Item 8

  

Uncertain Tax Positions

Gross unrecognized tax benefits related to uncertain tax positions as of June 30, 2025, 2024, and 2023, were $ 24.7  billion, $ 22.8  billion, and $ 17.1  billion, respectively, which were primarily included in long-term income taxes in our consolidated balance sheets. If recognized, the resulting tax benefit would affect our effective tax rates for fiscal years 2025, 2024, and 2023 by $ 21.2   billion, $ 19.6  billion, and $ 14.4  billion, respectively.

As of June 30, 2025, 2024, and 2023, we had accrued interest expense related to uncertain tax positions of $ 8.2  billion, $ 6.8  billion, and $ 5.2  billion, respectively, net of income tax benefits. The provision for income taxes for fiscal years 2025, 2024, and 2023 included interest expense related to uncertain tax positions of $ 1.3  billion, $ 1.5  billion, and $ 918  million, respectively, net of income tax benefits.

  

The aggregate changes in the gross unrecognized tax benefits related to uncertain tax positions were as follows:

> **(In millions)**
>
> Year Ended June 30, ..................... 2025 / 2025 / 2024 / 2024 / 2023 / 2023
> Beginning unrecognized tax benefits ..... $ / 22,760 / $ / 17,120 / $ / 15,593
> Decreases related to settlements ........ ( 240 / ) / ( 76 / ) / ( 329 / )
> Increases for tax positions related to the current year ... 2,066 / 1,903 / 1,051
> Increases for tax positions related to prior years ... 468 / 4,289 / 870
> Decreases for tax positions related to prior years ... ( 300 / ) / ( 464 / ) / ( 60 / )
> Decreases due to lapsed statutes of limitations ... ( 25 / ) / ( 12 / ) / ( 5 / )
> Ending unrecognized tax benefits ........ $ / 24,729 / $ / 22,760 / $ / 17,120

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 June 30, 2025, 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., some of which are currently under audit by local tax authorities. The resolution of these audits is not expected to be material to our consolidated financial statements. Our operations in Ireland remain subject to examination for tax years    2020 and thereafter   .

  

NOTE 12 — UNEARNED REVENUE

  

Unearned revenue by segment was as follows:

| --- | --- | --- | --- | --- |
| (In millions) |  |  |  |  |
| June 30, | 2025 | 2025 | 2024 | 2024 |
| Productivity and Business Processes | $ | 50,567 | $ | 43,599 |
| Intelligent Cloud |  | 14,022 |  | 13,683 |
| More Personal Computing |  | 2,676 |  | 2,902 |
| Total | $ | 67,265 | $ | 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.

  

76

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PART II