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1、 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30,2024 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the

2、 Transition Period From toCommission 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- Securities registered pursuant to Section 12(b)of the Act:Title of each class Trading Symbol Name of exchan

3、ge on which registered Common stock,$0.00000625 par value per share MSFT NASDAQ3.125%Notes due 2028 MSFT NASDAQ2.625%Notes due 2033 MSFT NASDAQ Securities registered pursuant to Section 12(g)of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 4

4、05 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes No 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 Exchang

5、e 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 D

6、ata 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 accel

7、erated 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-a

8、ccelerated 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 th

9、e Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting fir

10、m that prepared or issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.Indicate by check

11、mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell c

12、ompany(as defined in Rule 12b-2 of the Act).Yes No As of December 31,2023,the aggregate market value of the registrants common stock held by non-affiliates of the registrant was$2.8 trillion based on the closing sale price as reported on the NASDAQ National Market System.As of July 25,2024,there wer

13、e 7,433,038,381 shares of common stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held on December 10,2024 are incorporated by reference into Part III.MICROSOFT

14、CORPORATIONFORM 10-K For the Fiscal Year Ended June 30,2024INDEX Page PART I Item 1.Business 3 Information about our Executive Officers 18 Item 1A.Risk Factors 20 Item 1B.Unresolved Staff Comments 34 Item 1C.Cybersecurity 34 Item 2.Properties 36 Item 3.Legal Proceedings 36 Item 4.Mine Safety Disclos

15、ures 36 PART II Item 5.Market for Registrants Common Equity,Related Stockholder Matters,and Issuer Purchases of Equity Securities 37 Item 6.Reserved 38 Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A.Quantitative and Qualitative Disclosures Abou

16、t Market Risk 55 Item 8.Financial Statements and Supplementary Data 56 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 98 Item 9A.Controls and Procedures 98 Report of Management on Internal Control over Financial Reporting 98 Report of Independent Register

17、ed Public Accounting Firm 99 Item 9B.Other Information 101 Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 101 PART III Item 10.Directors,Executive Officers,and Corporate Governance 101 Item 11.Executive Compensation 102 Item 12.Security Ownership of Certain Beneficial Ow

18、ners and Management and Related Stockholder Matters 102 Item 13.Certain Relationships and Related Transactions,and Director Independence 102 Item 14.Principal Accountant Fees and Services 102 PART IV Item 15.Exhibit and Financial Statement Schedules 103 Item 16.Form 10-K Summary 110 Signatures 111 2

19、PART IItem 1 Note About Forward-Looking StatementsThis report includes estimates,projections,statements relating to our business plans,objectives,and expected operating results that are“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995,Section 27A

20、of the Securities Act of 1933,and Section 21E of the Securities Exchange Act of 1934.Forward-looking statements may appear throughout this report,including the following sections:“Business”(Part I,Item 1 of this Form 10-K),“Risk Factors”(Part I,Item 1A of this Form 10-K),and“Managements Discussion a

21、nd Analysis of Financial Condition and Results of Operations”(Part II,Item 7 of this Form 10-K).These forward-looking statements generally are identified by the words“believe,”“project,”“expect,”“anticipate,”“estimate,”“intend,”“strategy,”“future,”“opportunity,”“plan,”“may,”“should,”“will,”“would,”“

22、will be,”“will continue,”“will likely result,”and similar expressions.Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially.We describe risks and uncertainties that could cause actua

23、l results and events to differ materially in“Risk Factors,”“Managements Discussion and Analysis of Financial Condition and Results of Operations,”and“Quantitative and Qualitative Disclosures About Market Risk”(Part II,Item 7A of this Form 10-K).Readers are cautioned not to place undue reliance on fo

24、rward-looking statements,which speak only as of the date they are made.We undertake no obligation to update or revise publicly any forward-looking statements,whether because of new information,future events,or otherwise.PART IITEM 1.BUSINESSGENERALEmbracing Our FutureMicrosoft is a technology compan

25、y committed to making digital technology and artificial intelligence(“AI”)available broadly and doing so responsibly,with a mission to empower every person and every organization on the planet to achieve more.We create platforms and tools,powered by AI,that deliver innovative solutions that meet the

26、 evolving needs of our customers.From infrastructure and data,to business applications and collaboration,we provide unique,differentiated value to customers.We strive to create local opportunity,growth,and impact in every country around the world.We have entered a new age of AI that will fundamental

27、ly transform productivity for every individual,organization,and industry on earth,while helping us address some of our most pressing challenges.Microsofts AI offerings,including Copilot and our Copilot stack,are already orchestrating a new era of AI transformation,driving better business outcomes ac

28、ross every role and industry.As a company,we believe we can be the democratizing force for this new generation of technology and the opportunity it will help unlock for every country,community,and individual.We believe AI should be as empowering across communities as it is powerful,and were committe

29、d to ensuring it is responsibly designed and built with safety and security from the outset.What We OfferFounded in 1975,we develop and support software,services,devices,and solutions that deliver new value for customers and help people and businesses realize their full potential.We offer an array o

30、f services,including cloud-based solutions that provide customers with software,services,platforms,and content,and we provide solution support and consulting services.We also deliver relevant online advertising to a global audience.Our products include operating systems,cross-device productivity and

31、 collaboration applications,server applications,business solution applications,desktop and server management tools,software development tools,and video games.We also design and sell devices,including PCs,tablets,gaming and entertainment consoles,other intelligent devices,and related accessories.3PAR

32、T IItem 1 The Ambitions That Drive UsTo achieve our vision,our research and development efforts focus on three interconnected ambitions:Reinvent productivity and business processes.Build the intelligent cloud and intelligent edge platform.Create more personal computing.Reinvent Productivity and Busi

33、ness ProcessesAt Microsoft,we provide technology and resources to help our customers create a secure,productive work environment.Our family of products plays a key role in the ways the world works,learns,and connects.Our growth depends on securely delivering continuous innovation and advancing our l

34、eading productivity and collaboration tools and services,including Microsoft 365,LinkedIn,and Dynamics 365.Microsoft 365 is an AI first platform that brings together Office,Windows,Copilot,and Enterprise Mobility+Security to help organizations empower their employees.Copilot for Microsoft 365 combin

35、es AI with business data in the Microsoft Graph and Microsoft 365 applications.Microsoft Teams is a comprehensive platform for communication and collaboration,with meetings,calling,chat,file collaboration,and the ability to bring all of the applications teams use into a single place.Microsoft Viva i

36、s an employee experience platform that brings together communications,knowledge,learning,resources,and insights.Together,the Microsoft Cloud,Dynamics 365,Microsoft Teams,and our AI offerings bring a new era of collaborative applications for every role and business function to get insights and busine

37、ss impact faster.Dynamics 365 is a portfolio of intelligent business applications that delivers operational efficiency and breakthrough customer experiences.Our role-based extensions of Microsoft Copilot Copilot for Sales,Copilot for Service,and Copilot for Finance bring together the power of Copilo

38、t for Microsoft 365 with role-specific insights and workflow assistance to streamline business processes.Copilot Studio allows customers to customize Copilot for Microsoft 365 or build their own Copilot.Microsoft Power Platform helps domain experts drive productivity gains with low-code/no-code tool

39、s,robotic process automation,virtual agents,and business intelligence.Copilot Pro is a consumer subscription service that offers faster and more powerful AI assistance in Microsoft 365 apps and on the web.LinkedIn combines our unique data with this new generation of AI to transform the way professio

40、nals learn,sell,market,and get hired.Build the Intelligent Cloud and Intelligent Edge PlatformDigital transformation and adoption of AI continues to revolutionize more business workstreams for organizations in every sector across the globe.For enterprises,digital technology empowers employees,optimi

41、zes operations,engages customers,and in some cases,changes the very core of products and services.We continue to invest in high performance and sustainable computing to meet the growing demand for fast access to Microsoft services provided by our network of cloud computing and AI infrastructure and

42、datacenters.Our cloud business benefits from three economies of scale:datacenters that deploy computational resources at significantly lower cost per unit than smaller ones;datacenters that coordinate and aggregate diverse customer,geographic,and application demand patterns,improving the utilization

43、 of computing,storage,and network resources;and multi-tenancy locations that lower application maintenance labor costs.The Microsoft Cloud provides the best integration across the technology stack while offering openness,improving time to value,reducing costs,and increasing agility.As the foundation

44、 of the Microsoft Cloud,Azure uniquely offers hybrid consistency,developer productivity,data and AI capabilities,and trusted security and compliance.We offer supercomputing power for AI at scale to run large workloads,complemented by our rapidly expanding portfolio of AI cloud services and hardware,

45、which includes custom-built silicon and strong partnerships with chip manufacturers.We have introduced purpose-built cloud infrastructure for AI workloads including a custom AI accelerator,Azure Maia,and a custom in-house central processing unit,Azure Cobalt.4PART IItem 1 Our AI platform,Azure AI,is

46、 helping organizations transform,bringing intelligence and insights to the hands of their employees and customers to solve their most pressing challenges.We offer a wide selection of industry-leading frontier and open models,including from partners,as well as state-of-the-art tooling,and AI-optimize

47、d infrastructure,delivering the Copilot stack for Microsoft,enterprises,and developers.Organizations large and small are deploying Azure AI solutions to achieve more at scale,more easily,with the proper enterprise-level responsible AI and safety and security protections.Azure AI Studio provides a fu

48、ll lifecycle toolchain customers can use to ground these models on their own data,create prompt workflows,and help ensure they are deployed and used safely.GitHub Copilot is at the forefront of AI-powered software development,giving developers a tool to write code easier and faster.From GitHub to Vi

49、sual Studio,we provide a developer tool chain for everyone,no matter the technical experience,across all platforms.We have a long-term partnership with OpenAI,a leading AI research and deployment company.We deploy OpenAIs models across our consumer and enterprise products.As OpenAIs exclusive cloud

50、provider,Azure powers all of OpenAIs workloads.We have also increased our investments in the development and deployment of specialized supercomputing systems to accelerate OpenAIs research.Our hybrid infrastructure offers integrated,end-to-end security,compliance,identity,and management capabilities

51、 to support the real-world needs and evolving regulatory requirements of commercial customers and enterprises.Our industry clouds bring together capabilities across the entire Microsoft Cloud,along with industry-specific customizations.Azure Arc simplifies governance and management by delivering a c

52、onsistent multi-cloud and on-premises management platform.The Microsoft Intelligent Data Platform fully integrates databases,analytics,and governance.Microsoft Fabric is an end-to-end,unified analytics platform that brings together all the data and analytics tools that organizations need.Nuance is a

53、 leader in conversational AI and ambient intelligence across industries,including healthcare,financial services,retail,and telecommunications.Microsoft and Nuance enable organizations to accelerate their business goals with security-focused,cloud-based solutions infused with AI.As the rate and pace

54、of cyberthreats continue to accelerate,security is a top priority for every organization.Microsoft offers customers integrated products addressing security,compliance,identity,management,and privacy across customers multi-cloud,application,and device assets.With Copilot for Security,Microsoft offers

55、 an AI cybersecurity product that enables security professionals to respond to cyberthreats quickly.Windows 365 enables users to stream a full Windows experience from the Microsoft Cloud to any device.Create More Personal ComputingWe strive to make computing more personal,enabling users to interact

56、with technology in more intuitive,engaging,and dynamic ways.Windows 11 offers innovations focused on performance,productivity,and creativity,including Copilot in Windows.Windows 11 security and privacy features include operating system security,application security,and user and identity security.Dev

57、 Home is an open-source experience in Windows to help developer productivity.We are committed to designing and marketing first-party devices to help drive innovation,create new device categories,and stimulate demand in the Windows ecosystem.The Surface family includes Surface Pro,Surface Laptop,and

58、other Surface products.Copilot+PCs are a new class of Windows 11 PCs that are powered by a neural processing unit.These PCs use on-device AI for enhanced performance and features.Copilot is an AI assistant that helps users navigate the web,answer questions,and create content.Microsoft Edge is our fa

59、st and secure browser that helps protect users data and offers enhanced browsing capabilities including quick access to AI-powered tools,apps,and more.The AI-powered Bing search engine with Copilot delivers better search,more complete answers,and the ability to generate content.5PART IItem 1 Microso

60、ft is expanding how billions of people globally access and play video games on PC,console,mobile,and cloud.We put game development front and center,backed by innovative hardware,experiences,and a subscription service,Xbox Game Pass,that allows those games to reach more players across more devices.Ac

61、tivision Blizzard,Inc.(“Activision Blizzard”),a leader in game development and an interactive entertainment content publisher,joined Microsoft in October 2023.Our Future OpportunityWe are focused on helping customers use the breadth and depth of the Microsoft Cloud to get the most value out of their

62、 digital spend while leading the AI platform wave across our solution areas.We continue to develop complete,intelligent solutions for our customers that empower people to be productive and collaborate,while safeguarding businesses and simplifying IT management.Our goal is to lead the industry in sev

63、eral distinct areas of technology over the long term,which we expect will translate to sustained growth.We are investing significant resources in:Transforming the workplace to deliver new modern,modular business applications,drive deeper insights,and improve how people communicate,collaborate,learn,

64、work,and interact with one another.Building and running cloud-based services in ways that utilize ubiquitous computing to unleash new experiences and opportunities for businesses and individuals.Applying AI and ambient intelligence to drive insights,revolutionize many types of work and business proc

65、esses,and provide substantive productivity gains using natural methods of communication.Tackling security from all angles with our integrated,end-to-end solutions spanning security,compliance,identity,and management,across all clouds and platforms.Inventing new gaming experiences that bring people t

66、ogether around their shared love for games on any devices and pushing the boundaries of innovation with console and PC gaming.Using Windows to fuel our cloud business,grow our share of the PC market,and drive increased engagement with our services like Microsoft Edge,Bing,Microsoft Teams,Microsoft 3

67、65 Consumer,Xbox Game Pass,and more.Our future growth depends on our ability to transcend current product category definitions,business models,and sales motions.Corporate Social ResponsibilityCommitment to SustainabilityMicrosofts approach to addressing climate change starts with the sustainability

68、of our own business.In 2020,we committed to being a carbon negative,water positive,and zero waste company by 2030.Since announcing that commitment,we have seen major changes both in the technology sector and in our understanding of what it will take to meet our climate goals.New technologies,includi

69、ng generative AI,hold promise for new innovations that can help address the climate crisis.At the same time,the infrastructure and electricity needed for these technologies create new challenges for meeting sustainability commitments across the tech sector.In May 2024,we released our Environmental S

70、ustainability Report which looked back at our progress in several areas during fiscal year 2023.In four areas we are on track,and in each of these we see progress that has the potential to have global impact beyond our own sustainability work.These are:Reducing our direct operational emissions(Scope

71、 1 and 2).Accelerating carbon removal.Designing for circularity to minimize waste and reusing cloud hardware.Improving biodiversity and protecting more land than we use.At the same time,there are two areas where were not yet on track,and in each of these we are intensively engaged in work to identif

72、y and pursue additional breakthroughs.These are:Reducing our indirect emissions(Scope 3).Reducing our water use and replenishing more water than we consume in our datacenter operations.6PART IItem 1 Even amid the challenges,we remain optimistic.Were encouraged by ongoing progress across our campuses

73、 and datacenters,and throughout our value chain.Addressing Racial Injustice and InequityIn June 2020,we outlined a series of multi-year commitments designed to address the racial injustice and inequity experienced by racial and ethnic minorities in the United States,including Black and African Ameri

74、can communities.We remain committed to addressing racial injustice and inequity and helping improve lived experiences at Microsoft,in employees communities,and beyond.In fiscal year 2024,we continued to collaborate with partners and worked within neighborhoods and communities to advance projects and

75、 programs.We grew our Nonprofit Tech Acceleration for Black and African American Communities program,to help more than 3,000 local organizations in nearly 1,900 Black and African American communities use technical solutions to modernize and streamline operations.We also expanded our Technology Educa

76、tion and Learning Support(“TEALS”)program to reach nearly 550 high schools across 21 racial equity expansion regions with the support of nearly 1,500 volunteers,12%of whom identify as Black or African American.We have committed$150 million in Minority Depository Institutions and funds supporting Bla

77、ck and African American-owned small businesses.These commitments drive sustained impact by directly enabling an increase of funds into local communities,improving diverse,small-business access to capital,and increasing skill development.We continue to partner with diverse-owned banking partners and

78、asset managers to catalyze growth and industry participation.Additionally,we enriched our supplier pipeline,achieving our goal to spend$500 million with double the number of Black-and African American-owned suppliers.We have also provided 162 low-or no-interest loans to our small to medium-sized par

79、tners through our Partner Capital Fund.We also continue to make progress toward our overall commitment to double the number of Black and African American and Hispanic and Latinx leaders in the U.S.by 2025.Investing in Digital SkillsMicrosofts Skills for Jobs initiative aims to support a more skills-

80、based labor market,with greater flexibility and accessible learning paths to develop the right skills needed for the most in-demand jobs.This initiative brings together classes,Career Essentials Certificates,and other resources from LinkedIn,GitHub,and Microsoft Learn,and is built on data insights d

81、rawn from LinkedIns Economic Graph.Our goal was to train and certify 10 million learners by 2025.As of May 2024,we have surpassed that goal,training and certifying 12.6 million learners.We also launched a campaign in the United States in 2021 to help skill and recruit 250,000 people into the nations

82、 cybersecurity workforce by 2025,representing half of the countrys workforce shortage.To that end,we are making curriculum available free of charge to all of the nations higher education institutions,providing training for new and existing faculty,and providing scholarships and supplemental resource

83、s to 25,000 students.The cyber skills initiative has expanded to 27 additional countries that show elevated cyberthreat risks coupled with significant gaps in their cybersecurity workforces,where weve partnered with nonprofits and other educational institutions to train the next generation of cybers

84、ecurity workers.Generative AI is creating unparalleled opportunities to empower workers globally,but only if everyone has the skills to use it.In June 2023,we launched an AI Skills initiative to help everyone learn how to harness the power of AI.This includes a new LinkedIn learning pathway offering

85、 new coursework on learning the foundations of generative AI.We also launched a new global grant challenge to uncover new ways of training workers on generative AI and provide greater access to digital learning events and resources.Additionally,we extended our reach in rural communities,including th

86、rough our TechSpark initiative in the United States.As of June 2024,weve helped more than 2.5 million people in 92%of the worlds countries learn how to use AI.HUMAN CAPITAL RESOURCESMicrosoft aims to recruit,develop,and retain world-changing talent from a diversity of backgrounds.To foster their and

87、 our success,we seek to create an environment where people can thrive and do their best work.We strive to maximize the potential of our human capital resourcesby creating a respectful,rewarding,and inclusive work environment that enables our global employees to create products and services that furt

88、her our mission.Microsofts culture is grounded in growth mindset.This means everyone is on a continuous journey to learn and grow,operating as one company instead of multiple siloed businesses.Our culture also embeds the security of customers and Microsoft as a priority for every employee and across

89、 all of our organizations.7PART IItem 1 As of June 30,2024,we employed approximately 228,000 people on a full-time basis,126,000 in the U.S.and 102,000 internationally.Of the total employed people,86,000 were in operations,including product support and consulting services,datacenter operations,and m

90、anufacturing and distribution;81,000 were in product research and development;45,000 were in sales and marketing;and 16,000 were in general and administration.Certain employees are subject to collective bargaining agreements.We design our programs to attract,reward,and retain top talent,enable our e

91、mployees continual growth,and reinforce our culture and values.Our total compensation opportunity is highly differentiated and market competitive.Our intended result is a global performance and development approach that fosters our culture,drives company performance,and competitive compensation that

92、 ensures equitable pay by role while supporting pay for performance.Diversity and inclusion are core to our business.As reported in our Global Diversity and Inclusion Reports,we monitor pay equity and career progress across multiple dimensions.We encourage every person at Microsoft to play an active

93、 role in creating an inclusive environment.We have invested significantly in employee wellbeing and offer a differentiated benefits package which includes many physical,emotional,and financial wellness programs.Our Occupational Health and Safety program helps to protect employees safety while they a

94、re working.We also have introduced Hybrid Workplace Flexibility guidance to better support leaders,managers,and employees in hybrid work scenarios.We believe providing employees with access to continual learning enables them to drive impact for the company.We provide individuals and teams with acces

95、s to first and third-party content resources across professions,disciplines,and roles,and offer skilling opportunities to support employees growth while driving organizations needs.Our employee listening systems enable us to gather feedback directly from our workforce to inform our programs and empl

96、oyee needs globally,giving us real-time insights into ways we can support our employees.As a company,we will continue to leverage data and research to inform decision making,balancing the needs of the business,team,and individual.OPERATING SEGMENTSWe operate our business and report our financial per

97、formance using three segments:Productivity and Business Processes,Intelligent Cloud,and More Personal Computing.Our segments provide management with a comprehensive financial view of our key businesses.The segments enable the alignment of strategies and objectives across the development,sales,market

98、ing,and services organizations,and they provide a framework for timely and rational allocation of resources within businesses.Additional information on our operating segments and geographic and product information is contained in Note 19 Segment Information and Geographic Data of the Notes to Financ

99、ial Statements(Part II,Item 8 of this Form 10-K).Our reportable segments are described below.Productivity and Business ProcessesOur Productivity and Business Processes segment consists of products and services in our portfolio of productivity,communication,and information services,spanning a variety

100、 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,Microsoft V

101、iva,and Copilot for Microsoft 365.Office Consumer,including Microsoft 365 Consumer and Copilot Pro subscriptions,Office licensed on-premises,and other Office services.LinkedIn,including Talent Solutions,Marketing Solutions,Premium Subscriptions,and Sales Solutions.Dynamics business solutions,includi

102、ng Dynamics 365,comprising a set of intelligent,cloud-based applications across ERP,CRM,Power Apps,and Power Automate;and on-premises ERP and CRM applications.8PART IItem 1 Office CommercialOffice Commercial is designed to increase personal,team,and organizational productivity through a range of pro

103、ducts and services.Growth depends on our ability to reach new users in new markets such as frontline workers,small and medium businesses,and growth markets,as well as add value to our core product and service offerings to span AI and productivity categories such as communication,collaboration,analyt

104、ics,security,and compliance.Office Commercial revenue is mainly affected by a combination of continued installed base growth and average revenue per user expansion,as well as the continued shift from Office licensed on-premises to Office 365.Office ConsumerOffice Consumer is designed to increase per

105、sonal productivity and creativity through a range of products and services.Growth depends on our ability to reach new users,add value to our core product set with new features including AI tools,and continue to expand our product and service offerings into new markets.Office Consumer revenue is main

106、ly affected by the percentage of customers that buy Office with their new devices and the continued shift from Office licensed on-premises to Microsoft 365 Consumer subscriptions.Office Consumer Services revenue is mainly affected by the demand for communication and storage through Skype,O,and OneDr

107、ive,which is largely driven by subscriptions,advertising,and the sale of minutes.LinkedInLinkedIn connects the worlds professionals to make them more productive and successful and transforms the way companies hire,market,sell,and learn.Our vision is to create economic opportunity for every member of

108、 the global workforce through the ongoing development of the worlds first Economic Graph,a digital representation of the global economy.In addition to LinkedIns free services,LinkedIn offers monetized solutions designed to offer AI-enabled insights and productivity:Talent Solutions,Marketing Solutio

109、ns,Premium Subscriptions,and Sales Solutions.Talent Solutions provide insights for workforce planning and tools to hire,nurture,and develop talent.Talent Solutions also includes Learning Solutions,which help businesses close critical skills gaps in times where companies are having to do more with ex

110、isting talent.Marketing Solutions help companies reach,engage,and convert their audiences at scale.Premium Subscriptions enable professionals to manage their professional identity,grow their network,find jobs,access knowledge,and connect with talent through additional services like premium search.Sa

111、les Solutions help companies strengthen customer relationships,empower teams with digital selling tools,and acquire new opportunities.Growth will depend on our ability to increase the number of LinkedIn members and our ability to continue offering insight and AI-enabled services that provide value f

112、or our members and increase their engagement.LinkedIn revenue is mainly affected by demand from enterprises and professionals for subscriptions to Talent Solutions,Sales Solutions,and Premium Subscriptions offerings,as well as member engagement and the quality of the sponsored content delivered to t

113、hose members to drive Marketing Solutions.DynamicsDynamics provides cloud-based and on-premises business solutions for financial management,enterprise resource planning(“ERP”),customer relationship management(“CRM”),and supply chain management,as well as other low code application development platfo

114、rms and AI offerings,for small and medium businesses,large organizations,and divisions of global enterprises.Dynamics revenue is driven by the number of users licensed and applications consumed,expansion of average revenue per user,and the continued shift to Dynamics 365,a unified set of cloud-based

115、 intelligent business applications,including our low code development platforms,such as Power Apps and Power Automate.9PART IItem 1 CompetitionCompetitors to Office include software and global application vendors,such as Apple,Cisco Systems,Google,Meta,Proofpoint,Slack,Symantec,Zoom,and numerous web

116、-based and mobile application competitors as well as local application developers.Apple distributes versions of its pre-installed application software,such as email and calendar products,through its PCs,tablets,and phones.Cisco Systems is using its position in enterprise communications equipment to

117、grow its unified communications business.Google provides a hosted messaging and productivity suite.Meta offers communication tools to enable productivity and engagement within organizations.Proofpoint and Symantec provide security solutions across email security,information protection,and governance

118、.Slack provides teamwork and collaboration software.Zoom offers videoconferencing and cloud phone solutions.Web-based offerings competing with individual applications have also positioned themselves as alternatives to our products and services.We compete by providing powerful,flexible,secure,integra

119、ted industry-specific,and easy-to-use productivity and collaboration tools and services that create comprehensive solutions and work well with technologies our customers already have both on-premises or in the cloud.LinkedIn faces competition from online professional networks,recruiting companies,ta

120、lent management companies,and larger companies that are focusing on talent management and human resource services;job boards;traditional recruiting firms;and companies that provide learning and development products and services.Marketing Solutions competes with online and offline outlets that genera

121、te revenue from advertisers and marketers,and Sales Solutions competes with online and offline outlets for companies with lead generation and customer intelligence and insights.Dynamics competes with cloud-based and on-premises business solution providers such as Oracle,Salesforce,SAP,Service Now,UI

122、 Path,and WorkDay.Intelligent CloudOur 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

123、 Server,Windows Server,Visual Studio,System Center,and related Client Access Licenses(“CALs”);and Nuance and GitHub.Enterprise and partner services,including Enterprise Support Services,Industry Solutions,Nuance professional services,Microsoft Partner Network,and Learning Experience.Server Products

124、and Cloud ServicesAzure is a comprehensive set of cloud services that offer developers,IT professionals,and enterprises freedom to build,deploy,and manageapplications on any platform or device.Customers can use Azure through our global network of datacenters for computing,networking,storage,mobile a

125、nd web application services,AI,Internet of Things(“IoT”),cognitive services,and machine learning.Azure enables customers to devote more resources to development and use of applications that benefit their organizations,rather than managing on-premises hardware and software.Azure revenue is mainly aff

126、ected by infrastructure-as-a-service and platform-as-a-service consumption-based services,and per user-based services such as Enterprise Mobility+Security.Azure AI offerings provide a competitive advantage as companies seek ways to optimize and scale their business with machine learning.With Azures

127、purpose-built,AI-optimized infrastructure,customers can use a variety of large language models and developer tools to create the next generation of AI apps and services.Our server products are designed to make IT professionals,developers,and their systems more productive and efficient.Server softwar

128、e is integrated server infrastructure and middleware designed to support software applications built on the Windows Server operating system.This includes the server platform,database,business intelligence,storage,management and operations,virtualization,service-oriented architecture platform,securit

129、y,and identity software.We also license standalone and software development lifecycle tools for software architects,developers,testers,and project managers.Server products revenue is mainly affected by purchases through volume licensing programs,licenses sold to original equipment manufacturers(“OEM

130、”),and retail packaged products.CALs provide access rights to certain server products,including SQL Server and Windows Server,and revenue is reported along with the associated server product.10PART IItem 1 Nuance and GitHub include both cloud and on-premises offerings.Nuance provides healthcare and

131、enterprise AI solutions.GitHub provides a collaboration platform and code hosting service for developers.Enterprise and Partner ServicesEnterprise and Partner Services,including Enterprise Support Services,Industry Solutions,Nuance professional services,Microsoft Partner Network,and Learning Experie

132、nce,assist customers in developing,deploying,and managing Microsoft server solutions,Microsoft desktop solutions,and Nuance conversational AI and ambient intelligent solutions,along with providing training and certification to developers and IT professionals on various Microsoft products.Competition

133、Azure faces diverse competition from companies such as Amazon,Broadcom,Google,IBM,Oracle,and open source offerings.Azures competitive advantage includes enabling a hybrid cloud,allowing deployment of existing datacenters with our public cloud into a single,cohesive infrastructure,and the ability to

134、run at a scale that meets the needs of businesses of all sizes and complexities.Our AI offerings compete with AI products from hyperscalers such as Amazon and Google,as well as products from other emerging competitors,including Anthropic,OpenAI,Meta,and other open source offerings,many of which are

135、also current or potential partners.Our Azure Security offerings include our cloud security solution and security information and event management solution,which compete with companies such as Palo Alto Networks and Cisco.Our Enterprise Mobility+Security offerings also compete with products from a ra

136、nge of competitors including identity vendors,security solution vendors,and numerous other security point solution vendors.We believe our clouds global scale,coupled with our broad portfolio of identity and security solutions,allows us to effectively solve complex cybersecurity challenges for our cu

137、stomers and differentiates us from the competition.Our server products face competition from a wide variety of server operating systems and applications offered by companies with a range of market approaches.Vertically integrated computer manufacturers such as Hewlett-Packard,IBM,and Oracle offer th

138、eir own versions of the Unix operating system preinstalled on server hardware and nearly all computer manufacturers offer server hardware for the Linux operating system.We compete to provide enterprise-wide computing and point solutions with numerous commercial software vendors that offer solutions

139、and middleware technology platforms,software applications for connectivity,security,hosting,database,and e-business servers.IBM and Oracle lead a group of companies that compete with our enterprise-wide computing solutions.Commercial competitors for our server applications for PC-based distributed c

140、lient-server environments include Broadcom,IBM,and Oracle.Our web application platform software competes with open source software such as Apache,Linux,MySQL,and PHP.In middleware,we compete against Java vendors.Our database,business intelligence,and data warehousing solutions offerings compete with

141、 products from Databricks,IBM,Oracle,SAP,Snowflake,and other companies.Our system management solutions compete with server management and server virtualization platform providers,such as BMC,Broadcom,Hewlett-Packard,and IBM.Our products for software developers compete against offerings from Adobe,IB

142、M,Oracle,and other companies,and also against open source projects,including Eclipse(sponsored by IBM,Oracle,and SAP),PHP,and Ruby on Rails.We believe our server products provide customers with advantages in performance,total costs of ownership,and productivity by delivering superior applications,de

143、velopment tools,compatibility with a broad base of hardware and software applications,security,and manageability.Our Enterprise and Partner Services business competes with a wide range of companies that provide strategy and business planning,application development,and infrastructure services,includ

144、ing multinational consulting firms and small niche businesses focused on specific technologies.11PART IItem 1 More Personal ComputingOur More Personal Computing segment consists of products and services that put customers at the center of the experience with our technology.This segment primarily com

145、prises:Windows,including Windows 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.D

146、evices,including Surface,HoloLens,and PC accessories.Gaming,including Xbox hardware and Xbox content and services,comprising first-party content(such as Activision Blizzard)and third-party content,including games and in-game content;Xbox Game Pass and other subscriptions;Xbox Cloud Gaming;advertisin

147、g;third-party disc royalties;and other cloud services.Search and news advertising,comprising Bing(including Copilot),Microsoft News,Microsoft Edge,and third-party affiliates.WindowsThe Windows operating system is designed to deliver a more personal computing experience for users by enabling consiste

148、ncy of experience,applications,and information across their devices.Windows OEM revenue is impacted significantly by the number of Windows operating system licenses purchased by OEMs,which they pre-install on the devices they sell.In addition to computing device market volume,Windows OEM revenue is

149、impacted by:The mix of computing devices based on form factor and screen size.Differences in device market demand between developed markets and growth markets.Growth of the AI PC categoryAttachment of Windows to devices shipped.Customer mix between consumer,small and medium businesses,and large ente

150、rprises.Changes in inventory levels in the OEM channel.Pricing changes and promotions,pricing variation that occurs when the mix of devices manufactured shifts from local and regional system builders to large multinational OEMs,and different pricing of Windows versions licensed.Constraints in the su

151、pply chain of device components.Piracy.Windows Commercial revenue,which includes volume licensing of the Windows operating system and Windows cloud services such as Microsoft Defender for Endpoint,is affected mainly by the demand from commercial customers for Microsoft 365 and our advanced security

152、offerings.Windows Commercial revenue often reflects the number of information workers in a licensed enterprise and is relatively independent of the number of PCs sold in a given year.Patent licensing includes our programs to license patents we own for use across a broad array of technology areas,inc

153、luding mobile devices and cloud offerings.Windows IoT extends the power of Windows and the cloud to intelligent systems by delivering specialized operating systems,tools,and services for use in embedded devices.DevicesWe design and sell devices,such as Surface(including Copilot+PCs),HoloLens,and PC

154、accessories.Our devices are designed to enable people and organizations to connect to the people and content that matter most using Windows and integrated Microsoft products and services.Surface is designed to help organizations,students,and consumers be more productive.Growth in Devices is dependen

155、t on total PC shipments,the ability to attract new customers,our product roadmap,and expanding into new categories.12PART IItem 1 GamingOur gaming platform is designed to provide a variety of entertainment through a unique combination of content,community,and cloud services.Our game content is devel

156、oped through a collection of first-party studios creating iconic and differentiated gaming experiences.We continue to invest in new gaming studios and content to expand our intellectual property roadmap and leverage new content creators.These unique gaming experiences are the cornerstone of Xbox Gam

157、e Pass,a subscription service and gaming community with access to a curated library of over 400 first-and third-party console and PC titles.The gamer remains at the heart of the Xbox ecosystem.We are identifying new opportunities to attract gamers across a variety of different end points through our

158、 first-and third-party content and business diversification across subscriptions,ads,and digital stores.Weve seen new devices from third-party manufacturers along with key PC and mobile end points that help us empower gamers to play in a way that is most convenient to them.We are focused on growing

159、the platform and expanding to new ecosystems to engage as many gamers as possible.Xbox enables people to connect and share online gaming experiences that are accessible on Xbox consoles,Windows-enabled devices,and other devices.Xbox is designed to benefit users by providing access to a network of ce

160、rtified applications and services and to benefit our developer and partner ecosystems by providing access to a large customer base.Xbox revenue is mainly affected by subscriptions and sales of first-and third-party content,as well as advertising.Growth of our Gaming business is determined by the ove

161、rall active user base through Xbox enabled content,availability of games,providing exclusive game content that gamers seek,the computational power and reliability of the devices used to access our content and services,and the ability to create new experiences.Search and News AdvertisingOur Search an

162、d news advertising business is designed to deliver relevant search,native,and display advertising to a global audience.Our Microsoft Edge browser and Bing search engine with Copilot are key tools to enable user acquisition and engagement,while our technology platform enables accelerated delivery of

163、digital advertising solutions.In addition to first-party tools,we have several partnerships with companies,such as Yahoo,through which we provide and monetize search offerings.Growth depends on our ability to attract new users,understand intent,and match intent with relevant content on advertising o

164、fferings.Competition Windows faces competition from various software products and from alternative platforms and devices,mainly from Apple and Google,and Microsoft Defender for Endpoint competes with CrowdStrike on endpoint security solutions.We believe Windows competes effectively by giving custome

165、rs choice,value,flexibility,security,an easy-to-use interface,and compatibility with a broad range of hardware and software applications,including those that enable productivity.Devices face competition from various computer,tablet,and hardware manufacturers who offer a unique combination of high-qu

166、ality industrial design and innovative technologies across various price points.These manufacturers,many of which are also current or potential partners and customers,include Apple and our Windows OEMs.Xbox and our cloud gaming services face competition from various online gaming ecosystems and game

167、 streaming services,including those operated by Amazon,Apple,Meta,and Tencent.We also compete with other providers of entertainment services such as video streaming platforms.Our gaming platform competes with console platforms from Nintendo and Sony,both of which have a large,established base of cus

168、tomers.We believe our gaming platform is effectively positioned against,and uniquely differentiated from,competitive products and services based on significant innovation in hardware architecture,user interface,developer tools,online gaming and entertainment services,and continued strong content fro

169、m our own first-party game franchises as well as other digital content offerings.Our Search and news advertising business competes with Google,OpenAI,and a wide array of websites,social platforms like Meta,and portals that provide content and online offerings to end users.13PART IItem 1 OPERATIONS W

170、e have regional operations service centers that support our operations,including customer contract and order processing,billing,credit and collections,customer lifecycle operations,information processing,and vendor management and logistics.The centers in Ireland and Romania support the African,Europ

171、ean,and Middle East regions;the centers in India and Ireland support the Asia-Pacific region;and the centers in Arlington,Virginia,Atlanta,Georgia,Charlotte,North Carolina,Fargo,North Dakota,Fort Lauderdale,Florida,Redmond,Washington,Reno,Nevada,and San Jose,Costa Rica support the Americas regions.I

172、n addition to our operations centers,we also operate datacenters throughout each of these regions.We continue to identify and evaluate opportunities to expand our datacenter locations and increase our server capacity to meet the evolving needs of our customers,particularly given the growing demand f

173、or AI services.Our datacenters depend on the availability of permitted and buildable land,predictable energy,networking supplies,and servers,including graphics processing units(“GPUs”)and other components.Our devices are primarily manufactured by third-party contract manufacturers.For the majority o

174、f our products,we have the ability to use other manufacturers if a current vendor becomes unavailable or unable to meet our requirements.However,some of our products contain certain components for which there are very few qualified suppliers.Extended disruptions at these suppliers could impact our a

175、bility to manufacture devices on time to meet consumer demand.RESEARCH AND DEVELOPMENT Product and Service Development,and Intellectual Property We develop most of our products and services internally through the following engineering groups.Cloud and AI focuses on making IT professionals,developers

176、,partners,independent software vendors,and their systems more productive and efficient through development of Azure AI platform and cloud infrastructure,server,database,CRM,ERP,software development tools and services,AI cognitive services,and other business process applications and services for ente

177、rprises.Strategic Missions and Technologies focuses on incubating technical products and support solutions with transformative potential for the future of cloud computing and continued company growth,such as quantum computing and advanced AI for science.Experiences and Devices focuses on delivering

178、high value end-user experiences across our products,services,and devices,including Microsoft 365,Windows,Microsoft Teams,and the Surface line of devices.Microsoft AI focuses on delivering online experiences targeted at consumers(including Bing,Copilot,Start/MSN,and other advertising-based services)a

179、nd developing advanced AI models.Microsoft Security focuses on delivering a comprehensive portfolio of services that protect our customers digital infrastructure through cloud platform and application security,data protection and governance,identity and network access,and device management.Technolog

180、y and Research focuses on fundamental research,product and business incubations,and forward-looking AI innovations that span infrastructure,services,and applications.This engineering group includes Microsoft Research,one of the worlds largest corporate research organizations,which focuses on fundame

181、ntal research in AI,computer science,and a broad range of other disciplines.LinkedIn focuses on our services that transform the way professionals grow their network and find jobs and the way businesses hire,market,sell,and learn.Gaming focuses on developing hardware,content,and services across a lar

182、ge range of platforms to help grow our user base through game experiences and social interaction.Internal development allows us to maintain competitive advantages that come from product differentiation and closer technical control over our products and services.It also gives us the freedom to decide

183、 which modifications and enhancements are most important and when they should be implemented.We strive to obtain information as early as possible about changing usage patterns and hardware advances that may affect software and hardware design.Before releasing new software platforms,and as we make si

184、gnificant modifications to existing platforms,we provide application vendors with a range of resources and guidelines for development,training,and testing.Generally,we also create product documentation internally.14PART IItem 1 We protect our intellectual property investments in a variety of ways.We

185、 work actively in the U.S.and internationally to ensure the enforcement of copyright,trademark,trade secret,and other protections that apply to our software and hardware products,services,business plans,and branding.We are a leader among technology companies in pursuing patents and currently have a

186、portfolio of over 63,000 U.S.and international patents issued and over 23,000 pending worldwide.While we employ much of our internally-developed intellectual property in our products and services,we also engage in outbound licensing of specific patented technologies that are incorporated into licens

187、ees products.From time to time,we enter into broader cross-license agreements with other technology companies covering entire groups of patents.We may also purchase or license technology that we incorporate into our products and services.At times,we make select intellectual property broadly availabl

188、e at no or low cost to achieve a strategic objective,such as promoting industry standards,advancing interoperability,supporting societal and/or environmental efforts,or attracting and enabling our external development community.Our engagement with open source software also causes us to license our i

189、ntellectual property rights broadly in certain situations.While it may be necessary in the future to seek or renew licenses relating to various aspects of our products and services,we believe,based upon past experience and industry practice,such licenses generally can be obtained on commercially rea

190、sonable terms.We believe our continuing research and product development are not materially dependent on any single license or other agreement with a third party relating to the development of our products.Investing in the Future Our success is based on our ability to create new and compelling produ

191、cts,services,and experiences for our users,to initiate and embrace disruptive technology trends,to enter new geographic and product markets,and to drive broad adoption of our products and services.We invest in a range of emerging technology trends and breakthroughs that we believe offer significant

192、opportunities to deliver value to our customers and growth for the company.Based on our assessment of key technology trends,we maintain our long-term commitment to research and development across a wide spectrum of technologies,tools,and platforms spanning digital work and life experiences,cloud com

193、puting,AI,devices,and operating systems.While our main product research and development facilities are located in Redmond,Washington,we also operate research and development facilities in other parts of the U.S.and around the world.This global approach helps us remain competitive in local markets an

194、d enables us to continue to attract top talent from across the world.We plan to continue to make significant investments in a broad range of product research and development activities,and as appropriate we will coordinate our research and development across operating segments and leverage the resul

195、ts across the company.This includes continuing to support fundamental research,which provides us with a unique perspective on future trends and contributes to our innovation.DISTRIBUTION,SALES,AND MARKETING We market and distribute our products and services through the following channels:OEMs,direct

196、,and distributors and resellers.Our sales organization performs a variety of functions,including working directly with commercial enterprises and public-sector organizations worldwide to identify and meet their technology and digital transformation requirements;managing OEM relationships;and support

197、ing systemintegrators,independent software vendors,and other partners who engage directly with our customers to perform sales,consulting,and fulfillment functions for our products and services.OEMs We distribute our products and services through OEMs that pre-install our software on new devices and

198、servers they sell.The largest component of the OEM business is the Windows operating system pre-installed on devices.OEMs also sell devices pre-installed with other Microsoft products and services,including applications such as Office and the capability to subscribe to Microsoft 365 Consumer.There a

199、re two broad categories of OEMs.The largest category of OEMs are direct OEMs as our relationship with them is managed through a direct agreement between Microsoft and the OEM.We have distribution agreements covering one or more of our products with virtually all the multinational OEMs,including Dell

200、,Hewlett-Packard,Lenovo,and with many regional and local OEMs.The second broad category of OEMs are system builders consisting of lower-volume PC manufacturers,which source Microsoft software for pre-installation and local redistribution primarily through the Microsoft distributor channel rather tha

201、n through a direct agreement or relationship with Microsoft.15PART IItem 1 Direct Many organizations that license our products and services transact directly with us through Enterprise Agreements and Enterprise Services contracts,with sales support from system integrators,independent software vendor

202、s,web agencies,and partners that advise organizations on licensing our products and services(“Enterprise Agreement Software Advisors”or“ESA”).Microsoft offers direct sales programs targeted to reach small,medium,and corporate customers,in addition to those offered through the reseller channel.A larg

203、e network of partner advisors support many of these sales.We also sell commercial and consumer products and services directly to customers,such as cloud services,search,and gaming,through our digital marketplaces and online stores.Additionally,our Microsoft Experience Centers are designed to facilit

204、ate deeper engagement with our partners and customers across industries.Distributors and Resellers Organizations also license our products and services indirectly,primarily through licensing solution partners(“LSP”),distributors,value-added resellers(“VAR”),and retailers.Although each type of resell

205、ing partner may reach organizations of all sizes,LSPs are primarily engaged with large organizations,distributors resell primarily to VARs,and VARs typically reach small and medium organizations.ESAs are also typically authorized as LSPs and operate as resellers for our other volume licensing progra

206、ms.Microsoft Cloud Solution Provider is our main partner program for reselling cloud services.We distribute our retail packaged products primarily through independent non-exclusive distributors,authorized replicators,resellers,and retail outlets.Individual consumers obtain these products primarily t

207、hrough retail outlets.We distribute our devices through third-party retailers.We have a network of field sales representatives and field support personnel that solicit orders from distributors and resellers and provide product training and sales support.Our Dynamics business solutions are also licen

208、sed to enterprises through a global network of channel partners providing vertical solutions and specialized services.LICENSING OPTIONS We offer options for organizations of varying sizes that want to purchase our cloud services and on-premise software.We license these organizations under volume lic

209、ensing agreements to allow the customer to acquire multiple licenses of products and services instead of having to acquire separate licenses through retail channels.These volume licensing programs have varying programmatic requirements and benefits to best meet the needs of our customers.Software As

210、surance(“SA”)conveys rights to new software and upgrades for perpetual licenses released over the contract period.It also provides support,tools,training,and other licensing benefits to help customers deploy and use software efficiently.SA is required to be purchased with certain volume licensing ag

211、reements and is an optional purchase with others.16PART IItem 1 Volume Licensing ProgramsEnterprise Agreement Enterprise Agreements offer large organizations a manageable volume licensing program that gives them the flexibility to buy cloud services and software licenses under one agreement.Enterpri

212、se Agreements are designed for medium or large organizations that want to license Microsoft products and services organization-wide over a three-year period.Organizations can elect to purchase perpetual licenses(covered with SA)and/or subscribe to cloud services.Microsoft Customer AgreementMicrosoft

213、 Customer Agreements are simplified purchase agreements presented,accepted,and stored through a digital experience.Microsoft Customer Agreements are non-expiring agreements that are designed to support all customers over time,whether purchasing through a partner or directly from Microsoft.Microsoft

214、Online Subscription AgreementMicrosoft Online Subscription Agreements are designed for small and medium organizations that want to subscribe to,activate,provision,and maintain cloud services seamlessly and directly via the web.These agreements allow customers to acquire monthly or annual subscriptio

215、ns for cloud-based services.Microsoft Products and Services Agreement Microsoft Products and Services Agreements are designed for medium and large organizations that want to license cloud services and on-premises software as needed,with no organization-wide commitment,under a single,non-expiring agr

216、eement.Organizations purchase perpetual licenses or subscribe to licenses.SA is optional for customers that purchase perpetual licenses.Open ValueOpen Value agreements are a simple,cost-effective way to acquire the latest Microsoft technology.These agreements are designed for small and medium organi

217、zations that want to license cloud services and on-premises software over a three-year period.Under Open Value agreements,organizations can elect to purchase perpetual licenses or subscribe to licenses and SA is included.Select Plus A Select Plus agreement is designed for government and academic org

218、anizations to acquire on-premises licenses at any affiliate or department level,while realizing advantages as one organization.Organizations purchase perpetual licenses and SA is optional.Partner Programs The Microsoft Cloud Solution Provider Program offers customers an easy way to license the cloud

219、 services they need in combination with the value-added services offered by their systems integrator,managed services provider,or cloud reseller partner.Partners in this program can easily package their own products and services to directly provision,manage,and support their customer subscriptions.T

220、he Microsoft Services Provider License Agreement allows hosting service providers and independent software vendors who want to license eligible Microsoft software products to provide hosted applications and software services to their end customers.Partners license software over a three-year period a

221、nd are billed monthly based on units licensed.The Independent Software Vendor Royalty Program enables partners to integrate Microsoft products into other applications and then license the unified business solution to their end users.17PART IItem 1 CUSTOMERSOur customers include individual consumers,

222、small and medium organizations,large global enterprises,public-sector institutions,Internet service providers,application developers,and OEMs.Our practice is to ship our products promptly upon receipt of purchase orders from customers;consequently,backlog is not significant.GOVERNMENT REGULATION We

223、are subject to a wide range of laws,regulations,and legal requirements in the U.S.and globally,including those that may apply to our products and online services offerings,and those that impose requirements related to user privacy,telecommunications,data storage andprotection,advertising,and online

224、content.How these laws and regulations apply to our business is often unclear,subject to change over time,and sometimes may be inconsistent from jurisdiction to jurisdiction.To comply with the accelerating global regulatory obligations,we established a regulatory governance framework and to create a

225、 repeatable system-focused approach to regulatory governance with an initial focus on four domains:Responsible AI,Privacy,Digital Safety,and Cybersecurity.The framework is designed to help us maintain customer trust and confidence in our products,remain in compliance with regulators around the globe

226、,and effectively scale our capability to address the growing number of complex regulations.Through the framework,our legal and regulatory subject matter experts ingest regulations,develop standards and implementation guidance,and,when appropriate,work with our engineers to develop and implement prod

227、ucts to monitor compliance.Our business teams,with legal support,manage the compliance programs and prepare external regulatory and commercial reporting,and our internal audit teams conduct reviews of our programs and processes.While we intended to create a unified approach to regulatory compliance,

228、some of the programs and processes established pursuant to the framework are tailored to meet specific regulatory obligations,such as with the creation of independent compliance functions required by the European Union(“EU”)Digital Markets Act and the EU Digital Services Act,which oversee,monitor,an

229、d assess the companys compliance with these acts.For a description of the risks we face related to regulatory matters,refer to Risk Factors(Part I,Item 1A of this Form 10-K).INFORMATION ABOUT OUR EXECUTIVE OFFICERSOur executive officers as of July 30,2024 were as follows:Name Age Position with the C

230、ompany Satya Nadella 56 Chairman and Chief Executive OfficerJudson B.Althoff 51 Executive Vice President and Chief Commercial OfficerKathleen T.Hogan 58 Executive Vice President and Chief Human Resources OfficerAmy E.Hood 52 Executive Vice President and Chief Financial OfficerTakeshi Numoto 53 Execu

231、tive Vice President and Chief Marketing OfficerBradford L.Smith 65 Vice Chair and PresidentChristopher D.Young 52 Executive Vice President,Business Development,Strategy,and Ventures Mr.Nadella was appointed Chairman of the Board in June 2021 and Chief Executive Officer in February 2014.He served as

232、Executive Vice President,Cloud and Enterprise from July 2013 until that time.From 2011 to 2013,Mr.Nadella served as President,Server and Tools.From 2009 to 2011,he was Senior Vice President,Online Services Division.From 2008 to 2009,he was Senior Vice President,Search,Portal,and Advertising.Since jo

233、ining Microsoft in 1992,Mr.Nadellas roles also included Vice President of the Business Division.Mr.Althoff was appointed Executive Vice President and Chief Commercial Officer in July 2021.He served as Executive Vice President,Worldwide Commercial Business from July 2017 until that time.Prior to that

234、,Mr.Althoff served as the President of Microsoft North America.Mr.Althoff joined Microsoft in March 2013 as President of Microsoft North America.Mr.Althoff also serves on the Board of Directors of Ecolab Inc.Ms.Hogan was appointed Executive Vice President and Chief Human Resources Officer in June 20

235、23.Ms.Hogan had been Executive Vice President,Human Resources since November 2014.Prior to that Ms.Hogan was Corporate Vice President of Microsoft Services.She also served as Corporate Vice President of Customer Service and Support.Ms.Hogan joined Microsoft in 2003.Ms.Hogan also serves on the Board

236、of Directors of Alaska Air Group,Inc.18PART IItem 1 Ms.Hood was appointed Executive Vice President and Chief Financial Officer in July 2013,subsequent to her appointment as Chief Financial Officer in May 2013.From 2010 to 2013,Ms.Hood was Chief Financial Officer of the Microsoft Business Division.Si

237、nce joining Microsoft in 2002,Ms.Hood has also held finance-related positions in the Server and Tools Business and the corporate finance organization.Ms.Hood also serves on the Board of Directors of 3M Corporation.Mr.Numoto was appointed Executive Vice President and Chief Marketing Officer in Octobe

238、r 2023.He served as Executive Vice President and Commercial Chief Marketing Officer from March 2020.Mr.Numoto served as a Corporate Vice President,Cloud Marketing from January 2012.Prior to that,Mr.Numoto served as a Corporate Vice President for Office 365 Marketing from 2004,where he led the transf

239、ormation from traditional on-premises packaged software to the introduction of Office 365.Since joining Microsoft in 1997,Mr.Numoto has heldmultiple roles in Windows Program Management and Office Marketing.Mr.Smith was appointed Vice Chair and President in September 2021.Prior to that,he served as P

240、resident and Chief Legal Officer since September 2015.He served as Executive Vice President,General Counsel,and Secretary from 2011 to 2015,and served as Senior Vice President,General Counsel,and Secretary from 2001 to 2011.Mr.Smith was also named Chief Compliance Officer in 2002.Since joining Micro

241、soft in 1993,he was Deputy General Counsel for Worldwide Sales and previously was responsible for managing the European Law andCorporate Affairs Group,based in Paris.Mr.Smith also serves on the Board of Directors of Netflix,Inc.Mr.Young has served as Executive Vice President,Business Development,Str

242、ategy,and Ventures since joining Microsoft in November 2020.Prior to Microsoft,he served as the Chief Executive Officer of McAfee,LLC from 2017 to 2020,and served as a Senior Vice President and General Manager of Intel Security Group from 2014 until 2017,when he led the initiative to spin out McAfee

243、 into a standalone company.Mr.Young also serves on the Board of Directors of American Express Company.AVAILABLE INFORMATIONOur Internet address is .At our Investor Relations website, make available free of charge a variety of information for investors.Our goal is to maintain the Investor Relations w

244、ebsite as a portal through which investors can easily find or navigate to pertinent information about us,including:Our annual report on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K,and any amendments to those reports,as soon as reasonably practicable after we electronically f

245、ile that material with or furnish it to the Securities and Exchange Commission(“SEC”)at www.sec.gov.Information on our business strategies,financial results,and metrics for investors.Announcements of investor conferences,speeches,and events at which our executives talk about our product,service,and

246、competitive strategies.Archives of these events are also available.Press releases on quarterly earnings,product and service announcements,legal developments,and international news.Corporate governance information including our articles of incorporation,bylaws,governance guidelines,committee charters

247、,codes of conduct and ethics,global corporate social responsibility initiatives,and other governance-related policies.Other news and announcements that we may post from time to time that investors might find useful or interesting.Opportunities to sign up for email alerts to have information pushed i

248、n real time.We publish a variety of reports and resources related to our Corporate Social Responsibility programs and progress on our Reports Hub website, reports on sustainability,responsible sourcing,accessibility,digital trust,and public policy engagement.The information found on these websites i

249、s not part of,or incorporated by reference into,this or any other report we file with,or furnish to,the SEC.In addition to these channels,we use social media to communicate to the public.It is possible that the information we post on social media could be deemed to be material to investors.We encour

250、age investors,the media,and others interested in Microsoft to review the information we post on the social media channels listed on our Investor Relations website.19PART IItem 1A ITEM 1A.RISK FACTORSOur operations and financial results are subject to various risks and uncertainties,including those d

251、escribed 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 RISKSWe face intense competition across all markets for our products and services,which may adversely affect our

252、results of operations.Competition in the technology sectorOur 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 fi

253、nancial 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,

254、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 ecosystemsAn important element of our business model has been to create platform-based eco

255、systems 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 maintai

256、n attractive margins.We face significant competition from firms that provide competing platforms.A competing vertically-integrated model,in which a single firm controls the software and hardware elements of a product and related services,has succeeded with some consumer products such as PCs,tablets,

257、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 an

258、d 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 substanti

259、al 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 pla

260、tform.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.C

261、ompeting 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 original equipment manufactu

262、rer(“OEM”)partners,which may affect their commitment to our platform.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

263、 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 competi

264、tors 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 m

265、odel objectives.20PART IItem 1A 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 competitionCompanies compete with us based on

266、 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

267、.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.We expect AI technology and servic

268、es to be 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 effec

269、tively 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 model,the license-based proprietary software model generates a substantia

270、l 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 an

271、d 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 w

272、ith 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,using open source AI models,and earning revenue on advertising or integrated products and services.These firms do not bear the full costs of re

273、search and development for the open source products.Some open source products mimic the features and functionality of our products.The competitive pressures described above may cause decreased sales volumes,price reductions,and/or increased operating costs,such as for research and development,market

274、ing,and sales incentives,which may adversely affect our financial condition and results of operations.Our focus on cloud-based and AI services presents execution and competitive risks.We are incurring significant costs to build and maintain infrastructure to support cloud computing and AI services.T

275、hese costs will reduce the operating margins.Whether we succeed in cloud-based and AI services depends on our execution in several areas,including:Continuing to bring to market compelling cloud-based and AI experiences and products that generate increasing traffic and market share.Maintaining the ut

276、ility,compatibility,and performance of our cloud-based and AI services on the growing array of computing devices,including PCs,smartphones,tablets,gaming consoles,and other devices.Continuing to enhance the attractiveness of our cloud platforms to third-party developers.Ensuring our cloud-based serv

277、ices meet the reliability expectations and specific requirements of our customers and maintain the security of their data as well as help them meet their own compliance needs.Making our suite of cloud-based services platform-agnostic,available on a wide range of devices and ecosystems,including thos

278、e of our competitors.It is uncertain whether our strategies will continue to attract users or generate the revenue required to succeed.If we are not effective in executing organizational and technical changes to increase efficiency and accelerate innovation,or if we fail to generate sufficient usage

279、 of our new products and services,we may not grow revenue in line with the infrastructure and development investments described above.This may adversely affect our operations,financial condition,and results of operations.21PART IItem 1A Our AI systems offer users powerful tools and capabilities.Howe

280、ver,there may be instances where these systems are used in ways that areunintended or inappropriate.In addition,some users may also engage in fraudulent or abusive activities through our cloud-based services,such as unauthorized account access,payment fraud,or terms of service violations including c

281、ryptocurrency mining or launching cyberattacks.While are committed to detecting and controlling such misuse of our cloud-based and AI services,our efforts may not be effective,and we may incur reputational damage or experience adverse impacts to our business and results of operations.RISKS RELATING

282、TO THE EVOLUTION OF OUR BUSINESSWe make significant investments in products and services that may not achieve expected returns.We will continue to make significant investments in research,development,and marketing for existing products,services,and technologies.In addition,we are focused on developi

283、ng new AI platform services and incorporating AI into existing products and services.We also invest in the development and acquisition of a variety of hardware for productivity,communication,and entertainment,including PCs,tablets,and gaming devices.Investments in new technology are speculative.Comm

284、ercial success depends on many factors,including innovation,developer support,and effective distribution and marketing.If customers do not perceive our latest offerings as providing significant new functionality or other value,they may reduce their purchases of new software and hardware products or

285、upgrades,unfavorably affecting revenue.We may not achieve significant revenue from new product,service,and distribution channel investments for several years,if at all.New products and services may not be profitable or may not achieve operating margins as high as we have experienced historically.We

286、may not get engagement in certain features that drive post-sale monetization opportunities.Our data-handling practices across our products and services will continue to be under scrutiny.Perceptions of mismanagement,driven by regulatory activity or negative public reaction to our practices or produc

287、t experiences,could negatively impact product and feature adoption.Developing new technologies is complex.It can require long development and testing periods.We could experience significant delays in new releases or significant problems in creating new products or services.These factors could advers

288、ely affect our business,financial condition,and results of operations.Acquisitions,joint ventures,and strategic alliances may have an adverse effect on our business.We expect to continue making acquisitions and entering into joint ventures and strategic alliances as part of our long-term business st

289、rategy.For example,in March 2022 we completed our acquisition of Nuance Communications,Inc.,and in October 2023 we completed our acquisition of Activision Blizzard,Inc.(“Activision Blizzard”).In January 2023 we announced the third phase of our OpenAI strategic partnership.Acquisitions and other tran

290、sactions and arrangements involve significant challenges and risks,including that they do not advance our business strategy,that we get an unsatisfactory return on our investment,that they raise new compliance-related obligations and challenges,that we have difficulty integrating and retaining new e

291、mployees,business systems,and technology,that they distract management from our other businesses,or that announced transactions may not be completed.If an arrangement fails to adequately anticipate changing circumstances and interests of a party,it may result in early termination or renegotiation of

292、 the arrangement.We also have limited ability to control or influence third parties with whom we have arrangements,which may impact our ability to realize the anticipated benefits.The success of these transactions and arrangements depend in part on our ability to leverage them to enhance our existin

293、g products and services or develop compelling new ones,as well as the acquired companies ability to meet our policies and processes in areas such as data governance,privacy,and cybersecurity.It may take longer than expected to realize the full benefits from these transactions and arrangements,such a

294、s increased revenue or enhanced efficiencies,or the benefits may ultimately be smaller than we expected.In addition,an acquisition may be subject to challenge even after it has been completed.For example,the Federal Trade Commission continues to challenge our Activision Blizzard acquisition and coul

295、d,if successful,alter or unwind the transaction.These events could adversely affect our business,operations,financial condition,and results of operations.If our goodwill or amortizable intangible assets become impaired,we may be required to record a significant charge to earnings.We acquire other co

296、mpanies and intangible assets and may not realize all the economic benefit from those acquisitions,which could cause an impairment of goodwill or intangibles.We review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be reco

297、verable.We test goodwill for impairment at least annually.Factors that may be a change in circumstances,indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable,include a decline in our stock price and market capitalization,reduced future cash flow e

298、stimates,and slower growth rates in industry segments in which we participate.We have in the past recorded,and may in the future be required to record,a significant charge in our consolidated financial statements during the period in which any impairment of our goodwill or amortizable intangible ass

299、ets is determined,negatively affecting our results of operations.22PART IItem 1A CYBERSECURITY,DATA PRIVACY,AND PLATFORM ABUSE RISKSCyberattacks and security vulnerabilities could lead to reduced revenue,increased costs,liability claims,or harm to our reputation or competitive position.Security of o

300、ur information technologyThreats to IT security can take a variety of forms.Individual and groups of hackers and sophisticated organizations,including state-sponsored organizations or nation-states,continuously undertake attacks that pose threats to our customers and our IT,and we have experienced c

301、ybersecurity incidents in which such actors have gained unauthorized access to our IT systems and data,including customer systems and data.These actors use a wide variety of methods,which include developing and deploying malicious software;exploiting known and potential vulnerabilities or intentiona

302、lly designed processes in hardware,software,or other infrastructure to attack our products and services or gain access to our networks and datacenters;using social engineering techniques to induce our employees,users,partners,or customers to disclose sensitive information,such as passwords,or take o

303、ther actions to gain access to our data or our users or customers data;or acting in a coordinated manner or conducting coordinated attacks.For example,as previously disclosed in our Form 8-K filed with the Securities and Exchange Commission on January 19,2024 and amended on March 8,2024,beginning in

304、 late November 2023,a nation-state associated threat actor used a password spray attack to compromise a legacy test account and,in turn,gain access to Microsoft email accounts.The threat actor used and may continue to use information it obtained to gain,or attempt to gain,unauthorized access to some

305、 of our source code repositories and internal systems,and the threat actor may utilize this information to otherwise adversely affect our business and results of operations.This incident has and may continue to result in harm to our reputation and customer relationships.Additionally,we may discover

306、additional impacts of this or other incidents as part of our ongoing examination of this incident.Nation-state and state-sponsored actors can sustain malicious activities for extended periods and deploy significant resources to plan and carry out attacks.Nation-state attacks against us,our customers

307、,or our partners have and may continue to intensify during periods of intense diplomatic or armed conflict,such as the ongoing conflict in Ukraine.Cyber incidents and attacks,individually or in the aggregate,could adversely affect our financial condition,results of operations,competitive position,an

308、d reputation,or expose us to legal or regulatory risk.Inadequate account security or organizational security practices,including those of companies we have acquired or those of the third parties we utilize,have resulted and may result in unauthorized access to our IT systems and data,including custo

309、mer systems and data,in the future.For example,system administrators may fail to timely remove employee account access when no longer appropriate.Employees or third parties may intentionally compromise our or our users security or systems or reveal confidential information.Malicious actors may emplo

310、y the IT supply chain to introduce malware through software updates or compromised supplier accounts or hardware.Cyberthreats are constantly evolving and becoming increasingly sophisticated and complex,increasing the difficulty of detecting and successfully defending against them.Threat actors may a

311、lso utilize emerging technologies,such as AI and machine learning.We may have no current capability to detect certain vulnerabilities or new attack methods,which may allow them to persist in the environment over long periods of time.It may be difficult to determine the best way to investigate,mitiga

312、te,contain,and remediate the harm caused by a cyber incident.Such efforts may not be successful,and we may make errors or fail to take necessary actions.It is possible that threat actors may gain undetected access to other networks and systems after establishing a foothold on an internal system.Cybe

313、r incidents and attacks can have cascading impacts that unfold with increasing speed across our internal networks and systems,as well as those of our partners and customers.In addition,it may take considerable time for us to investigate and evaluate the full impact of incidents,particularly for soph

314、isticated attacks.These factors may inhibit our ability to provide prompt,full,and reliable information about the incident to our customers,partners,regulators,and the public.Breaches of our facilities,network,or data security can disrupt the security of our systems and business applications,impair

315、our ability to provide services to our customers and protect the privacy of their data,result in product development delays,compromise confidential or technical business information,result in theft or misuse of our intellectual property or other assets,subject us to ransomware attacks,require us to

316、allocate more resources to improve technologies or remediate the impacts of attacks,or otherwise adversely affect our business.In addition,actions taken to remediate an incident could result in outages,data losses,and disruptions of our services.23PART IItem 1A Our internal IT environment continues

317、to evolve.Often,we are early adopters of new devices and technologies.We embrace new ways of sharing data and communicating internally and with partners and customers using methods such as social networking and other consumer-oriented technologies.Increasing use of generative AI models in our intern

318、al systems may create new attack methods for adversaries.Our business policies and internal security controls may not keep pace with these changes as new threats emerge or the emerging cybersecurity regulations in jurisdictions worldwide.Security of our products,services,devices,and customers dataTh

319、e security of our products and services is important in our customers decisions to purchase or use our products or services across cloud and on-premises environments.Security threats are a significant challenge to companies like us,whose business is providing technology products and services to othe

320、rs.Threats to or attacks on our own IT infrastructure,such as the nation-state attack described in the prior risk factor,have also affected our customers and may do so in the future.Customers using our cloud-based services rely on the security of our infrastructure,including hardware and other eleme

321、nts provided by third parties,to ensure the reliability of our services and the protection of their data.Adversaries tend to focus their efforts on the most popular operating systems,programs,and services,including many of ours,and we expect that to continue.In addition,adversaries can attack our cu

322、stomers on-premises or cloud environments,sometimes exploiting previously unknown(“zero-day”)vulnerabilities,such as the attack in early calendar year 2021 with several of our Exchange Server on-premises products.Vulnerabilities in these or any product can persist even after we have issued security

323、patches if customers have not installed the most recent updates,or if the attackers exploited the vulnerabilities before patching to install additional malware to further compromise customers systems.Adversaries will continue to attack customers using our cloud services as customers embrace digital

324、transformation.Adversaries that acquire user account information can use that information to compromise our users accounts,including where accounts share the same attributes such as passwords.Inadequate account security practices may also result in unauthorized access,and user activity may result in

325、 ransomware or other malicious software impacting a customers use of our products or services.There may be vulnerabilities in open source software that may make our products susceptible to cyberattacks as we increasingly incorporate open source software into our products.Additionally,features that r

326、ely on generative AI may be susceptible to unanticipated security threats from adversaries as we add new generative AI features to our services while continuously developing our understanding of security risks andprotection methods in the new field of generative AI.Our customers operate complex IT s

327、ystems with third-party hardware and software from multiple vendors that may include systems acquired over many years.They expect our products and services to support all these systems and products,including those that no longer incorporate the strongest current security advances or standards.As a r

328、esult,we may not be able to discontinue support in our services for a product,service,standard,or feature solely because a more secure alternative is available.Failure to utilize the most current security advances and standards can increase our customers vulnerability to attack.Further,customers of

329、widely varied sizes and technical sophistication use our technology,and consequently may still have limited capabilities and resources to help them adopt and implement state-of-the-art cybersecurity practices and technologies.In addition,we must account for this wide variation of technical sophistic

330、ation when defining default settings for our products and services,including security default settings,as these settings may limit or otherwise impact other aspects of IT operations and some customers may have limited capability to review and reset these defaults.Cyberattacks may adversely impact ou

331、r customers even if our production services are not directly compromised.We are committed to notifying our customers whose systems have been impacted as we become aware and have actionable information for customers to help protect themselves.We are also committed to providing guidance and support on

332、 detection,tracking,and remediation.We may not be able to detect the existence or extent of these attacks for all of our customers or have information on how to detect or track an attack,especially where an attack involves on-premises software such as Exchange Server where we may have no or limited

333、visibility into our customers computing environments.Any of the foregoing events could result in reputational harm,loss of revenue,increased costs,or otherwise adversely affect our business,financial condition,and results of operations.24PART IItem 1A Development and deployment of defensive measuresTo defend against security threats to our internal IT systems,our cloud-based services,and our custo