Microsoft Corporation (Microsoft) is a technology company committed to making digital technology and artificial intelligence (‘AI’) available broadly and doing so responsibly.
The company creates platforms and tools, powered by AI, that deliver innovative solutions that meet the evolving needs of the company’s customers. The company generates revenue by offering a wide range of cloud-based solutions, content, and other services to people and businesses; licensing and supporting an array of soft...
Microsoft Corporation (Microsoft) is a technology company committed to making digital technology and artificial intelligence (‘AI’) available broadly and doing so responsibly.
The company creates platforms and tools, powered by AI, that deliver innovative solutions that meet the evolving needs of the company’s customers. The company generates revenue by offering a wide range of cloud-based solutions, content, and other services to people and businesses; licensing and supporting an array of software products; delivering relevant online advertising to a global audience; and designing and selling devices.
The company develops and supports a broad portfolio of technology solutions for individuals and businesses, focusing on secure, trusted, and innovative platforms and tools that meet evolving customer needs across cloud computing, productivity and collaboration, and personal computing.
Microsoft's AI offerings span every layer of the technology stack, enabling transformative outcomes across sectors and unlocking opportunity for every country, community, and individual.
The company develops and supports software, services, devices, and solutions that deliver new value for customers and help people and businesses realize their full potential.
The company offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content; and the company provides solution support and consulting services. The company also delivers relevant online advertising to a global audience.
Digital 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, optimizes operations, engages customers, and in some cases, changes the very core of products and services.
The Microsoft Cloud provides integration across the technology stack while offering openness, improving time to value, reducing costs, and increasing agility. The company’s 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 of computing, storage, and network resources; and multi-tenancy locations that lower application maintenance labor costs.
The company offers its customers integrated AI-driven products addressing security, compliance, identity, management, and privacy across customers’ multi-cloud, application, and device assets.
Operating Segments
The company operates its business and reports its financial performance using three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The company’s segments provide management with a comprehensive financial view of the company’s key businesses. The segments enable the alignment of strategies and objectives across the development, sales, marketing, and services organizations, and they provide a framework for timely and rational allocation of resources within businesses.
Productivity and Business Processes
The company’s Productivity and Business Processes segment consists of products and services in the company’s 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, 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.
Microsoft 365 Commercial Products and Cloud Services
Microsoft 365 Commercial is an AI-powered business and productivity solutions platform that brings together Office, Windows, Microsoft 365 Copilot, and Enterprise Mobility + Security to help organizations empower their employees. Growth depends on the company’s ability to reach new users in new markets, such as frontline workers, small and medium businesses, and growth markets, as well as add AI-enabled tools, features, and agentic scenarios to its core product and service offerings across communication, collaboration, analytics, security, compliance, and other AI business productivity categories. Microsoft 365 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 Microsoft 365.
Microsoft 365 Consumer Products and Cloud Services
Microsoft 365 Consumer is designed to increase personal productivity and creativity through a range of products and services. Growth depends on the company’s ability to reach new users, add value to its core product set with new features, including AI tools, and continue to expand its product and service offerings into new markets. Microsoft 365 Consumer cloud revenue and Office Consumer products revenue is mainly 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. Microsoft 365 Consumer cloud revenue is also affected by the demand for communication and storage through Outlook.com and OneDrive, which is largely driven by subscriptions and advertising.
LinkedIn
LinkedIn connects the world’s professionals to make them more productive and successful and transforms the way companies hire, market, sell, and learn. In addition to LinkedIn’s free services, LinkedIn offers monetized solutions designed to offer AI-enabled insights and productivity: Talent Solutions, Marketing Solutions, Premium Subscriptions, and Sales Solutions. Growth will depend on the company’s ability to increase LinkedIn member engagement on the platform and its ability to continue offering insight and AI-enabled services that provide value for the company’s members and customers. 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 those members to drive Marketing Solutions.
Dynamics Products and Cloud Services
Dynamics 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 agentic AI and other low code application development platforms, 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 intelligent business applications, including the company’s low code development platforms, such as Power Apps and Power Automate.
Intelligent Cloud
The company’s Intelligent Cloud segment consists of the company’s 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.
Server Products and Cloud Services
Azure is a comprehensive set of cloud services that offer developers, IT professionals, and enterprises freedom to build, deploy, and manage applications on any platform or device. Customers can use Azure through the company’s global network of datacenters for computing, networking, storage, mobile and 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 affected by infrastructure-as-a-service and platform-as-a-service consumption-based services.
Azure AI offerings provide a competitive advantage as companies seek ways to optimize and scale their business with AI. The company offers supercomputing power for AI at scale to run large workloads, complemented by its rapidly expanding portfolio of AI cloud services (including the latest models) and hardware, which includes custom-built silicon and strong partnerships with chip manufacturers. Azure AI Foundry is a unified platform for developers to design, customize, and manage AI applications and agents.
The company’s server products are designed to make IT professionals, developers, and their systems more productive and efficient. Server software 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, security, and identity software. The company also licenses 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’), 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.
GitHub and Nuance Healthcare include both cloud and on-premises offerings. GitHub provides a collaboration platform for developers to manage code and incorporate AI and agent-based tools across the software development lifecycle. Nuance Healthcare provides AI solutions to the healthcare industry.
Enterprise and Partner Services
Enterprise and partner services, including Enterprise Support Services, Industry Solutions, Nuance professional services, Microsoft Partner Network, and Learning Experience, 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.
More Personal Computing
The company’s More Personal Computing segment consists of products and services that put customers at the center of the experience with its technology. This segment primarily comprises:
Windows and Devices, including Windows OEM licensing (Windows Pro and non-Pro licenses sold through the OEM channel) and Devices, comprising Surface 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, and other cloud services.
Search and news advertising, comprising Bing and Copilot, Microsoft News, Microsoft Edge, and third-party affiliates.
Windows and Devices
The Windows operating system is designed to deliver a more personal computing experience for users by enabling consistency 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 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 category.
Attachment of Windows to devices shipped.
Customer mix between consumer, small and medium businesses, and large enterprises.
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 supply chain of device components.
Piracy.
The company designs and sells devices, such as Surface (including Copilot+ PCs) and PC accessories. The company's 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 dependent on total PC shipments, the ability to attract new customers, the company's product roadmap, and expanding into new categories.
Gaming
The company is expanding how billions of people globally access and play video games on PC, console, mobile, and cloud. The company's game content is developed through a collection of first-party studios creating iconic and differentiated gaming experiences. The company continues to invest in gaming studios and content to expand its intellectual property roadmap and leverage new content creators. These unique gaming experiences are the cornerstone of Xbox Game Pass, a subscription service and gaming community with access to a curated library of first- and third-party titles.
The gamer remains at the heart of the Xbox ecosystem. The company is identifying new opportunities to attract gamers across a variety of different end points through the company’s first- and third-party content and business diversification across subscriptions, ads, and digital stores. The company has seen new devices from third-party manufacturers along with key PC and mobile end points that help the company empower gamers to play in a way that is most convenient to them. The company is focused on growing 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 certified applications and services and to benefit its developers 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 the company’s Gaming business is determined by the overall 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 its content and services, and the ability to create new experiences.
Search and News Advertising
The company's Search and news advertising business is designed to deliver relevant search, native, and display advertising to a global audience. Microsoft Copilot is a digital companion designed to inform, entertain, and inspire. The company's Microsoft Edge browser and Bing search engine with Copilot are key tools to enable user acquisition and engagement, while its technology platform enables accelerated delivery of digital advertising solutions. In addition to first-party tools, the company has several partnerships with other companies through which it provides and monetizes search offerings. Growth depends on the company's ability to attract new users, understand intent, and match intent with relevant content on advertising offerings.
Operations
The company has regional operations service centers in the Americas, Asia Pacific, Europe, and the Middle East that support its business operations, including customer contract and order processing, billing, credit and collections, customer lifecycle AI and cloud operations, and vendor management and logistics.
In addition to its operations centers, the company also operates datacenters throughout each of these regions. The company continues to align its datacenter locations and server capacity to meet the evolving needs of its customers, particularly given the growing demand for AI services. The company's datacenters depend on the availability of permitted and buildable land, predictable energy, networking supplies, and servers, including graphics processing units (GPUs), and other components.
The company engages third-party manufacturers to produce its devices and has implemented measures to enhance supply chain efficiency and resilience, including the ability to relocate production geographically.
Distribution, Sales, and Marketing
The company markets and distributes its products and services through the following channels: direct, distributors and resellers, and OEMs. The company's 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; supporting system integrators, independent software vendors, and other partners who engage directly with its customers to perform sales, consulting, and fulfillment functions for its products and services; and managing OEM relationships.
Direct
Many organizations that license the company's products and services transact directly with it through Enterprise Agreements and Enterprise Services contracts, with sales support from system integrators, independent software vendors, web agencies, and partners that advise organizations on licensing the company's products and services (Enterprise Agreement Software Advisors or ESA). The company offers direct sales programs targeted to reach small, medium, and corporate customers, in addition to those offered through the reseller channel. A large network of partner advisors supports many of these sales.
The company also sells commercial and consumer products and services directly to customers, such as cloud services, search, and gaming, through its digital marketplaces and online stores. Additionally, the company's Microsoft Experience Centers are designed to facilitate deeper engagement with its partners and customers across industries.
Distributors and Resellers
Organizations also license the company’s products and services indirectly, primarily through licensing solution partners (‘LSP’), distributors, value-added resellers (‘VAR’), and retailers. Although each type of reselling 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 the company’s other volume licensing programs. Microsoft Cloud Solution Provider is the company’s main partner program for reselling cloud services.
The company distributes its retail packaged products primarily through independent non-exclusive distributors, authorized replicators, resellers, and retail outlets. Individual consumers obtain these products primarily through retail outlets. The company distributes its devices through third-party retailers. The company has a network of field sales representatives and field support personnel that solicit orders from distributors and resellers and provide product training and sales support.
The company’s Dynamics business solutions are also licensed to enterprises through a global network of channel partners providing vertical solutions and specialized services.
OEMs
The company distributes its products and services through OEMs that pre-install the company’s software on new devices and 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 are two broad categories of OEMs. The largest category of OEMs are direct OEMs as the company’s relationship with them is managed through a direct agreement between Microsoft and the OEM. The company has distribution agreements covering one or more of the company’s products with virtually all the multinational OEMs, including Dell, 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 than through a direct agreement or relationship with Microsoft.
Licensing Options
The company offers options for organizations of varying sizes that want to purchase the company’s cloud services and on-premise software. The company licenses these organizations under volume licensing 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 the company’s customers.
Software Assurance (‘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 agreements and is an optional purchase with others.
Volume Licensing Programs
Enterprise 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. Enterprise 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 Agreement
Microsoft 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 Online Subscription Agreement
Microsoft 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 subscriptions 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 agreement. Organizations purchase perpetual licenses or subscribe to licenses. SA is optional for customers that purchase perpetual licenses.
Open Value
Open Value agreements are a simple, cost-effective way to acquire the latest Microsoft technology. These agreements are designed for small and medium organizations 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 organizations 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 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.
The 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 and 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.
Customers
The company’s customers include individual consumers, small and medium organizations, large global enterprises, public-sector institutions, service providers, application developers, and OEMs.
Seasonality
The company's revenue fluctuates quarterly and is generally higher in the fourth quarter (year ended June 2025) of its fiscal year. Fourth quarter revenue is driven by a higher volume of multi-year contracts executed during the period.
Government Regulation
While the company has a unified approach to regulatory compliance, some of the programs and processes 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, and assess the company’s compliance with these acts.
History
Microsoft Corporation was founded in 1975. The company was incorporated in 1993.
