Second Quarter Fiscal Year 2011 Results January 27, 2011SS CeCe ccc CMTey ala tem este canta ELC orto Roulette leo UCO RSTO) LOR UCL) (aa OS CEULe | reer RM eee R OMe Lim ILO ERT this presentation or discussed in today’s press release, in the management's discussion and analysis section of the company’s most recent Form 10-K, Forms 10- km as cer hilute Mim ueescctis rut M eer uteCkSeUiuTeeto nT undertake no duty to update or revise any forward-looking statements, whether as a oe Xel ma NMOL Lommel eel me mel ANSAgenda Quarterly Overview & Quarter Results Business Segment Financial Overview Outlook AppendixQuarterly Overview Customer response to innovation led to strong financial results Record revenue and EPS Double-digit revenue and EPS growth* Bookings growth of 21% Introduced Kinect sensor and sold 8 million units Office 2010 launch momentum continues Another quarter of operating margin expansion “pajusted for fisel 2010 deferred revenue relating to Windows 7 tech guerantee and pre-salesFinancial Summary — FY11 Q2 © Record GAAP revenue: $20.0 billion 15% growth over the comparable period last year* GAAP operating income: $8.2 billion 20% growth over the comparable period last year* GAAP diluted earnings per share: $0.77 28% growth over the comparable period last year* Operating cash flow of $4.2 billion Cash returned to shareholders $5 billion of shares repurchased and declared $1.3 billion in dividends Se ns ea nee ee eraFY11 Q2 Metrics Contracted Not Billed >$16.5B Unearned Revenue $13.4B PC Unit Growth Vee OEM Premium Mix 72% Consumer Premium Mix CEL ETO acaba Eley) Xbox 360 Console Sales 6.3MAgenda Quarterly Overview & Quarter Result Business Segment Financial Overview Outlook AppendixWindows & Windows Live Division \dows 7 anniversary — Over 300M licenses sold to date WWLD revenue growth inline with *° i bt OM F< Ca) ey eet F A nee L1rs ia OC amee aA ar a } [pee pee More than 20% of PCs running Windows 7 90% of enterprise companies have started their formal migration to AW itaTe loa Next version of Windows will oA ue elo FYLOQ2 FY10Q3 FYIO.Q4 FYI1Q1 FYIL.Q2 architectures Se ee Cio Niretea ey over) “Adjusted for prior year of Windows 7 defered revenue recognition and impact of Windows 7 launch in prior year launch impact) MicrosoftWindows OEM Revenue Bridge Normalized" FY11 Q2 OEM Revenue Growth Drivers (%) se! Growth Ga ETL Eid Hardware Segment Mix 7) Windows Attach and Inventory 0% Upsell and Channel Dynamics 0% Other OEM Revenue Adjustments -1% Ble ea UR Clc lua Pl een eee ee een ee etaServer & Tools Division Datacenter, developer & cloud drive double-digit growth A Pee Trad ° Non-annuity revenue in line with fiery OS aire ML Multi-year licensing revenue growth 11% Enterprise Services revenue growth 9% Windows Server 2008 R2 Coola ale MoM Mare System Center; Windows Server Sosa g ul oa Fivw GD cx grew double-digits Pree eeOnline Services Division Search revenue growth continues ayy SCE RAG irre © Online advertising revenue grew 23%, driven by growth in search Bing continues to gain market ar cman MOS) Continued Bing innovation with expansion of Facebook partnership > Continued progress on Yahoo! ES Traamacre leita) FYIO.Q2 FY10Q3 FYIOQ4 FYILQ1 FYI1Q2 OvenMicrosoft Business Division Office 2010 launch momentum drives growth Office 2010 consumer license sales more than 50% ahead of Office 2007 over same period following launch Business non-annuity revenue growth >40% Multi-year licensing revenue growth 9% SharePoint, Lync, and Dynamics CRM grew revenue double-digits me Pane MOL Mee) lam Unreal -re| Se eae ee oa Pra E eerste | | FYI0.Q2 FY10Q3 FYIOQ4 FYI1Q1 FY11.Q2 Sey eee nyEntertainment & Devices Division Kinect launch exceeds all expectations © 8 million Kinect sensors sold in 60 oli Xbox 360 console units up 21%, fastest growing game console Year-to-date operating income exceeds $1 billion Xbox Live memberships grew 30% > Windows Phone 7 now available on 60 operators in 30 countries $40 cad Increase cee) oo See! ser Maser Mar Te Maree Mage ord VEEL}Microsoft Cloud Momentum Office 365 Announced el iit<-Fel MIM LNe lol mei (a cy Professional, Exchange Online, SharePoint Online, and Lync Online Available worldwide in calendar 2011 Beta oversubscribed Windows Azure Platform enhancements announced at October PDC LTaateN E-1s(ons noni ar-1t19 1) Ce Animation studios and ADP with NVoicePay New data center modular expansion TRAE ems ULM enn ome) 91 requirements Microsoft Online Services Available in 40 countries eT ol RN CRON New York, the US Department of et Mme nae RUC ecko eT ola one Re PAE ieRe ROM asa ets tl Consumer Offerings © Bing powering Yahoo! search in US & [e-Tir-Tel-) eine mecca R-Le (aaa keg) traffic in Mexico, Brazil, and Australia Ce MUmuc oaicisnt hon PL Xbox Live 30M members Kinect support for Netflix, Hulu Plus and Avatar Kinect announced DeeAgenda lol Tac AAO AMI MOL IA moc ie Business Segment Financial Overview Outlook AppendixOutlook RYT Ta) Aone Q3 sens 4 Ftc a eek a reat Ds Rr nN CW Meee Ea ara cee pee Ree ck nee) ears Deere ee a ee err eee Me ae ere eee rae Server & Tools revenue and Services should growhigh- | revenue and Services should grow low. Rees perianaen ee eels , a (Eira tel aan Dy reersoiga Pe EOLA ested ee See el ToL ieee Pere erent Pee eae ey en Tate 8 PVA) een) Cr eet re aa Ce corey marke eters wee } echeaca Nera “oc A Pera uty QB will be driven primarily by the growth in the Entertainment and Devices Division, Xbox consoles & Kinact sensors cele) Penis toe fol rn emer omnpennnn rere es Be ON i BeekAgenda lol Tac AAO AMI MOL IA moc ie Business Segment Financial Overview Outlook AppendixReconciliation of differences between GAAP and non-GAAP Financial Measures Our presentation of second-quarter performance includes non-GAAP financial measures. ° The following slides provide a reconciliation between the GAAP and non-GAAP financial measures presented including: ° Impact of Windows 7 recognition and launch on WWLD revenue Impact of Windows 7 recognition on Microsoft revenue and Ol Impact of Windows 7 recognition on Microsoft Net Income and EPS ° Impact of Windows 7 recognition on OEM revenue Microsoft Operating Income: Quarterly TrendReconciliation of GAAP and Non-GAAP Financial Measures WWLD; Windows 7 recognition and launch impact Three Months Ended Sree 12/31/2010 12/31/2009 Y/V % GAAP WWLD revenue (A) RSKeec NT Ae ite recognition (B) a Tea Mead) SOA ECCS co) Der itd Se ee ieee Ret eee eee eee) pee rae ecerer ee ee roa lee bearer ne nee ere a ee a ro) oe $7,193 I ($1,711) ($560) Er EP] Sees ea eee eee rid aces eosReconciliation of GAAP and Non-GAAP Financial Measures Microsoft Revenue and Ol: Windows 7 recognition impact MU nem YrelaLt am sale =) eer ees 12/31/2010 12/31/2009 _Y/V% oN ere oa LC) $19,953 RSC IIy7I 5% Tee eae cre nea Peete) ore Meson t ut echo Cu area eae $17,311 GAAP Microsoft operating income (D) ESpIoy $8,513 Fe eA ce nea recognition (E) (171) Perea eur face tac eg above items F = (0 + ) | | $8,165 ELE] el Vie roite cea mucu ln) ct che are Pee Une ecg above items (F/C) aoe Sal zee Heciaee ine rte coat Rc rset Set scr eee ea ee aoa tata Porto Erste enlace ete eee ere a Roan Breuer ic ast Re hoa eae cack a Ieee aoa eee bare eS et pode Peace aero ee ee eedReconciliation of GAAP and Non-GAAP Financial Measures Microsoft Net Income and EPS: Windows 7 recognition impact Three Months Ended Olea SPE SUAS 21-3070 Ad VN eres aoa) $6,634 SKa74 0% Ae A cM Eesti elat SD) ($1,283) Persea Mee lly Tenet Cea)) | Por) | PETE | 23% 1 ] 1 CVs a OZ cu Cenc ener vu) Sod $0.60 ee he eee rm ed Breer ta eee ee ee eo cue Choa hr tae Ie tt dace Bite terete eam eeReconciliation of GAAP and Non-GAAP Financial Measures OEM Revenue: Windows 7 recognition impact Three Months Ended ae 12/31/2010 12/31/2009 Y/Y % GAAP OEM revenue (A) $3,802 Post} 32% Le Wind Weert) " pach hahaa ($1,665) fe UT ere lento Relay | at ; $3,963 ‘The non-GAAP measures provided above which remove the Windows 7 deterred pee re eee ne eee ieee ela attache rraeie ea hace Peters ‘U8 fot be considered az suosttute for or superior to, the measures of fina DeenaReconciliation of GAAP and Non-GAAP Financial Measures Microsoft Operating Income: Quarterly Trend FY10 A eg ee oe Add/Less: DeferralRecognition of Tech Coco Gl Revenue, adjusted for above items C=(A+B) Cee et) Per ee eee en a Guarantee Programs (E) Non-GAAP Operating Income, adjusted for peat att) Tee ret icg Bsa aca eevee root aad qa Bert Bur $5,999 FYO9 7) Ce BUTE BoC mSELy ore) co Pee) eyed ry er Bed ed rd Rad er a $12,920 $1,466 te eal $166. rood rc Fi @ Erol onze Bua oe onze) $6,802 ed crs eae re ee teagan eee em ee SR rete eee eae rea ee or nea Understanding the Company's second-quarter performance and the impact tat certain ems and events had onthe financial resus. The non-GAAP finance meesures provided above snouid not be consisered as a substate for or superior to, he measures offnancal performance prepared mn peter arra nN @ Boca Ena} Bo Fores recy ed Era os ry her) corr) $5,930 rr An aes au eure Eat s7ais Pat) rr a Cr} ocd Boy ert) Bg Sear tc eres ea te Beek