Notes to Financial Statements
NOTE 16 — SEGMENT INFORMATION AND GEOGRAPHIC DATA
In its operation of the business, management, including our chief operating decision maker, who is also our Chief Executive Officer, reviews certain financial information, including segmented internal profit and loss statements prepared on a basis not consistent with GAAP. During the periods presented, we reported our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.
Our reportable segments are described below.
Productivity and Business Processes
Our Productivity and Business Processes segment consists of products and services in our portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. This segment primarily comprises:
Intelligent Cloud
Our Intelligent Cloud segment consists of our public, private, and hybrid server products and cloud services that can power modern business and developers. This segment primarily comprises:
More Personal Computing
Our More Personal Computing segment consists of products and services that put customers at the center of the experience with our technology. This segment primarily comprises:
Revenue and costs are generally directly attributed to our segments. However, due to the integrated structure of our business, certain revenue recognized and costs incurred by one segment may benefit other segments. Revenue from certain contracts is allocated among the segments based on the relative value of the underlying products and services, which can include allocation based on actual prices charged, prices when sold separately, or estimated costs plus a profit margin. Cost of revenue is allocated in certain cases based on a relative revenue methodology. Operating expenses that are allocated primarily include those relating to marketing of products and services from which multiple segments benefit and are generally allocated based on relative gross margin.
In addition, certain costs are incurred at a corporate level and allocated to our segments. These allocated costs generally include legal, including settlements and fines, information technology, human resources, finance, excise taxes, field selling, shared facilities services, customer service and support, and severance incurred as part of a corporate program. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated and is generally based on relative gross margin or relative headcount.
Segment revenue and operating income were as follows during the periods presented:
(In millions) |
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Three Months Ended September 30, |
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2023 |
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2022 |
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Revenue |
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Productivity and Business Processes |
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$ |
18,592 |
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$ |
16,465 |
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Intelligent Cloud |
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24,259 |
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20,325 |
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More Personal Computing |
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13,666 |
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13,332 |
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Total |
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$ |
56,517 |
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$ |
50,122 |
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Operating Income |
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Productivity and Business Processes |
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$ |
9,970 |
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$ |
8,323 |
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Intelligent Cloud |
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11,751 |
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8,978 |
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More Personal Computing |
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5,174 |
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4,217 |
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Total |
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$ |
26,895 |
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$ |
21,518 |
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No sales to an individual customer or country other than the United States accounted for more than 10% of revenue for the three months ended September 30, 2023 or 2022. Revenue, classified by the major geographic areas in which our customers were located, was as follows:
(In millions) |
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Three Months Ended September 30, |
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2023 |
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2022 |
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United States (a) |
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$ |
28,812 |
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$ |
25,867 |
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Other countries |
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27,705 |
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24,255 |
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Total |
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$ |
56,517 |
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$ |
50,122 |
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Revenue, classified by significant product and service offerings, was as follows:
(In millions) |
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Three Months Ended September 30, |
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2023 |
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2022 |
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Server products and cloud services |
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$ |
22,308 |
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$ |
18,388 |
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Office products and cloud services |
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13,140 |
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11,577 |
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Windows |
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5,567 |
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5,313 |
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Gaming |
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3,919 |
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3,610 |
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3,913 |
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3,628 |
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Search and news advertising |
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3,053 |
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2,913 |
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Enterprise and partner services |
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1,944 |
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1,929 |
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Dynamics |
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1,540 |
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1,260 |
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Devices |
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1,125 |
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1,448 |
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Other |
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8 |
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56 |
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Total |
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$ |
56,517 |
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$ |
50,122 |
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We have recast certain prior period amounts to conform to the way we internally manage and monitor our business.
Our Microsoft Cloud revenue, which includes Azure and other cloud services, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties, was $31.8 billion and $25.7 billion for the three months ended September 30, 2023 and 2022, respectively. These amounts are primarily included in Server products and cloud services, Office products and cloud services, LinkedIn, and Dynamics in the table above.
Assets are not allocated to segments for internal reporting presentations. A portion of amortization and depreciation is included with various other costs in an overhead allocation to each segment. It is impracticable for us to separately identify the amount of amortization and depreciation by segment that is included in the measure of segment profit or loss.
