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NOTE 9 — INTANGIBLE ASSETS

The components of intangible assets, all of which are finite-lived, were as follows:


(In millions)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount


	September 30, 2024							June 30, 2024

Marketing-related	$	16,490	$	(3,296	)	$	13,194	$	16,500	$	(3,101	)	$	13,399
Technology-based		22,426		(11,709	)		10,717		21,913		(10,741	)		11,172
Customer-related		6,039		(3,261	)		2,778		6,038		(3,051	)		2,987
Contract-based		81		(19	)		62		58		(19	)		39


Total	$	45,036	$	(18,285	)	$	26,751	$	44,509	$	(16,912	)	$	27,597

Intangible assets amortization expense was $1.4 billion and $636 million for the three months ended September 30, 2024 and 2023, respectively.

The following table outlines the estimated future amortization expense related to intangible assets held as of September 30, 2024:


(In millions)


Year Ending June 30,

2025 (excluding the three months ended September 30, 2024)	$	4,563
2026		4,538
2027		2,847
2028		1,961
2029		1,780
Thereafter		11,062


Total	$	26,751

NOTE 11 — INCOME TAXES

Effective Tax Rate

Our effective tax rate was 19% and 18% for the three months ended September 30, 2024 and 2023, respectively. The increase in our effective tax rate for the current quarter compared to the prior year was primarily due to tax benefits from tax law changes in the first quarter of fiscal year 2024, including the impact from the issuance of Notice 2023-55 by the Internal Revenue Service (“IRS”) and U.S. Treasury Department, which delayed the effective date of final foreign tax credit regulations to fiscal year 2024 for Microsoft. Notice 2023-80, issued in the second quarter of fiscal year 2024, further delayed the effective date of final foreign tax credit regulations indefinitely.

Our effective tax rate was lower than the U.S. federal statutory rate for the three months ended September 30, 2024, primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations center in Ireland.

Uncertain Tax Positions

As of September 30, 2024 and June 30, 2024, unrecognized tax benefits and other income tax liabilities were $25.9 billion and $24.9 billion, respectively, and are included in long-term income taxes in our consolidated balance sheets.

We remain under audit by the IRS for tax years 2014 to 2017. With respect to the audit for tax years 2004 to 2013, on September 26, 2023, we received Notices of Proposed Adjustment (“NOPAs”) from the IRS. The primary issues in the NOPAs relate to intercompany transfer pricing. In the NOPAs, the IRS is seeking an additional tax payment of $28.9 billion plus penalties and interest. As of September 30, 2024, we believe our allowances for income tax contingencies are adequate. We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRS’s administrative appeals office and, if necessary, judicial proceedings. We do not expect a final resolution of these issues in the next 12 months. Based on the information currently available, we do not anticipate a significant increase or decrease to our income tax contingencies for these issues within the next 12 months.

We are subject to income tax in many jurisdictions outside the U.S. Our operations in certain jurisdictions remain subject to examination for tax years 1996 to 2024, some of which are currently under audit by local tax authorities. The resolution of each of these audits is not expected to be material to our consolidated financial statements.

NOTE 8 — GOODWILL

Changes in the carrying amount of goodwill were as follows:


(In millions)	June 30, 2024		Acquisitions		Other		September 30, 2024


Productivity and Business Processes	$	31,361	$	0	$	44	$	31,405
Intelligent Cloud		25,648		0		22		25,670
More Personal Computing		62,211		0		88		62,299


Total	$	119,220	$	0	$	154	$	119,374

We have recast certain prior period amounts to conform to the way we internally manage and monitor our business. Refer to Note 1 – Accounting Policies for further information.

The measurement periods for the valuation of assets acquired and liabilities assumed end as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available, but do not exceed 12 months. Adjustments in purchase price allocations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined.

Any change in the goodwill amounts resulting from foreign currency translations and purchase accounting adjustments are presented as “Other” in the table above. Also included in “Other” are business dispositions and transfers between segments due to reorganizations, as applicable.

As discussed in Note 1 – Accounting Policies, during the first quarter of fiscal year 2025 we made changes to our segments. These segment changes also resulted in changes to our reporting units. We reallocated goodwill across impacted reporting units using a relative fair value approach. In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment existed.

NOTE 2 — EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and stock awards.

The components of basic and diluted EPS were as follows:


(In millions, except earnings per share)


Three Months Ended September 30,	2024		2023

Net income available for common shareholders (A)	$	24,667	$	22,291


Weighted average outstanding shares of common stock (B)		7,433		7,429
Dilutive effect of stock-based awards		37		33


Common stock and common stock equivalents (C)		7,470		7,462


Earnings Per Share

Basic (A/B)	$	3.32	$	3.00
Diluted (A/C)	$	3.30	$	2.99

Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

NOTE 10 — DEBT

Short-term Debt

As of September 30, 2024, we had no commercial paper issued or outstanding. As of June 30, 2024, we had $6.7 billion of commercial paper issued and outstanding, with a weighted average interest rate of 5.4% and maturities ranging from 28 days to 152 days. The estimated fair value of this commercial paper approximates its carrying value.

Long-term Debt

The components of long-term debt were as follows:


(In millions, issuance by calendar year)	Maturities (calendar year)				Stated Interest Rate				Effective Interest Rate			September 30, 2024			June 30, 2024


2009 issuance of $3.8 billion				2039				5.20%			5.24%	$	520		$	520
2010 issuance of $4.8 billion				2040				4.50%			4.57%		486			486
2011 issuance of $2.3 billion				2041				5.30%			5.36%		718			718
2012 issuance of $2.3 billion				2042				3.50%			3.57%		454			454
2013 issuance of $5.2 billion				2043		3.75%	–	4.88%	3.83%	–	4.92%		314			314
2013 issuance of €4.1 billion		2028	–	2033		2.63%	–	3.13%	2.69%	–	3.22%		2,567			2,465
2015 issuance of $23.8 billion		2025	–	2055		2.70%	–	4.75%	2.77%	–	4.78%		9,805			9,805
2016 issuance of $19.8 billion		2026	–	2056		2.40%	–	3.95%	2.46%	–	4.03%		7,930			7,930
2017 issuance of $17.1 billion		2026	–	2057		3.30%	–	4.50%	3.38%	–	5.49%		6,833			6,833
2020 issuance of $10.1 billion		2030	–	2060		1.35%	–	2.68%	2.53%	–	5.43%		10,111			10,111
2021 issuance of $8.2 billion		2052	–	2062		2.92%	–	3.04%	2.92%	–	3.04%		8,185			8,185
2023 issuance of $0.1 billion		2026	–	2050		1.35%	–	4.50%	5.16%	–	5.49%		56			56
2024 issuance of $3.3 billion		2026	–	2050		1.35%	–	4.50%	5.16%	–	5.49%		3,344			3,344


Total face value													51,323			51,221
Unamortized discount and issuance costs													(1,209	)		(1,227	)
Hedge fair value adjustments (a)													(49	)		(81	)
Premium on debt exchange													(4,948	)		(4,976	)


Total debt													45,117			44,937
Current portion of long-term debt													(2,249	)		(2,249	)


Long-term debt												$	42,868		$	42,688

(a)

Refer to Note 5 – Derivatives for further information on the interest rate swaps related to fixed-rate debt.

As of September 30, 2024 and June 30, 2024, the estimated fair value of long-term debt, including the current portion, was $44.6 billion and $42.3 billion, respectively. The estimated fair values are based on Level 2 inputs.

Debt in the table above is comprised of senior unsecured obligations and ranks equally with our other outstanding obligations. Interest is paid semi-annually, except for the Euro-denominated debt, which is paid annually.

The following table outlines maturities of our long-term debt, including the current portion, as of September 30, 2024:


(In millions)


Year Ending June 30,

2025 (excluding the three months ended September 30, 2024)	$	2,250
2026		3,000
2027		9,250
2028		0
2029		1,953
Thereafter		34,870


Total	$	51,323

NOTE 16 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in accumulated other comprehensive income (loss) by component:


(In millions)


Three Months Ended September 30,		2024			2023

Derivatives

Balance, beginning of period	$	(3	)	$	(27	)
Unrealized gains (losses), net of tax of $7 and $(4)		29			(15	)
Reclassification adjustments for (gains) losses included in other income (expense), net		(49	)		46
Tax expense (benefit) included in provision for income taxes		10			(10	)


Amounts reclassified from accumulated other comprehensive loss		(39	)		36


Net change related to derivatives, net of tax of $(3) and $6		(10	)		21


Balance, end of period	$	(13	)	$	(6	)


Investments

Balance, beginning of period	$	(2,625	)	$	(3,582	)
Unrealized gains (losses), net of tax of $297 and $(75)		1,118			(283	)
Reclassification adjustments for (gains) losses included in other income (expense), net		(5	)		29
Tax expense (benefit) included in provision for income taxes		1			(6	)


Amounts reclassified from accumulated other comprehensive loss		(4	)		23


Net change related to investments, net of tax of $296 and $(69)		1,114			(260	)


Balance, end of period	$	(1,511	)	$	(3,842	)


Translation Adjustments and Other

Balance, beginning of period	$	(2,962	)	$	(2,734	)
Translation adjustments and other, net of tax of $0 and $0		304			(355	)


Balance, end of period	$	(2,658	)	$	(3,089	)


Accumulated other comprehensive loss, end of period	$	(4,182	)	$	(6,937	)

NOTE 17 — SEGMENT INFORMATION AND GEOGRAPHIC DATA

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

We have recast certain prior period amounts to conform to the way we internally manage and monitor our business. Refer to Note 1 – Accounting Policies for further information.

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:

•

Microsoft 365 Commercial products and cloud services, including Microsoft 365 Commercial cloud, comprising Microsoft 365 Commercial, Enterprise Mobility + Security, the cloud portion of Windows Commercial, the per-user portion of Power BI, Exchange, SharePoint, Microsoft Teams, Microsoft 365 Security and Compliance, Microsoft Viva, and Microsoft 365 Copilot; and Microsoft 365 Commercial products, comprising Windows Commercial on-premises and Office licensed on-premises.

•

Microsoft 365 Consumer products and cloud services, including Microsoft 365 Consumer subscriptions, Office licensed on-premises, and other consumer services.

•

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

•

Dynamics products and cloud services, including 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.

Intelligent Cloud

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

•

Server products and cloud services, including Azure and other cloud services, comprising cloud and AI consumption-based services, GitHub cloud services, Nuance Healthcare cloud services, virtual desktop offerings, and other cloud services; and Server products, comprising SQL Server, Windows Server, Visual Studio, System Center, related Client Access Licenses (“CALs”), and other on-premises offerings.

•

Enterprise and partner services, including Enterprise Support Services, Industry Solutions, Nuance professional services, Microsoft Partner Network, and Learning Experience.

More Personal Computing

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

•

Windows and Devices, including Windows, comprising Windows OEM licensing (Windows Pro and non-Pro licenses sold through the OEM channel), Windows Internet of Things, and patent licensing; and Devices, comprising Surface, HoloLens, and PC accessories.

•

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

•

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

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

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

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


(In millions)


Three Months Ended September 30,	2024		2023

Revenue

Productivity and Business Processes	$	28,317	$	25,226
Intelligent Cloud		24,092		20,013
More Personal Computing		13,176		11,278


Total	$	65,585	$	56,517


Operating Income

Productivity and Business Processes	$	16,516	$	14,297
Intelligent Cloud		10,503		8,908
More Personal Computing		3,533		3,690


Total	$	30,552	$	26,895

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, 2024 or 2023. Revenue, classified by the major geographic areas in which our customers were located, was as follows:


(In millions)


Three Months Ended September 30,	2024		2023

United States (a)	$	33,913	$	28,812
Other countries		31,672		27,705


Total	$	65,585	$	56,517

(a)

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

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


(In millions)


Three Months Ended September 30,	2024		2023

Server products and cloud services	$	22,155	$	18,062
Microsoft 365 Commercial products and cloud services		20,449		18,044
Gaming		5,621		3,919
Windows and Devices		4,329		4,340
LinkedIn		4,292		3,913
Search and news advertising		3,225		3,018
Enterprise and partner services		1,928		1,944
Dynamics products and cloud services		1,849		1,626
Microsoft 365 Consumer products and cloud services		1,727		1,643
Other		10		8


Total	$	65,585	$	56,517

Our Microsoft Cloud revenue, which includes Microsoft 365 Commercial cloud, Azure and other cloud services, the commercial portion of LinkedIn, and Dynamics 365, was $38.9 billion and $31.9 billion for the three months ended September 30, 2024 and 2023, respectively. These amounts are primarily included in Microsoft 365 Commercial products and cloud services, Server products and cloud services, LinkedIn, and Dynamics products and cloud services 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.

The components of investments were as follows:


(In millions)	Fair Value Level	Adjusted Cost Basis		Unrealized Gains		Unrealized Losses			Recorded Basis			Cash and Cash Equivalents		Short-term Investments			Equity and Other Investments


September 30, 2024

Changes in Fair Value Recorded in Other Comprehensive Income

Commercial paper	Level 2	$	6,513	$	0	$	0		$	6,513		$	6,513	$	0		$	0
Certificates of deposit	Level 2		2,899		0		0			2,899			2,855		44			0
U.S. government securities	Level 1		48,764		16		(1,828	)		46,952			0		46,952			0
U.S. agency securities	Level 2		17		0		0			17			0		17			0
Foreign government bonds	Level 2		288		8		(9	)		287			0		287			0
Mortgage- and asset-backed securities	Level 2		937		10		(22	)		925			0		925			0
Corporate notes and bonds	Level 2		8,932		114		(166	)		8,880			0		8,880			0
Corporate notes and bonds	Level 3		1,639		0		(1	)		1,638			0		138			1,500
Municipal securities	Level 2		263		2		(8	)		257			0		257			0
Municipal securities	Level 3		104		0		(15	)		89			0		89			0


Total debt investments		$	70,356	$	150	$	(2,049	)	$	68,457		$	9,368	$	57,589		$	1,500


Changes in Fair Value Recorded in Net Income

Equity investments	Level 1								$	4,252		$	884	$	0		$	3,368
Equity investments	Other									10,910			0		0			10,910


Total equity investments									$	15,162		$	884	$	0		$	14,278


Cash									$	10,588		$	10,588	$	0		$	0
Derivatives, net (a)										(1	)		0		(1	)		0


Total									$	94,206		$	20,840	$	57,588		$	15,778


(In millions)	Fair Value Level	Adjusted Cost Basis		Unrealized Gains		Unrealized Losses			Recorded Basis		Cash and Cash Equivalents		Short-term Investments		Equity and Other Investments


June 30, 2024

Changes in Fair Value Recorded in Other Comprehensive Income

Commercial paper	Level 2	$	4,666	$	0	$	0		$	4,666	$	4,666	$	0	$	0
Certificates of deposit	Level 2		1,547		0		0			1,547		1,503		44		0
U.S. government securities	Level 1		49,603		4		(2,948	)		46,659		14		46,645		0
U.S. agency securities	Level 2		17		0		0			17		0		17		0
Foreign government bonds	Level 2		319		3		(16	)		306		0		306		0
Mortgage- and asset-backed securities	Level 2		944		3		(35	)		912		0		912		0
Corporate notes and bonds	Level 2		9,106		28		(318	)		8,816		0		8,816		0
Corporate notes and bonds	Level 3		1,641		0		(1	)		1,640		0		140		1,500
Municipal securities	Level 2		262		0		(13	)		249		0		249		0
Municipal securities	Level 3		104		0		(17	)		87		0		87		0


Total debt investments		$	68,209	$	38	$	(3,348	)	$	64,899	$	6,183	$	57,216	$	1,500


Changes in Fair Value Recorded in Net Income

Equity investments	Level 1								$	3,547	$	561	$	0	$	2,986
Equity investments	Other									10,114		0		0		10,114


Total equity investments									$	13,661	$	561	$	0	$	13,100


Cash									$	11,571	$	11,571	$	0	$	0
Derivatives, net (a)										12		0		12		0


Total									$	90,143	$	18,315	$	57,228	$	14,600

(a)

Refer to Note 5 – Derivatives for further information on the fair value of our derivative instruments.

NOTE 12 — UNEARNED REVENUE

Unearned revenue by segment was as follows:


(In millions)


	September 30, 2024		June 30, 2024

Productivity and Business Processes	$	40,429	$	43,599
Intelligent Cloud		12,397		13,683
More Personal Computing		2,863		2,902


Total	$	55,689	$	60,184

We have recast certain prior period amounts to conform to the way we internally manage and monitor our business. Refer to Note 1 – Accounting Policies for further information.

Changes in unearned revenue were as follows:


(In millions)


Three Months Ended September 30, 2024

Balance, beginning of period	$	60,184
Deferral of revenue		37,642
Recognition of unearned revenue		(42,137	)


Balance, end of period	$	55,689

Revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods, was $266 billion as of September 30, 2024, of which $259 billion is related to the commercial portion of revenue. We expect to recognize approximately 45% of our total company remaining performance obligation revenue over the next 12 months and the remainder thereafter.

NOTE 3 — OTHER INCOME (EXPENSE), NET

The components of other income (expense), net were as follows:


(In millions)


Three Months Ended September 30,	2024			2023

Interest and dividends income	$	681		$	1,166
Interest expense		(582	)		(525	)
Net recognized gains (losses) on investments		463			(107	)
Net gains (losses) on derivatives		(338	)		93
Net gains (losses) on foreign currency remeasurements		176			(101	)
Other, net		(683	)		(137	)


Total	$	(283	)	$	389

Other, net primarily reflects net recognized losses on equity method investments, including OpenAI.

Net Recognized Gains (Losses) on Investments

Net recognized gains (losses) on debt investments were as follows:


(In millions)


Three Months Ended September 30,	2024			2023

Realized gains from sales of available-for-sale securities	$	8		$	2
Realized losses from sales of available-for-sale securities		(15	)		(25	)
Impairments and allowance for credit losses		12			(6	)


Total	$	5		$	(29	)

Net recognized gains (losses) on equity investments were as follows:


(In millions)


Three Months Ended September 30,	2024			2023

Net realized gains on investments sold	$	65		$	45
Net unrealized gains (losses) on investments still held		412			(123	)
Impairments of investments		(19	)		0


Total	$	458		$	(78	)

NOTE 13 — LEASES

We have operating and finance leases for datacenters, corporate offices, research and development facilities, Microsoft Experience Centers, and certain equipment. Our leases have remaining lease terms of less than 1 year to 17 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.

The components of lease expense were as follows:


(In millions)


Three Months Ended September 30,		2024		2023

Operating lease cost	$	1,161	$	775


Finance lease cost:
Amortization of right-of-use assets	$	696	$	380
Interest on lease liabilities		275		149


Total finance lease cost	$	971	$	529

Supplemental cash flow information related to leases was as follows:


(In millions)


Three Months Ended September 30,		2024		2023

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,207	$	795
Operating cash flows from finance leases		275		149
Financing cash flows from finance leases		802		285

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		1,892		1,804
Finance leases		4,332		1,704

Supplemental balance sheet information related to leases was as follows:


(In millions, except lease term and discount rate)


	September 30, 2024			June 30, 2024

Operating Leases

Operating lease right-of-use assets	$	20,528		$	18,961


Other current liabilities	$	4,009		$	3,580
Operating lease liabilities		16,361			15,497


Total operating lease liabilities	$	20,370		$	19,077


Finance Leases

Property and equipment, at cost	$	37,186		$	32,248
Accumulated depreciation		(7,070	)		(6,386	)


Property and equipment, net	$	30,116		$	25,862


Other current liabilities	$	2,504		$	2,349
Other long-term liabilities		28,847			24,796


Total finance lease liabilities	$	31,351		$	27,145


Weighted Average Remaining Lease Term

Operating leases		7 years			7 years
Finance leases		12 years			12 years

Weighted Average Discount Rate

Operating leases		3.4%			3.3%
Finance leases		4.0%			3.9%

The following table outlines maturities of our lease liabilities as of September 30, 2024:


(In millions)


Year Ending June 30,	Operating Leases			Finance Leases

2025 (excluding the three months ended September 30, 2024)	$	3,386		$	2,742
2026		4,122			3,697
2027		3,411			3,720
2028		2,754			3,706
2029		2,124			3,099
Thereafter		7,174			22,745


Total lease payments		22,971			39,709
Less imputed interest		(2,601	)		(8,358	)


Total	$	20,370		$	31,351

As of September 30, 2024, we had additional operating and finance leases, primarily for datacenters, that had not yet commenced of $7.4 billion and $108.7 billion, respectively. These operating and finance leases will commence between fiscal year 2025 and fiscal year 2030 with lease terms of 1 year to 20 years.

NOTE 14 — CONTINGENCIES

U.S. Cell Phone Litigation

Microsoft Mobile Oy, a subsidiary of Microsoft, along with other handset manufacturers and network operators, is a defendant in 45 lawsuits filed in the Superior Court for the District of Columbia by individual plaintiffs who allege that radio emissions from cellular handsets caused their brain tumors and other adverse health effects. We assumed responsibility for these claims in our agreement to acquire Nokia’s Devices and Services business and have been substituted for the Nokia defendants. Twelve of these cases were consolidated for certain pre-trial proceedings; the remaining cases are stayed. In a separate 2009 decision, the Court of Appeals for the District of Columbia held that adverse health effect claims arising from the use of cellular handsets that operate within the U.S. Federal Communications Commission radio frequency emission guidelines (“FCC Guidelines”) are pre-empted by federal law. The plaintiffs allege that their handsets either operated outside the FCC Guidelines or were manufactured before the FCC Guidelines went into effect. The lawsuits also allege an industry-wide conspiracy to manipulate the science and testing around emission guidelines.

In 2013, the defendants in the consolidated cases moved to exclude the plaintiffs’ expert evidence of general causation on the basis of flawed scientific methodologies. In 2014, the trial court granted in part and denied in part the defendants’ motion to exclude the plaintiffs’ general causation experts. The defendants filed an interlocutory appeal to the District of Columbia Court of Appeals challenging the standard for evaluating expert scientific evidence. In October 2016, the Court of Appeals issued its decision adopting the standard advocated by the defendants and remanding the cases to the trial court for further proceedings under that standard. The plaintiffs have filed supplemental expert evidence, portions of which were stricken by the court. A hearing on general causation took place in September of 2022. In April of 2023, the court granted defendants’ motion to strike the testimony of plaintiffs’ experts that cell phones cause brain cancer and entered an order excluding all of plaintiffs’ experts from testifying. The parties agreed to a stipulated dismissal of the consolidated cases to allow plaintiffs to appeal the expert testimony order. Plaintiffs appealed the court’s order in August of 2023, and the parties have filed their briefs on the appeal. A hearing on the status of the stayed cases occurred in December of 2023. In July 2024, the court entered summary judgment in nine of the stayed cases on the grounds that plaintiffs had agreed to be bound by the general causation outcome in the consolidated cases.

Irish Data Protection Commission Matter

In 2018, the Irish Data Protection Commission (“IDPC”) began investigating a complaint against LinkedIn as to whether LinkedIn’s targeted advertising practices violated the recently implemented European Union General Data Protection Regulation (“GDPR”). Microsoft cooperated throughout the period of inquiry. In April 2023, the IDPC provided LinkedIn with a non-public preliminary draft decision alleging GDPR violations and proposing a fine. In July 2024, the IDPC provided LinkedIn with a revised non-public draft decision. In October 2024, the IDPC provided LinkedIn with a final decision, and LinkedIn is considering its options to appeal.

Other Contingencies

We also are subject to a variety of other claims and suits that arise from time to time in the ordinary course of our business. Although management currently believes that resolving claims against us, individually or in aggregate, will not have a material adverse impact in our consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

As of September 30, 2024, we accrued aggregate legal liabilities of $492 million. While we intend to defend these matters vigorously, adverse outcomes that we estimate could reach approximately $600 million in aggregate beyond recorded amounts are reasonably possible. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact in our consolidated financial statements for the period in which the effects become reasonably estimable.


(In millions)


	September 30, 2024		June 30, 2024

Raw materials	$	488	$	394
Work in process		11		7
Finished goods		1,127		845


Total	$	1,626	$	1,246