Item 7

  

Fiscal Year 2025 Compared with Fiscal Year 2024

Research and development expenses increased $3.0 billion or 10% driven by investments in cloud and AI engineering and Gaming, including the impact of the Activision Blizzard acquisition.

Sales and Marketing

> **(In millions, except percentages)**
>
> 2025 / 2025 / 2024 / 2024 / PercentageChange / PercentageChange
>
> Sales and marketing ..................... $ / 25,654 / $ / 24,456 / 5%
> As a percent of revenue ................. 9% / 10% / (1)ppt

Sales and marketing expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, trade shows, seminars, and other programs.

Fiscal Year 2025 Compared with Fiscal Year 2024

Sales and marketing expenses increased $1.2 billion or 5% driven by investments in commercial sales and Gaming, including the impact of the Activision Blizzard acquisition.

General and Administrative

> **(In millions, except percentages)**
>
> 2025 / 2025 / 2024 / 2024 / PercentageChange / PercentageChange
>
> General and administrative .............. $ / 7,223 / $ / 7,609 / (5)%
> As a percent of revenue ................. 3% / 3% / 0ppt

General and administrative expenses include payroll, employee benefits, stock-based compensation expense, employee severance expense incurred as part of a corporate program, and other headcount-related expenses associated with finance, legal, facilities, certain human resources and other administrative personnel, certain taxes, and legal and other administrative fees.

Fiscal Year 2025 Compared with Fiscal Year 2024

General and administrative expenses decreased $386 million or 5% driven by Gaming, including the impact of the Activision Blizzard acquisition.

OTHER INCOME (EXPENSE), NET

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

> **(In millions)**
>
> Year Ended June 30, ..................... 2025 / 2024
> Interest and dividends income ........... $ / 2,647 / $ / 3,157
> Interest expense ........................ (2,385 / ) / (2,935 / )
> Net recognized losses on investments .... (349 / ) / (118 / )
> Net losses on derivatives ............... (260 / ) / (187 / )
> Net gains (losses) on foreign currency remeasurements ... 171 / (244 / )
> Other, net .............................. (4,725 / ) / (1,319 / )
> Total ................................... $ / (4,901 / ) / $ / (1,646 / )

We use derivative instruments to manage risks related to foreign currencies, interest rates, equity prices, and credit; to enhance investment returns; and to facilitate portfolio diversification. Gains and losses from changes in fair values of derivatives that are not designated as hedging instruments are primarily recognized in other income (expense), net.

  

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PART II