SEGMENT INFORMATION AND GEOGRAPHIC DATA

9 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

SEGMENT INFORMATION AND GEOGRAPHIC DATA

NOTE 17 — SEGMENT INFORMATION AND GEOGRAPHIC DATA

In its operation of the business, management, including our chief operating decision maker, who is also our Chief Executive Officer, reviews certain financial information, including segmented internal profit and loss statements prepared on a basis not consistent with GAAP. During the periods presented, we reported our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

We have recast certain prior period amounts to conform to the way we internally manage and monitor our business.

Our reportable segments are described below.

Productivity and Business Processes

Our Productivity and Business Processes segment consists of products and services in our portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. This segment primarily comprises:

•Office Commercial (Office 365 subscriptions, the Office 365 portion of Microsoft 365 Commercial subscriptions, and Office licensed on-premises), comprising Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Microsoft Viva.

•Office Consumer, including Microsoft 365 Consumer subscriptions, Office licensed on-premises, and other Office services.

•LinkedIn, including Talent Solutions, Marketing Solutions, Premium Subscriptions, and Sales Solutions.

•Dynamics business solutions, including Dynamics 365, comprising a set of intelligent, cloud-based applications across ERP, CRM, Customer Insights, Power Apps, and Power Automate; and on-premises ERP and CRM applications.

Intelligent Cloud

Our Intelligent Cloud segment consists of our public, private, and hybrid server products and cloud services that can power modern business and developers. This segment primarily comprises:

•Server products and cloud services, including Azure and other cloud services; SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (“CALs”); and Nuance and GitHub.

•Enterprise Services, including Enterprise Support Services, Microsoft Consulting Services, and Nuance professional services.

More Personal Computing

Our More Personal Computing segment consists of products and services that put customers at the center of the experience with our technology. This segment primarily comprises:

•Windows, including Windows original equipment manufacturer (“OEM”) licensing and other non-volume licensing of the Windows operating system; Windows Commercial, comprising volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; and Windows Internet of Things.

•Devices, including Surface, HoloLens, and PC accessories.

•Gaming, including Xbox hardware and Xbox content and services, comprising first- and third-party content (including games and in-game content), Xbox Game Pass and other subscriptions, Xbox Cloud Gaming, third-party disc royalties, advertising, and other cloud services.

•Search and news advertising, comprising Bing (including Chat), Microsoft News, Microsoft Edge, and third-party affiliates.

Revenue and costs are generally directly attributed to our segments. However, due to the integrated structure of our business, certain revenue recognized and costs incurred by one segment may benefit other segments. Revenue from certain contracts is allocated among the segments based on the relative value of the underlying products and services, which can include allocation based on actual prices charged, prices when sold separately, or estimated costs plus a profit margin. Cost of revenue is allocated in certain cases based on a relative revenue methodology. Operating expenses that are allocated primarily include those relating to marketing of products and services from which multiple segments benefit and are generally allocated based on relative gross margin.

In addition, certain costs are incurred at a corporate level and allocated to our segments. These allocated costs generally include legal, including settlements and fines, information technology, human resources, finance, excise taxes, field selling, shared facilities services, customer service and support, and severance incurred as part of a corporate program. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated and is generally based on relative gross margin or relative headcount.

Segment revenue and operating income were as follows during the periods presented:

(In millions)	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Revenue
Productivity and Business Processes	$	17,516	$	15,789	$	50,983	$	46,764
Intelligent Cloud		22,081		18,987		63,914		54,161
More Personal Computing		13,260		14,584		40,829		45,480
Total	$	52,857	$	49,360	$	155,726	$	146,405
Operating Income
Productivity and Business Processes	$	8,639	$	7,185	$	25,137	$	22,454
Intelligent Cloud		9,476		8,391		27,358		24,395
More Personal Computing		4,237		4,788		11,774		16,000
Total	$	22,352	$	20,364	$	64,269	$	62,849

No sales to an individual customer or country other than the United States accounted for more than 10% of revenue for the three or nine months ended March 31, 2023 or 2022. Revenue, classified by the major geographic areas in which our customers were located, was as follows:

(In millions)	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
United States (a)	$	26,007	$	24,771	$	78,850	$	74,064
Other countries		26,850		24,589		76,876		72,341
Total	$	52,857	$	49,360	$	155,726	$	146,405

(a)Includes billings to OEMs and certain multinational organizations because of the nature of these businesses and the impracticability of determining the geographic source of the revenue.

Revenue, classified by significant product and service offerings, was as follows:

(In millions)	Three Months Ended March 31,						Nine Months Ended March 31,
	2023		2022		2023			2022
Server products and cloud services	$	20,025	$	17,046	$	58,007		$	48,498
Office products and cloud services		12,438		11,164		35,823			33,223
Windows		5,328		6,069		15,449			18,337
Gaming		3,607		3,740		11,975			12,775
LinkedIn		3,697		3,437		11,236			10,104
Search and news advertising		3,045		2,945		9,196			8,665
Enterprise Services		2,007		1,891		5,745			5,505
Devices		1,282		1,835		4,160			5,606
Other		1,428		1,233		4,135			3,692
Total	$	52,857	$	49,360	$	155,726		$	146,405

Our Microsoft Cloud revenue, which includes Azure and other cloud services, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties, was $28.5 billion and $81.3 billion for the three and nine months ended March 31, 2023, respectively, and $23.4 billion and $66.3 billion for the three and nine months ended March 31, 2022, respectively. These amounts are primarily included in Server products and cloud services, Office products and cloud services, and LinkedIn in the table above.

Assets are not allocated to segments for internal reporting presentations. A portion of amortization and depreciation is included with various other costs in an overhead allocation to each segment. It is impracticable for us to separately identify the amount of amortization and depreciation by segment that is included in the measure of segment profit or loss.