Notes to Financial Statements
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) |
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Three Months Ended March 31, |
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Nine Months Ended March 31, |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating lease cost |
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$ |
882 |
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$ |
766 |
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$ |
2,473 |
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$ |
2,112 |
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Finance lease cost: |
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Amortization of right-of-use assets |
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$ |
453 |
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$ |
348 |
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$ |
1,241 |
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$ |
994 |
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Interest on lease liabilities |
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190 |
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132 |
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507 |
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364 |
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Total finance lease cost |
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$ |
643 |
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$ |
480 |
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$ |
1,748 |
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$ |
1,358 |
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Supplemental cash flow information related to leases was as follows:
(In millions) |
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Three Months Ended March 31, |
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Nine Months Ended March 31, |
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2024 |
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2023 |
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2024 |
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2023 |
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Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows from operating leases |
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$ |
836 |
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$ |
690 |
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$ |
2,433 |
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$ |
1,989 |
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Operating cash flows from finance leases |
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190 |
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132 |
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507 |
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364 |
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Financing cash flows from finance leases |
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323 |
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272 |
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896 |
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790 |
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Right-of-use assets obtained in exchange for lease obligations: |
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Operating leases |
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1,831 |
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663 |
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4,482 |
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2,377 |
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Finance leases |
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3,421 |
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1,044 |
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6,921 |
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2,253 |
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Supplemental balance sheet information related to leases was as follows:
(In millions, except lease term and discount rate) |
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March 31, 2024 |
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June 30, 2023 |
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Operating Leases |
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Operating lease right-of-use assets |
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$ |
17,371 |
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$ |
14,346 |
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Other current liabilities |
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$ |
3,413 |
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$ |
2,409 |
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Operating lease liabilities |
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14,469 |
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12,728 |
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Total operating lease liabilities |
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$ |
17,882 |
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$ |
15,137 |
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Finance Leases |
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Property and equipment, at cost |
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$ |
27,328 |
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$ |
20,538 |
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Accumulated depreciation |
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(5,865 |
) |
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(4,647 |
) |
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Property and equipment, net |
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$ |
21,463 |
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$ |
15,891 |
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Other current liabilities |
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$ |
1,869 |
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$ |
1,197 |
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Other long-term liabilities |
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21,036 |
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15,870 |
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Total finance lease liabilities |
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$ |
22,905 |
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$ |
17,067 |
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Weighted Average Remaining Lease Term |
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Operating leases |
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8 years |
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8 years |
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Finance leases |
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12 years |
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11 years |
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Weighted Average Discount Rate |
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Operating leases |
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3.3% |
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2.9% |
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Finance leases |
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3.8% |
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3.4% |
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The following table outlines maturities of our lease liabilities as of March 31, 2024:
(In millions) |
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Year Ending June 30, |
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Operating Leases |
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Finance Leases |
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2024 (excluding the nine months ended March 31, 2024) |
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$ |
956 |
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$ |
560 |
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2025 |
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3,566 |
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2,694 |
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2026 |
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3,076 |
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2,398 |
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2027 |
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2,608 |
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2,409 |
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2028 |
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2,100 |
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2,409 |
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Thereafter |
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7,812 |
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18,058 |
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Total lease payments |
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20,118 |
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28,528 |
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Less imputed interest |
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(2,236 |
) |
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(5,623 |
) |
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Total |
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$ |
17,882 |
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$ |
22,905 |
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As of March 31, 2024, we had additional operating and finance leases, primarily for datacenters, that had not yet commenced of $8.4 billion and $87.8 billion, respectively. These operating and finance leases will commence between fiscal year 2024 and fiscal year 2030 with lease terms of 1 year to 20 years.
