SEGMENT INFORMATION AND GEOGRAPHIC DATA

6 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

SEGMENT INFORMATION AND GEOGRAPHIC DATA

NOTE 16 — 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.

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, including Microsoft Office 365 subscriptions and Office licensed on-premises, comprising Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business, and related Client Access Licenses (“CALs”).

• Office Consumer, including Office 365 subscriptions and Office licensed on-premises, and Office Consumer Services, including Skype, Outlook.com, and OneDrive.

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

• Dynamics business solutions, including Microsoft Dynamics 365, a set of cloud-based applications across ERP and CRM, Dynamics ERP on-premises, and Dynamics CRM on-premises.

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 Microsoft Azure; Microsoft SQL Server, Windows Server, Visual Studio, System Center, and related CALs; and GitHub.

• Enterprise Services, including Premier Support Services and Microsoft Consulting 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; Windows Internet of Things (“IoT”); and MSN advertising.

• Devices, including Microsoft Surface and PC accessories.

• Gaming, including Xbox hardware and Xbox content and services, comprising Xbox Live transactions, subscriptions, cloud services, and advertising (“Xbox Live”), video games, and third-party video game royalties.

• Search.

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 incurred at a corporate level that are identifiable and that benefit our segments are allocated to them. These allocated costs include costs of: legal, including settlements and fines; information technology; human resources; finance; excise taxes; field selling; shared facilities services; and customer service and support. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated. Certain corporate-level activity is not allocated to our segments.

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

(In millions)	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018			2019		2018
Revenue
Productivity and Business Processes	$	11,826	$	10,100	$	22,903	$	19,871
Intelligent Cloud		11,869		9,378		22,714		17,945
More Personal Computing		13,211		12,993		24,344		23,739
Total	$	36,906	$	32,471	$	69,961	$	61,555
Operating Income
Productivity and Business Processes	$	5,182	$	4,015	$	9,964	$	7,896
Intelligent Cloud		4,531		3,279		8,420		6,210
More Personal Computing		4,178		2,964		8,193		6,107
Total	$	13,891	$	10,258	$	26,577	$	20,213

No sales to an individual customer or country other than the United States accounted for more than 10% of revenue for the three or six months ended December 31, 2019 or 2018. Revenue, classified by the major geographic areas in which our customers were located, was as follows:

(In millions)	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018			2019		2018
United States (a)	$	19,149	$	16,787	$	36,419	$	31,527
Other countries		17,757		15,684		33,542		30,028
Total	$	36,906	$	32,471	$	69,961	$	61,555

(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 from external customers, classified by significant product and service offerings, was as follows:

(In millions)	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018			2019		2018
Server products and cloud services	$	10,119	$	7,791	$	19,311	$	14,849
Office products and cloud services		8,983		7,747		17,449		15,369
Windows		5,593		4,758		10,946		9,659
Gaming		3,327		4,232		5,869		6,970
Search advertising		2,163		1,976		4,154		3,764
LinkedIn		2,102		1,693		4,011		3,223
Devices		2,048		1,948		3,250		3,209
Enterprise Services		1,612		1,521		3,157		2,971
Other		959		805		1,814		1,541
Total	$	36,906	$	32,471	$	69,961	$	61,555

Our commercial cloud revenue, which includes Office 365 Commercial, Azure, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties, was $12.5 billion and $24.1 billion for the three and six months ended December 31, 2019, respectively, and $9.0 billion and $17.5 billion for the three and six months ended December 31, 2018, respectively. These amounts are primarily included in Office products and cloud services, Server 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.