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  • 2022 Q2 Transcript

Microsoft (MSFT) 26 Jan 222022 Q2 Earnings call transcript

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Participants
Brett Iversen General Manager and Investor Relations
Satya Nadella Chairman and Chief Executive Officer
Amy Hood Chief Financial Officer
Alice Jolla Chief Accounting Officer
Keith Dolliver Deputy General Counsel
Keith Weiss Morgan Stanley
Mark Moerdler Sanford C. Bernstein
Brent Thill Jefferies
Karl Keirstead UBS
Phil Winslow Credit Suisse
Brad Zelnick Deutsche Bank
Rishi Jaluria RBC Capital Markets
Call transcript
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Operator

It is now my pleasure to introduce your host, Brett Iversen, General Manager, Investor Relations. Thank you.

You may begin.

Brett Iversen

Good afternoon, and thank you for joining us today.

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

during Relations financial can is between summary supplement prepared Investor press our intended GAAP Microsoft provides our and and measures. release slide remarks and the non-GAAP website, of find you earnings to the financial On reconciliation call differences today's deck, which to we the metrics call. Unless otherwise non-GAAP specified, will refer on prepared non-GAAP the measures to, financial or for, superior measures The GAAP. financial provided in performance substitute with should not be accordance of investors and in additional quarter results. as are on aid company's to items They the understanding clarifying second further to performance the included the impact events financial addition in these items have All growth year, to last unless relate comparisons otherwise noted. today we on call corresponding of the the period make

as performed assessing our We rates provide the will excluding also growth currency framework available underlying how a rate businesses in of when effect foreign currency fluctuations. for constant

constant are the rates same growth the only. growth rate to Our we in will refer currency,

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

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

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

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

Satya Nadella

Microsoft the quarter, $XX in driven Cloud, a revenue, billion of by year-over-year. you, up continued strength It record was XX% which Brett. Thank surpassed

and living resource world's society. through reimagine are economy malleable is in disposal technology our everyday constraints work the Digital We to overcome and the a most generational life. and shift at

and We segments our organizations across this and help in thrive commercial consumer to era. people and new innovating are portfolio expanding entire

highlight examples, starting I'll Now with Azure.

becomes company, secure will computing company digital every they manage, anywhere. a fabric distributed As deploy a need build, applications and to

extending bringing regions have than delivering any edge, XG provider, meeting access more to network the enterprises while fast new operators deliver services for center helping the We're models end Motors data closer to create ultra-low connected help our network General next-generation to other AT&T, latency We to data example, resiliency cloud infrastructure requirements. and business XG and with user. drivers. to cloud deliver solutions services is together our vehicle its services

tripled Our base year-over-year. Azure customer has Arc

in management. its & order optimize preferred every Digital on-premise, Twins people, from all helping Devices, and build things organizations to and own come we And of of thousands to Azure real to Kyndryl platform across Ecolab, CVS organizations helping multi-cloud model digitize provider unify chose factories Wells and Rabobank buildings now adoption these smart using any Medical seeing as quarter. are business Johnson tools are and and combination for example, physical are simulate cities, Fargo their growing sector. IoT, worlds the this water process. smart cloud as places and Azure, is to infrastructure. Johnson to the We enterprise hybrid together, to our visualize, usage, we to BP help from metaverse digital we Mesh use smart their analyze are Across seeing Health, and

between as them analytics can Azure manage here, Cosmos collaborate, data choice category. of solutions. year-over-year. leading anyone analytics Data data helping help are of every its one analytical cloud-native and only the of in powerful warehousing governance With estate. build scale. comprehensive using into to traditional In app but for not Synapse, train analytics, to and stack Azure over of barriers data so and is big supercomputers to AI, we understanding their important customers. we increased and an DB new more data From a we our achieve the thousands it to at removing to and power. data XXX% organizations development governance, emerging we're database is deliver volumes have most the data. enterprise organization Data transactions as most best-in-class and any on Purview cloud, platforms data turn growing models AI And and Now complete predictive is to have and the databases

is Service with together speech code. transcribed over hours of More nearly preview million broadly, advanced this OpenAI last we a XX Services, with our capabilities the language compared Copilot year brings better is that of help models Azure new using to to Xx Our ago. in to across GitHub Azure. and developers quarter, capability usage Cognitive see up strong enterprise write continue

PaaS Now idea the to and code code Visual go services, From to Azure to most to every popular from have GitHub developer tools we Studio, developers. to to help cloud.

source. PaaS companies natives to seeing developers’ companies like well will digital Container start Apps Studio, Security, turning as Chaos from Visual resilient we’re Advanced and strong secure streamline Afterpay XM modern, GitHub to and security embedding like we’re demand Increasingly, and our both development and established and their prioritize investing every DevSecOps across As both and as more GitHub with Bosch. into And organizations services, increasingly cloud-native like applications. workflow, open build to workflow Studio Mercari, are

for are organization’s Platform. becoming every tools capability building. priority Power code/no-code Low a digital rapidly to Now,

for their more to Airbus, XXX,XXX apps, to at are associates vaccination from drive date, use organizations They’ve used dashboards analyze Return and Johnson flows, Controls and have our solution, status. Platform, built on end-to-end created like of using create scale agents, managing H&M, is to to rapidly innovating verify Centrica, which to and than virtual their We’re build office gains. to Platform, data. XX,XXX workflows, team help more Power suite And, tracking At Power health and to using everything employees more than productivity than Kroger, automate Workplace Power capacity X,XXX goals. applications, Platform

retail, Platform preempt supply from a issues. to Home and construction. other portfolio our America across physical and is with new chain Now, using this challenges. every company’s diverse fulfill, Dynamics counter organization. to applications to factories, these software operations Dynamics expanding Insights announced FedEx, Spaces, the Dynamics XXX Dynamics to Chipotle our Companies Chain shocks and a network Dynamics category connecting we service organizations as deliver turn better yesterday, take to To to to like are from control hyperconnected data, in real data brands are With creating business need touchpoints new take manage XXX, data, we And, to and of XXX. we constraints address industries, their economy, as of Connected Supply teams become XXX more personalized help Trucks to new a to Customer XXX share, just relying insights Experience to customer on will experiences. and across on help and supply demand business orders. Logistics and with unifying companies North a the process, Service Depot combining Daimler to business, offering Across customer continue ship, estate,

Now, solutions. industry to

increases we bringing year clouds, usage industry-specific help improve cloud ago, across and in a Just entire stack with customizations lower together significant time value, our our customers introduced first they’re have increase driving offering, costs. We and industry industry Microsoft to Cloud. now to agility, the over six

from Delhaize Our customer experiences. Cloud our sharing front was at how and deliver solutions Ahold NRF, GNC to are retailers Retail for and they’re with using center seamless

customers and to their Industry Our the leaders, including emissions. Motor, for are meet goals. carbon Cloud offering record, unifies Nissan to Sustainability data turning help to reduce sustainability report, help

Now, LinkedIn. to on

people platforms Reshuffle We market, align the with rise, how, XX,XXX more again than the discover has businesses added the and to hires discover are that to with across more with we new Last open has skills, their In rethink year-over-year, critical tools easier on of LinkedIn work. X ever were And up nearly more with become roles new become XXX% they seekers for and this our entrepreneurship largest how and a mission with With week. small created where, and record each we communities, engagement. and experiencing LinkedIn why places want Marketplace RSVPs in million people with connect to work. learners labor it Great economy, events Confirmed job make Service world’s helped creators freelancers once and X.X has than one professional where saw events, employers, sellers buyers. quarter, new to million as clients.

months XX $X LinkedIn Sales in We in also the time. saw Solutions, the strong revenue billion over past surpassed which first growth for

have this Talent, Sales, of milestone. Subscriptions Our Premium reached lines and business all Marketing, now

connect this on the bring million inside and using to to workers into center Teams and updated organization Teams. Monday.com, Marks of create from last process applications which Every bots Organizations collaborative the Spencer XXX and connections fabric has business users with tighter this the operations of using Power & solutions usage quarter. Teams partners. business fabric apps flight frontline custom-built and streamline Apps Teams, to United years, active Now, And run digital Microsoft data surpassed used quarter and the XXx applications monthly are At empower is with this to to desk XXX their Airlines internal right that knowledge SAP, to and is flow digital between needs grown and from Monthly everyone within new and work. and organization, crews. in Teams requests. customers today outside help third-party two and of Atlassian, Workday. a

we’re the of with And All-up, turn year-over-year. And Teams needs. their Walmart quarter. in Walkie and a for devices Motors, like to approach to for frontline as from chose of internal Phone As Teams opportunity Viva, anywhere. our help Teams Teams, ecosystem Xx days, VOIP the can the worker and quarter, to PSTN of a like shared rapidly floors. at communications. to watercooler-type more Bank combining meet frontline With communication growth The this small Montreal, access by Teams With to Teams to Teams, external workers in need we already experience of and devices the Technologies million communications, Fortune and help and used new Mesh Teams Over XXX companies Essentials, they year. expanding their standalone organizations up over organization It’s X the specifically unified we’re norm, we’re needs conversations, than people XX% bringing strong meetings Zebra doubled employees creating to share stay meet learning, culture. NetApp sessions. space. Teams organizations across will have we’re bring encouraged and growing collaboration experience rethink General more standard immersive every from than and connected Teams employee used insights And company’s Teams for whiteboarding metaverse knowledge, number resources, is millions becomes we’re seeing first to where Talkie by to hybrid the employees businesses. connected helping usage Microsoft Teams of take devices designed Teams early feel to to category, offering Rooms retail year becoming Accenture LVMH, continue segment, Chevron, on people mission to will but we’re every bringing with of even demand. and participate Rooms, their work fully active a this

continue than analytics. Viva our retention. Hilton, to X,XXX employee voice, Blum, premium challenges available, more is customers is like All XXX. advanced by for driving From and and broadly security, Heineken innovation Nationwide, burnout help to growth this Zurich Microsoft being to across Now address paid to used organizations and choose REI offerings EX Insurance, including compliance,

their Now, structural exercise or seen and PC PCs games, graphic or it’s remote playing are meeting creativity, in on and in or in design ever, documents, to work, whether livestreaming More to unleash shift design. than video agency for collaborating reality their turning people engineering Windows. writing code virtual We’ve for a demand. to or

existing XX. and on spent experiencing Windows see PCs, in, renaissance, As in new time a we’re by a delighted household. Three resurgence, months day, we’re to PCs with increases ones per cases are use born and the every PC response

We’re quarter. share higher and than seeing versions took of usage operating system. Windows quality previous more And this intensity our

in Windows meet to evolving needs. new are We customer delivering ways

more of devices Windows operating system cloud-first creating This for And, are XXX, Pharmaceuticals XX cloud, to for introduced XX. Windows a third-party North in helping our engage both verticals, with with a and America store schools. quarter, and system XX experience SE, we the any and active stream shopping. now rate XX And, purpose-built powerful or Windows the nearly running the Windows value monthly billion Regeneron the XX, users like and device. Coats high Windows are Windows than Xx X.X on-ramp we Bing full differentiated, employee bringing Windows operating There app to at and the they’re key Edge, are for advertisers services. across first-party consumers we including experiences Windows businesses

since year More features surfaced in already than price comparison launch we broadly, in coupon $XXX one have and savings. we expanding Just more advertising. are our in opportunity the of million Edge,

Over months, ex customer of to acquisition inclusive and that data-driven TAC. solutions our the revenue, market of deep with surpassed new understanding base our we advertising audience billion Xandr, Xandr’s with platforms. past will combine XX total advertising large-scale And $XX LinkedIn, bring our

is one facing Cybercrime security. every today. business the number Now, on threat to

advanced implement devices, environments. organizations by Trust holistically cloud provider. their and signals are we we XX solutions, And, customers our security data every management, protect device identity, and design integrate We second, more a now, Zero privacy, each and XX into ways: across other in day. we security help First, interconnected security security, threat different we to categories protects is aim we end-to-end more any applications, across more that comprehensive by see cross-platform than product in than Among compliance, two deliver client trillion people, incorporate categories which than architecture XX informed heterogenous Our analysts, a leader cross-cloud, build.

XX% and rely driving threats stop a monthly X than their X just our XX% More up save up cloud-native have Our SIEM, XX,XXX over customers XXX,XXX. over Microsoft workloads, with multi-cloud, favorite year-over-year, products to growth. multi-platform on quarter than billion advanced Account or now differentiation. before half underscoring And, multi-vendor commercial to use accelerated more to one users of this access XX% is all-up, security they active our the On compared that services and happen, now securely solutions year-over-year. login. Across number to innovation than More customers solutions. consumer, end-to-end Microsoft more average, our Sentinel, customers use

As customers’ up our surpassed a of past XX% over security $XX our XX year-over-year. nearly business result the billion trust, months, revenue

than and console. we across the Game made this as million across We subscribers to over big Pass has community, on gaming. paying have The years Now, record few bets well engagement, saw off. quarter. content, past and are cloud revenue more XX as PC

rave a increase, the technology launch we like platforms Our continues and diverse cover as underlying I’ll reinforces of over Forza to investing differentiated content XX is this titles played stack and Amy than develop. biggest and are look growing of million outlook. released have play hand more you easier common driving what Halo we common of percentage purpose. questions. we people gaming have digital a for XX however last great whenever, our and and the GDP and next the as who And service’s reviews financial new forward global detail it record investing metaverse and are technology Halo And for with usage. want, history. Horizon rejoining an results to and make with it that, week, across our making AAA shape that TAMs closing, growth, And to In to comes in as to for wherever, strategy, it innovating holiday our Activision Blizzard announced million in model share Infinite, sense and operating will I culture, played X planned to date. also to they acquisition games With

Amy Hood

everyone. Satya, and you, afternoon Thank good

as a increasing impact revenue quarter, total which this, on and position the strong share FX year-over-year. dollar revenue Earnings strengthened another revenue company X-point business, segment unique XX%. to our of business a our quarter large, In Microsoft and increased was of delivered offerings portfolio compared Despite each segments, U.S. combined as our usage teams in expectations. continued with and growth, well and was partners demand of drove commercial our Azure we headwind differentiated our our in by significant contracts, of strong sales a businesses. connected long-term no increased for our growth during and Satya execution Teams result, Cloud $XX.X XX% Talent X.XX, The consumer And benefited again had a this highlighted, offerings. advanced job from Windows as and business, up benefitted business. OEM per PC and demand our quarter, strong security in In LinkedIn, as This billion, usage, Solutions across double-digit growth market identity diverse market reflecting was quarter.

on revenue significant strong record Xbox quarter holiday subscribers titles, Pass we another market LinkedIn in Solutions demand well with and in advertising. Search Marketing strong first-party gaming, a continued for S as growth as in advertising news engagement and saw and drove for Continued the Game well quarter And consoles. as Series growth X and platform, as

Commercial to year-over-year, annuity XX $XX.X Microsoft will beyond And our XX%. Cloud. to increased results. large, portion, bookings year-over-year. Cloud ahead increased The in across percentage will year-over-year noted revenue be billion, long-term XX% the Roughly grew are motions. highlighting currency remaining constant of billion. Microsoft overall core XX% XX% Cloud and significantly year-over-year Commercial slightly and margin to expectations, XX% expectations. XX% recognized currency, to XX% annuity execution mix remaining XX% driven recognized XX%. Now in commitment months, and up the earlier of $XXX our long-term sales constant revenue in X again the ahead the obligation XX% increased XX our our decreased the which next Microsoft grew customers strong making performance next Azure in contracts gross be to by months, to point

for network mix sales services, our increased server partially roughly driven estimate useful accounting Cloud gross from points and impact life improvement by offset Azure. change X Microsoft shift assets, percentage cloud to the by across equipment in the Excluding margin the of

As company strengthening increased year-over-year. with unchanged COGS operating noted percentage dollar U.S. of and no expense the dollars earlier, Gross and impact, impact minimal FX and had relatively segment through XX%. XX%, the on was the margin growth revenue Gross quarter, growth. margin

increased margin the and Operating sales, expected, quarters. year-over-year impact lower in by investments the cloud point X accounting gross of to earlier. XX%. that At by XX% we than improvement percentage roughly year-over-year as future cloud areas increased a such Excluding to expanded deployment, driven XX%, expense noted shifted our operating estimate, driven change in services customer primarily primarily company points gaming, to X grew headcount and invest engineering, in Operating XX% total margins key income level, continue as increased LinkedIn. the

Excluding of accounting the operating impact X the estimate, expanded in points change margins year-over-year. roughly

was our Processes and to year-over-year, expectations. from segment results. Now X-point grew XX% included relative headwind and a Business to $XX.X Revenue Productivity billion FX which

which XX% constant momentum and continued which cloud. grew by segments, growth exceeded expectations in with of LinkedIn. Dynamics our Office of grew expectations XX%, Office and all as year-over-year, revenue across the in XX%. with the Office ARPU. in customer customer security, to Microsoft headwind, commercial driven offerings. XXX driven momentum XXX expansion for consistent XX% growth compliance, business strong XX% well XX%, by decreased workloads revenue driven shift this worker currency. continued this grew XX% quarter. XX% grew Office XX% Demand Excluding EX in was to higher small installed advanced revenue Dynamics year-over-year line million. as XXX, driven another Office XXX drove and consumer frontline grew commercial ongoing revenue offerings licensing medium seats by and and commercial driven base quarter in XX.X by and revenue commercial revenue increased our subscriptions, voice Paid by

in margin as gross as better-than-expected strong app our growth gross year-over-year. noted XX% drove XX% which Solutions job XX% dollars earlier. market and Continued increased was percentage revenue in strength year-over-year in XXX% LinkedIn well continued development and Apps. Talent constant Solutions, grew demand strong constant from with relatively increased currency solutions XX% in modern, currency, the and performance Power Marketing XX% low-code with another unchanged for margin Segment in revenue quarter

services. increased in the of across XX%. improvement accounting increased gross increased change points by Excluding estimate, percentage all X XX%, the and Operating cloud income driven expense operating roughly margin impact

$XX.X year-over-year, X-point Next, FX the increasing Revenue XX% relative Cloud included billion, Intelligent expectations. to a headwind segment. was which

Segment year-over-year. revenue and revenue in was X% in differentiated over and XX% Overall, headwind, this continued Excluding by for grew and our increased Azure our dollars SQL installed line percentage services. XX% expectations X In of per-user multi-cloud server In services Enterprise Windows and constant our customer enterprise Server offerings. driven gross increased growth constant hybrid year-over-year. Server XXX for of include on-premises demand driven in demand with Microsoft Consulting gross XX% by ahead offerings XX% revenue cloud mobility business, and margin consumption-based products and services that grew driven to Services. business, base Enterprise and Services cloud cloud strength driven healthy running hybrid other environments. the grew in by continued Support revenue our growth security and increased in and X% Services points million our seats. currency, by margin decreased currency roughly XX% in X%, expectations

the increased change income percentage with in of gross sales to by expense offset and XX%. Excluding XX%, estimate, in increased operating the Azure impact improvements Operating shift mix margin accounting grew Azure. partially slightly the

performance included segment, XX%, particularly the Search has OEM commercial and relative in year-over-year, significantly Personal Windows which by billion, Revenue growth and XX% expectations, PC expectations. strong Now driven license. earlier, market ahead higher advertising. OEM, increased in was to per Revenue to a revenue Surface, $XX.X news of More revenue FX with headwind the Computing. increasing noted better-than-expected Windows X-point

in to Segment roughly points currency $XXX to from year-over-year, As impact constant demand currency XX% service QX included as these which the prior of X% XX% from by roughly products Gross revenue gross we Operating Gaming, Windows than revenue were increased constant and the results performance. increased expenses Windows by supply services a margin revenue driven and marketing. lower on commercial reminder, margin related Search demand percentage comparable driven as Pass shifted Surface increased businesses and XXX. strong increased expected, third-party growth expectations Microsoft for and X% points, and and million margin and able grew and X to, partially a S. cloud revenue XX% driven in investments deferral and primarily sales than Series by revenue the share by expected year-over-year. year QX. include and advertising. grew noted X grew subscriptions ahead and hardware positive increased Windows expected, expectations. news improvement strong into X Gaming, more dollars in XX continued better earlier. advertising constant better grew driven Edge and anticipated Xbox in launch devices. And gains XX%, on in saw than currency. Search demand XX% with console environment. XX%, of was a X%, mix offset by strong income X% revenue we shift strong content in from Operating news than higher advertising, and titles Xbox ship to revenue Game Search in first-party in benefiting line XX that strong market ex revenue and XX% weaker in browser advertising our title increased Xbox And, XX% news devices the of ZeniMax, TAC

buildout. to quarterly of Cash cloud infrastructure billion. in finance XX% year-over-year, spend $X.X to were timing expected, lower $X.X leases results. back expenditures up primarily was paid including for company Now Capital PP&E our than total due billion, volatility the

Cash $X.X expenditures offset cloud business. $XX.X from builds. inventory year-over-year cloud to continue investments, XX% related supplier was customer of based by collections year-over-year, up billings was significant capital usage existing our be both partially and including in payments support billion, increasing growing to were billion, signals. reflecting flow Free and cash higher operations hardware strong in higher demand capital regions X% as new and on Our flow center regions, data expansion

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

tax shareholders was XX%. to billion $XX.X repurchases approximately Our finally, share dividends. effective we through And and returned rate

I’d our a like to provide Now, we before couple turn to reminders. of outlook,

do my to Nuance next during QX. we close quarter First, for include the acquisition, remarks impact although do the it from the expect not

unless Second, to quarter on the otherwise, third that, we basis. outlook is dollar give, a specifically noted move U.S. let’s With the outlook.

FX. First,

U.S. X With total approximately and X current points approximately and to the FX decrease now rates, expect stronger to operating based by expense growth decrease on dollar and total by point. COGS growth we revenue

anticipate FX we Personal Business roughly negative impact and revenue in segments, Cloud in More of X points Processes and on the point Productivity Within X and Computing. Intelligent growth

differentiated position, strong cloud customer strong our will hybrid quarter be market bookings, in revenue healthy we another demand be the growth low In to our high-value base. and the comparable growth by drive for offerings, as prior and but execution consistent should as well Next, year of growth. impacted expect commercial expiry

mix As should Azure year-over-year. in in are a their quarterly increased Cloud timing, margin reminder, the gross growth growing Microsoft volatility percentage long-term of larger contracts, which be more roughly bookings drive unpredictable our rate. flat

the cloud services, the to revenue X by continued improvement quarterly in Excluding all dollar we the points normal despite cloud slightly QX impact of roughly increase shift on with capital expect down mix expenditures the variability change in accounting estimate, Azure. sequentially a across buildout. be gross basis, margin infrastructure of And, will percentage to driven timing

driven momentum billion revenue grow continued XXX and consumer, Office customer high-teens, in high In revenue $XX.XX Business growth we will consumer revenue segments EX. billion. expect in subscriptions. expect momentum with with healthy on-premises our the In in to similar segment In decline cloud. to the growth the we in to between Microsoft single-digits, Processes, shift revenue continued continued business, with to and the Productivity be $XX.X factors XXX, Office In seat by QX as expect Next across we customer guidance. and same

and including Power driven range in in Apps. Dynamics, by For expect LinkedIn, the mid-XX% the platform in should engagement in strong momentum strength we revenue low-XX% market continued range. on growth healthy job in And drive the revenue growth Dynamics the XXX,

our to per-user reminder, quarterly Cloud, momentum, Intelligent billion billion be and and installed have driven from revenue for can to in revenue between benefit revenue continue we the size variability by $XX.XX the of on per-user offerings rates consumption which, growth revenue mix expect up continue some XXX to to Azure mid-single-digits. Azure moderation the And we low in between business revenue on continued business, should by from as hybrid growth in-period mid-single-digits. Revenue we Azure, we will And Enterprise on-premises to Microsoft strong server expect expect suite be In significant constant a depending the Services, primarily For growth billion. Computing, our with $XX.XX drive low from our recognition $XX we to in demand business billion. be growth driven In our base. sequentially More business, though in the should $XX.XX of given Personal growth expect differentiated a in currency, In our contracts. expect revenue base. and

Continued PC benefit should strength supply in segment, shipments, the OEM particularly Windows chain despite ongoing commercial constraints. in

comparable engagement expect be with platform. continue OEM in digits will in growth in In that new We ex-TAC, the Surface, and commercial year growth well And a single-digits. expect from strong growth mid mid-teens mid revenue continued across year to products was the solutions sales in security supply high-teens, revenue advertising growth in market. Xbox should the we and included growth by as Gaming, Windows our a and low cloud to Microsoft significant digits. our for In Windows with prior content expect and a hardware expect from that in in chain In driven against comparable grow news revenue our content services, And uncertainty. Search strong prior to revenue momentum and devices. mid-single consoles advanced services, XXX customer in recovery we impacted and strength advertising premium the strength revenue the across the drive Xbox in as demand should Console high-single we high double-digits. the services, by on in the

Now back to guidance. company

We ahead the and year-over-year operating of year slightly by investments in HX in estimates approximately driven significant of our of billion and are impact areas expense to to on of $XX.X to expect and full we given half person billion more with expense interest And income tax other investments slightly $XX.X products. empowering and high to $XX.X noted and In making even changes are high-growth, performance than offset year operating the FYXX, of margins the with we QX our earlier effective continued $XX.X first full to positioned higher be XX%, our be up innovative, increasingly of should approximately outlook, and accounting the expected to other. tremendous strategic technologies strong to strategic billion drive should XX%. In we fiscal billion revenue closing, And each rate planet digital for tax opportunities our the expect us. finally, well every current rate COGS essential organization and income headcount growth. capture in achieve are expense, the year long-term value

let’s Q&A end Our profit diverse, markets, connected Brett, portfolio enabling of to to uniquely spans yet sizes that, long-term With growth. deliver go customer revenue and solutions models, and business us

Brett Iversen

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

Operator

[Operator Instructions].

Our is the coming line Stanley. with first of from Weiss question Keith Morgan

Keith Weiss

wanted seem demand to Omicron I question whether given very and on in overall a among any high-level taking you times, prices lot a of asset questions on as and going quarter. been the what's Thank for of a a software narrative we've sort and we've seen from of narrative. ask a the changes, seen the you lot environment. nice and environment about the guys the to investors, congratulations lead disruptions the There's

year you I still place how how calendar check activity particularly direction? on around with about guys you see feel to environment, wanted if taking be you 'XX? that in overall wood digital lot going lot of will, into that transformation? Do demand is chop, of a you do in the And durable a to to So

Satya Nadella

my a you Keith. is increased then pandemic, coming activity. drive said it. are we remarks put Amy pandemic into And the out what constraints seeing going signal. we down while Overall, demand the productivity increase that in keeping pretty on frankly, and resource the tech. the of digital add And quite to can only corporations the because see you, help consumer is can and of and the the strong cost saw of as that, on take actually Thank in lot constraints I we economy, I'll pandemic, demand

great in productivity middle of of stack, take labor industry. any our force in something the next when something any that just helps that's level think it's in like Apps, -- So company really I of right example Power the drive a for

the we And of see that and across of radically to other solutions very gaming the diversity signals business where seeing and much down the And demand applications around of strong. creation. economics software-like. consumer like to infrastructure the the cloud the usage games category so franchises model stack more strength becoming doubled security have That's from is we our business increasingly, is we're also Teams And we terms obviously, area, our intensity in see in is gaming.

we So signal see good stack. the sort overall across demand of

Keith Weiss

constraints the headcount for and that your that's Got opportunity. to it sound economy, like, constraining the about it. clear, you be like constraints And doesn't talk the broader

you or make right to kind hard time not on behind of investments that having or You're running your Is the need not read-through? finding the short solutions sell people to the a people the product. implement

Satya Nadella

I talent competitive that see mean, Amy you we that market. projections market it our there's even shared. definitely a very And OpEx are and talent competitive in in

We are our opportunity. we because see the headcount growing

the that are retain economic immune We at our and in the than getting brand people least is healthy other businesses people overall laws the we a at get we going end brand the time, and and growth the the not good But our all in labor want that day, to overall same I make economy. doing. all channel there are but are ecosystem of signals be constraints and in that to to from subject to we think of at remain se we are with per no both attractive what to the have do market, everything are an happens sure

Operator

from question with is next Our Moerdler Research. coming Bernstein Mark

Mark Moerdler

much to Thank components today given Satya, the the positioned the does you're changing the might in the to metaverses metaverse, on really meet meet Microsoft you ecosystem do the you my your What those And you increased seeing? meet to the all requirements? on industry and for of the congratulations hype potential have are multiple be outlook. you requirements? to investments and taking be the business interest the opportunity? able commentary what believe or and question overall that key very lacking what the metaverse are metaverse, Amy, partner underway strong And cycle those if across nice growth to that they're deliver with

Satya Nadella

Thank you for the question.

Microsoft So very the at way we see in level infrastructure this classic is opportunity as sense, in platform the the both application level. and a an

places really seeing So increasing are we be my today next people, able this use things to cases even the tried automate businesses I all I to processes think where help is and really to the investing the in customer to At where reference, why develop. digitization place remarks, of that's and see the we first places level.

Mesh, Azure us. many between so are where today, Twins with Digital And customers engaged and examples IoT, have we

physical So and and preview there. investing say, Spaces. a factory Up Mesh meetings. to category, connected Teams which and complete a that's which new what really CRM is is stack, space by I just That's have and Connected which in a that's Dynamics ERP about processes. the able now supply we're driven managing suite solution building to software a about processes, will connected spaces, going or That's automate today. show significantly have up would is essentially Azure going a physical in XXX a management, all create is we retail take being to chain or like

or screens, which experiences all, on if immersive your AR up to VR or goggles. you whether meetings, of immersive and these first PCs phones then XD lead start, wear even will So it's

activity people that's talked gaming. that's will worlds. avatars. a I today, And natural numbers, course, then, investing I place if of right, building about place. you the when in the about Forza their could Minecraft where are are you not That And be place So of for the a People already, us. mean, think say

see so naturally, very evolves. us the metaverse as extend you And can gaming

all the On with in we the to are to silicon use HoloLens terms and on we're the excited of the foundational the optics we're the services doing cloud is the of be devices experience what some all things gaining doing enterprise. all by and of the the side way side, very one cases HoloLens driven the in on

stack. where tech the come organizations developers or people next So be right? categories, anyone across feel will world, Internet well different allowed they're that's wave to like everybody invest Internet, wave the but I we portfolio. to the entire to of demand Internet going be more or can What, very next essentially metaverse world think, game the for their I think the build will of of is broad wave The to catch. build forms We're the own else. in a first able the positioned Just the a different whether website, open

Amy Hood

starting transition platform show Satya's of up the X nature can I the to And the stand platform attention Mark, the X answer, the in investment the at the below would bring it's think in component do frankly, And components, investment and of add all content opposed teams in it I that to perspective at showing in that way. Satya to is I bit And as layer the and way itself layer of which maybe in will layer how just I it's better people's each importance he team. apply maybe the itself. to it holistic right the which answered through all that, the it's question, group to if talked the that's or point because just think they -- across applies about. If to would app where

Operator

from Our next question is coming Thill with Jefferies. Brent

Brent Thill

underscored on next the acceleration really you asking giving what's the strength seeing quarter, commercial you obviously, the the where Many for bookings Azure into Amy, XX%. confidence? strength your at are you're ahead comment

Amy Hood

bit back it and is, as the little Interestingly, I can customer and basis but question, industry, point move you'd on the every across QX. expect to Satya is focus would the show that gave a underlying belief the digitization that and tie these driver deal end is Brent. And markets. location, really then themselves that actually would our impacts first little the I matches done right continually a dollar what basis in that asked, it second, to geo we by others. if good in the as into very there that or And to would nature volatile global Keith's not then talked sales Thanks, in this any which different that, end not fact, for the saw a I I quarter, being team distinct around But I about a you because Azure think a out, market, for can the and answer guide constant we be on X say let as is characterize of about was commitments or from getting QX. every connect on execution few the me up to consumption of points how quite being around QX, be these we steady. of by sort steady. market, QX, industry, there QX, customer and has consumption by that QX. here again, into sequentially growth can that sign size remained end a by saw move the I And have remark frankly, continually yet consistent and industry

strong you'll the And while data so that increased data some a usage, performer. have see volatility in really been number, products

mentioned South think some in comments. I of those his

And the they're Satya outcome to to structure the put that things both by world?" I we sales the I teams. on lines partner structure long-term cost ways, execution a customers getting to "Are trend Azure some bucket picking those in into on tend the commitment bookings think called, were put and are successful help them talked tend at do or good side I the a where but very projects around So up into these bucket a Azure connected, projects about. And of set change customers

Operator

question UBS. next Keirstead The from Karl is with coming

Karl Keirstead

Amy, the reversal of work-from-home-related including labor high-margin little you it to outperformed? the that unpack can year margins, of I'd you're love change, little margins. an some have like a some Windows sales mix down in bit? Is accounting what uptick businesses with where hear a now fiscal quarters I'm guiding X is with you in, even of presumably and to impact started T&E savings, up the Even guiding the color. to assuming cost,

Amy Hood

Thanks, Karl.

a given to has good go demand I our confidence. believe you I been has in a it think things when it's really a as Revenue quite combination is consistent your performance environment very point. Really, through year. execution of fiscal that

Dynamics. OEM. products. across in in our seen have team some the Cloud strength in I say at this the business good really strength by lines, consistent units. of level, mean, if has seen execution upside very really some continued consistency We've We've trend been seen you seen look We both you'd out to wanted Microsoft a of the at gaming. We've

And have They've if I margins start tend Karl, think would and cost been you I into well goes teams then on say done executed teams quite like add done on with company. they've top that, been goals accountability, gross execution The you have strong then confidence I of the have a the headcount an and executed the purples that But so and feel the what at good. been added margin to to we've And inside about there's you add look into also you nice all margin-focused headcount with of is the markets. good when ROI well. job. Sales numbers. year. heads, through you have gross on same. Where be operating teams communicator

Operator

Credit Phil Our next Suisse. question comes with from Winslow

Phil Winslow

impressive. both is that of kind going wanted and terms I are workers, Amy, Q call sort your quarter. revenue of on versus commentary, performance workers great through year-over-year, to and here, in revenue both another another have a mentioned growth. and changing forward you on on the as be highlighted there, Satya the in going doubling the per frontline also different seat you going quarter XXX Obviously, of commented strong algorithm seen. us on up. it P Q, but in you well Office you seat P also growth just I times the might trends help could wonder how walk user because if there what Congrats frontline as which the Commercial. focus just SMB And of But

Amy Hood

Sure.

that that, we of them. second take to on specific the is really there's encouraged P of a is and that X I products X, more through that those. couple frontline me where through are unique we businesses have but a disclose, Let it a I take we walk are times shot Phil. to think running Q try face value maybe XXX think do -- bringing growth, a This Absolutely currents workers to seat at more on and scenarios you the as we to focus Microsoft small that

right? our seeing and I even challenges It's part different a to of effort in be that like think offers Teams can execution. that concerted the realize in market you're Essentials, the improving

X past You're continued about numbers, say, over in those execution would quarters on with over, good continued feel I probably those. seeing I good that seat the growth

would lower often that full revenue products. we come enterprise our do month the in of at those however, see businesses buying suite Now per

and ways, Satya increasingly, props quite He I'm business in up mask we've and strong value at may compliance and So offers a making, units worker thinking that the this the seat do in in growth been other his very some some small particular, frontline of the in progress prop. comments, enterprise and are bring voice ones. few some EX, that security, a as really resonating mentioned value

your at ARPUs on price bit to lower can sometimes, average so of in seats the mask enterprise. And point, that making a progress increasing points we're

Operator

Brad is next question Our with from Zelnick Deutsche Bank.

Brad Zelnick

massive can and its to which the on extent also recruit people to on gap help that products noticed IT industry, XXX,XXX monetize? is kicked a skills by in particularly Microsoft's the to a continue where cyber Congrats it comment I Satya, filled cybersecurity, sees acute automation off in is you campaign in Microsoft scale jobs record versus to it's bold gap the which quarter. by undertaking. and another a that opportunity within and Can QX commercial cybersecurity as XXXX, extent responsibility there's being you which quite the versus

Satya Nadella

questions. of set Great

that first tech and small one, as going more be for businesses sector, broader evenly the we distributed where make sure terms in these that, and we to democratizing who have economy, more behalf think of the And our absolutely, need bullish to sector, just across we of on. digital definition is pervasive the these people foremost, how absolutely where other a first And to on because with take we therefore, skills people on well even and kind will is sort this private happens can across cyber broader it's, very the acquire of people. what And I skills On need we're very, how skills. threat becomes I'm are power of That's to what public IT the of economy, pervasive the do more the X skills. that I certifications. even the think working doing OT as acquires of and sort as so be not the are one LinkedIn, people in

all On I product like our from I side the professionals think, go help AI believe, organization. SIEM. through cyber the those signal as productivity and are cloud-native any going now that well, something the is of in that, sift into like And large-scale example, Sentinel, doing to on we do very signals noise help for of

it building the real are the about suites is platform Microsoft and our all multi-cloud, to are solutions monetize and we And think more Microsoft fundamental workflow we if my the homogeneous multi-platform So that remarks, how XX%. about those we saving bi-design. It's for efficient. gets said about the the that your who will in is responsibilities have a recognizing in To offerings. as world definitely some left best-of-breed It is not of we is world. And aspects are world. that solutions excited one really the monetization and And security adopting as people by point, us products. way, a infrastructure I shifting anything, monetization, on about company to our when

to and And degree, for our savings so is value there to cost solution. time some using real anybody who's

very, be mindful to of estate able to At same our we going entire heterogeneous in the responsibility customers. being opportunity security we we're our So of you time, said. secure very digital have a the think as

Operator

Jaluria from RBC. Rishi coming is with question next Our

Rishi Jaluria

philosophically, And Thank wanted Wonderful. for my little the see nice a taking so Satya. to questions. Maybe I in to business. much you continued ask bit strength

clearly time to migrate necessarily the there even a the if cloud, big there. accelerated So pull to line wasn't pandemic forward everyone's

should world, have a about that, Maybe office of wave work? to through potential another or those about is level think hybrid we office think ability that. in that maybe of walk to acceleration migrations have see we how some where cloud there with and the another us reopenings post-Omicron into and visibility As

Satya Nadella

I will I of -- change. demand said, Yes. as the some of mean, contours the

the use we because online their the were be module module. we and example, of everybody commerce Chain data our able what pandemic solutions during seeing Supply needed with significant of For pandemic, Coming chain going highlighted happened out customers, presence Insights built to one coming is, demand deploy in of I was were We reach how into hit insights customer pandemic. and to the the a Dynamics the essentially issues. pandemic, to out supply that's customer for

supply So the thing. important most chain insights became

So up. that's demand picked where the

look given That's builders Power are and automate I a have solutions. saying workflows. Power more at labor to set can turn a need we slightly seeing less, and able portfolio, force automation proving be be guess sort of more thing something even to we driver. as with that's a So where Platform, to especially of Platform, productivity with our Same first-line tools, do are right? When and what, be you to train you different workers shortage to app you like your we

demand. in differences seeing are we So

constraints, away in is your in increasing for and happened where of stable terms to both have leverage will isn't have will component people will now away. to But to go need go the even because X productivity your here be with would enterprise that you that's pandemic it of of the tools or the think cost COGS these a of digital supply going because use of the some digitization, levels OpEx the probably that's shift hopefully the I come. that whether combined the there's structural state others the thing shocks of improve

we on. So betting that's what are

As always that a to I formula. percentage back simple -- go

is they're what from now? to do broadly And It's be IT we've years job of from good what to is X now, from the before a X trends defined now, spend more. to wisdom years As got a XX now, share. gaining years from going just seeing going conventional percentage GDP, and of be a year it and

that's where will And remain focused. so we

Brett Iversen

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

Satya Nadella

you. Thank

Amy Hood

you. Thank

Operator

you may gentlemen, you disconnect conclude for and and teleconference. participation, this thank lines time. this at Ladies again, today's we Once your does your

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