MSFT - Earnings call transcript Q1 2020

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Operator

Welcome to the Microsoft Fiscal Year 2020 First 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

Mike Spencer

you Thank us today. Good for afternoon. joining

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

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

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statements update of statement. XX-K, the Commission. subject any this based during and Actual will Form be making These with projections, conference any to the this section and differ Exchange discussed current Securities forward-looking on During filings in factor call, reports and results to not are made We release, comments because in other press forward-looking undertake XX-Q, risks our statements materially call, the and and and duty earnings assumptions risk do Forms other today’s and future could events. which that are expectations about factors in statements we predictions, are uncertainties. of

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

Satya Nadella

to Thank everyone phone joining. and you, thanks on for Mike, the

fiscal in billion We revenue delivering start $XX off to a in this strong quarter. XXXX, are

provides a own at collaboration. Cloud compliance, security Microsoft and differentiated and the developer productivity data services, to companies spanning application business we build scale them their to work Commercial stack as digital process Our infrastructure, help alongside continues grow AI, business and capability. leading world’s tools technology and

of integration First, best-in-class we’re entire to represents coherence needs unparalleled in innovation third, offer and long-term world opportunities; meet second, each the growth the each architectural our these layer; and we stack of across customers. real delivering areas and openness secular,

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the an extensive with we Azure partnerships making week, Oracle Just partnership announced destination this with and ecosystems VMware these for customer. our go-to-market cloud. preferred every to SAP bring SAP, our And also

areas. every where banking industry to and while coffee We’re the Stack, in to to and factories modern privacy. in Sphere, ensuring care Starbucks seeing we’re is connecting remote scenarios extending edge, And customers security data from smart machines from the to enabling get insights compliant real-time mobile generated traction enabling cloud Azure securely health beyond Azure

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XX% are most last in and we XXX The more has of have tools, of months. the be AI the infrastructure more will using services. comprehensive the AI. Fortune customers, than characteristic And every of forward and companies application now quintessential XX Azure than portfolio AI going AI Azure XX,XXX

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will every turn productivity to let’s be workflows Platform. Power cloud Now, gains our for to function key every Automating workflow across organization.

robotic as both, service It enabling Microsoft Microsoft everyone automation We Dynamics monthly Power experts, design, XXX in to of apps build to exists. custom X.X than have applications. as extensibility as XX% Teams citizen are and build none already to and organization Fortune framework together app XXX building self created app active of intelligent no-code business Platform helps inclusive closest already those where XXX. million low-code, problem for And fast. brings has publish PowerApps an Power process well analytics, development, an the Platform more power developers. the the workflow domain or

increasing about and strategic a compliance for Rising organization. cyber every Now, mean on threats priority let’s regulation security talk security. and

access identity, zero to comprehensive protect with identity, for tools, a Active by people, across Azure -- and than XXX,XXX used Directory offering people infrastructure across developer device environment. SaaS starts management apps, We in and environment. application compliance have security security data It heterogeneous today’s trust more customers organizations Premium and spanning devices,

a signal Defender analyzes protection with information now service Microsoft Sentinel broadly cloud first and extends with Advanced It to security using security our now and automatically Protection, Ignite Sentinel, vulnerability next about organization Threat across investigate, that builds is remediate the weeks. Azure opportunity to risk-based more at AI scale Conference threats. And at it in and in detect, our few the expanding management. We’ll available. security entire cloud share with massive

to Now, on to of of move operations finance sales Dynamics insights. the is AI unlock outcomes. and to business from only business view a and to processes unified repeatable marketing and predictable silo reactive XXX-degree that data gives business to every organization business, applications. customers from XXX level cloud their and enables It proactive, powered transaction

introduced new back solution and a deliver we Commerce, wherever XXX are. to experiences, and quarter, This digital Dynamics shoppers content unify omni-channel office, in-store personalized

ingests app first source, data any third from Dynamics data from engagement freeing XXX and party of record systems intelligence. of party systems AI or modern to insights power

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Patheon, Guides X, cloud Dynamics our to and business HoloLens XXX for reality services, We’re X processes enabling with along with mixed customers its bridge using physical Pharmaceutical and XXX mixed Dynamics for training Azure reality to company, HoloLens applications. the spanning employees. digital is reimagine example, our

XX% Marketing of again members. remains LinkedIn, Solutions leverage our as up to record million tools levels this connect with XXX Now platform. to across growing the LinkedIn. nearly engagement quarter segment, our fastest marketers year-over-year, community-based saw We

members retain develop We discoverable LinkedIn to Glint, recruiters. showcase and to continue and help to organization a every portfolio, for Learning to more innovate best Solutions, including attract, Skills our is LinkedIn Talent talent across Assessment proficiency Talent become way their Insights, new talent.

and Surface screen to including devices Earlier month, coming next new dual this two Now, unveiled turning to our Microsoft XXX broadest date, Surface. lineup we year.

every role help device we factors silicon with creative reimagining AI infuse layer be are world. and to productive up from in of We a more the multi-device operating form and people multi-sense, how to systems

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weekend X the and both In We our community Game first Pass ever content, XX Finally, X on strength its than Gears opportunity more with revenue Minecraft players we’re record Live years record X and continued with and growth we Minecraft worldwide. Xbox franchise saw for gaming. users with cloud billion mobile and bringing stronger to PC, are active and gaming, Earth. subscriptions. to alone. is with in off services monthly investing in usage, saw expand million audiences than in and console gamers new in

trials Finally, just last play on and of gamers so want wherever xCloud, can device. Project week, whenever we they any games started

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large early still and it’s We’re with markets potential, investing growth in significant days. aggressively

outlook. for And to I’ll to that look results With our hand questions. I forward share financial rejoining and our who your in Amy will detail over call

Amy Hood

everyone. Thank you, Satya, good afternoon, and

all currency. $X.XX, was increased XX%, billion, currency. XX% constant in and XX% XX%, dollars increasing and across solid double-digit of geographic earnings This share top offerings quarter with quarter, increased Consistent and per demand hybrid start and we XX%, currency. revenue another income margin was line saw in broad-based to Operating and perspective, strong XX% the XX%, strength in From in drove a cloud up our for bottom execution markets. $XX.X XX% constant a currency, and constant and fiscal year Gross growth. and constant

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result, XX% new growth $XX.X and of volume expectations As constant strong revenue in bookings XX%, XX% a at Commercial higher execution. Commercial and of currency, of XX% unearned ahead up ahead mix constant XX% expectations, and renewal billion, business increased increasing to currency. Commercial and was annuity in with was a

commitments. constant performance and customer XX% Our XX% up in these was Commercial obligation $XX long-term currency, billion, driven by remaining

margin Commercial reminder, contract constant in which to making going ahead expectations, as commitments a our performance X revenue KPI, margin increased to customers are types. XX% X margin year-over-year year significant forward, was sales and driven all our shift obligations XX% Cloud disclose across the percentage $XX.X and Commercial Company for Commercial to growing gross As currency. sales billion, reflects a will as was XX%, percentage points in we mix better XX%, businesses. by points gross offset remaining Cloud Azure. higher margin year-over-year Azure mix gross improvement up a of

points, and and constant slightly by growth growth quarter, X than weaker allocation. expenses marketing leverage in combination project impact operating by of in resulted dollar of slightly than expanded U.S. bit margins X than higher cogs anticipated, results. resource approximately this gross X% less Operating and operating and expectations our to expenses FX lower by by margins spend. the mainly currency, operating reduced was to less a point. through revenue grew driven The And driven X% effective the timing which

XX% Office Productivity Business in points XX% strength segment constant billion, ahead to Commercial On-Premises Now, was $XX.X XX% Processes in expectations, approximately grew and revenue in XX% the Commercial primarily Japan. benefited our business. results. increasing Revenue and Office X constant and currency, driven from by of transactional from currency, and

installed of again mix Seats XX% Office across Microsoft Commercial higher growing driven as revenue a in and XXX was from suite. all XXX as constant customer currency ARPU. growth XX% XXX by workloads well and XX% segments, growth Office Commercial with increased our base

Office to X XX.X Office strength year Consumer XXXX. consumer subscribers roughly revenue the with launch points of the than in strong Japan, grew X% more grew transactional constant and comparable related currency benefit XXX in prior to from offsetting Office of million. X%

Dynamics in LinkedIn increased margin levels. revenue and margin XX% offsets all revenue an grew revenue in improvements points in increased record increased dollars Dynamics XX% gross XX% currency XX% XXX of increase in growth than as as XX% Office Segment in businesses. mix. XXX by XX% increased strength more margins percentage and across engagement gross currency, constant driven XX% with and XX% LinkedIn constant and LinkedIn constant year-over-year again in constant XX% and continued currency, and X cloud currency. sessions reached revenue

currency. X% Operating Engineering. by increased in and Operating increased X% income and constant XX% XX% in expenses LinkedIn constant investment and Cloud in currency, continued driven

a was our of XX% revenue expectations, by Intelligent increased currency, services hybrid in On $XX.X constant driven by our and XX% significant products cloud segment. value. Revenue Next, server and Cloud increasing XX% the in driven on-premises from server and XX% ahead base, currency, continued demand billion, constant business.

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for momentum. XX% benefit Mobility Server grew Windows end base Our grew from GitHub over hybrid of and XX% our XXX to and the server seats, our business continued XXXX. XXX across premium driven from currency, in roughly suite benefiting support strength the million X Microsoft XX% offerings, And installed on-premises Enterprise of and points and constant SQL by

XX% growth in in Azure offset Gross mix and driven a was currency. and XX% X% up constant dollars percentage another IaaS margin Enterprise increased of Services in currency, PaaS margin improvement Premier increased revenue. quarter revenue services. by and margin Azure X% gross Support of by material in partially gross Segment as growing was slightly constant

investments Operating engineering sales and constant XX%, GitHub. expenses by Operating driven XX% and ongoing XX% grew increased in currency. and cloud income AI, and including

entry constant better expected currency, businesses, was Pro monetization expected revenue titles Inventory Windows below performance declined the normal and the the consumer levels X% Now level PC market, X%, ahead offset More billion, Revenue Computing. ahead in quarter to Personal than XX%, of XX $XX.X momentum expectations pressure market, as across category. of PC the in Windows OEM increasing OEM Commercial more and support. X% of by the X In and strong than Pro demand range. grew within third-party with than in advance the driven continued in Windows, of in ended our revenue lower Windows gaming. commercial OEM end non-Pro

by driven in XX% carries currency, revenue in-quarter constant XXX, recognition. higher demand Windows grew Commercial XX% services revenue and healthy Microsoft cloud which products and for

and currency, in and by Search driven product of increased product ahead in constant rate X% by Bing constant XX% launches. of lifecycle announced the driven declined the X% timing currency, XX% transitions growth. recently ex revenue revenue Surface TAC

Gears increased from of by a Game gaming, declined relatively console title and in and currency, X% and revenue and prior was services Pass growth War unchanged content currency in Minecraft, In Xbox subscriptions constant X% with lower in third-party the driven constant X% offset year. X by sales. strong revenue

opportunities partially XX% X constant to gaming. as to percentage gross XX% expenses sales increased was X% mix. higher investments Operating by redeployment constant Segment growth and points X% gross due increased dollars in higher currency offset engineering and of currency in resources margin in and declined margin margin

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

Capital billion, infrastructure in paid to $X.X PP&E out. Now, of the to was $X.X to expenditures investment expectations year-over-year, up for total back XX% our driven finance Company build timing slightly for demand services billion. cloud cloud spend Cash variability results. growing quarterly including leases due and ongoing our were below normal meet by

partially Cash tax Free cloud and by related $XX.X QX billion operations as collections intangible strong was increased transfer offset of were to cash billings from payments X% $XX.X increased and flow and flow was property. billion X%. year-over-year, the

impact these flow XX%, respectively. XX% and tax of flow and cash from grew free payments, Excluding operations the cash

expense, income and in other remeasurement currency expected, foreign offset expense, As recognized interest income on interest was and investments. by losses

increase Our effective through was And rate of billion with returned tax XX%, finally, expectations. and dividends, in year-over-year. line an $X.X shareholders we repurchases share to XX%

to move let’s outlook. our Now,

stable, we Productivity Processes point, no FX COGS expenses Company by to and decrease X growth revenue and and points, total on operating Intelligent by growth. impact More remains Cloud current X Assuming Company approximately Business rate revenue Personal expect growth and total have Computing approximately

commercial expect expenditures will our continue strong another We business. services and hybrid Demand quarter to strong offerings in reflect and that. for remained capital our cloud

the timing, down CapEx will with variability on toward Azure prior even of slightly QX to spend mix a services. sequential improve but margin Cloud percentage basis, year. a still spend infrastructure normal continue the gross basis, And Given continued from and Commercial growing consumption-based revenue on we expect to the year-over-year be

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

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

demand be of In of between of More million XXXX. our as $XX the by Windows ahead increased premium and this meet supply with $XX.X will ahead end business the demand Server upcoming chain’s Computing, support the growth million. and and the hybrid XX for OEM of Personal well revenue as we should healthy server demand Windows benefit to continued ability on-premises QX. market end balance In Our the demand PC expect the in from from for Windows driven we X be solutions, for overall support as benefit again Windows, revenue

prior of past strong our and deadline. continued support quarter, January, In customer Windows continued signal some expect cycles, XXX we Based end Commercial, demand cloud benefiting on another momentum and services, products end Microsoft momentum. of we expect support from

on by we Surface Search we should quarterly decline prior launch challenging revenue and most comparable. gaming, as lower to digit growth similar laptop TAC, we double and the revenue of driven devices the titles Surface, sales generation, strong low the in growth from year revenue expect In Surface ex range In comparable drive as latest mid-XX% Pro as And QX. this end in the well last console to expect the third-party of year. a near

Now, back to overall Company guidance.

above We expect is COGS expense. $XX.XX billion. rate be QX income $XX.X rate to approximately expense interest by billion and expenses $XX.XX expect partially tax $XX.X operating XX%. Other and lease finally, we be And finance billion, million slightly of and as income of the offset billion to interest full-year of to should effective $XX our

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

for and high mix up significant year-over-year, continue ambition first we results margins even to remainder slightly expected in growth of we areas. invest operating strong our the the now quarter with be Given sales expect to year, the as

go let’s to With that, Mike, Q&A

Mike Spencer

your to of please respect Operator, repeat you Amy. Q&A. please Thanks, only request one ask move can now instructions? question. participants on to others We’ll call, the we Out the over

Operator

Please comes first proceed. Weiss line question Morgan of of the from [Operator Instructions] Stanley. Our Keith

Keith Weiss

the bit business perspective. there from what and for very I guys quarter. question, hybrid Cloud and a are little you seeing in Thank a you the dig was Intelligent hoping taking to into nice Excellent.

Satya for one question and And so, one maybe for Amy.

Server with these as equation of surprising of what lot us hybrid talk any they they engage, well customers, sort of of of can is think Because out kind us assets Satya, positively how are of both in the & way a do bit sense assets? the really And are as it? doing. larger well you about cloud little the and the Tools to For give rolling on-premise a terms from engagements I part investors how is the contracting kind you how can in

expectations, maybe sort of of constant the & of about currency, that of up should expirations? then, ahead Windows pull what over durable what to understand Server you we how durability the Amy, of when back And from going help And be Server think could us of more like well look some sort terms on at our for ahead XX% in pull Tools forwards? in which of time is we forward the SQL and demand -- of comes is those Server

Satya Nadella

approach world vision computing or as not Thanks thinking Sure, the to fabric computing is wherever think you this data always real transitory will generated, you just for long-term, about our cloud, to Keith. will the about very Because first have world, of there think where long-term been as for some the if as generated Overall, has question. compute phase, how migrate a meet hybrid think edge but distributed data a the as be you about getting about and class will when cloud real the in increasingly the construct. needs. the about

can context, they that the hybrid have customers you Azure cloud the driving of and That’s that choice renew, That the is see we edge. excited that the is One flexibility and definitely the is today. the fact increasingly they benefits. the in couple knowing about even So, what getting is both growth. that a see of things results in what

addition Second are the is center very with you we’re think some our about even what’s When products marketplace. -- gaining also the competitive data happening share. of the in edge,

And so, architecturally, we those feel you see effects. both But of well-placed.

models on our computing like even going forward. will the Ignite the see inclusive terms in us how forward of even programming what Conference, you take about application looks we think distributed of leap the In models, next architecture at fact

well-positioned feel we there. So,

Amy Hood

that’s to on that the of four we tried durability, out and we sort of was points the of your to transactionally due felt question Keith, support, in call XX USD. And to end X the

call hybrid are is of that this reality we a this that about, you license of compute which in in if respects needed for inherent Satya sure us, report and second, the just the step that for the making and but what durable rights way data -- trends so back we will is And number. talked course proposition, where value to be we long-term how a

in of of for strength, not view the course saw proposition premium is they and us, as that this of constrained so, which their because people both what terms and And flexibility hybrid value SQL you’ll by we in Windows be broad estate. of some see well, of when feel to quarter licensing how strength

Keith Weiss.

Excellent. That’s guys. helpful. super Thanks,

Mike Spencer

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

Operator

Thank you.

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

Heather Bellini

gross Great. Cloud is wondering that much Thank for, to related you. to coming ahead? target been starting it you gross you you where over going could I and to that’s maybe how to be margins, been, amortization just at and Thank saying due to your obviously get a question could of a I’m be, lower for now with is years to Azure up depreciation margin. much you’re the just guess, much just better wondering, have margins look capacity a to you it’s to you they as a that so the think have ratcheting guys I’m sense able longer trying you’re And of just material How recognize. say data I expand of for clip share need utilization? the just than you us benefited that how Amy. if is maybe improvement centers Azure and improvements and less while seeing you’ve hugely been for much. Commercial This was that’s in you’re gross

Amy Hood

Heather. Thanks,

the Let expenditure me you’re in margin, our than two start capital gross past, seeing is has at been the by Commercial saying, faster Cloud almost for general, revenue growth. years that growth what vastly

are on unit of able It from premium services overall per cost the sell of and also Heather, to comes in portfolio improving couple from services team see being gross improving consumption you’re have which say the as you a getting terms start but their services delivered improvement seeing was for from improvement data is that on felt actually I general, more if and of that think we in revenue both, it five-year comes premium on I really from mix But, to what and across margin and what the top consistent is to represented also then what of -- that growth, or roadmap on basis. done at a SaaS-like of So, frame, material even you margin but structural we’re gross us. improving where services a more of things, would do comes sort has quite Azure. margins targets shift has

made we’ve some that Now, improve the overall on mix expect they available to as consumption being at you to premium well. same the side utilized continue being will continue to see basis margin shift and both as rates. of to do margins room see a especially services the Azure improve still the gross you’ll rate, higher gross cloud services, on Azure, at to especially we and these have to consumption-based that to go-forward the and said improve, as start and continue see we But,

Heather Bellini

you. Thank Great.

Mike Spencer

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

Operator

Thank you.

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

Karl Keirstead

guidance Amy, revenue to about X% to by at quarter it seems growth equate midpoint next When revenue segment, you. for you. question I XX%. rate, overall an the your to look of Thank assuming

that in So, support XX% when the end fairly get I XX% despite revenue that the combine half moving growth in roughly of to second you double-digit year, you’re overall to past key implies Microsoft fact code remain full some should in ZIP the milestones. the that just enable growth with the to for QX, growth you up it put

some of a delta. were bit more think, little us I half, expecting of half a second first

in sustain are one doesn’t any it’s ask reflect to the maybe spending really drivers and if the Thanks environment? to to two I that in overall guidance that enable what you lot. or So, or that your second you wanted deterioration assume the just half, a growth fair three rate

Amy Hood

Yes.

Satya couple in a of is I to referred were a very the bookings bookings QX of execution the perspective across good good, commercially some with good. the in we’re Karl, I we’re comments Renewals seeing seeing, our growth commitments quarter, we good, the signs the consistency it we’re or good cloud that and prepared. business from the many quarter workflow Azure, XXX, were things a we’re start to Whether value. general, Overall, in Azure the was would and very both Power number some strong Microsoft recapture to, the think, point was I things seeing the rates it’s the that about on new a of Dynamics, Platform, contracting that overall consumption seeing trends and of of across rates in the strong a absolute size commitments board. talked LinkedIn,

here trends confidence, same that we’ve up of Cloud we talked be end sustainable of the differentiation Commercial about, in to quarter, to the will the had with they course are to offers show year. are for through trends fact and that And points So, support making continue that that, there overall more longer of and make customers, significant and we term ARPU. consistent and each some while our commitments, value grow those tried

that’s think portfolio grow really in margins were wanted that of when in will you have better talking I than and to you if in the comparables Surface do I last about the significantly that HX QX. QX sort a -- from. of in think thought easier And QX. gaming you’re And reflected HX, being were they So, I some new a be QX, about, to some about that clear challenge I seasonality we see expect

I see trajectory in in So, change as HX another you’ll well. that’s think

Karl Keirstead

Amy. you, Thank Terrific.

Mike Spencer

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

Operator

Thank you.

the from of next Mark Please Bernstein Research. Our Moerdler comes question proceed. with line

Mark Moerdler

can quarter. a a and congrats growth And, us of ahead spending on way the some you large obviously investing should Microsoft is you, of give is for the where Satya, or driver Cloud on Azure, Amy, AI driving see this on journey? AI color OpEx it. was you big AI large more Thanks. it? it Intelligent about quarter. Thank is already we this revenue think appreciate I revenue, focus; how

Satya Nadella

you own come phenomenal we having question, are transcription It’s to look because what’s see of would is, new vision just dimensions first-party that a HoloLens. AI our when There some Mark. features I Thanks, One with with or SaaS X applications. features at say it. use AI as breakthroughs great computer new happening

capabilities are cloud Azure as new being infrastructure. at these everything party equals We powered build that of all by driven by Microsoft are the platform. first third core same way the with all the by with All AI party

what is you us own high applications so fact tooling the even bringing enterprise using innovation for SaaS the drive best-in-class and in our but consumer And see end then customers. AI capability, to

are the even So, a of what for that even learning our there for driving look enterprise have in, customers like are innovations that machine ML. example, that’s DevOps And age? the projects innovated capability types like on unique Azure Azure. in does those the we That’s have

the So, compliance, you what then of across perhaps is think spend, OpEx our great that’s get tooling, Microsoft we’re will and And I see what all them making does or market, in overall whether best good enterprise to a us CapEx way security. it’s place the leverage surface progress. which in traction where is

Amy Hood

me actually for through every AI a here component of it’s natural is or customers is, layer at little you’re you’ll XXX in AI whether some whether Mark, say, of work. and and like through maybe our with commentary a the important I the participating how you see we using layer Insights to heard here. components, tech and are me Dynamics invest woven hard interaction specifically for entire gosh, bit think, for What Satya’s stack, it so, that And you’re

usage, that me, And and and frankly see that it we almost our cost investment, margin product for because it competitors. provide see and fundamental so, differentiation you’ll versus is to can in

Mark Moerdler

it. Excellent. I really you. Thank appreciate

Mike Spencer

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

Operator

you. Thank

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

Brent Thill

tech you Thanks. on some been macro seem the doesn’t It group some weakness. demand But, perspective. lot of seen just given a in peers there’s what seeing investors, your have curious concern that have from could among if a Amy, comment you of you’re anything. seen I’m

Amy Hood

those products, remain of And say Thanks, areas capability technical in marketing, for Brent. it many, when not if is investing and you been time invest TAM. where in large, in spend both building are think those sales has so all, investing I places. to been What our think, we about and on has us, in exist, expansive it opportunity growth I durable and that and would focused important to where capability,

them right for help I to remaining us Satya need opportunity about in I about but when on we’ve invested and how and of to the it think, our their way, of So, our places. really great the on say, customers own them macro done environment, is job there nice few being right executing through create think And call, to mentioned execute our investing a do where execution the many. their me, are in or own in growth. a look the transition, is ability I places, a a in focused

I to year workflow, differentiate, have If business and And we think about a where security, continue in set be well go multiyear to the feel opportunity invest like to can I to take of every journey compliance, as you reinvention, well-positioned. to innovation, every on think tend execute and list on communication, up quarter, an share. process

I’ve And so, that’s how approached I that. think

Satya Nadella

get that’s participate which of think, the What’s next. from questions apps second is to and and something in first the us. years we footprint. in we opportunity go security, We’ve apps, to what, when That’s to the never our Biz XXX, And growing perhaps in spite participated, competitive that now. past with think start next a infra in get the compliance, is so and it comes something exist AI all to now for first-line ago, innings; frankly we far, are we about probably competitive the innings Even for participate this. what’s cloud. I in it. way all and unifying a very huge to which first us innings. a you Microsoft built, Guess participated a didn’t we theme for quite the success few workflow When work, like is fairly even of never data

see all we and sure going opportunities stay about. are to competitive secular focused is we on our growth those layers So, talked making in long-term innovation I

Brent Thill

you. Thank

Mike Spencer

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

Operator

you. Thank

Winslow the Phil comes line of from Our next question with Wells Fargo. Please proceed.

Phil Winslow

taking especially also, Hey, you do would out the strategic and the quarter. showing in numbers? there And and Amy, from want Wondering obviously think Oracle, VMware guess, of thoughts this those with on behind really guys. [ph] on up in about one my VMware what’s call, recent customers are most strategic the focus since obviously another the Satya, just sort congrats the feedback these. question, earlier been? you these you for if walk longer, Oracle, the I sort the how differences SAP. Thanks year the us announcements talked impressive through and with strategic of then, big And about actually then, I to to

Satya Nadella

thanks. Phil, Sure.

and had infrastructure be infrastructure is looking know, as overall, Postgres with Windows one first-class their all participated to really past I heterogeneous. as and with has what we footprint, you operating are and in had VMware to partnerships migration have which this and Oracle. that’s support us of Red fairly narrow hypervisor. we our Windows a where layer of have infrastructure again think, supported infrastructure databases own well the Linux, us a and SQL, as for in Hat to needs, provider we at So, which primarily our And .NET, led business, is the the but systems. obviously VMware, our cloud, those We, for things Java the the customers that Whereas is

feel And So, with now same the to we the data really because SAP and now cloud. ability got infrastructure estate preferred these estate, that have add be we SAP has partnerships. value to are able that entire take both entire the represents I infrastructure, the

for So, And was announcement I their SAP who this from what us that they to customer fairly customer an the no-brainer innovation any and SAP should is accelerate to move who cloud and migration a it’s wants think, to that’s Azure. all about.

that that executing see and need essentially to forward looking very that really customer we’re strategy on clearly. so, we And

Amy Hood

on And where to question see would this. we your Phil,

see actually which move reliable the migrate us in is fact faster help confidence. at places, of in in that Azure, cloud to But, extension. more most to not heart their You’d be a and logical to easier, this with estate of the and may couple it just making for customers the it

through it’s that, see partner. a actually that’s to business whether And X be broader becoming these changes. that workloads, And helping committed in we even when partnerships so, get process about able Tier do Microsoft Cloud to closer and results you

so, are us And goal is why we for move think make customer this in the to to important I sure to first which continue centric, is continue actually quite these direction.

Mike Spencer

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

Operator

Thank you.

UBS. Our comes from line Lowe next Jennifer the of question with Please proceed.

Jennifer Lowe

Great. Thank you.

question. an probably is I think, this Amy

decelerate, isn’t through double-digit XXX on potentially migration as on sustainability around more as the as front the think about the a of within going I growth left as still on have? sort we’ve also the Dynamics seen your on of count premium Commercial to maybe the quarter within uplift much sustain ARPU we discussion things segment, seat how parse like seat count pricing bigger As But, point like -- believe you to time through we that are the Office and of of eat the there commercial is seat a seeing to that lot of growth? base frontline seat in me frontline already and which bit driver from a strong much to count saw worker past, of the the uptake versus at forward, in the that’s ability where piece success worker seeing just the and there here. leads you can to there and is you maybe things a SKUs continue the well. same leaning And into lift opportunity start could frontline growth further you’re But, licenses as

Amy Hood

Thanks, Jen.

Let think trade-off. dynamics apart, important me break as are of you don’t actually always this because I asking question that

more answer. my And to clear that I make want in so,

to question seat First, your on growth.

on in on tasks trying size. accomplish and small to is workers, first-line devices first is any workers, that of even room, work whether have people, ability our a a mobile and to We very businesses, reach just their for us with global basis broad mid-sized beyond do opportunity this

And progress on so, front. room continue make significant that is there to for to us

pressure could -- no ARPU used talked certainly think being the Now, important don’t negative. could. necessarily seats for a I through up me just some end We with to It long of that we that about. really as make money the But, that term?

many or dollars opportunity is new dollars on revenue, us. new new or those all new dollar multiple socket every so, for seats earned And and

I’ve is people move SKUs, in continue sort Let knowledge or ability learning, higher that. well is we as where way to collaboration things the sorry, the seen that number our that or XXX add in continue XXX and add EX, EX to value. Whether from indication, I’m of Microsoft be or to why compliance in we security about or may not I whether transition not our compelling -- optimistic me which I’m new separate really of value an and the value. to to dynamic, call addition M average sure room best we communications or that which opportunity through next that that’s can have ability or very a feel

So, hopefully that helps, Jen.

Jennifer Lowe

That’s Yes. you. great. Thank

Mike Spencer

question Jen. take please. our we’ll last Thanks, now, Operator,

Operator

Thank you.

will question Please last Raimo Lenschow with Barclays. proceed. line come Our the from of

Raimo Lenschow

do like for squeezing think just at progress doing some are in. create industry outsourcing? Azure. simple Thanks et around I relationships other evolving SAP kind out to Azure the you the infrastructure of cetera. about I look you. smell of there on Like, deeper Humana, have more had me kind guys Thank question If making how you of Hey. announcements, into there Quick the announcements to and in different industries terms getting and but

Satya Nadella

to work with Yes. strategy already It’s In have a our and very have. want needs, need we deliberate to meeting partners with also work on that we they platform. customers’ the our

and starts Humana announced Nuance, customers, whether partners Walmart which we Walgreens with or starts is It it the with sometimes one it’s or others. So, another also that recently. like

have is partners and the as by to marquee every as we to be right us industry really And go the so, well ensuring idea have markets. strong customers for that the

I route from the great Microsoft understands especially a marketplace a market. is in partner is that everyone things to perspective the of for One think

Azure, value from to they helps with on realize sales developers in as benefit get have partners is our as force, on our a benefits. We those their platform a and the well. because rely third-party directly channel, that them our as fact, very to as customers that it best get as And also attractive well

Mike Spencer

for of joining today. portion Thanks, Thank to Raimo. up all call. wraps with Q&A the us speaking you And you soon. of That earnings today’s forward look we

Amy Hood

you. Thank

Satya Nadella

Thank you, all.

Operator

Thank you. today’s concludes teleconference. This

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

Microsoft (MSFT) 23 Oct 192020 Q1 Earnings call transcript