Microsoft (MSFT) 29 Jan 202020 Q2 Earnings call transcript

Welcome to the Microsoft Fiscal Year 2020 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would like to turn the call over to Mike Spencer, General Manager of Investor Relations. you. Thank proceed. Please

thank and joining today. us Good you afternoon for

General are Chief Officer; Executive On Dolliver, Brod, the Amy Nadella, me with Deputy Keith and Financial call Officer; Satya Hood, Accounting Officer; Counsel. Chief Frank Chief

On financial the can earnings supplement which release of press provides our deck, between website, measures. prepared financial and slide today's intended differences find a call summary and our and is Investor Microsoft Relations' you to non-GAAP remarks GAAP during reconciliation

quarter items accordance refer on additional with to understanding non-GAAP prepared will items results. as the metrics on should performance Unless be The GAAP. we otherwise and financial the a in to financial to to second non-GAAP clarifying the call. in impact the events or financial are not in addition aid have performance these specified, measures of They superior provided included investors measures company's further the substitute considered as for

today last All to growth comparisons relate unless noted. period year corresponding the we make otherwise on the call of

We the we rates rate rate underlying a our currency for constant the framework constant growth in rates in when growth how as performed, growth are of Where available foreign assessing fluctuations. excluding effect refer currency to same currency, businesses provide only. also

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and other and subject These assumptions future be uncertainties. making current that risks forward-looking are During which statements expectations this predictions, on events. statements will about call, projections, and are statements to are based we

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to Satya. with And that, I'll the over call turn

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competitiveness enables Dynamics to predictable proactive, data. every from forward on will be to organizations reactive the ability The XXX. value their of Now siloed of Dynamics going their by and business repeatable, defined transactional harness to move outcomes. XXX business full to processes

to data upsell, today. is built AEP layered on Energy using unify third-party Customer churn. increase, it Insights first customer and to only the Synapse that's data operating scale and customer platform reduce Dynamics and at Azure is XXX

and is experiences. And XXX is personalized to digital in Assisted training shopping Goose Qantas XXX Canada the call bridge for Dynamics world. deliver physical centers and Dynamics Guides using new experiences. unify back-office, Remote Commerce HoloLens using retail, In ABB training, in-store, X using more across to to And and data is immersive

LinkedIn. for marketers economic connect create to Now quarter. again hired on global enhanced LinkedIn. our and opportunity the seconds, pages of LinkedIn this our continues every as seven levels remains tools million to the on workforce. nearly LinkedIn members. member Marketing saw We XXX solutions leverage business record growing Every member someone to with is fastest engagement of

of Sales data use features LinkedIn meaningful to helps Navigator more New drive power customer in validation engagement. network their sellers LinkedIn the

continue last We talent. and skills launch LinkedIn the develop organizations completed best talent our portfolio, including to already Glint have five help since million attract, Learning assessment across the than Talent More innovate quarter. retain solutions, and LinkedIn to Insights, members talent

experience turning convert knowledge searchable is helping into in more in to abundant, is attention PowerPoint, content Presentations Microsoft and and e-mail the Microsoft empowers AI XXX. an in Microsoft day, persuasive with Now are however, solution in any Every integrated is and computing more a collaborate create, XXX are videos on only that actionable data secure is XXX where everyone is stream with scarce. Excel, world more device. more insightful Cortana.

knowledge information it give new information Cortex to amounts the of precisely context easier need with work people Microsoft And protects with The at and your find the their new privacy in your security they enterprise online class work. Microsoft the of Search. Edge analyzes makes to project massive

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a communication million than the XX users, in engaged platform in collaboration, and than more participating more forms richer with Now active million increasingly month. are of people meetings across daily XX

join pop-out chats and keeps and from between work, conversations to phone calendaring, and apps. meetings the bounce need eliminating context, Integrated back the in to one-touch your forth meetings

Teams the workers Lenovo. feature our Cisco's Webex of with the gives they secure walkie-talkie on-the-go. to rooms devices the Teams reimagining productive in need integration the along technology And future and Samsung, new more with are with first-line from We and meeting partnership with be collaborative, new

choosing Tesco, for Microsoft XX,XXX All Nestlé to Specialty Teams. this shift the like Berkshire are are our see Rockwell at customers Teams at AXA, than Hathaway, employees increased innovation using is employees and XXX, largest From IKEA we and first-line companies to demand from XX,XXX world's offerings More premium Duracell. driving to are Insurance for usage. L'Oréal moving Automation, continue management.

the new ecosystem. light XX And incredibly of family thin to benefit our our from expanded to dual-screen gaming powerful laptops devices, innovative categories we holiday, showcased OEM creating and at entire designs. devices rigs that new This CES, Surface Windows partners

gaming. Finally,

and again across to hundreds very continue PC participating We xCloud and ever. our powerful record will start, than off console. people Xbox We Xbox a Series how active in thousands strong for console reach quarter, initial monthly games to users new are more doubled month led with invest quarter, X subscribers distributed, this endpoint, of Pass set viewed by console. and to announced played of trials. gamers a strength is this Game of mobile, the transforming every Xbox Live be most last

more always are this work. the we creating responsibility ensure have closing, expanding recognize sustainable is trusted opportunity opportunity, we and build with across Along our to we technology the In is businesses. we our inclusive, all

customers XXXX. to commitment. ambitious Our looking sustainability negative need urgent by them Microsoft are announced we and take to in partnership carbon will why us action. be this That's carbon XXXX. by And remove see XXXX, new $X carbon in an since removal accelerate emitted company billion the all founded the and our Fund of development was And Climate will Innovation technologies. the reduction we will have we with

alongside that with sustainable innovate customers to continue profitable, opportunity. will solutions We our expand

and detail look in hand to our over who you questions. rejoining for that, With to it results our after I'll outlook. will share I Amy, cover financial forward

Thank you, good afternoon, Satya, and everyone.

was This and constant adjusting quarter, share currency, XX% increased and XX% revenue XX% related $XX.X XX% XX% in was increased year. earnings income constant currency. the charges Gross when XX% Operating and TCJA in XX% from billion, XX% in per to and increasing constant currency. net the and currency, constant for $X.XX, in dollars up margin prior

Our trends. sales secular favorable and geographic strong again results, saw from we continue partners commercial delivered and we markets. strength perspective, From across teams all a broad-based to benefit

a mobility and see with the In drove of bringing increased and XXX, value commitment platform. existing together Azure differentiated intelligent business, new Office as both to Windows to unique continued cloud enterprise XXX hybrid strong by our commercial the offerings adoption security, our demand solution, and And again Microsoft customers. XX we for secure and customer

execution. As in ahead volume of high expectations, with of result, constant currency, and increasing new XX% renewal and growth business strong a was commercial a bookings XX%

billion, Azure. increased year-over-year growing points Commercial which margin performance cloud by XX% by $XX margin Our to driven obligation percentage, percentage $XX.X gross offset than to up XX% year-over-year, long-term and in commitments. was cloud constant again in XX%, commercial shift remaining billion, more material customer improvement XX% mix was gross Commercial driven revenue Azure currency. five sales

the In percentage in year-over-year percentage than by driven improvement up sales, expected licensing mix gross stronger points margin benefited and gross sales three and was of all our five across commercial quarter, favorable console margin gross segments. our cloud margin results lower from Company software percentage. XX%, improvement

reduced slightly margins decisions by operating X%, favorable as lower below grew strategic primarily gross expanded growth growth and And on revenue point expectations, by FX In slightly reduced in spend. driven no and a had and on margins of higher quarter to leverage growth invest this program was impact high through expected operating expectations, line operating areas. Operating expense expense point. FX one and by result disciplined impact growth. more one COGS growth than with

currency, Now both segment and XX% constant and and XX% Productivity by ahead expectations, increasing to results. our was businesses. from our in billion, commercial consumer driven Processes Revenue of Business $XX.X

points commercial strength primarily across commercial well driven Office ARPU. Office XX% growth revenue and growth constant of with segments in in and in higher on-premises benefit, base XX% currency was XXX Japan. again of three by currency and XX% as roughly workloads grew revenue customer all XX% transactional as from constant installed

seats grew mix from subscription XX% consumer our Office commercial an Microsoft by suite. driven currency, XXX grew XXX Office in increasing in XX% revenue and with XXX XX% constant growth revenue. Office

timing by roughly from prior of points Office transactional from the Japan the seven This to benefit comparable benefit quarter, growth and low of strength was five purchases. of also impacted XXXX related year the in points

constant XXX revenue XX% in adopting with XXX continued workloads. number and revenue Dynamics Dynamics grew subscriptions momentum in XXX currency. in of Office customers million. XX.X Dynamics consumer multiple constant XX% XX% increased XX% currency, and grew the to

revenue increased of with in XX% of by solutions again strength XX% this grew XX%. engagement sessions across businesses, and continued quarter. LinkedIn currency, record highlighted levels with growth constant XX% marketing LinkedIn all

gross currency, gross an constant two and revenue mix. more in Segment XXX and XX% LinkedIn improvements points in and Office margins increased as XX% percentage offset, cloud year-over-year increased dollars than in increase margin margin

driven Operating and And continued and cloud in operating constant XX%, income engineering. XX% by increased increased XX% expense LinkedIn in currency. investment

cloud significant Cloud by products offerings. increasing base, increased Azure XX% $XX.X demand constant business consumption-based another segment. and and a and in of in and constant services Intelligent revenue currency, all our currency, XX% segments. XX% XX% driven in growth the customer server customer quarter was Next, revenue XX% currency. Revenue hybrid of constant billion, expectations, On for grew ahead by XX% strong driven continued in our across

with to and XXX user per Microsoft continued And premium over XX% million from mobility of our in constant XXXX, business, on-premises suite currency, seats, strength base and four enterprise Windows our momentum. server business roughly benefit support benefit grew points of continued our with hybrid XX% the In XXX Server installed XX% to in for from our the end addition solutions. of grew

and using the use our benefits flexibility Server reflecting hybrid are enterprise deploy one-third SQL Nearly of offerings. Windows and customers our to of value already Server these Azure,

Enterprise investments in Segment improvement XX% offset margin year-over-year material than Services mix grew gross in IaaS by and Azure margin one in premier increased gross Operating XX% constant margin XX% and currency, by income of expense dollars constant increased growing increased the support XX%, gross revenue primarily point services. Azure quarter more Azure. and of continued as constant in X% currency. PaaS revenue. driven and increased X% and Operating growth in another in currency, driven percentage XX%

revenue. than currency, Computing. was expectations Personal surface our and Revenue More and in of performance better-than-expected as ahead $XX.X to increasing constant businesses billion, across Windows more Now X% lower-than-expected X% search offset

related Pro chip of of grew to supply up to makes by in and momentum Windows year the Windows, In Windows demand. OEM end market OEM and PC we of support stronger revenue, timing strong overall XX% driven the roughly partners. which from revenue, comparable our was total prior continued Windows benefited expected growth X low XX XX%, than advance of

XX% The OEM benefit the roughly X%. non-Pro low roughly comparable revenue, of up prior revenue, makes points from Windows which increased total year growth. of that XX drove

was the seven the by normal category of entry-level and low an continued Inventory pressure in range. roughly the more from timing ended quarter This comparable of license points the levels partner. benefit the in OEM purchases from quarter, than year offset prior

and for constant XXX, driven Microsoft and XX% cloud licensing remainder XX% up in grew in-quarter which of higher our Windows and by revenue, the The revenue, is currency, total revenue recognition. demand roughly services again components. which other business Windows products strong carries of commercial XX% up makes Windows of made services

TAC Search in lower below X% and as was offset currency, consumer execution in X% X% commercial the challenges increased revenue continued revenue the currency, segment. segment expectations, strong volume. driven in ex Surface and Bing in constant primarily partially constant lower-than-expected X% by by increased momentum

console driven the in continued gaming, Game content lower prior and XX% the declined XX% as in by X% Minecraft. launch. revenue growth revenue line next Xbox the declined we Pass and currency expectations, title in third-party impact a from with constant And in in more and constant services as sales strong currency, year subscribers Xbox than XX% and in approach offset

Segment gross X% of declined mix. Operating margin in dollars seven primarily margin currency, due higher-margin to higher-growth to redeployment points as percentage in gaming resources engineering increased constant offset XX% and first-party year-over-year sales and XX% by was investments, gross content. partially expense opportunities increased

and As XX% currency. XX% constant in a result, grew income operating

company capital to finance $X.X total billion, to meet expectations, an driven with including services. ongoing In were by back our up results. Now growing for demand leases XX% cloud line year-over-year, expenditures investment

and Cash cloud for Free Cash driven of XX%, $X.X cash $X.X PP&E operations from was reflecting billings for flow billion increased $XX.X payments collections. cash year-over-year, PP&E. healthy paid the billion. timing increased was and XX% billion by flow was and

than anticipated our Other due income in million portfolio. was recording mark-to-market higher to the gains $XXX of equity

Our above And expectations. we repurchases returned $X.X with effective shareholders to slightly tax through dividends. billion and XX%, was line in rate finally, share

Now, to outlook. our let's move

individual both remain we rates and expense current company COGS segment total level and one decrease company and have FX on no to revenue approximately by growth. point impact at stable, Assuming expect operating the

impacted consistent in another growth strong execution demand to In by our but quarter. materially ex-rebase. and growth QX a our hybrid healthy, solutions our be again be commercial bookings expect Commercial business, should lower we continued for drive will

increase demand. in to gross at we than margin consumption-based invest support quarter to year-over-year, sequential lower our continue expect And growing to as dollar Azure capital of cloud Commercial expenditure last a mix given growing services. the rate improve percentage will although a continue we

$XX.X by billion Productivity guidance. Processes, Office billion, between In we expect Commercial, double-digit growth Dynamics, continued $XX.X segment and Business driven and LinkedIn. to across revenue and Now

For of in reflect Cloud, strong billion consumption-based given In growth balance expect the growth billion. revenue size and $XX.XX to Azure, we installed moderating our growth in revenue our per business, Intelligent continue $XX.XX of user the between our and the base. will business

business Windows high support Growth single related strong some end XXXX. be driven should as well in on-premise to continued benefit as our for server digits, of the again demand by Server hybrid

last Services, $XX.XX be we Personal higher we Computing, $XX.XX than revenue billion between expect More In slightly and to Enterprise expect In growth quarter. revenue billion.

mid-single-digits be X, to the Windows for should wider-than-usual in overall, OEM chain's and demand. demand, related reflects to XX segment ability in The public the China. the low and range of In situation reflect Windows growth support to end revenue Windows, in Computing uncertainty healthy supply More continue Personal health meet to

and and Services, healthy another from Windows, some momentum X Products of agreements. we Windows support by double-digit growth, Cloud XXX Microsoft driven extended In suite Commercial quarter expect continued revenue benefit

In Surface, in growth In ex we Search single to execution digits revenue work the segment. the consumer QX. low expect challenges we TAC, revenue the we through growth similar expect in as

double-digit expect Gaming, in And decline we driven well volume of as lower in a we the near by of to as trend as the console on the X Series Xbox revenue the continuation transaction launch title. range, low third-party

Now, back guidance. to overall the company

of other timing year finally, to of and rate slightly each expect should below of $XX.X XX% And be and due billion equity offset to we QX $XX.X vests. billion. expense operating to income our full of In We interest expense, expect $XX.XX rate to other. income COGS and tax our $XX.XX effective the billion billion expense

year. growth, business. company the the Now, level, continue revenue strength the income to full commercial our and share of additional operating we by continued comments on some At expect driven me double-digit let

full lower XX% growth now result HX, a expect For we operating as expense, spend of between year XX%. and in

remainder well invest areas mix strong second as HX up significant high-growth now year, our points margin the even we given expected ambition roughly be with and expect of the to half results, in the finally, particularly of in as year-over-year, for high this we margins year. the operating sales two And businesses, in as strategic

Q&A. go let's to Mike, that, With

to Thanks, now move over Q&A. Amy. We'll

one the only others to ask can instructions? on participants Operator, question. that respect your repeat please we As call, request you please

of [Operator Please Our proceed. Thank conducting be comes Mark a we Instructions] you. Bernstein. session. first At question Moerdler from with this question-and-answer the time, line will

much I'd in Thank on more [technical look little give at details bit there what's think give a you. that? you we the strong some are contracts driving Are helping Are starting you very Q-over-Q to And on and about a factors the acceleration really kicking what Can ramp? of seeing also on Satya, revenue congratulations that difficulty]. like growth? large accessible Azure. to you if other xCloud sense are can Thank of that is us the impact Azure. in you

for the Thanks question. Sure. Mark

I to stack we sort think, the the through so, seen it's went that fairly of Ignite even I infrastructure announced of even that at have the previous our things Azure I thing mean, is PaaS terms quarters we from services, that conference. have in in is a overall, momentum, some of which the we that's differentiated. the

the fact it. that control the a Take competitive side, cloud-native the as now side, something of pretty on both think, have product. Synapse, Azure on like we a and well plane Azure a The is multi-cloud, differentiated databases, transactions, have aspect we Arc. I analytics as is that computing side that's And very multi-edge, the for hybrid OLTP on data

and there. out So that's of see what a you adoption terms in the play growth customer

it really mean, always is any helping think, we’ve first workload. I of internally, equals xCloud, a party of had the will whether mantra third understand new of the us workloads use third of is great it I party, in can parties of you how terms can some even capabilities. Sony use. course patterns, infrastructure the the then And that which same see is

excited others teaches needs. about we're us, their the in but can how ecosystem more what xCloud importantly, same use the streaming about capability So, excited for are we

bit very IaaS the broad-based good about divide healthy, PaaS. into growth, let growth its components. rate, me reacceleration that little and Azure did a We your in especially -- And, the on Mark, to question a and consumption in have

see on optimization this already work, in started touched I quarter of Satya important good the strong workload to actually, the Synapse workloads some migration we some PaaS also like and was important. only think, really which of is to growth one the DB these that add not well, part that as of of and Cosmos starting are in new stack Arc the workloads momentum parts but running,

some And The component result does SaaS security have get We number suite movement Microsoft that that. addition quarter that base, did got and well. or I from contributor tends be quarter-to-quarter. particular, variability actually, in where per-user component good a to some healthy also to the component you'll as SaaS the in momentum a in in management is and think XXX and in the we've big to and mobility

And consumption whether of contracts get couple of to can a course, just quarter the of the in particular, layer, type some that quarter signed, have that's impact for points. in

were there good. will the fundamentals variability but So, some be across underlying and user that number, both consumption per in the quite

Perfect. I you, Thank appreciate. and again congrats. really do

you, please. Mark. we'll the question, Operator, take next Thank

you. Thank

line Keith from Morgan Weiss, Keith your question next comes of question. Please with live. Please proceed. the proceed line Weiss Our is your Stanley. with

views I impacted that's competitive and at and And with and out also, out Azure? around about of very, become Sorry, marketplace? DevOps dynamic a nice your guys little changed Tools? with a that's the Ignite the sort progress to kind us all Developer quarter. changed guys, developers Coming Studio how GCP differentiation stuff acquisition. question, competitive AWS particularly that real dynamic like bit to Has with kind the of in of traction the the there your like get for a after your conference, I GitHub Can taking talk you the Thanks and was on how very on wanted of mute. broadly,

Yes.

the for thanks, First Keith, question. of all,

from is productivity Visual offering. very of coming more and class number the non-tech any solution only together sector. of Microsoft around solution in engineers effectively software in think in the and increase I at points the as developer some to very, about one excited going DevOps than forward. tech use now compelling and I data is and because is between This of communication, as happening going that's SaaS are the We same the what's to with Studio doing developer other what sector in as world developers I a we're SaaS as GitHub the the level, mean, Azure love

tools tool We So we that's building as want love to chain. company. a best build are all, we the developers. who After for

so not way, only we're on focused by and the And -- Azure.

developers they of an not device, this our For to tool clear who to edge end. means target use can cloud, itself. It's always sort been any so We've any and chains, end about is some it.

tool what we SaaS But having essentially developers true that tools both will the open are a to well by itself, ecosystem. of is, to with to who tools. and chain source, us business overall, that said, in going this help ethos But as as, as stay of high-margin want be course, course, best of do our GitHub

progress In fact, even Facebook last the been testament of just made this quarter, the Microsoft. that's I by adopted being some tools a to that's, think, you saw by and engineering

talked developer us to And in. Keith, I would the at just SaaS The for continue to Satya is area opportunity invest about add to that, this is important an level.

investing for the you GitHub see opportunity in whether an chain, place a this growth. see Azure that so in as And we'll continue tool be to or will us

Excellent. Thank you.

move we’ll to Great. Thank you. question Operator, next please.

you. Thank

question of Keirstead Bank. Please from comes the Karl proceed. next Our Deutsche with line

about. March a gross team quarter down your current margin that and shifts year-over-year, margins your to you ask us or the third we've IR sales in to warned bracing love I'd flat Beginning trend quarter, have given gross for long Amy, question. Thanks. or the you even been mix

take I gross XXX your margins are guide bps COGS actually of year-over-year. Revs it Yet when about up to equates and XQ your XX%, which guide,

color margin higher that Azure what's helpful. gross gross little understand is there businesses than wanted in decelerating are pace Is at the margin perhaps than expected A it improvement going to on. So just greater pace the thought? of you your a slower I might second be Or half?

Really, sales margin all it changes, mix. down Karl. gross when the Thanks, you comes see to

growth feel gross So continuing good every on of across they own the fundamental very also execution only saw and not deliver in margin Azure each level, growing to focus cost, margin -- at a as service goals. to just gross not but service, growth. attach ARPU improvement cloud see about their to on I We of ability terms their

what of and what What and the focus say the into -- HX line for is into product can from, you'll you right? simply see on Windows QX. be a HX that and do competitive? in of we're lot the lines, many could I saw most next console -- console, since cycle. in about heading them mix There each mix at example, its best products in away So I right, the to was

little head you'll company mix HX, what of if would gaming, about of tail couple go whether bit. contribution or without see the hardware portfolio in what a points is The At thought up server well our like as gaming that, looked support of level, OEM gross impacts components a little on will from a margins a it's as bit. to the as of sort off, And in the we you And shift side. have that's impact. other end

So a that in have QX, said, impact sense. margin in a QX, and to that little implication into you continue helps higher you'll we a if you still does head result, give gross different that see to as slightly as

Yes. Thanks Amy.

Operator Yes, next we’ll take thanks Karl. the please. question

comes proceed. Please from line Bellini Heather the Our of next question Sachs. with Goldman

how PaaS the could what I Karl or to follow a the was give trending? just was shift to can IaaS us of kind you I about help wondering relating asking sense that's you just between maybe gross us and of up been of what mix bit just a think mix if wanted margins. if little on kind -- and

down success ask margin is, I you're But -- been wanted -- been every I to what unbelievable, able seen margin do given for maybe what guess call to it's you improvements gross out also, years asking the the road, there, Azure quarter, higher X is ultimately, you have I'm going -- think X gross look you've material thought X business you've in has you to would And Azure. your than be view years a just to about ago? if

the we PaaS on where I thought and user-like you'll margins trend trending And actually the expected. what Specifically the per trending But would on think assets. on trend trend that Azure, on they would layer. where we the thought see gross seeing we that also are is continued IaaS And improvement you're the we Azure they're improvement line And as way they will flow of as the in mix will increasing toward time, of user and the TAM. and see better opportunity rate and PaaS from the those It go flow. IaaS just forward layer. the a that get IaaS and at in per in terms you'll nature will PaaS but improvements

So about what for that the same impact it up. would frankly, commercial margins period, the long view unchanged, Heather, think how like. should of over time cloud my all is And, look gross course, run, I

gross goes in it think But margin if -- much how fact the opportunity implication, separate of what exists revenue to this this from cloud. just I you

thoughtfully if the so And the in capture and about grow mechanics solutions really worry opportunity meet revenue more to grow continue level we and continue GM, improve of to the industry can can things, I and our continue scenarios, by less about invest pick to needs customer growth, those service revenue. which to to

leverage separate there operating the categories infrastructure around even it's whether put don't just IoT. say PaaS PaaS to for and services think R&D have IoT. or We these and we when practically mean, our for I then CapEx it do SaaS. might I of you, or and an around IaaS, sales Yeah, out cloud, we service we would about

have and have have Dynamics Azure. and in XXX. capability around IoT Game Pass We and the xCloud Similarly, apps streaming we we subscriptions the

collectively about the and company and we long-term sense, margin holistically what's that think investment. that's manage the our all in get well investments to profile we layers of leverage define how across I going our is So think

Very helpful. Thank you.

Heather. next take we’ll question, please. Thanks, the Operator,

Thank you.

the Thill Our next question Jefferies. of Brent proceed. Please comes with line from

you software. the I'm tailwind talk cloud drivers seeing strength from of that through But the some growth the other on-premise grow? expiration. I the the you you're the have to curious; even of the know out as on in business such continues maybe just Amy, on-premise causing called Thanks. that's great

as people because related solution the is they where the long some customer that that Thanks, been call and premium. sense the need the seen side hybrid And which really been things has that makes and also makes the on demands. we've relatively the on they as cloud, call actually so deploy prop flexibility, Brent. in has and were on-prem, to way ultimately, edge, if whether that is What the customers in may it And and drivers people consistent that which the that on-prem for flexibility the have value they're the absolutely relatively seen we've it when indifferent Azure it. need may meets sense solution value

And use for that Server point I already advantage SQL right so are take customers you workload starting prop, that be and value able data flexibility start that Windows to solutions. is one-third of of which that their hybrid to to the to see that gave, flexibility the in

is about number relatively trends, years. And it for IC as talked I on so on that's a support that, think out. probably two quarter think I for And durable. the of end called why the now about, tail points I we think, was those and we And the if see of I

underlying very I feel good trajectory. So, about the

Thanks.

question, Brent. Thanks, please. we’ll to move Operator, next the

you. Thank

Our the with next Mark of Please line Murphy question from comes JPMorgan. proceed.

if some you the Satya, commented you. the engagement being Teams user ago, few company's is is daily history. growth bookings comment to growing time a other or criteria? on Or reference clarify, thank and app active or Wondering a if had spent that fastest a Yes, is in quarters you impact? that user that the could in Teams

prior Amy, thoughts post-Windows As directional XXXX. high-level offer if well, what on you versus year could any of you wondering And to trend in line, how the model on support fiscal how kind of cycle? happened OEM that into going Windows and end thoughts could the think any just X

the in It's effects. and for happen rest context engagement. workers. of the the also office, few where used driving integrated also of office these There knowledge workflows in a usage of meetings. both messaging, platform scaffolding related the types question, depth engagement, which thanks is the to My which products very Yes, comment are have obviously has It's of usage. Mark. Teams around mostly that significant was deployment is gets of process messaging of obviously around workers first-line for business place because rest It's channels. and patterns in usage

at So engagement. than that user and and much when effect, to all of terms scaffolding it's in any cumulative of drive its look effect platform other type I of ability broader that experience

excited see saw as remarks we well. that my in about that, And you to continue we're it. So and

in prior which your would you if uncertainty be quite ends, we would of important constraints would we've to terms had question the you the to like what public on to look supply similar. related is to on chip And I say, is situation or challenging, compared China, actually what's either OEM, out, comments take in some cycle have the some think of what try cycle health of the

than little not, If opportunity mid tail little and a more have probably to small segment we probably a the last it last in did the longer time. business the have

through quarters that we forward. situations still work need now looking feel talked very and both as We'll we frankly, about, good. I've for a So through the then work to quite few

So we'll on give quarter. what see we continue to you the in market guidance each

Thank very much. you

Thanks, Mark. question, Operator, next please. we’ll take

Thank you.

Our next line Please the of Stifel. from with question comes Brad Reback proceed.

sense customer hybrid very Great. that of Within represents that times rights. mentioned evening Thanks. couple what those much. one-third workloads Thanks any about a using for base, clients? of this of percent Amy, customers of you

not good that. Brad, a way really know to for there's me

that means for this about that transition to think the of decisions a to make about experience solutions developers workloads, all we've themselves and Satya top are It funnel. and how starting to get I that way mentioned to the corporate Azure where how it. or got making is me, For really use

happen a in workload and help having for use can partner continue of we to through to more a that have the sign. is investing environment hybrid teaching and skilling great always the And most workloads make this continue the with to them process customers sense. then transition. meaningful the adoption learning that rights me, were these For and said and lot We've about

to say, more opportunities into customers, think going a we've more got the at with if the tend So top good thing. start funnel, partner for I I us, to and that's

Great. you. Thank

Thanks, take Operator, please. Brad. our last we’ll questioner,

you. Thank

from Our Phil Fargo. Winslow with will last come Wells question Please the of line proceed.

just called the driving for quarter. question in products both on and for Dynamics but on with question Satya. rate. Amy attach that thanks guys wanted you I dynamics. a guess seat also out growth mean, taking focus and a multiple great Amy, increasing I congrats to I Hey, to my growth

Wondering in overall car AI trying AI have of also to but then as et if could to platform you with Satya, from that out. where of we've of of when but side data, us to Microsoft obviously, products important sort Dynamics you're you the the cetera, past Dynamics desk, sort help And what just you how because, there. those particularly can over do Azure insights, months, think is XX with about sort – rollouts seen parse in strategy, a some in general, SaaS you of Salesforce the of a use the data

you in trying the the, So could strategy the just of application it, just wondering of world? to what if walk that sort us in through you're of and call the sort context do AI then

the question. Yes. Thanks, No, Phil, for great.

what can and It's suite application what into business its remarks, and of predictions, really way, I Azure, look story That my excited it then about is is we of needed. these model wholesale which modules, fascinating it turn top same, a extensibility on integrates both cloud mean, the next architected LinkedIn. operations because of on the data I are all what Synapse, It a the is so we are that integrated Microsoft is native in databases. integrates been insights into use in very for Power mean, and that example, referenced for next manufacturing, have and That's they've terms I Microsoft referenced it's bring which the It think, the is XXX to platform. together built of you'd all and its the Power retail efficiency. sort I Azure platform into Azure. in Dynamics deeply level the of of XXX, And happening pretty and Let with when real I more is I Dynamics Canada which era, Dynamics Amy, can. me needs end-to-end Goose, of of at start, comprehensive. what's boundaries. particular, XXX take world you into XXX, insights even needs actually to take the example this nature without currency had automation able how the is is

The a processes the how experts thing and change people that's The over business Dynamics domain time, no no a thing that's absolutely canonical no, business is and up there's – pretty question And business canonical rapidly such shine. with where as as a keep right? and such change. can XXX

So about we're happening what's excited there.

a think case. about new CDP, a are in fact that, category, point is There Sidecar. mentioned You and legitimate we starting that's leading. race with very a a new We use and

well. that as And so excited about I feel

for I And new so think on have. reaches about the just Dynamics the what into comment this the important of your about tap is, to question not budgets excitement And about what's When been us, new for of to able being had talked in us way, I growth most we think that of adding how seat Satya around the to sort from per how dissimilar XXX we made that workloads, about I is businesses. how not tend able terms I opportunity before. think access to

of a the new a you for more can add You add tapping that's in great budgets, terms you and seat opportunity do workloads then into that and us.

the and I'll its more place, focus is on we I think sort Dynamics momentum. about So seen as HX. do I in another and can would little about more a we based investments learn I momentum out, that's where we continue think start in This to that, have bit of talk call a make to frame XXX HX some

Thanks.

Q&A of portion today's Thanks, the Phil. wraps That call. up earnings

today, the find Investor you to speaking we additional Relations soon. for us Thanks and joining details Investor website. – forward can Microsoft You on look with

much. very you Thank

you. Thank

Thank you. teleconference. today's This concludes

time. may this You at your lines participation. disconnect your you for Thank