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 18 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 December 31, |
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Six Months Ended December 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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Operating lease cost |
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$ |
817 |
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$ |
684 |
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$ |
1,591 |
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$ |
1,346 |
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Finance lease cost: |
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Amortization of right-of-use assets |
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$ |
408 |
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$ |
457 |
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$ |
788 |
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$ |
646 |
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Interest on lease liabilities |
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168 |
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119 |
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317 |
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232 |
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Total finance lease cost |
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$ |
576 |
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$ |
576 |
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$ |
1,105 |
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$ |
878 |
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Supplemental cash flow information related to leases was as follows:
(In millions) |
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Three Months Ended December 31, |
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Six Months Ended December 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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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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$ |
803 |
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$ |
645 |
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$ |
1,597 |
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$ |
1,299 |
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Operating cash flows from finance leases |
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168 |
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119 |
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317 |
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232 |
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Financing cash flows from finance leases |
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288 |
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262 |
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573 |
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518 |
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Right-of-use assets obtained in exchange for lease obligations: |
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Operating leases |
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847 |
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525 |
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2,651 |
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1,714 |
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Finance leases |
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1,796 |
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598 |
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3,500 |
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1,209 |
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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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December 31, 2023 |
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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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$ |
16,398 |
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$ |
14,346 |
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Other current liabilities |
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$ |
2,787 |
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$ |
2,409 |
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Operating lease liabilities |
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14,155 |
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12,728 |
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Total operating lease liabilities |
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$ |
16,942 |
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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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$ |
24,245 |
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$ |
20,538 |
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Accumulated depreciation |
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(5,484 |
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(4,647 |
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Property and equipment, net |
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$ |
18,761 |
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$ |
15,891 |
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Other current liabilities |
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$ |
1,691 |
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$ |
1,197 |
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Other long-term liabilities |
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18,506 |
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15,870 |
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Total finance lease liabilities |
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$ |
20,197 |
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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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3.7% |
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3.4% |
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The following table outlines maturities of our lease liabilities as of December 31, 2023:
(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 six months ended December 31, 2023) |
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$ |
1,614 |
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$ |
1,021 |
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2025 |
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3,091 |
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2,411 |
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2026 |
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2,633 |
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2,101 |
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2027 |
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2,179 |
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2,109 |
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2028 |
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1,933 |
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2,121 |
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Thereafter |
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7,615 |
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15,326 |
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Total lease payments |
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19,065 |
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25,089 |
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Less imputed interest |
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(2,123 |
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(4,892 |
) |
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Total |
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$ |
16,942 |
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$ |
20,197 |
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As of December 31, 2023, we had additional operating and finance leases, primarily for datacenters, that had not yet commenced of $7.5 billion and $85.1 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.
