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10-Q

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, 2024

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Transition Period From to

Commission File Number 001-37845

MICROSOFT CORPORATION


Washington		91-1144442
(STATE OF INCORPORATION)		(I.R.S. ID)

ONE MICROSOFT WAY, REDMOND, Washington 98052-6399

(425) 882-8080

www.microsoft.com/investor



Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of exchange on which registered

Common stock, $0.00000625 par value per share	MSFT	Nasdaq
3.125% Notes due 2028	MSFT	Nasdaq
2.625% Notes due 2033	MSFT	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ☒		Accelerated Filer ☐
Non-accelerated Filer ☐		Smaller Reporting Company ☐
		Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding as of April 22, 2024


Common Stock, $0.00000625 par value per share		7,432,305,794 shares

MICROSOFT CORPORATION

FORM 10-Q

For the Quarter Ended March 31, 2024

INDEX


				Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements

		a)	Income Statements for the Three and Nine Months Ended March 31, 2024 and 2023	3

		b)	Comprehensive Income Statements for the Three and Nine Months Ended March 31, 2024 and 2023	4

		c)	Balance Sheets as of March 31, 2024 and June 30, 2023	5

		d)	Cash Flows Statements for the Three and Nine Months Ended March 31, 2024 and 2023	6

		e)	Stockholders’ Equity Statements for the Three and Nine Months Ended March 31, 2024 and 2023	7

		f)	Notes to Financial Statements	8

		g)	Report of Independent Registered Public Accounting Firm	31

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		32

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		49

	Item 4.	Controls and Procedures		49

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings		50

	Item 1A.	Risk Factors		50

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		64

	Item 5.	Other Information		65

	Item 6.	Exhibits		66

SIGNATURE				67

PART I

Item 1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INCOME STATEMENTS


(In millions, except per share amounts) (Unaudited)	Three Months Ended March 31,						Nine Months Ended March 31,


	2024			2023			2024			2023

Revenue:
Product	$	17,080		$	15,588	$	51,556		$	47,846
Service and other		44,778			37,269		128,839			107,880


Total revenue		61,858			52,857		180,395			155,726


Cost of revenue:
Product		4,339			3,941		13,834			13,933
Service and other		14,166			12,187		40,596			35,135


Total cost of revenue		18,505			16,128		54,430			49,068


Gross margin		43,353			36,729		125,965			106,658
Research and development		7,653			6,984		21,454			20,456
Sales and marketing		6,207			5,750		17,640			16,555
General and administrative		1,912			1,643		5,363			5,378


Operating income		27,581			22,352		81,508			64,269
Other income (expense), net		(854	)		321		(971	)		315


Income before income taxes		26,727			22,673		80,537			64,584
Provision for income taxes		4,788			4,374		14,437			12,304


Net income	$	21,939		$	18,299	$	66,100		$	52,280


Earnings per share:
Basic	$	2.95		$	2.46	$	8.90		$	7.02
Diluted	$	2.94		$	2.45	$	8.85		$	6.99

Weighted average shares outstanding:
Basic		7,431			7,441		7,431			7,450
Diluted		7,472			7,464		7,467			7,474

Refer to accompanying notes.

PART I

Item 1

COMPREHENSIVE INCOME STATEMENTS


(In millions) (Unaudited)	Three Months Ended March 31,						Nine Months Ended March 31,


	2024			2023				2024		2023

Net income	$	21,939		$	18,299		$	66,100	$	52,280


Other comprehensive income (loss), net of tax:
Net change related to derivatives		10			(9	)		28		(34	)
Net change related to investments		(202	)		753			869		(796	)
Translation adjustments and other		(294	)		69			11		(136	)


Other comprehensive income (loss)		(486	)		813			908		(966	)


Comprehensive income	$	21,453		$	19,112		$	67,008	$	51,314

Refer to accompanying notes.

PART I

Item 1

BALANCE SHEETS


(In millions) (Unaudited)


	March 31, 2024			June 30, 2023

Assets
Current assets:
Cash and cash equivalents	$	19,634		$	34,704
Short-term investments		60,387			76,558


Total cash, cash equivalents, and short-term investments		80,021			111,262
Accounts receivable, net of allowance for doubtful accounts of $616 and $650		44,029			48,688
Inventories		1,304			2,500
Other current assets		21,826			21,807


Total current assets		147,180			184,257
Property and equipment, net of accumulated depreciation of $74,945 and $68,251		121,375			95,641
Operating lease right-of-use assets		17,371			14,346
Equity and other investments		14,807			9,879
Goodwill		119,163			67,886
Intangible assets, net		28,828			9,366
Other long-term assets		35,551			30,601


Total assets	$	484,275		$	411,976


Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	18,087		$	18,095
Short-term debt		20,535			0
Current portion of long-term debt		2,249			5,247
Accrued compensation		10,432			11,009
Short-term income taxes		7,311			4,152
Short-term unearned revenue		41,888			50,901
Other current liabilities		18,023			14,745


Total current liabilities		118,525			104,149
Long-term debt		42,658			41,990
Long-term income taxes		26,786			25,560
Long-term unearned revenue		2,945			2,912
Deferred income taxes		2,469			433
Operating lease liabilities		14,469			12,728
Other long-term liabilities		23,271			17,981


Total liabilities		231,123			205,753


Commitments and contingencies
Stockholders’ equity:
Common stock and paid-in capital – shares authorized 24,000; outstanding 7,433 and 7,432		99,193			93,718
Retained earnings		159,394			118,848
Accumulated other comprehensive loss		(5,435	)		(6,343	)


Total stockholders’ equity		253,152			206,223


Total liabilities and stockholders’ equity	$	484,275		$	411,976

Refer to accompanying notes.

PART I

Item 1

CASH FLOWS STATEMENTS


(In millions) (Unaudited)	Three Months Ended March 31,							Nine Months Ended March 31,


	2024			2023				2024			2023

Operations
Net income	$	21,939		$	18,299		$	66,100		$	52,280
Adjustments to reconcile net income to net cash from operations:
Depreciation, amortization, and other		6,027			3,549			15,907			9,987
Stock-based compensation expense		2,703			2,465			8,038			7,195
Net recognized losses (gains) on investments and derivatives		49			(40	)		261			152
Deferred income taxes		(1,323	)		(1,675	)		(3,593	)		(4,171	)
Changes in operating assets and liabilities:
Accounts receivable		(2,028	)		(1,408	)		6,055			7,157
Inventories		260			106			1,229			868
Other current assets		951			1,152			880			428
Other long-term assets		(2,137	)		(554	)		(5,577	)		(1,285	)
Accounts payable		648			(407	)		(659	)		(4,032	)
Unearned revenue		(645	)		(181	)		(10,309	)		(8,689	)
Income taxes		2,622			1,414			2,493			(1,039	)
Other current liabilities		2,803			1,715			215			(490	)
Other long-term liabilities		48			6			313			451


Net cash from operations		31,917			24,441			81,353			58,812


Financing
Proceeds from issuance (repayments) of debt, maturities of 90 days or less, net		(3,810	)		0			6,392			0
Proceeds from issuance of debt		6,352			0			24,198			0
Repayments of debt		(11,589	)		0			(16,005	)		(1,750	)
Common stock issued		522			536			1,468			1,354
Common stock repurchased		(4,213	)		(5,509	)		(13,044	)		(16,541	)
Common stock cash dividends paid		(5,572	)		(5,059	)		(16,197	)		(14,746	)
Other, net		(498	)		(258	)		(1,006	)		(839	)


Net cash used in financing		(18,808	)		(10,290	)		(14,194	)		(32,522	)


Investing
Additions to property and equipment		(10,952	)		(6,607	)		(30,604	)		(19,164	)
Acquisition of companies, net of cash acquired, and purchases of intangible and other assets		(1,575	)		(301	)		(67,790	)		(1,329	)
Purchases of investments		(2,183	)		(9,063	)		(14,901	)		(25,675	)
Maturities of investments		3,350			13,154			23,218			26,744
Sales of investments		1,941			1,239			8,871			8,725
Other, net		(1,281	)		(1,686	)		(916	)		(2,847	)


Net cash used in investing		(10,700	)		(3,264	)		(82,122	)		(13,546	)


Effect of foreign exchange rates on cash and cash equivalents		(80	)		29			(107	)		(113	)