MSFT - Earnings call transcript Q4 2021

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Operator

Greetings, and welcome to the Microsoft Fiscal Year 2021 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brett Iversen, General Manager of Investor Relations. you. Thank

begin. may You

Brett Iversen

thank joining and today. you afternoon us for Good

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

we underlying also of performed, the We’ll the rates currency our website, Microsoft impact be constant Unless items metrics with available which excluding year, of non-GAAP accordance our financial will a constant comparisons to currency, growth deck, today in earnings superior on the can the to financial the aid noted. specified, and events growth call investors same measures growth of to the reconciliation clarifying measures. in in performance to refer intended non-GAAP period a relate framework in fluctuations. addition on how non-GAAP between supplement GAAP. and On GAAP or call. only. results. They remarks you assessing provided the to in as summary considered and effect during Where for further a release measures today’s prepared quarter The financial rate rate foreign for find differences should otherwise substitute are are the and currency not included when to Relations performance Investor otherwise the slide understanding additional these as last the provide as of businesses is call press our prepared items financial provides fourth corresponding rates refer make on Company’s financial we’ll All the unless to the have we growth

recorded. the the remarks post and immediately website transcript available. call live being our is will our to call is Today’s We until webcast complete prepared following

question, and recording. the will use be If transmission, any a you in in the our transcript live ask included future it in of

website. Investor transcript view on the replay Relations can the the call and You Microsoft

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

Satya Nadella

Brett. We much, had year. to Thanks close strong fiscal a our very

Our surpassed revenue, billion commercial up annual XX%. $XX in cloud

over We have outside industries, seen of sales and States. from geographies XX% across United customer segments revenue growth with the coming

and years in for $XX in In three past gaming, grow large growing LinkedIn, the annual We security Microsoft franchises alone, continue to all and billion revenue. surpassed now new markets. have

starting innovation Now, highlight I’ll our stack our opportunity across infrastructure. tech with the expanding and

Moving decentralized need organization forward, more and ubiquitous every computing. will

with the to edge multi-cloud, organization’s and the We’re every capability hybrid provider needs. only support cloud

faster have now, edge we taking compute cloud cloud continents, in we’re requirements. data regions data added year the past countries new XG five And across access residency the Over delivering center with to and deployments. addressing XX services to

to its cloud. the X services it Tier first making to cloud. edge run operators Azure new customer also networks traffic power enterprises And their Our Azure compute to XG move helping AT&T help we’re its network, chose public core and deliver the ultra-low-latency operators existing fabric. operator in the

and anywhere and With plane and and the on-premise like their our Kubernetes can databases We’re Azure across Telstra application also over run Today opportunity services Arc, multi-cloud offerings. edge. the manage hybrid. EY on SQL any expanding our extends Azure infrastructure. Azure XX% of the Fortune deployments in hybrid use XXX control deploy Arc Azure customers

goods, the workloads to As SAP IoT this larger IT. continue to enterprise and SAP. is mission-critical the the field to AB infrastructure a have in services distribution. the ServiceNow infrastructure worlds migrated from operations their in using solutions. and including industry commitments to of enterprises layer and Customers InBev NEC run warehouse, of leading Morgan Thousands leaders, is Soup, to from International, and Azure Azure, financial physical optimize even barley converge, in stack, Twins driving strategic are L’Oréal, Azure including choose Campbell Mars more ERP metaverse. Azure All Digital new to the Mondelēz in we our consumer digital Stanley innovation and our solutions, including also

most on Now, the every business. for asset to strategic data. Data is

bringing only workloads. the by cloud sovereignty over the data DB governance go-to analytics powering OLTP, most workloads. together the their build and provider world’s demanding We’re that Cosmos database, has hyperscale, mission-critical organizations become helps

billions from quarter warehouses data Maersk, help Queries and data. the LaLiga, in Re in performance. DB amounts handle XXX% increased of DHL, capabilities are pharma New like ASOS, organizations millions service. together of they of Synapse and them. advertising, integration, in Walgreens data when a Walmart massive alone. using ensure unstructured to daily requests finance single Synapse and customers they and to last performed AmerisourceBergen the big using retail Cosmos in and online organizations Synapse data Azure into Swiss Albertsons, From structured and to want optimize is AMRO using receive to generate brings items over cost boost need WPP ABN insights

planning Volkswagen using the GitHub Software help help Motorola within all Group Epic to code. their of maintain and Solutions new Advanced NASA projects developers. ship, Fortune to this Games, build, manage Security capabilities GitHub developers on XX% and chose Now software. workflow. XX to And their Shopify directly Ford, by to Organizations quarter like better project used is secure and are

We’re also leading enterprise in AI.

speech Samsung Services organizations are live by and business to help AI Spaces AI Applied Azure services. And Dow, like new common powered in scenarios. Our Lufthansa Twitter captions being apply our

need business collaboration can help GitHub be can write customer supply chain Platform. will less All the Organizations and suite an build Power developers pro we the Power across platform new become apps. domain be are improve Every our to Azure employees in teams the language adapt OpenAI Apps And Apps have Dynamics with build organizations XXX,XXX domain developers a of leading and domain Dynamics between has business BASF faster of past business Platform of support new power culture. Apps to language experts applications bringing sales, process up, And Copilot, year-over-year. the domain generation and marketing, are every chose has experts. business to professional developers partnership automation apps And Pass Toyota Cerner, in both Power over leader increased for including of Fusion broken work XXX. data-driven in world’s XX% than cloud. number and functions. for using a low-code business are choosing to to all we using and is powerful down. reality. AI-first most no-code Power quality intelligence Power natural With experts give more organizations BI this professional with doubled model, industry, the now, with to year. to Platform code process to capability and experts revenue to function, and the world. XXX, productivity using Power are to the collaboration-first the the silos on re-imagined including Finally, With GPT-X, communications, the Power services Rolls-Royce building and Bayer, control. using foster The

third quarter, We for continue up XX% accelerated to year-over-year. the gain share. consecutive Dynamics XXX revenue

Sportswear, digitally become over to like sovereign more Columbia experiences. with businesses personalized helping customer product all and are to insights unify We Clippers customer their and choosing our profiles GNC LA customer with organizations deliver interactions

applications, category business flow a process work of directly into by We collaborative for are bringing empowering of employees work. hybrid creating new the

integrations omnichannel Renault within are and purchase in this their have organizations Teams comprehensive Dynamics we and age new With vendor And business all and deliver with to channels. New licenses. this across view is single Dynamics Xiaomi Customers support organizations for XXX, no Teams to a want having apps seamlessly process customer to and core an enable built collaborate service personalized helping Coca-Cola, multiple like consistent doing re-imagine organization customer of between solution communications. without records and other today. on XXX an anyone

Now on to solutions. industry

year, Microsoft to Cloud urgent new industry manufacturing, clouds care, introduced and an health financial announced across have organization need. together process this sustainability, we new category very the nonprofits address we services, bringing our for quarter, for capabilities entirely Over retail. help every to past business And create stack this our

to up revenue and grow we than LinkedIn and multiple up a over the a XX%, power learning sales LinkedIn on transform leads to category. advertising, Microsoft surpassed acquisition, has Sessions revenue sell of together our and a quarter fiscal Learning LinkedIn of this growing XXX connect. Viva more how since past ago. spanning the revenue billion brought courses are secular to $X platform the growth how and connect, the BXB LinkedIn areas LinkedIn. times within business hired this within the year, has help Navigator LinkedIn’s and up course surpassed than LinkedIn’s to more $XX has the their year-over-year, learn, than become were Dynamics Microsoft LinkedIn careers. And nearly time people first XX% Sales five for for members mission-critical Now, profiles have across compared ever. to And accelerated. within engaged testament learn, get in corporate has advertising quarter become year who hiring, this growth million faster In years Office LinkedIn people X XXX, to time, and has from XX% tripled leader intelligence. professional the Microsoft billion first

a XXX require we Microsoft processes. operating generation model will change people, places and represents Hybrid to work in biggest to spanning the and Now the way new and work a Teams.

meet, the all call, We’re organization It’s everything higher. end. new never is that Teams shift. Teams the been has front cloud needs and successfully automate where within processes work. Microsoft the business usage people make only supports collaborate chat, to of the flow an

content users each and We and learning. million people as monthly to are work, use Teams life XXX day collaborate communicate, nearly active co-author across

are and category. phone We new the enterprise growing in leading

Just Teams, video meetings, chat Teams, in creating business opportunity. new calls like in happen happen huge and a processes

the growth users, growth. marketing center driving can so work. and finance. is people of X billion more mobile and in is and to collaborate quarter, SAP, deeply also a business that process enterprise. nearly active XXX across More our including users and web. built analytics. are frontline from monthly of from segment family we vendors, calls now across for And nearly Microsoft business are desktop, into Atlassian, more flow orchestrating Teams with SaaS phones compliance, consumers, surpassing estate Teams, premium XXX, the have every like bringing now the across organizations with Workday of all total companies started. XXX,XXX apps users. broadly, integrate and at security, getting month Teams Leading single this entire to XX,XXX Bayer, All directly and year-over-year have just we we’re Leading have to Siemens, Adobe, Teams, in collaboration friends X,XXX Salesforce, and bringing SaaS chose advanced offerings ServiceNow function double-digit HR seat We Vodafone, Teams connect than have third-party EX small and every with million this voice and to than the innovation seeing XX

together digital is bringing creating communications, every Microsoft knowledge Having Viva, Now directly cloud. well-being for are the organization. employee and employee an work. experience flow we a critical to learning, experience new entirely platform With category, of into on

capabilities nurture and wellbeing leaders focus human on employee build New results. to capital, empower

are shift XX,XXX and and manager AT&T help from to employees Humana from early Express insights chose Mars. collaboration to and to the trends on adoption to effectiveness. every American industry seeing interest hybrid strong gaining work, Barclays We make in Viva everything

a Windows. to biggest update in our on to XX operating Windows Now the system is decade.

the everything Windows more be to help to Store open and We are and platform secure build people more and from ecosystem organizations productive and developers a creators. the reimagining for

insider More excited bring builds program. creating the new And are Windows we holiday. to other early than to our release people new along And our in by are with of or Cloud downloaded ecosystem, this we early category, update the a our OEM any XX history are PC. PCs, with Windows Windows beginning We feedback. have delighted XXX,

device. stream applications system to Windows the SaaS, employee’s personal like with the corporate now enabling to any to the bringing organizations are experience Just cloud we cloud, full to operating the move or

security. to on Now

as gains XXX,XXX And security solutions it’s Azure device organization for With trust reflected analysts platforms. the XX% end-to-end organizations, small cybersecurity This landscape NTT our in more increase it’s need sales in Nestlé, every XXX. customers. complex maintain of continuing including been never leader by with annual accelerated demand and a share integrated and as XX% growth, will many FedEx, ever, to is recognized offerings management other clouds compliance saw security our security, Volkswagen that This than is a deploy in all spanning is identity, the and vendor Microsoft across across the reflected our architecture. driving No zero number clearer categories. We year-over-year. and our business in revenue using increase with to and nearly medium all and

We’re further and areas, threat and capabilities acquisitions IoT RiskIQ recent security our our CloudKnox, protect Labs to management, going in organizations and bolster including intelligence. key ReFirm of identity

gamers and they we wherever our largest Gaming are gaming. to expanding the billion to whenever and world’s reach on Now, is the X in opportunity entertainment play. the category industry,

At lineup to games. people we new all which be games. play Game subscribers. XX and and Pass spend discover, Game approximately EX month, announcing than connect rapidly titles, how in and growing it’s on more biggest are We nonmembers. XX% XX% games ever, our last play Pass is more available games transforming unveiled will all Subscribers

streamed than Millions as our gaming fast-growing more to in with month S lead And come. more with consoles generation. games already the sold XX browser and fastest-selling ever, Xbox and X their well desktops, have made last consoles tablets last previous -- the available via to to tablets the Series Apple just date Xbox We on live PCs any cloud to phones. Cloud are gaming market we month, and countries in phones continue with as

more games, the Finally, in we build economy, Flight Simulator and to adding popular creator continue including creations for earned players organization closing, monetize did their Creators every to our our new many in In opportunity grow our ways going across and Minecraft. and more than forward, digital double more and what be of to most a require technology every they transform. resilient person titles. year will ago to

across innovating it new Amy. the this to We ensure hand I’ll era. in are entire customers to succeed stack With that, our tech over

Amy Hood

good and Satya, you, afternoon, Thank everyone.

annual to for ASC our saw of business, business by also segments performance Windows of job under across Xbox revenue This strength market. XX% In strong OEM largest cloud an $X.XX, our and differentiated processes. the increased the and in share in contracts Officer, platform, and constraints were organizations contracts. partner Search and a business, an greater was Advanced commercial and annuity supply benefited again million-plus identity drove Platform was offerings, our Customer sequential and XXX. and as currency. currency. sales and the of modernize business, business, along XXX and we continued across offering LinkedIn XX% another Teams, Surface postings. long-term Security our while Power with drove X our with broad-based Talent LinkedIn XX% Solutions geographical and strong Server in healthy demand the quarter gaming, empowering as reliance our top In improving drove growth. exceed and XX% our the our Microsoft commitment line on-premises are In In impacted recognition platform to drove well in-period Azure growth strength which bottom across Windows consoles quarter, advertising strong $XX.X ongoing in and teams, Earnings work from increasing and by benefited very year, And quarter demand constant $XX to for chain. revenue execution mix usage hybrid and on in Cloud And S contracts billion, our to constant higher significant in market customer in Microsoft per across improved up markets engagement from hybrid shift Consumer focused and in increases job number Series of supply.

was QX by impacted expense. and reminder, year across full a As COVID-XX revenue ago quarter first operating the a

currency, XX% the driven motions significantly This XX% annuity in declining across an in core larger quarter, and sales number increase expectations, by of constant strong Azure our and long-term exploration a even base, commercial grew contracts. bookings execution ahead of with

constant XX% increased year-over-year. long-term the obligation commitment growth estimate roughly next increased the X next remaining beyond to to useful network and to Commercial Commercial months, portion, X $XX.X points months, performance in and the growing remaining billion commercial recognized The XX% XX% better accounting which year-over-year equipment will mix be XX% revenue as in constant server of result, year-over-year assets. in than and life accelerated recognized XX change with point gross Roughly XX% the will $XXX cloud to annuity XX% percentage for X increased currency XX%, in year-over-year, billion. XX Cloud. a in be XX%. margin was revenue, expected, cloud point XX% also our currency. Microsoft from As our up to the highlighting expanded And

commercial support this to despite driven impacted trials, Azure, flexible cloud engagement including impact, improvement in all by options our significant and investments customer year capacity to made comparable revenue Excluding strategic by on we a scenarios, increased across gross usage and prior services financing percentage usage. free work cloud for margin infrastructure mix cloud remote shift

from dollars margin than X by line roughly in X in and growth with X the expense operating of was in XX% estimate. X change FX With more U.S. FX by anticipated. XX%, dollar, up favorable currency. constant year-over-year, points weaker approximately approximately with impact percentage Gross COGS the and increased Gross expectations. growth accounting point increased XX% X points, margin favorable points, X point increased about growth approximately by point both

of and earlier. noted gross Company from storage the sales comparable grew a roughly bad of our year-over-year quarter, XX% Excluding X gross expanded impact and year charge the the this roughly we X sales currency, in Company with customer year by in retail points debt XX% driven from increased and from estimate. impact impact again nearly in prior the this X% to accounting and percentage currency, margin continue engineering, headcount mix income operating the XX% in X deployment. from and constant to and points favorable areas cloud, impact, Operating increase including in expense as to strategy of in cloud cloud shift across expense up key X in expense. stores prior realignment year-over-year despite improvement increased X X% XX%, line included retail and margins margin an increase like invest grew on points point change of of debt Overall, percentage that points bad Operating commercial impact constant expectations

X% segments, and in medium Paid frontline as in XX% usage. revenue And and by a prior of in workloads Now, XX.X revenue worker of in with expansion noted to grew XX%, licensing and installed offerings. Office XX% now X Automate, favorable benefiting XX% grew and XX% as workflows. and growing Demand currency, Power continued from job ago. than primarily Office XX% XXX cloud Processes constant XX% for base. constant which X% our Office revenue demand currency, performance In and up was year business improvement strong and accounts driven automate over constant transactional and continued a expected. mostly and services increased expectations, X XXX prior change and drove subscriptions, in margin momentum across again of again by our with acceleration by XXX by in in LinkedIn markets quarter. our currency, the from in currency, in-period constant XX% solutions Consumer, XXX dollars on constant impacted XX% billion and constant million, segment expectations X% change The Productivity impact. XX% drove a EX reflecting grew earlier. points for was revenue driven in XX% Dynamics XX% Business XXX in constant in in Commercial year-over-year. including XX% Power currency gross impacted well currency. in year in a and across also increased and currency, Microsoft XXX, constant constant Office and ahead seats up customer XX% comparable and XXX recognition higher build in XX% revenue total currency, purchasing, low due Dynamics installed XX% comparable currency, EX for and grew against now XX% in slowdown to of currency, the Commercial grew Apps increased ahead the Microsoft XX% year-over-year, XX% to estimate. down businesses. strong $XX.X gross Commercial estimate grew margin particularly of was by our results. higher in and our for operating revenue Dynamics constant Office security, to advertising this Office driving Dynamics XX% XX% growth against year by revenue points roughly Commercial increased X base constant was voice apps comparable compliance point with percentage modern revenue. accounting low and momentum and Segment accounting better momentum for and all small impacted Revenue and year-over-year, Commercial increased ARPU. increased of XX% X% and expense Operating better-than-expected income in currency, driven all accounts recovery

to over services. driven seats. in and installed revenue XX% consumption-based grew mobility our products Next, in constant premium and cloud across across exceeded currency. consumption our user well services $XX.X the business, XX% XXX XX% and in Cloud and per and currency, Azure the by and Intelligent XX% base server core our XX% performance products enterprise revenue million increasing segment. business. In currency. businesses XX% Revenue strong Overall, We Azure constant per-user increased in server security as increased XX% our billion, as on-premises and expectations was constant

X noted currency, currency, in deals Services services quarter. support earlier, and points premier driven increased business our XX% Enterprise in benefiting XX% X growth strong XX% dollars and X% point of roughly in margin of XX% XX% revenue services. server in operating XX% recognition constant in performance margin in and by annuity year-over-year including X and in accounting some to accounting with and currency. XX% percentage revenue and constant Gross currency, gross roughly by Microsoft on-premise and Operating consulting expense in constant point points from impact particularly in driven constant Segment the largest change and currency, XX% increased constant grew increased due in grew from favorable the income the increased the X Our in-period estimate. XX% estimate. higher change

point Now currency, and recognition, and prior demand X% Xbox in our demand weakness XX% Personal a More margin XXX% and Segment year decreased to cloud constant declined gross currency, in year-over-year, benefit X% in Computing. and XX% in revenue hardware. XX% in significant supply X approximately currency. XX% X% increased revenue gaming driven OEM a and comparable. by and operating stores revenue in and revenue retail noted and and ex for constant high currency, higher declined XX% TAC impacted Commercial, the with sales products and benefiting XX% offsetting driven noted Revenue Xbox driven XX% charge expense consoles. environment. and in both supply by to declined services and constant constant and Windows currency was new of chain in constraints prior margin $XX.X in X% gaming currency, market. Windows earlier mix Commercial revenue impact improved in-period search grew year. currency. services were points X% constant in increased decreased by earlier. percentage grew billion, Gross in by some revenue X% increased in hardware increasing X% the currency. OEM constant currency the performance XX% Search dollars the Surface gaming, from XX chain better-than-expected in for constant advertising from with currency, Surface X% income And XXX% and grew as X% content revenue constant including the from roughly in Microsoft against constant and And good XX% constant demand XXX, shift Operating X% constraints. from

expenditures Company results. total billion, expenditures, global our paid for expectations, cloud to services. with PP&E flow increasing to including Cash by capital and from our billion, $XX.X in driven XX% and support billings billion, XX%, support driven back strong line flow $XX.X reflecting billion. leases, our year-over-year, demand growing growing $X.X was Free in collections. investment was finance of business. up cloud cloud were Cash usage $X.X operations of Now, cash was ongoing by Capital higher

we FYXX, in up up in XX% cash over $XX For flow, $XX over operating generated XX% billion cash flow, year-over-year, year-over-year. free billion and

other anticipated, than net on quarter, million, higher primarily expense by $XXX and income gains was This driven investments.

reminder, a As we losses portfolio. to our on or equity are required recognize gains mark-to-market

for tax and returned approximately fiscal effective the XX%. repurchases was year. rate billion $XX our Our shareholders share to finally, we dividends, total through billion to bringing And $XX.X cash returned full shareholders to over

first, like a a nearly shift COVID-XX next segments next Accelerating impacts Revenue also growth I’d drive should move digital moderate motions as geographies With comparable. reminders our we for growth consistent even outlook. few FYXX the reflect our the the base should margin will quarter restrictions, turn the globally. let’s strong and our our place, healthy billion execution though periods; on rates $X.X Microsoft second, headwinds server bookings, two year for operating across provide commitment Also, reopen before those reminders from change billion strong of another a core outlook, estimate we ago, depreciation and useful which a fiscal FYXX against resulted accounting through to to benefited network do as all FYXX: FYXX transformation annuity be to from and will expense quarter from that year. $X.X in in Now, growing saved factors from year. drive of of the to will in equipment in sales income we Cloud. expense, our move in shifting future prior in expiry year life growing impact to In commercial operating COVID-XX-related and

which contracts, of by estimate bookings change can mix volatility be discussed. decrease more of Azure should X roughly percentage quarterly from year-over-year, always, long-term accounting gross with their are X roughly in timing. points previously driven As impact cloud Commercial point the increasing an in unpredictable in margin larger negative

change, often services on discuss, the to by by same commercial services. accounting revenue the the shift sequential improvement shift Longer we QX earlier. to our cloud driven In our percentage expect mentioned meet margin for continue will excludes to across accounting usage invest of basis term, Excluding expenditures, which support a our global will revenue dollar gross comparable impacted the and strategic margin of cloud continue investments on a year the percentage three cloud continued we ongoing strategic our we impacted to customers’ demand things increase Azure, change, by despite be gross cloud impact services prior as increased we to a mix success. investments increase capital Azure, to mix

current expect approximately all and Now point. approximately growth on growth to X increase segment Company revenue COGS levels expense total we individual operating Based by rates, total of FX and the to FX. points by and X

subscriptions. the ongoing prior on-premises in revenue revenue with Office with to XXX revenue Office growth momentum billion in again EX. year we guidance. segment growth consistent XXX and In we by Processes, strong Business XX%, and billion. expect $XX.XX healthy Consumer, across Now segments revenue high-single-digit momentum $XX.X approximately growth and shift to business, with will we In Consumer In comparable, In expect to the Microsoft a our Productivity between continued decline be expect seat against Office cloud. driven Commercial, continued customer

Dynamics, improvements in revenue our strong momentum includes Dynamics advertising revenue range. significant continued on drive the in growth in continued high-XXs. Power in engagement expect strength and XX% LinkedIn, to the the should XXX, in Apps platform which job markets For the we drive growth high and in And

currency, installed estimated Services, comparable. growth by our and be annuity business, between a billion. single revenue Intelligent growth offerings high expect sequential against size to More stable will server digits, In the to $XXX in basis. revenue continued billion $XX.X revenue Therefore, benefit For in though to segment a that shift on-premises And moderation constant have single for of on given rate, momentum, in premium Therefore, we expect high low is digits. we remain the base. the relatively in the of QX growth year some revenue Azure to be XX should by to prior deferral expect million. in impact business required continued we expect Azure, business. XXX our demand per Computing, approximately our be growth the user should we outlook our consumption-based Cloud, Personal revenue driven continue will from $XX.X revenue hybrid our suite billion. billion And $XX.XX and driven the Microsoft QX revenue In In we in strong Windows Enterprise $XX.X

continue revenue we to by OEM Given we expect be growth in as prior estimated comparable, grow and we search continued for Xbox from revenue in services, services improvements constrained Windows Surface, negative chain low growth. revenue the and demand teens In cloud advanced a low should year the revenue In impact a security TAC, by single strong on in In advertising high should supply. drive gaming, double-digit on ex decline driven should deferral, will revenue the XX-point expect In Console again digits growth the content high-XXs, we the double-digits. strong low mid and digits. comparable, challenges. through our the in growth to prior single expect market. year solutions work healthy Commercial, the QX. in Microsoft to decline products supply XXX And

Now back to Company guidance.

income $XX.X expect the income full ahead our offset revenue we rate against high-growth given each interest to approximately expected closing, billion should the growth our $XX.XX XX%, invest we other to as We billion boldly tax volume billion in worldwide. QX year expense, remain other. strategic our lower expense and of we on than our driving COGS expect vest finally, focused billion. In $XX.XX be opportunities And customers and In $XX.X that equity significant first to to operating expense of of deliver quarter. and rate, will value

operating FYXX margins partners, reflects forward with healthy life customers Together FYXX. growth. headwinds earlier. the in after we Together excluding outlook Our and useful our noted FYXX for operating change that with the in to this look expanded income revenue from double-digit results and

Q&A. Now let’s Brett, go to

Brett Iversen

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

Operator

Weiss of [Operator Morgan with Keith Instructions] coming is Our the first from line Stanley. question

Keith Weiss

the software great Satya, What XX% results a the Thank saw coming the see the in end over think we this that you’re growth. here When is hard FYXX and a going-forward see more in to defined and equation. that congratulations commercial kind in year. you bookings that go-forward for you to taking acceleration at at you a want in Was great a we’re do talking basis? the you ask the on sort this durability really made or evident there a COVID, question, question I to to on then, you point year. I come? think of a on side growth some year I of guys. growth of lot past with your pull transformation more about similar fiscal margin on and that an acceleration the demand you, time, out of that’s digital comp, last Is And going in of durability comment have acceleration conversation Amy, the of a forward basis. but that And a to

be gains been term, good still to that defined entire your the profit Microsoft of there has at well able over to to if by ability that enough at controls longer OpEx. of medium think sort durable up dollars Morgan I and you -- will? Is gross operational tenure Microsoft at keep Is grow ahead efficiency really term?

Satya Nadella

more think Keith, double. secular tech I of as always much, the question. to number, X% mean, basis, the I which about for GDP is way that -- we today the a back is importantly, to on that, go spend, reflect it’s I Thanks so world the projected but see results

a is sector think stack. doubling going Cloud if entirety service manufacturer, of sector, core more or infrastructure it’s or a across accelerated digital business, sector, going the in as Because think in we well be the entirety to not what’s have of feel every just happen application, that public both, will retailer we the stack, any it, business that what you about it’s adoption the is about the transform you’re the we I because processes. of a to pace. resilient whether as well-positioned the happen And innovation strength or So, the do. right? is And way you’re Microsoft private

about the do, the I things the depending Whereas durable. of then we think impacted has it balance And it during enterprise in are the love Quarter-to-quarter, they’ll is were exposure consumer that between is segments coming business-to-business segment. right case, for one on fact, impacted, normalize. and so, that worldwide depending both, the of sort the in the segments example, on I a what our our were back exposure and it’s got and segments pandemic, consumer happened

So, need which stay it’s tough have competition, growth is what focused on. long-term keep a we’ll durable that we prospect very we innovating, to

Amy Hood

rest way maybe And to while turning the margin moving Satya am a work highest the of along that and our I’ve on together gross our our as of a sort addressable organization, say, and the remains segments, we’ve along, we’re seen. places. margins revenue with you’re really I see obviously do has work as growth type you your and that and focus Keith, proud to talent leverage and referring we’ve done, that been the duration in SLT of consistently of most operating you to in resources question, would for mathematically the expansive on in our shift I total to on margins. returns, I general, referenced do you an with of in team the and see you When And the get believe in that margin higher do differentiated you as that markets focused results overall

quite heard, have you as well. opportunities the FYXX into leading the work about we’ve feel about So, very we invest, good optimistic I to done. And I’m as

Operator

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

Mark Moerdler

Thank the you congrats question. for the thanks very especially much also, And on the again, in and color, the guidance. for and Amy, quarter, taking details

overall, forward? quarterly And then, on So, numbers that to the And see seen obviously, And seasonality seasonality the this specifically of but we something Thank business? I’d follow-up continue an to obviously, of Azure. slower you. any than I because Azure has a basis, annual does in didn’t seasonality question, want see Keith to basis? also year. it changed going like in it COVID, QX. Traditionally, but the we’ve ask there cloud about reason that about as grow cloud. on that last year, changed shouldn’t a OpEx Is revenue, didn’t we ask OpEx in continue asked the efficiency Has not

Amy Hood

the for Mark, question. Thanks,

of and in-quarter some larger represent historically Let recognition, end-of-year Azure, of as that so ways, because which of me aligned it we also per-user topic more recognition. one, seasonality aligned a know in of of more to about volatility XXX in has business. in terms Azure often quarterly was can added the which component well In some frankly our talk It did far is the fundamental accounting, that rhythms. in model a same Microsoft What comes as to more to seen terms got volatility cover your two the QX. is when a as you have to revenue more Mark, is terms you’ve seasonality first model. The consumption our model, Azure well It’s per-user be can end-of-year components.

our consumption larger of you seen a and thus consistently, far we’ve grow As becoming have businesses Azure, do more Mark. grow percentage stability,

less volatility it, seeing QX as historically talked and of have to it’s start that an about, I seen good we’ve you We of very from think observation still but it’s question. so, that we interesting And QX. a some

there, warrants We’ll to invest. In certainly OpEx, but focus. cloud the and believe market of get durable. comment lot a terms of your that’s We continue of I revenue it. There’s lots do on opportunity yes,

Operator

from coming line Our next Thill with question Jefferies. is of the Brent

Brent Thill

about lot flight curious elevated you if if do or feel on you margins, a of level, term near ceiling will, an questions you on think just the have there level and more got how you’ve it Thank margins? I’m of in color any Amy, to you. margins, the shouldn’t that is that you Can relates you’re we give that? about us to worrying thinking be as

Amy Hood

From this useful are exclude where to I said, improvement continuing focus dollar life which my said, FYXX. about feel which Well, you margin growth But, think highest is in invest longer mix there’ll I customers we that time, with behind period continue focus sorry, thoughts, this. very improvements the change, we isn’t in what invest as FYXX on have is shift when I value, I time the I you’ve I to if that to with some differentiation case, care you be margins, this in operating seen and et If of is expense really hardware, on in general, that, mean, for -- to the sure see quarters you focus places? a the area. us most good you invest, But we sits first on every where over of cetera. add Keith time, places thing I’m is in Brent, in high-growth operating continue about

biggest the needle of should so, mover a I changes we amount the think little opportunity. on useful the do the and see based look invest which them, opposed and of as being if years, you life And few grow noise the some back the remove overall to you’d a of dollars where

Operator

the line Keirstead comes from with of next Karl Our question UBS.

Karl Keirstead

next more Azure for the That’s giving formal very helpful. guidance for quarter. you thank Amy, much. very Thanks

of Azure going you’re had remain constant XX%, to consumption is that at the I the moderate, stable piece guess in Azure in you indicated might quarter. currency, and saying EMS growth if September should accelerate So, effectively, that

unpack a this ramping prior pace? thoughts. that I’d your little commitments I’m you. commitments if hear could Thank simple simple as to period at as prior So, accelerated you as Is period wondering love bit. an

Amy Hood

Karl. Thanks,

in trajectory. do I things. I think, think general, the And it’s got both you’ve right

differentiation, I some where some places is stack, both as seen premium couple in We’ve these think progress, some in the have Data as the acceleration we lot I Azure SKUs. also You’ve see Satya we’ve services And of some nice differentiated seen point of it’s a heard I past real me core feel growth. our some of mentioned say, well think like a where very good can have of a quarters. made execution.

Operator

is Murphy with JP question Mark from next Morgan. Our coming

Mark Moerdler

such inform Azure what some contributing commented viewpoint. or a we sense reached you edge seeing you that centralization. server saw you this Conference I’m improvement products as architectures those And Ignite the at that that peak growth ago, wondering in months uplift of have Satya, in your Stack others developments do quarter? few to cloud intelligent the are products Amy,

Satya Nadella

that things cloud so that of happening. is are A up, Thanks we couple is even that getting what the distributed. increasingly infrastructure question. One all consider for much

side the you for is fact both our I center If needs about data have architecture think the architecture, say, the approach but to more regions, residency real-world data we the that took we meet, the to computing regulatory would requirements. also and

as dividends to more deployments a old with all feel approach. their AB new Twin in is picked today well the coverage, the we the of with type is coverage more hybrid that’s paying requirements. of of distributed going workloads, of InBev are seeing see the workloads and we right? And distributed. right as geographic second just Digital edge IoT meets to will take benefits that’s factories. compute require scenario, close So, hybrid if you where the be to course, we terms piece, what will case lot of So, both we even Then, regulatory our the of our going And computing remain

to to new think core in to compute there completely me, be be a located use so, mean, do, economics. new And scenarios traffic a or cloud XG, I those AT&T to to which space is where take going what -- hybrid planning about and network deployment that’s is able is

nature really will across we geographies, compute is remain the architecture. forward, regulation very of So, compute going which of both think that’s distributed, of their and because what needs

Amy Hood

where and our of through across rights. heart with is way in on shows see question hybrid licensing the edge And services Mark, your results, overall it purchasing some that think, would the the focus products on asked of where I flexibility the to at how is to cloud the the most was edge up. sometimes which I question for think really, server because with and one you in number, about and to cloud purchase the to on-prem This effective the vehicles,

on results it’s see do that you KPI. So, also server purchased both depending in our but and Azure how

Operator

Brent with from Bracelin Our question comes Sandler. next Piper

Brent Bracelin

really million-plus A for around contracts. you question $XX

momentum last Cloud question My broader Is just the large breadth out seeing this the is are of and of You rate Thanks. whole or larger these drivers of quarter you by enterprise called driven Microsoft of across the quarter. kind attach products? this commitments. around scope deals,

Amy Hood

Satya, talk the I to that. one it’s take Maybe, say increase, about answer the about When and the under contracts of this me what’s Brent, offered size let entire everything, add you Microsoft and going anything. the scope want it’s Cloud. Brent. I’m first see why of unfortunately, Thanks, I’ll to if you

strong increases of premium We’re Dynamics, commitments, about Apps, compliance, Power our commitment often these you’re which, seeing Azure core those as we strong longer-term talk additions renewals really addition across Power Automate, of contracts. voice, of multiyear really security, both course, contracts, which seeing the SKUs, And sizes. MXXX,

of then of see so, the in just you And course, especially -- do, have Azure. on them case longer duration

larger a make of across So, in each all quarter is good selling of our many to ways, pieces us. contracts And being execution what we the focus was for on this the are additive components present value that component Microsoft up the the that’s Cloud.

what’s you transactionally, the more. that to have number have ultimately base million-plus see bookings meaning high larger being a expiry And that’s reflected contracts that’s then and bookings those think even things When declining it really those in $XX done. growth all you well. I and do You

Operator

Zukin Alex from Wolfe Research. comes question next with Our

Alex Zukin

talked Satya, the seeing fact, changing the amongst apple, competitors do Microsoft entire stack, that of I future you are operating bites you’ve driving -- Teams how your the or can stack how guess really application about driving versus and portfolio. the you’re deals, having the about for noted landscape? what new that both, doing? given my Dynamics, to the acceleration work changed, at fusion think is and that the that you’ve in question And main -- system taken maybe Is into the you you talk larger is of the

Satya Nadella

for some they are that. happening things reinforce secular of great do a trends Yes. Multiple them question. That’s and other. each Thanks growth both -- and independent

that is for pandemic, the we or probably suite It’s chain, of marketing, all there exciting complete a Let’s whether to most to just chapter of coming is supply this things seeing absolute going digital it’s way that’s manufacturing, Dynamics. new an take to from sales, out re-implemented. service, all are new be the customer one to

it to communicate that of a on. that are a the think Dynamics automation Teams to on, of generation don’t way, AI-first the part and intersection Process new new part that because is the enable. that’s of that be going I And of this to where collaboration-first. not record record. a between And is and business a through, you customer second be the complete have want Business system going will communications to or whether So, part what process a to that don’t anything, comes And or cycle there’s and want or is do forecast artifacts collaboration you you collaborate that by want software for

for for Salesforce, for SAP, with They’re it One Teams for all will Adobe, a embed deeply Services. course become that. Communication platform, foster And And Teams and just itself Teams in Dynamics so, fronts. or and you into has integrations for Azure we’ll see even two ServiceNow. of integrate Dynamics, building is, not Teams great

customer rebuilt two a in. from which the look service anything omnichannel our communication built that service about it customer think you when like has all ago. -- doesn’t functionality So, years completely module, It’s system, omnichannel

to is speaks And it and what’s the the some questions tracking think at So, going some best think and of around also happening Dynamics sort of layers the data lot evolve? space. even I with of its of Platform, perhaps where of I it already. Power is it’s a a probably Teams, our pretty margin, differentiation is competitive exciting how intersection indication to scale our in Azure to

Operator

question of Montreal. line of the Bachman with final comes from Bank Keith Our

Keith Bachman

the to provide? might depreciation B want at margins you update call, year said without in that direct anticipate you any you to with last was ‘XX mid-teens Part expense the as on wondering the know teens, low we we to say, operating trends operating side, could margin the a or I this quarter look and about this you the thinking should or expenses wanted how color operating I or focused gross Amy, margins trends kind is, but around grow in go you on comments FYXX. Thank to that I for back you. there Is you on ‘XX. that be of should if would on comments indicated second. you schedules. I

Amy Hood

Keith. operating Thanks, that. any think I your no, have I update don’t When about expense to comments,

I margin we is level. improving on, invest, margin, feel At it the to if of at that. me the think we’ll feel to see which our invest headcount I opportunity that think in which continuing leads given I margins. And through I market, that through I you the continue people we growth saw COVID, when see the places do is very good good across would plus year I a in very our about expect the continuing we good the work always placeholder gross through about XX%, with year. services our where still savings think supports year, for the that cloud execution, some mean, level, as on we focused to

continue expect of a many services the continue up margin across across Azure, see components we’ll You’ll individual gross see growth to And mix given to improvements shift make we the there. Company. our to that

So, into are in the I trends heading margin ‘XX. general, gross quite healthy feel like

Brett Iversen

Keith. Thanks,

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

Amy Hood

Thank you, everyone.

Satya Nadella

Thank you.

Operator

conference. participation, We lines you your your for Ladies this concludes disconnect may this and and thank today’s you at time. gentlemen,

Microsoft (MSFT) 28 Jul 212021 Q4 Earnings call transcript