Microsoft 10-Q 2025-03-31

Filed 2025-04-30. 8 sections, 277K characters. Original on sec.gov · Markdown · JSON

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 March 31, 2025
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

Washington91-1144442
(STATE OF INCORPORATION)(I.R.S. ID)

ONE MICROSOFT WAY**,** REDMOND**,** Washington 98052-6399

(425) 882-8080

www.microsoft.com/investor

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common stock, $0.00000625 par value per shareMSFTNasdaq
3.125% Notes due 2028MSFTNasdaq
2.625% Notes due 2033MSFTNasdaq

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.

ClassOutstanding as of April 24, 2025
Common Stock, $0.00000625 par value per share7,432,543,865 shares

MICROSOFT CORPORATION

FORM 10-Q

For the Quarter Ended March 31, 2025

INDEX

Page
PART I.FINANCIAL INFORMATION
Item 1.Financial Statements
a)Income Statements for the Three and Nine Months Ended March 31, 2025 and 20243
b)Comprehensive Income Statements for the Three and Nine Months Ended March 31, 2025 and 20244
c)Balance Sheets as of March 31, 2025 and June 30, 20245
d)Cash Flows Statements for the Three and Nine Months Ended March 31, 2025 and 20246
e)Stockholders’ Equity Statements for the Three and Nine Months Ended March 31, 2025 and 20247
f)Notes to Financial Statements8
g)Report of Independent Registered Public Accounting Firm31
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations32
Item 3.Quantitative and Qualitative Disclosures About Market Risk47
Item 4.Controls and Procedures47
PART II.OTHER INFORMATION
Item 1.Legal Proceedings48
Item 1A.Risk Factors48
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds63
Item 5.Other Information64
Item 6.Exhibits65
SIGNATURE66

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 March 31,Nine Months Ended March 31,
2025202420252024
Revenue:
Product$15,319$17,080$46,810$51,556
Service and other54,74744,778158,473128,839
Total revenue70,06661,858205,283180,395
Cost of revenue:
Product3,0374,33910,18713,834
Service and other18,88214,16653,63040,596
Total cost of revenue21,91918,50563,81754,430
Gross margin48,14743,353141,466125,965
Research and development8,1987,65323,65921,454
Sales and marketing6,2126,20718,36917,640
General and administrative1,7371,9125,2335,363
Operating income32,00027,58194,20581,508
Other expense, net**(**623)(854)**(**3,194)(971)
Income before income taxes31,37726,72791,01180,537
Provision for income taxes5,5534,78816,41214,437
Net income$25,824$21,939$74,599$66,100
Earnings per share:
Basic$3.47$2.95$10.03$8.90
Diluted$3.46$2.94$9.99$8.85
Weighted average shares outstanding:
Basic7,4347,4317,4347,431
Diluted7,4617,4727,4667,467

Refer to accompanying notes.

PART I

Item 1

COMPREHENSIVE INCOME STATEMENTS

(In millions) (Unaudited)Three Months Ended March 31,Nine Months Ended March 31,
2025202420252024
Net income$25,824$21,939$74,599$66,100
Other comprehensive income (loss), net of tax:
Net change related to derivatives**(**20)10428
Net change related to investments450(202)1,130869
Translation adjustments and other353(294)**(**377)11
Other comprehensive income (loss)783(486)757908
Comprehensive income$26,607$21,453$75,356$67,008

Refer to accompanying notes.

PART I

Item 1

BALANCE SHEETS

(In millions) (Unaudited)
March 31, 2025June 30, 2024
Assets
Current assets:
Cash and cash equivalents$28,828$18,315
Short-term investments50,79057,228
Total cash, cash equivalents, and short-term investments79,61875,543
Accounts receivable, net of allowance for doubtful accounts of **$**695 and $83051,70056,924
Inventories8481,246
Other current assets24,47826,021
Total current assets156,644159,734
Property and equipment, net of accumulated depreciation of **$**87,074 and $76,421183,939135,591
Operating lease right-of-use assets24,47518,961
Equity and other investments16,03514,600
Goodwill119,329119,220
Intangible assets, net23,96827,597
Other long-term assets38,23436,460
Total assets$562,624$512,163
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$26,250$21,996
Short-term debt06,693
Current portion of long-term debt2,9992,249
Accrued compensation10,57912,564
Short-term income taxes6,8055,017
Short-term unearned revenue44,63657,582
Other current liabilities22,93719,185
Total current liabilities114,206125,286
Long-term debt39,88242,688
Long-term income taxes25,06127,931
Long-term unearned revenue2,8402,602
Deferred income taxes2,5222,618
Operating lease liabilities17,68615,497
Other long-term liabilities38,53627,064
Total liabilities240,733243,686
Commitments and contingencies
Stockholders’ equity:
Common stock and paid-in capital – shares authorized 24,000; outstanding 7,434 and 7,434106,965100,923
Retained earnings219,759173,144
Accumulated other comprehensive loss**(**4,833)(5,590)
Total stockholders’ equity321,891268,477
Total liabilities and stockholders’ equity$562,624$512,163

Refer to accompanying notes.

PART I

Item 1

CASH FLOWS STATEMENTS

(In millions) (Unaudited)Three Months Ended March 31,Nine Months Ended March 31,
2025202420252024
Operations
Net income$25,824$21,939$74,599$66,100
Adjustments to reconcile net income to net cash from operations:
Depreciation, amortization, and other8,7406,02722,95015,907
Stock-based compensation expense2,9802,7038,9018,038
Net recognized losses (gains) on investments and derivatives**(**298)49553261
Deferred income taxes**(**2,244)(1,323)**(**4,835)(3,593)
Changes in operating assets and liabilities:
Accounts receivable**(**2,461)(2,028)5,5986,055
Inventories522603901,229
Other current assets1,076951642880
Other long-term assets**(**518)(2,137)**(**3,368)(5,577)
Accounts payable1,1796481,221(659)
Unearned revenue**(**1,032)(645)**(**12,923)(10,309)
Income taxes1,2982,622**(**1,081)2,493
Other current liabilities2,8392,803576215
Other long-term liabilities**(**391)48292313
Net cash from operations37,04431,91793,51581,353
Financing
Proceeds from issuance (repayments) of debt, maturities of 90 days or less, net0(3,810)**(**5,746)6,392
Proceeds from issuance of debt06,352024,198
Repayments of debt**(**2,250)(11,589)**(**3,216)(16,005)
Common stock issued5465221,5081,468
Common stock repurchased**(**4,781)(4,213)**(**13,874)(13,044)
Common stock cash dividends paid**(**6,169)(5,572)**(**17,913)(16,197)
Other, net**(**382)(498)**(**1,614)(1,006)
Net cash used in financing**(**13,036)(18,808)**(**40,855)(14,194)
Investing
Additions to property and equipment**(**16,745)(10,952)**(**47,472)(30,604)
Acquisition of companies, net of cash acquired and divestitures, and purchases of intangible and other assets**(**981)(1,575)**(**4,235)(67,790)
Purchases of investments**(**4,474)(2,183)**(**8,144)(14,901)
Maturities of investments6,7213,35011,46123,218
Sales of investments2,1611,9416,6888,871
Other, net604(1,281)**(**325)(916)
Net cash used in investing**(**12,714)(10,700)**(**42,027)(82,122)
Effect of foreign exchange rates on cash and cash equivalents52(80)**(**120)(107)
Net change in cash and cash equivalents11,3462,32910,513(15,070)
Cash and cash equivalents, beginning of period17,48217,30518,31534,704
Cash and cash equivalents, end of period$28,828$19,634$28,828$19,634

Refer to accompanying notes.

PART I

Item 1

STOCKHOLDERS’ EQ****UITY STATEMENTS

(In millions, except per share amounts) (Unaudited)Three Months Ended March 31,Nine Months Ended March 31,
2025202420252024
Common stock and paid-in capital
Balance, beginning of period$104,829$97,480$100,923$93,718
Common stock issued5465221,5081,468
Common stock repurchased**(**1,390)(1,512)**(**4,366)(4,213)
Stock-based compensation expense2,9802,7038,9018,038
Other, net00**(**1)182
Balance, end of period106,96599,193106,96599,193
Retained earnings
Balance, beginning of period203,482145,737173,144118,848
Net income25,82421,93974,59966,100
Common stock cash dividends**(**6,168)(5,573)**(**18,508)(16,718)
Common stock repurchased**(**3,379)(2,709)**(**9,476)(8,836)
Balance, end of period219,759159,394219,759159,394
Accumulated other comprehensive loss
Balance, beginning of period**(**5,616)(4,949)**(**5,590)(6,343)
Other comprehensive income (loss)783(486)757908
Balance, end of period**(**4,833)(5,435)**(**4,833)(5,435)
Total stockholders’ equity$321,891$253,152$321,891$253,152
Cash dividends declared per common share$0.83$0.75$2.49$2.25

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 2024 Form 10-K and Form 8-K filed with the U.S. Securities and Exchange Commission on July 30, 2024 and December 3, 2024, respectively.

Principles of Consolidation

The consolidated financial statements include the accounts of Microsoft Corporation and its subsidiaries. Intercompany transactions and balances have been eliminated.

Recast of Certain Prior Period Information

In August 2024, we announced changes to the composition of our segments. These changes align our segments with how we currently 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 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 Information 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 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.

PART I

Item 1

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.

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.

Investments that are considered variable interest entities (“VIEs”) are evaluated to determine whether we are the primary 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 VIE’s economic performance, and (2) the obligation to absorb losses or the right to receive benefits from the VIE that 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 (“OpenAI”) and have made total funding commitments of $13 billion. The investment is accounted for under the equity method of accounting.

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.

PART I

Item 1

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.

Contract Balances and Other Receivables

As of both March 31, 2025 and June 30, 2024, long-term accounts receivable, net of allowance for doubtful accounts, was $4.9 billion and is included in other long-term assets in our consolidated balance sheets.

As of March 31, 2025 and June 30, 2024, other receivables related to activities to facilitate the purchase of server components were $10.8 billion and $10.5 billion, respectively, and are included in other current assets in our consolidated balance sheets.

We record financing receivables when we offer certain customers the option to acquire our software products and services offerings through a financing program in a limited number of countries. As of March 31, 2025 and June 30, 2024, our financing receivables, net were $2.6 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 other currently available evidence.

Related Party Transactions

In March 2024, we entered into an agreement with Inflection AI, Inc. (“Inflection”), pursuant to which we obtained a non-exclusive license to Inflection’s intellectual property. Reid Hoffman, a member of our Board of Directors, is a co-founder of and 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 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 I

Item 1

Recent Accounting Guidance

Segment Reporting – Improvements to Reportable Segment Disclosures

In 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 consolidated 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 standard on our segment disclosures.

Income Taxes – Improvements to Income Tax Disclosures

In 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 effective 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.

Income Statement – Disaggregation of Income Statement Expenses

In November 2024, the FASB issued a new standard to expand disclosures about income statement expenses. The guidance requires disaggregation of certain costs and expenses included in each relevant expense caption on our consolidated income statements in a separate note to the financial statements at each interim and annual reporting period, including amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The standard will be effective for us beginning with our annual reporting for fiscal year 2028 and interim periods thereafter, with early adoption permitted. We are currently evaluating the impact of this standard on our disclosures.

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 per share amounts)Three Months Ended March 31,Nine Months Ended March 31,
2025202420252024
Net income available for common shareholders (A)$25,824$21,939$74,599$66,100
Weighted average outstanding shares of common stock (B)7,4347,4317,4347,431
Dilutive effect of stock-based awards27413236
Common stock and common stock equivalents (C)7,4617,4727,4667,467
Earnings Per Share
Basic (A/B)$3.47$2.95$10.03$8.90
Diluted (A/C)$3.46$2.94$9.99$8.85

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 March 31,Nine Months Ended March 31,
2025202420252024
Interest and dividends income$597$619$1,878$2,519
Interest expense**(**594)(800)**(**1,770)(2,234)
Net recognized gains (losses) on investments111(25)**(**286)(63)
Net gains (losses) on derivatives187(24)**(**267)(198)
Net gains (losses) on foreign currency remeasurements89(138)112(203)
Other, net**(**1,013)(486)**(**2,861)(792)
Total$**(**623)$(854)$**(**3,194)$(971)

Other, net primarily reflects net recognized losses on equity method investments, including OpenAI.

Net Recognized Gains (Losses) on Investments

Net recognized gains (losses) on debt investments were as follows:

(In millions)Three Months Ended March 31,Nine Months Ended March 31,
2025202420252024
Realized gains from sales of available-for-sale securities$8$8$25$14
Realized losses from sales of available-for-sale securities**(**17)(24)**(**51)(78)
Impairments and allowance for credit losses33115
Total$**(**6)$(13)$**(**25)$(49)

Net recognized gains (losses) on equity investments were as follows:

(In millions)Three Months Ended March 31,Nine Months Ended March 31,
2025202420252024
Net realized gains on investments sold$9$15$66$29
Net unrealized gains (losses) on investments still held135(7)572156
Impairments of investments**(**27)(20)**(**899)(199)
Total$117$(12)$**(**261)$(14)

PART I

Item 1

NOTE 4 — INVESTMENTS

Investment Components

The components of investments were as follows:

(In millions)Fair Value LevelAdjusted Cost BasisUnrealized GainsUnrealized LossesRecorded BasisCash and Cash EquivalentsShort-term InvestmentsEquity and Other Investments
March 31, 2025
Changes in Fair Value Recorded in Other Comprehensive Income
Commercial paperLevel 2$11,101$0$0$11,101$11,002$99$0
Certificates of depositLevel 23,517003,5173,473440
U.S. government securitiesLevel 142,3497**(**1,747)40,60985839,7510
U.S. agency securitiesLevel 21,953001,9531,94490
Foreign government bondsLevel 23216**(**13)31413130
Mortgage- and asset-backed securitiesLevel 21,6106**(**27)1,58901,5890
Corporate notes and bondsLevel 28,63762**(**139)8,56008,5600
Corporate notes and bondsLevel 32,4100**(**12)2,39801232,275
Municipal securitiesLevel 22161**(**9)20802080
Municipal securitiesLevel 31040**(**16)880880
Total debt investments$72,218$82$**(**1,963)$70,337$17,278$50,784$2,275
Changes in Fair Value Recorded in Net Income
Equity investmentsLevel 1$4,427$870$0$3,557
Equity investmentsOther9,930009,930
Total equity investments$14,357$870$0$13,487
Cash$10,680$10,680$0$0
Derivatives, net (a)27906273
Total$95,653$28,828$50,790$16,035

PART I

Item 1

(In millions)Fair Value LevelAdjusted Cost BasisUnrealized GainsUnrealized LossesRecorded BasisCash and Cash EquivalentsShort-term InvestmentsEquity and Other Investments
June 30, 2024
Changes in Fair Value Recorded in Other Comprehensive Income
Commercial paperLevel 2$4,666$0$0$4,666$4,666$0$0
Certificates of depositLevel 21,547001,5471,503440
U.S. government securitiesLevel 149,6034(2,948)46,6591446,6450
U.S. agency securitiesLevel 21700170170
Foreign government bondsLevel 23193(16)30603060
Mortgage- and asset-backed securitiesLevel 29443(35)91209120
Corporate notes and bondsLevel 29,10628(318)8,81608,8160
Corporate notes and bondsLevel 31,6410(1)1,64001401,500
Municipal securitiesLevel 22620(13)24902490
Municipal securitiesLevel 31040(17)870870
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 investmentsLevel 1$3,547$561$0$2,986
Equity investmentsOther10,1140010,114
Total equity investments$13,661$561$0$13,100
Cash$11,571$11,571$0$0
Derivatives, net (a)120120
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 adjustments 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 March 31, 2025 and June 30, 2024, equity investments without readily determinable fair values measured at cost with adjustments for observable changes in price or impairments were $2.9 billion and $3.9 billion, respectively, and equity investments measured using the equity method were $6.8 billion and $6.0 billion, respectively.

PART I

Item 1. Unrealized Losses on Debt Investments

Unrealized Losses on Debt Investments

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 Months12 Months or GreaterTotal Unrealized Losses
(In millions)Fair ValueUnrealized LossesFair ValueUnrealized LossesTotal Fair Value
March 31, 2025
U.S. government and agency securities$492$**(**50)$38,754$**(**1,697)$39,246$**(**1,747)
Foreign government bonds66**(**3)127**(**10)193**(**13)
Mortgage- and asset-backed securities649**(**3)227**(**24)876**(**27)
Corporate notes and bonds1,720**(**14)3,629**(**137)5,349**(**151)
Municipal securities00212**(**25)212**(**25)
Total$2,927$**(**70)$42,949$**(**1,893)$45,876$**(**1,963)
Less than 12 Months12 Months or GreaterTotal Unrealized Losses
(In millions)Fair ValueUnrealized LossesFair ValueUnrealized LossesTotal Fair Value
June 30, 2024
U.S. government and agency securities$529$(12)$45,821$(2,936)$46,350$(2,948)
Foreign government bonds79(2)180(14)259(16)
Mortgage- and asset-backed securities201(1)409(34)610(35)
Corporate notes and bonds1,310(9)5,779(310)7,089(319)
Municipal securities38(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 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 March 31, 2025:

(In millions)Adjusted Cost BasisEstimated Fair Value
March 31, 2025
Due in one year or less$31,746$31,609
Due after one year through five years32,12730,870
Due after five years through 10 years6,9196,530
Due after 10 years1,4261,328
Total$72,218$70,337

NOTE 5 — DERIVATIVES

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. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative 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 of our foreign currency hedge positions.

PART I

Item 1

Foreign 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 used 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 effectively 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 certain 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 hold 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

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Item 2. Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Revenue increased $8.2 billion or 13% with growth across each of our segments. Intelligent Cloud revenue increased driven by Azure. Productivity and Business Processes revenue increased driven by Microsoft 365 Commercial cloud. More Personal Computing revenue increased driven by Search and news advertising.

Cost of revenue increased $3.4 billion or 18% driven by growth in Microsoft Cloud.

Gross margin increased $4.8 billion or 11% with growth across each of our segments.

Gross margin percentage decreased driven by Intelligent Cloud.

Microsoft Cloud gross margin percentage decreased to 69% driven by the impact of scaling our AI infrastructure.

Operating expenses increased $375 million or 2% driven by investments in cloud and AI engineering.

Operating income increased $4.4 billion or 16% with growth across each of our segments.

Revenue, gross margin, and operating income included an unfavorable foreign currency impact of 2%, 2%, and 3%, respectively. Cost of goods sold included a favorable foreign currency impact of 2%.

Nine Months Ended March 31, 2025 Compared with Nine Months Ended March 31, 2024

Revenue increased $24.9 billion or 14% with growth across each of our segments. Intelligent Cloud revenue increased driven by Azure. Productivity and Business Processes revenue increased driven by Microsoft 365 Commercial cloud. More Personal Computing revenue increased driven by Gaming and Search and news advertising.

Cost of revenue increased $9.4 billion or 17% driven by growth in Microsoft Cloud.

Gross margin increased $15.5 billion or 12% with growth across each of our segments.

Gross margin percentage decreased slightly driven by Intelligent Cloud, offset in part by More Personal Computing.

Microsoft Cloud gross margin percentage decreased to 70% driven by the impact of scaling our AI infrastructure.

Operating expenses increased $2.8 billion or 6% driven by investments in cloud and AI engineering and the impact of the Activision Blizzard acquisition.

Operating income increased $12.7 billion or 16% with growth across each of our segments.

SEGMENT RESULTS OF OPERATIONS

(In millions, except percentages)Three Months Ended March 31,Percentage ChangeNine Months Ended March 31,Percentage Change
2025202420252024
Revenue
Productivity and Business Processes$29,944$27,11310%$87,698$78,19312%
Intelligent Cloud26,75122,14121%76,38763,67920%
More Personal Computing13,37112,6046%41,19838,5237%
Total$70,066$61,85813%$205,283$180,39514%
Operating Income
Productivity and Business Processes$17,379$15,14315%$50,780$43,95516%
Intelligent Cloud11,0959,51517%32,44927,97816%
More Personal Computing3,5262,92321%10,9769,57515%
Total$32,000$27,58116%$94,205$81,50816%

PART I

Item 2

Reportable Segments

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Productivity and Business Processes

Revenue increased $2.8 billion or 10%.

Microsoft 365 Commercial products and cloud services revenue increased $2.2 billion or 11%. Microsoft 365 Commercial cloud revenue grew 12% with Microsoft 365 Commercial seat growth of 7% driven by small and medium business and frontline worker offerings, as well as growth in revenue per user. Microsoft 365 Commercial products revenue grew 5% driven by the Windows Commercial on-premises components of Microsoft 365 suite sales and an increase in Office transactional purchasing.

Microsoft 365 Consumer products and cloud services revenue increased $173 million or 10%. Microsoft 365 Consumer cloud revenue grew 10% driven by Microsoft 365 Consumer subscriber growth of 9% to 87.7 million, as well as growth in revenue per user from the price increase announced in January 2025, offset in part by continued mix shift to Microsoft 365 Basic.

LinkedIn revenue increased $298 million or 7% with growth across all lines of business.

Dynamics products and cloud services revenue increased $189 million or 11% driven by growth in Dynamics 365, offset in part by a decline in Dynamics on-premises products. Dynamics 365 revenue grew 16% with growth across all workloads.

Operating income increased $2.2 billion or 15%.

Gross margin increased $2.3 billion or 10% driven by growth in Microsoft 365 Commercial cloud. Gross margin percentage was relatively unchanged inclusive of the impact of scaling our AI infrastructure.

Operating expenses increased $53 million or 1% primarily driven by investments in cloud and AI engineering.

Revenue, gross margin, and operating income each included an unfavorable foreign currency impact of 3%.

Intelligent Cloud

Revenue increased $4.6 billion or 21%.

Server products and cloud services revenue increased $4.5 billion or 22% driven by Azure and other cloud services. Azure and other cloud services revenue grew 33% driven by demand for our portfolio of services, including 16 points from our AI services. Server products revenue decreased 6% primarily driven by a decrease in transactional purchasing with continued customer shift to cloud offerings.

Enterprise and partner services revenue increased $85 million or 5% driven by growth in Enterprise Support Services, offset in part by a decline in Industry Solutions.

Operating income increased $1.6 billion or 17%.

Gross margin increased $1.9 billion or 13% driven by growth in Azure. Gross margin percentage decreased driven by the impact of scaling our AI infrastructure.

Operating expenses increased $302 million or 6% driven by investments in cloud and AI engineering.

More Personal Computing

Revenue increased $767 million or 6%.

Windows and Devices revenue increased $46 million or 1%. Windows OEM and Devices revenue increased 3% driven by growth in Windows OEM, with inventory levels remaining elevated due to tariff uncertainty.

Gaming revenue increased $270 million or 5% driven by growth in Xbox content and services. Xbox content and services revenue increased 8% driven by growth in Xbox Game Pass, Call of Duty, and Minecraft. Xbox hardware revenue decreased 6%.

PART I

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Search and news advertising revenue increased $449 million or 15%. Search and news advertising revenue excluding traffic acquisition costs increased 21% driven by higher revenue per search and higher search volume.

Operating income increased $603 million or 21%.

Gross margin increased $623 million or 9% driven by growth in Search and news advertising and Gaming. Gross margin percentage increased driven by improvement in Search and news advertising and Gaming.

Operating expenses increased $20 million or 1%.

Gross margin and operating income both included an unfavorable foreign currency impact of 2%.

Nine Months Ended March 31, 2025 Compared with Nine Months Ended March 31, 2024

Productivity and Business Processes

Revenue increased $9.5 billion or 12%.

Microsoft 365 Commercial products and cloud services revenue increased $7.4 billion or 13%. Microsoft 365 Commercial cloud revenue grew 14% driven by seat growth and growth in revenue per user. Microsoft 365 Commercial products revenue grew 7% driven by the Windows Commercial on-premises components of Microsoft 365 suite sales and an increase in Office transactional purchasing.

Microsoft 365 Consumer products and cloud services revenue increased $399 million or 8%. Microsoft 365 Consumer cloud revenue grew 8% with continued growth in Microsoft 365 Consumer subscribers.

LinkedIn revenue increased $1.1 billion or 9% with growth across all lines of business.

Dynamics products and cloud services revenue increased $666 million or 13% driven by growth in Dynamics 365, offset in part by a decline in Dynamics on-premises products. Dynamics 365 revenue grew 18% with growth across all workloads.

Operating income increased $6.8 billion or 16%.

Gross margin increased $7.4 billion or 12% driven by growth in Microsoft 365 Commercial cloud. Gross margin percentage decreased slightly driven by the impact of scaling our AI infrastructure.

Operating expenses increased $544 million or 3% driven by investments in cloud and AI engineering and commercial sales.

Intelligent Cloud

Revenue increased $12.7 billion or 20%.

Server products and cloud services revenue increased $12.6 billion or 22% driven by Azure and other cloud services. Azure and other cloud services revenue grew 32% driven by demand for our portfolio of services, including 14 points from our AI services. Server products revenue decreased 4% driven by a decrease in transactional purchasing.

Enterprise and partner services revenue increased slightly driven by growth in Enterprise Support Services, offset in part by a decline in Industry Solutions.

Operating income increased $4.5 billion or 16%.

Gross margin increased $5.6 billion or 13% driven by growth in Azure. Gross margin percentage decreased driven by the impact of scaling our AI infrastructure.

Operating expenses increased $1.2 billion or 8% driven by investments in cloud and AI engineering.

More Personal Computing

Revenue increased $2.7 billion or 7%.

Windows and Devices revenue increased $184 million or 1%. Windows OEM and Devices revenue increased 3% driven by growth in Windows OEM, offset in part by a decline in Devices.

PART I

Item 2

Gaming revenue increased $1.4 billion or 9% driven by growth in Xbox content and services, offset in part by a decline in Xbox hardware. Xbox content and services revenue increased 18% driven by the impact of the Activision Blizzard acquisition and Xbox Game Pass. Xbox hardware revenue decreased 26% driven by lower volume of consoles sold.

Search and news advertising revenue increased $1.0 billion or 11%. Search and news advertising revenue excluding traffic acquisition costs increased 20% driven by higher search volume and higher revenue per search.

Operating income increased $1.4 billion or 15%.

Gross margin increased $2.5 billion or 13% driven by growth in Gaming, including the impact of the Activision Blizzard acquisition, and Search and news advertising. Gross margin percentage increased driven by sales mix shift to higher margin businesses and improvement in Search and news advertising and Gaming.

Operating expenses increased $1.1 billion or 11% driven by the impact of the Activision Blizzard acquisition.

OPERATING EXPENSES

Research and Development

(In millions, except percentages)Three Months Ended March 31,Percentage ChangeNine Months Ended March 31,Percentage Change
2025202420252024
Research and development$8,198$7,6537%$23,659$21,45410%
As a percent of revenue12%12%0ppt12%12%0ppt

Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development. Research and development expenses also include technology development costs, including AI training and other infrastructure costs, third-party development and programming costs, and the amortization of purchased software code and services content.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Research and development expenses increased $545 million or 7% driven by investments in cloud and AI engineering.

Nine Months Ended March 31, 2025 Compared with Nine Months Ended March 31, 2024

Research and development expenses increased $2.2 billion or 10% driven by investments in cloud and AI engineering and the impact of the Activision Blizzard acquisition.

Sales and Marketing

(In millions, except percentages)Three Months Ended March 31,Percentage ChangeNine Months Ended March 31,Percentage Change
2025202420252024
Sales and marketing$6,212$6,2070%$18,369$17,6404%
As a percent of revenue9%10%(1)ppt9%10%(1)ppt

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, promotions, trade shows, seminars, and other programs.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Sales and marketing expenses were relatively unchanged.

PART I

Item 2

Nine Months Ended March 31, 2025 Compared with Nine Months Ended March 31, 2024

Sales and marketing expenses increased $729 million or 4% driven by the impact of the Activision Blizzard acquisition and investments in commercial sales.

General and Administrative

(In millions, except percentages)Three Months Ended March 31,Percentage ChangeNine Months Ended March 31,Percentage Change
2025202420252024
General and administrative$1,737$1,912(9)%$5,233$5,363(2)%
As a percent of revenue2%3%(1)ppt3%3%0ppt

General and administrative expenses include payroll, employee benefits, stock-based compensation expense, 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 March 31, 2025 Compared with Three Months Ended March 31, 2024

General and administrative expenses decreased $175 million or 9% primarily driven by Gaming.

Nine Months Ended March 31, 2025 Compared with Nine Months Ended March 31, 2024

General and administrative expenses decreased $130 million or 2% primarily driven by Gaming, offset in part by investments in corporate functions.

OTHER INCOME (EXPENSE), NET

The components of other income (expense), net were as follows:

(In millions)Three Months Ended March 31,Nine Months Ended March 31,
2025202420252024
Interest and dividends income$597$619$1,878$2,519
Interest expense(594)(800)(1,770)(2,234)
Net recognized gains (losses) on investments111(25)(286)(63)
Net gains (losses) on derivatives187(24)(267)(198)
Net gains (losses) on foreign currency remeasurements89(138)112(203)
Other, net(1,013)(486)(2,861)(792)
Total$(623)$(854)$(3,194)$(971)

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 instruments are primarily recognized in other income (expense), net.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Interest and dividends income decreased primarily due to lower portfolio balances. Interest expense decreased primarily due to maturities of commercial paper, offset in part by higher finance lease interest expense. Net recognized gains on investments increased primarily due to higher gains on equity investments in the current period. Net gains on derivatives increased primarily due to gains on equity derivatives in the current period as compared to losses in the prior period. Other, net primarily reflects net recognized losses on equity method investments, including OpenAI.

PART I

Item 2

Nine Months Ended March 31, 2025 Compared with Nine Months Ended March 31, 2024

Interest and dividends income decreased primarily due to lower portfolio balances. Interest expense decreased primarily due to maturities of commercial paper, offset in part by higher finance lease interest expense. Net recognized losses on investments increased primarily due to higher impairments, offset in part by higher gains on equity investments in the current period. Net losses on derivatives increased primarily due to higher losses on equity derivatives in the current period. Other, net primarily reflects net recognized losses on equity method investments, including OpenAI.

INCOME TAXES

Effective Tax Rate

Our effective tax rate was 18% for both the three months ended March 31, 2025 and 2024, and 18% for both the nine months ended March 31, 2025 and 2024. Our effective tax rate for the three months ended March 31, 2025 was primarily impacted by changes in the mix of our earnings and tax expenses between the U.S. and foreign countries. Our effective tax rate for the nine months ended March 31, 2025 was primarily impacted by tax benefits from tax law changes in the prior fiscal year, including the delay of the effective date of final foreign tax credit regulations, and changes in the mix of our earnings and tax expenses between the U.S. and foreign countries.

Our effective tax rate was lower than the U.S. federal statutory rate for the three and nine months ended March 31, 2025, 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 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 Pillar 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.

Uncertain Tax Positions

We 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 NOPAs, the IRS is seeking an additional tax payment of $28.9 billion plus penalties and interest. As of March 31, 2025, we believe our allowances for income tax contingencies are adequate. We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRS’s administrative appeals 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 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 our consolidated financial statements.

PART I

Item 2

LIQUIDITY AND CAPITAL RESOURCES

We 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 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 Investments

Cash, cash equivalents, and short-term investments totaled $79.6 billion and $75.5 billion as of March 31, 2025 and June 30, 2024, respectively. Equity and other investments were $16.0 billion and $14.6 billion as of March 31, 2025 and June 30, 2024, respectively. Our short-term investments are primarily intended to facilitate liquidity 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 diversify 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 insignificant given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities.

Valuation

In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine the fair value of our financial instruments. This pricing 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 liabilities 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 notes 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 priced 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 is used mainly when a quoted price is not available, the 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 without 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 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.

Cash Flows

Cash from operations increased $12.2 billion to $93.5 billion for the nine months ended March 31, 2025, primarily due to an increase in cash received from customers, offset in part by an increase in cash paid to suppliers and employees and cash used to pay income taxes. Cash used in financing increased $26.7 billion to $40.9 billion for the nine months ended March 31, 2025, primarily due to $9.0 billion in cash used for repayments of debt, net of proceeds in the current period compared to $14.6 billion in proceeds from the issuance of debt, net of repayments in the prior period. Cash used in investing decreased $40.1 billion to $42.0 billion for the nine months ended March 31, 2025, primarily due to a $63.6 billion decrease in cash used for acquisitions of companies, net of cash acquired and divestitures, and purchases of intangible and other assets, offset in part by a $16.9 billion increase in additions to property and equipment and a $7.2 billion decrease in cash from net investment purchases, sales, and maturities.

PART I

Item 2

Debt Proceeds

We 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 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 Revenue

Unearned revenue comprises mainly unearned revenue related to volume licensing programs, 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 we 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 March 31, 2025:

(In millions)
Three Months Ending
June 30, 2025$21,566
September 30, 202511,722
December 31, 20258,394
March 31, 20262,954
Thereafter2,840
Total$47,476

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 recognized 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 Obligations

Income Taxes

As a result of the TCJA, we are required to 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 March 31, 2025, our eighth transition tax installment of $4.4 billion is short-term and payable in the first quarter of fiscal year 2026.

Share Repurchases

For the nine months ended March 31, 2025 and 2024, we repurchased 23 million shares and 25 million shares of our common stock for $9.8 billion and $9.2 billion, respectively, through our share repurchase program. All repurchases were made using cash resources. As of March 31, 2025, $549 million 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 this Form 10-Q) for further discussion.

Dividends

For the nine months ended March 31, 2025 and 2024, our Board of Directors declared dividends totaling $18.5 billion and $16.7 billion, respectively. We intend to continue returning capital to shareholders in the form of dividends, subject to declaration by 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.

PART I

Item 2

Other Planned Uses of Capital

We will continue to invest in sales, marketing, product support infrastructure, and existing and advanced areas of technology, 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 and training. We have operating and finance leases for datacenters, corporate offices, research and development facilities, Microsoft Experience Centers, and certain equipment. We have not engaged in any related party transactions or arrangements with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity or the availability of capital resources.

RECENT ACCOUNTING GUIDANCE

Refer to Note 1 – Accounting Policies of the Notes to Financial Statements (Part I, Item 1 of this Form 10-Q) for further discussion.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements and accompanying notes are prepared in accordance with GAAP. Preparing consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and could have a material impact on our financial condition or results of operations. We have critical accounting estimates in the areas of revenue recognition, impairment of investment securities, goodwill, research and development costs, legal and other contingencies, income taxes, and business combinations – valuation of intangible assets.

Revenue Recognition

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. When a cloud-based service includes both on-premises software licenses and cloud services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the cloud service and recognized over time. Certain cloud services, primarily Office 365, depend on a significant level of integration, interdependency, and interrelation between the desktop applications and cloud services, and are accounted for together as one performance obligation. Revenue from Office 365 is recognized ratably over the period in which the cloud services are provided.

Judgment is required to determine the standalone selling price (“SSP") for each distinct performance obligation. We use a single amount to estimate SSP for items that are not sold separately, including on-premises licenses sold with SA or software updates provided at no additional charge. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services.

In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs. We typically have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP.

Due to the various benefits from and the nature of our SA program, judgment is required to assess the pattern of delivery, including the exercise pattern of certain benefits across our portfolio of customers.

Our products are generally sold with a right of return, we may provide other credits or incentives, and in certain instances we estimate customer usage of our products and services, which are accounted for as variable consideration when determining the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period if additional information becomes available. Changes to our estimated variable consideration were not material for the periods presented.

PART I

Item 2

Impairment of Investment Securities

We review debt investments quarterly for credit losses and impairment. 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. This determination requires significant judgment. In making this judgment, we employ a systematic methodology that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments. 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.

Equity investments without readily determinable fair values are written down to fair value if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than carrying value. We perform a qualitative assessment on a periodic basis. We are required to estimate the fair value of the investment to determine the amount of the impairment loss. Once an investment is determined to be impaired, an impairment charge is recorded in other income (expense), net.

Goodwill

We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. We evaluate our reporting units on an annual basis and, if necessary, reassign goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (May 1) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated primarily through the use of a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital.

The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit.

Research and Development Costs

Costs incurred internally in researching and developing a computer software product are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. We have determined that technological feasibility for our software products is reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to production. The amortization of these costs is included in cost of revenue over the estimated life of the products.

Legal and Other Contingencies

The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. An estimated loss from a loss contingency such as a legal proceeding or claim is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our consolidated financial statements.

PART I

Item 2

Income Taxes

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Accounting literature also provides guidance on derecognition of income tax assets and liabilities, classification of deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. Judgment is required in assessing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements.

Business Combinations – Valuation of Intangible Assets

Accounting for business combinations requires significant judgments when allocating the purchase price to the estimated fair values of assets acquired and liabilities assumed at the acquisition date. Determination of fair value involves estimates and assumptions which can be complex, most notably with respect to intangible assets. Critical estimates used in the valuation of intangible assets include, but are not limited to, the amount and timing of projected cash flows, useful lives, and discount rates. While management’s estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain as they pertain to forward-looking views of our business and market conditions. The judgments made in this valuation process could materially impact our consolidated financial statements.

PART I

Item 3, 4

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

RISKS

We are exposed to economic risk from foreign exchange rates, interest rates, credit risk, and equity prices. We use derivatives instruments to manage these risks, however, they may still impact our consolidated financial statements.

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 of our foreign currency positions, including hedges. Principal currency exposures include the Euro, Japanese yen, British pound, Canadian dollar, and Australian dollar.

Interest Rate

Securities held in our fixed-income portfolio are subject to different interest rate risks based on their maturities. We manage the average maturity of the fixed-income portfolio to achieve economic returns that correlate to certain global fixed-income indices.

Credit

Our fixed-income portfolio is diversified and consists primarily of investment-grade securities. We manage credit exposures relative to broad-based indices to facilitate portfolio diversification.

Equity

Securities held in our equity investments portfolio are subject to price risk.

SENSITIVITY ANALYSIS

The following table sets forth the potential loss in future earnings or fair values, including associated derivatives, resulting from hypothetical changes in relevant market rates or prices:

(In millions)
Risk CategoriesHypothetical ChangeMarch 31, 2025Impact
Foreign currency – Revenue10% decrease in foreign exchange rates$(10,372)Earnings
Foreign currency – Investments10% decrease in foreign exchange rates(21)Fair Value
Interest rate100 basis point increase in U.S. treasury interest rates(1,045)Fair Value
Credit100 basis point increase in credit spreads(333)Fair Value
Equity10% decrease in equity market prices(1,247)Earnings

Item 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1, 1A

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to Note 14 – Contingencies of the Notes to Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding legal proceedings in which we are involved.

ITEM 1A. RI****SK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business, operations, financial condition, results of operations, liquidity, and the trading price of our common stock.

STRATEGIC AND COMPETITIVE RISKS

We face intense competition across all markets for our products and services, which may adversely affect our results of operations.

Competition in the technology sector

Our competitors range in size from diversified global companies with significant research and development resources to small, specialized firms whose narrower product lines may let them be more effective in deploying technical, marketing, and financial resources. Barriers to entry in many of our businesses are low and many of the areas in which we compete evolve rapidly with changing and disruptive technologies, shifting user needs, and frequent introductions of new products and services. If we do not continue to innovate and provide products, devices, and services that appeal to businesses and consumers, we may not remain competitive, which may adversely affect our business, financial condition, and results of operations.

Competition among platform-based ecosystems

An important element of our business model has been to create platform-based ecosystems on which many participants can build diverse solutions. A well-established ecosystem creates beneficial network effects among users, application developers, and the platform provider that can accelerate growth. Establishing significant scale in the marketplace is necessary to achieve and maintain attractive margins. We face significant competition from firms that provide competing platforms.

A competing vertically-integrated model, in which a single firm controls the hardware and software elements of a product and related services, has succeeded with some consumer products such as PCs, tablets, smartphones, gaming consoles, wearables, and other endpoint devices. Competitors pursuing this model also earn revenue from services integrated with the hardware and software platform, including applications and content sold through their integrated marketplaces. They may also be able to claim security and performance benefits from their vertically-integrated offer. We also offer some vertically-integrated hardware and software products and services. Shifting a portion of our business to a vertically-integrated model may increase our cost of revenue and reduce our operating margins.

We derive substantial revenue from licenses of Windows operating systems on PCs. We face significant competition from competing platforms developed for new devices and form factors such as smartphones and tablets. These devices compete on multiple bases including price and the perceived utility of the device and its platform. Users continue to turn to these devices to perform functions that in the past were performed by PCs. Even if many users view these devices as complementary to a PC, the prevalence of these devices may make it more difficult to attract application developers to our PC operating system platforms. Competing with operating systems licensed at low or no cost may decrease our PC operating system margins. Popular products or services offered on competing platforms could increase their competitive strength. In addition, some of our devices compete with products made by our OEM partners, which may affect their commitment to our platform.

PART II

Item 1A

Competing platforms have content and application marketplaces with scale and significant installed bases. The variety and utility of content and applications available on a platform are important to device purchasing decisions. Users may incur costs to move data and buy new content and applications when switching platforms. To compete, we must successfully enlist developers to write applications for our platform and ensure that these applications have high quality, security, customer appeal, and value. Efforts to compete with competitors’ content and application marketplaces may increase our cost of revenue and lower our operating margins. Competitors’ rules governing their content and applications marketplaces may restrict our ability to distribute products and services through them in accordance with our technical and business model objectives.

For all of these reasons, we may not be able to compete successfully against our current and future competitors, which may adversely affect our business, operations, financial condition, and results of operations.

Business model competition

Companies compete with us based on a growing variety of business models.

A material part of our business involves cloud-based services available across the spectrum of computing devices. Our competitors continue to develop and deploy cloud-based services for consumers and business customers, and pricing and delivery models are evolving. We and our competitors are devoting significant resources to develop and deploy our cloud-based strategies.

We are investing in artificial intelligence (“AI”) across the entire company and infusing generative AI capabilities into our consumer and commercial offerings. AI technology and services are a highly competitive and rapidly evolving market, and new competitors continue to enter the market. We will bear significant development and operational costs to build and support the AI models, services, platforms, and infrastructure necessary to meet the needs of our customers. To compete effectively we must also be responsive to technological change, new and potential regulatory developments, and public scrutiny.

Even as we transition more of our business to infrastructure-, platform-, and software-as-a-service business models, the license-based proprietary software model generates a substantial portion of our software revenue. We bear the costs of converting original ideas into software products through investments in research and development, offsetting these costs with the revenue received from licensing our products. Many of our competitors also develop and sell software to businesses and consumers under this model.

Other competitors develop and offer free applications, online services, and content, and make money by selling third-party advertising. Advertising revenue funds development of products and services these competitors provide to users at little or no cost, competing directly with our revenue-generating products.

Some companies compete with us by modifying and then distributing open source software at little or no cost to end users, developing, making available, or using AI models that are open, and earning revenue on advertising or integrated products and services. These firms do not bear the full costs of research and development for the open source products. Some open source products mimic the features and functionality of our products

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Item 1A. Risk Factors

Abrupt political change, terrorist activity, and armed conflict, such as the ongoing conflict in Ukraine, pose economic and other risks, which may negatively impact our ability to sell to and collect from customers, increase our operating costs, or otherwise disrupt our operations in markets both directly and indirectly impacted by such events. These conditions also may add uncertainty to the timing and budget for technology investment decisions by our customers and may cause supply chain disruptions for hardware manufacturers. Geopolitical change may result in changing regulatory systems and requirements and market interventions that could impact our operating strategies, access to national, regional, and global markets, hiring, and profitability. Geopolitical instability may lead to sanctions and impact our ability to do business in some markets or with some public-sector customers. Any of these changes may negatively affect our results of operations. Changes in geopolitical conditions also increase the security risks described elsewhere in these risk factors.

The occurrence of regional epidemics or a global pandemic, such as COVID-19, may adversely affect our business, operations, financial condition, and results of operations. The extent to which global pandemics impact our business going forward will depend on factors such as the duration and scope of the pandemic; governmental, business, and individuals' actions in response to the pandemic; and the impact on economic activity, including the possibility of recession or financial market instability. Measures to contain a global pandemic may intensify other risks described in these Risk Factors.

The long-term effects of climate change on the global economy and the IT industry in particular are unclear. Environmental regulations or changes in the supply, demand, or available sources of energy or other resources may affect the availability or cost of goods and services, including natural resources, necessary to run our business. Changes in climate where we operate may increase the costs of powering and cooling computer hardware we use to develop software and provide cloud-based services.

Our global business exposes us to operational and economic risks. Our customers, employees, and infrastructure are located throughout the world and a significant part of our revenue comes from international sales. The global nature of our business creates operational, economic, and geopolitical risks. Global, regional, and local economic developments, monetary policy, restrictions on international trade, such as tariffs and other controls on imports or exports, inflation, and recession, as well as political and military disputes, may adversely affect our results of operations. In addition, our international growth strategy includes certain markets, the developing nature of which presents several risks, including deterioration of social, political, labor, or economic conditions in a country or region, and difficulties in staffing and managing foreign operations. Emerging nationalist and protectionist trends and concerns about human rights, the environment, and political expression in specific countries may significantly alter the trade and commercial environments. Changes to trade policy or agreements as a result of populism, protectionism, or economic nationalism may result in higher tariffs, local sourcing initiatives, and non-local sourcing restrictions, export controls, investment restrictions, or other developments that make it more difficult to operate and sell our products in foreign countries. Disruptions of these kinds in developed or emerging markets could negatively impact demand for our products and services, impair our ability to operate in certain regions, or increase operating costs. Although we hedge a portion of our international currency exposure, significant fluctuations in foreign exchange rates between the U.S. dollar and foreign currencies may adversely affect our results of operations.

Our business depends on our ability to attract and retain talented employees. Our business is based on successfully attracting, training, and retaining talented employees representing diverse backgrounds, experiences, and skill sets. The market for highly skilled workers and leaders in our industry is extremely competitive. Maintaining our brand and reputation, as well as a diverse and inclusive work environment that enables all our employees to thrive, are important to our ability to recruit and retain employees. We are also limited in our ability to recruit internationally by restrictive domestic immigration laws. Restraints on the flow of technical and professional talent, including as a result of changes to U.S. immigration policies or laws, may inhibit our ability to adequately staff our research and development efforts. If we are less successful in our recruiting efforts, or if we cannot retain highly skilled workers and key leaders, our ability to develop and deliver successful products and services may be adversely affected. Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. How employment-related laws are interpreted and applied to our workforce practices may result in increased operating costs and less flexibility in how we meet our workforce needs. Our global workforce is predominantly non-unionized, although we do have some employees in the U.S. and internationally who are represented by unions or works councils. In the U.S., there has been a general increase in workers exercising their right to form or join a union. The unionization of significant employee populations could result in higher costs and other operational changes necessary to respond to changing conditions and to establish new relationships with worker representatives.

PART II

Item 2

ITEM 2. UNREGISTERED SALES OF EQUI****TY SECURITIES AND USE OF PROCEEDS

SHARE REPURCHASES AND DIVIDENDS

Following are our monthly share repurchases for the third quarter of fiscal year 2025:

PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
(In millions)
January 1, 2025 – January 31, 20252,712,050$427.652,712,050$2,889
February 1, 2025 – February 28, 20252,814,771408.032,814,7711,741
March 1, 2025 – March 31, 20253,072,544387.843,072,544549
8,599,3658,599,365

All share repurchases were made using cash resources. Our share repurchases may occur through open market purchases or pursuant to a Rule 10b5-1 trading plan. The above table excludes shares repurchased to settle employee tax withholding related to the vesting of stock awards.

Our Board of Directors declared the following dividends during the third quarter of fiscal year 2025:

Declaration DateRecord DatePayment DateDividend Per ShareAmount
(In millions)
March 11, 2025May 15, 2025June 12, 2025$0.83$6,170

We returned $9.7 billion to shareholders in the form of share repurchases and dividends in the third quarter of fiscal year 2025. Refer to Note 15 – Stockholders’ Equity of the Notes to Financial Statements (Part I, Item 1 of this Form 10-Q) for further discussion regarding share repurchases and dividends.

PART II

Item 5

Item 5. OTHER INFORMATION

Insider Trading Arrangements

Our Section 16 officers and directors, as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934 (the “Exchange Act”), may from time to time enter into plans for the purchase or sale of our common stock that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act. During the quarter ended March 31, 2025, the following Section 16 officers and directors adopted, modified, or terminated “Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K of the Exchange Act):

Satya Nadella, our Chief Executive Officer and Chairman of the Board of Directors, adopted a new written 10b5-1 trading plan on March 7, 2025, during an open trading window. The plan’s maximum duration is until September 5, 2025. The first trade will not occur until September 2, 2025, at the earliest. Under the trading plan, Mr. Nadella will sell 80% of the net vested shares of our common stock upon the August 31, 2025 vest of a Performance Stock Award. The actual number of shares sold under the trading plan will depend upon achievement of previously disclosed performance metrics and a relative total shareholder return modifier applicable to the Performance Stock Award.

No other officers or directors, as defined in Rule 16a-1(f), adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, during the three months ended March 31, 2025.

PART II

Item 6

Item 6. EXHIBITS

Incorporated by Reference
Exhibit NumberExhibit DescriptionFiled HerewithFormPeriod EndingExhibitFiling Date
15.1Letter regarding unaudited interim financial informationX
31.1Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002X
31.2Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002X
32.1*Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X
32.2*Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X
101.INSInline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL documentX
101.SCHInline XBRL Taxonomy Extension Schema with Embedded Linkbase DocumentsX
104Cover page formatted as Inline XBRL and contained in Exhibit 101X
  • Furnished, not filed.

Items 3 and 4 are not applicable and have been omitted.

SIGNAT****URE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized.

MICROSOFT CORPORATION
/s/ ALICE L. JOLLA
Alice L. Jolla
Corporate Vice President and Chief Accounting Officer (Duly Authorized Officer)
April 30, 2025