Item 8

  

Changes in unearned revenue were as follows:

| --- | --- | --- | --- |
| (In millions) |  |  |  |
| Year Ended June 30, 2025 |  |  |  |
| Balance, beginning of period | $ | 60,184 |  |
| Deferral of revenue |  | 186,957 |  |
| Recognition of unearned revenue |  | ( 179,876 | ) |
| Balance, end of period | $ | 67,265 |  |

Revenue allocated to remaining performance obligations, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods, was $ 375  billion as of June 30, 2025, of which $ 368  billion is related to the commercial portion of revenue. We expect to recognize approximately  40 % of our total company remaining performance obligation revenue over the next   12   months and the remainder thereafter.

  

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   20   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)**
>
> Year Ended June 30, ..................... 2025 / 2025 / 2024 / 2023
> Operating lease cost .................... $ / 5,524 / $ / 3,555 / $ / 2,875
> Finance lease cost:
> Amortization of right-of-use assets ..... $ / 3,408 / $ / 1,800 / $ / 1,352
> Interest on lease liabilities ........... 1,417 / 734 / 501
> Total finance lease cost ................ $ / 4,825 / $ / 2,534 / $ / 1,853

  

Supplemental cash flow information related to leases was as follows:

> **(In millions)**
>
> Year Ended June 30, ..................... 2025 / 2025 / 2024 / 2023
> Cash paid for amounts included in the measurement of lease liabilities:
> Operating cash flows from operating leases ... $ / 4,931 / $ / 3,550 / $ / 2,706
> Operating cash flows from finance leases ... 1,372 / 734 / 501
> Financing cash flows from finance leases ... 2,283 / 1,286 / 1,056
> Right-of-use assets obtained in exchange for lease obligations:
> Operating leases ........................ 7,826 / 6,703 / 3,514
> Finance leases .......................... 20,511 / 11,633 / 3,128

  

77

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PART II