 2023, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $4.2 billion.
PART I
Next: Item 1. Unrealized Losses on Debt Investments