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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

 

2


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.

3


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.

4


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.

5


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

)