MSFT - Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Microsoft Fiscal Year 2022 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, Vice President 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;

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

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Satya Nadella

stronger. is we macroeconomic to When positioned more From with XX% revenue clear this organizations to first applications and digital business on In environment, $XX Thank Microsoft every data work, to focused digital unique so Cloud I the organizations their imperative provide currency. to environment, to on deliver company than value no less. emerge infrastructure better and quarterly first, in X we a overcome today's the differentiated they in things: are you, real billion with in hybrid that for constant our customers, help talk customers. this can do and help and opportunity technology industry XX% use up Brett. Amid is it's surpassed Microsoft challenges time, there

take we businesses we new advantage. share Second, invest to have long-term will categories and structural and where build

continue own Azure. period and an highlight on industry Organizations in cloud leverage. intense will excellence our our that, executional drive with me Lastly, this IT their with to we demand. progress, focus in let our to operational with align choose every through manage prioritization to investments With operations starting

number million-plus record We and commitments won larger $XXX $X are deals of this and billion-plus longer-term seeing quarter. a and

regions We the over will provider, have data we more year. other regions center and than XX any next launch

and enabling compliance, sector Uniper companies we to customers where requirements. are Greggs, applications meeting Sovereignty Azure With Cloud security Microsoft for customers are on-prem helps UBS edge Arc, and environments. and new multi-cloud public run meet they Our urgent like across privacy GM,

cloud their its We for IT its move more platform Azure. mission-critical industry, its SAP internal Azure. American our chose example, seeing Airlines, will for the And and of customers key to Azure. run choice ERP data Leaders operational move in workloads have warehouse. to workloads Telstra are Heinz, the on cloud. Kraft workloads, And we including to workloads migrated Unilever are every Fujitsu to including apps

service Just last week, we workloads on accelerate Oracle Azure. adoption announced to a new of

Oracle cloud the with to only running databases simplified the public direct are We access Cloud. Oracle in

instead solutions, With data the complete and value Now more of fabric Platform, our on Data growing than data focus use we provide XXXX we integrating our on Fortune helping AI. faster spanning customers than the data Microsoft Intelligent More databases, fragmented estate. are and governance, to data a of X of operational creating and analytics XX% market. or

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developer Now on to tools.

software. a is more subscribed every which write container helps have across the Delhaize better in up, digits. And KPMG of GitHub made can container choosing Ahold developers code and month any all ago. cloud expanding have increased since Leaders our developer first-of-its-kind most popular platform. by from people build triple to portfolio XXX,XXX than with it Copilot organizations revenue More H&M resilient generally we All like programmer, applications. faster. to services, cloud-native available Philips services the pair are Azure modern, We any to industry AI from tools GitHub build

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XXX. Dynamics to on Now

their category. continue in experience, the every market are customer outgrow organizations finance chain and digitize service, supply as we We helping to functions

customer overcome Digital in Dynamics AI And well between of to Microsoft to Center capabilities together brings the Contact HP Microsoft and Teams new Platform like Nuance XXX Our Dynamics as Intelligent integrations people deliver work Management flow disruptions. omnichannel from XXX, customers new collaborate and supply Order help as engagement. help chain Teams enterprise

take industry their are it call winning our seeing organizations is its sales applications. Visa center strong as We a service to service as Coffee for chain on business address And we Carlsberg modernizing operations. challenges. supply is both customer platform-driven help are customers switched our digital deliver to comes When its pressing organizations cross-industry we standardizing with approach we help its and imperative. their Dynamics and clouds, to most Pete's field organizations. adoption and XXX

member Healthcare, success of the expanding a or for a chain, the into clinical for DAX to a of For as solution that experience example, health of across us. is modernizing services, care becoming their companies outcomes. strategy. the choice is as Intermountain significant drive and partner delivery, empowering inclusive looking Cloud differentiator new it's plan a the transforming for health pillar digital Healthcare, its example, Cloud a Nuance, health the meaningful for provider financial for platform Microsoft dedicated value Healthcare retailer is Ambient having to chose as Whether Nuance's Intelligence technology well care truly

chat Johnson Teams leader both the from companies, in building and as market their our Phone XX% usage meetings Adobe collaboration Now essential Teams. Johnson, Teams. the digital All us. XXX users, with to Technologies gap to those the flow XX experience We a and XXX,XXX XXX And to In This a it's working well-being nearly Veeva remote the experience people apps Insurance year custom higher just than every that by to ago. employee XX% have collaborate and line of XX% Teams remotely this with all work organizations cameras. environment, & synchronously office turn XXX calling customers and new is have of companies bridges accelerate of of in-person. and And Workday increased the as for including from economic imperative a is increasingly LOB Teams as PSTN year-over-year. every use their Progressive create with already deployed platform between for have and applications employees Lumen connect share in Rooms to that business Teams and new category is employee support now their than in recognize we workplace. and Veeva asynchronously intensity chosen is to and calling completely now VoIP the a over like taking the seeing more TAM work. high-growth an process ISVs and number Fortune productivity. orchestrate work, business expansive transformation organization as active and well innovations More is Fortune the across looking million are productivity. usage cloud hybrid built third-party to number across Teams. double AI-powered to We're and have the deep on PSTN. category. suite Microsoft flexibility also Microsoft up, Hybrid with improve Rooms priority integrations as and employee in of the and to to across

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chose Asahi, than premium Expedia our and all Qualcomm offerings work. year-over-year. EX how to employees increased more Group XX% seats transform

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the identify Marketing are We rely More surpassed billion alike source filters LinkedIn the employers surpassed candidates to on for up Talent and XX now job past efficiently first on annual prioritize more to $X Solutions LinkedIn candidates. billion year-over-year. And than over companies seeing work. XX% revenue months, skills LinkedIn and in in Solutions time. XX% find skills the revenue of $X

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quarter, Sephora build chose revenue customer data stream solution and to maintaining help our relationships. their advertising new of ownership a This own while

to offer We on in Now the gaming gaming. industry. the value best

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intense Amy. best-of-category of and over portfolio coming our me focus about on Our durable products that, our it best-of-suite with in ahead to an year. hand models, opportunity I'll along the solutions, With and prioritization excellence, make business confident executional

Amy Hood

Satya, you, Thank good afternoon, and everyone.

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and company Total other hires expense XX% be to constant offset COGS US$XX.X billion. and between billion and XX% in expected or income and LinkedIn, grow, between billion currency US$XX.X grow US$XX.X is constant should start engineering, income between expect billion cloud to expected US$XX.X operating expense in to sales. XX,XXX XX% customer in between We to in primarily to XX% to commercial continue other. and QX, interest and to In deployment currency be and grow with each expense, and or headcount

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in see be FY billion services QX our for platform resulting closing, payments compelling completed making TCJA in to $X.X gains. we increased continue the flow, share transition intangible Finally, to cash and products commitment demand of delivering of to dynamic and remain continued as in this we our property a tax and strong of on focused the environment, customer value we In QX 'XX. related on will transfer tax reminder as

we go continue on let's operational to Brett. that, through will As future and focus to excellence in invest discipline. execution period, Q&A, this we manage growth With while maintaining intense

Brett Iversen

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

Operator

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

Keith Weiss

particularly in environment results cloud question bookings. difficult those we're dealing my a And where with, when it lies. very that's impressive Very commercial comes that to all

for us to You deals. sign were Can talked QX. about you to got the little largest-ever that you to this think number able Microsoft of harder that deals you it sign of talk how about that makes market those of macro, we bit kind environment is Typically, typical it you done? for big it type was close of these thing in is QX end-of-year kind environment? a to flush the the environment? of really actually guys? you And just of performance? not benefit in kind to it the price deals related was Or this or And consolidating the -- type brings a to Was that guys big the environment absent of budget a guys impact the maybe

Satya Nadella

for with QX. context for even the Keith, you, of even the us, Thank question. was a record It

been bookings There is it going of the in the digital macro the things is -- in on our IT the every very percentage whether macro a One going Mac to the them, something number business long with or deals feel play obviously there's to trying this Mac sense, of environment. deals time tech fortify to observed. X does does for of itself speak strength. to, the spend and size I are least we what navigate talking some to is GDP, about at I've think, as much the have number is a So that because which which increase environment, now, and

second whether you these, security, every each work, reflected which tech leading stack, do we that, we referenced, hybrid is, infra, right, data, is even which the numbers. think, probably have share Power layer products. do is So And Platform. the to includes In what have aspect I just value, then this best-of-category what best-of-suite it's of is of that those X in is And also gains.

effectively and So bet think on that, that's what to of long-term if of consume you're where you you then that indicative value basis vendor I best-of-suite a on numbers able those to a on of. have it are some terms, want your sort

Operator

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

Mark Moerdler

Thank the all Azure's think much Internet like bit consumer recession? see SMB very for on little about is more the advertising in recession, real business, do about to exposure up How a to trying to follow and everyone and do specifically, cloud I'd IaaS, you do that. offerings about you resiliency? you Microsoft's case, and congratulations a how PaaS and macro slowdown quarter. this recession, how With we if think concerns on Azure's and understand

Satya Nadella

Keith's Azure or -- to though, remarks I'd there about quarter. Amy, to doing immune in is happening start, her feel Yes. I'll add. can macroeconomic of -- side and they the with trying that our question, not with happening overall sure with even deal with the in mean, results because I I question situation I more that Mark, demand talked make businesses what's in in some in in and overall, do Amy But trying and Maybe whether your SMBs, the right? the consumers some sense, less. we're on to think start to think macro what's say free I'd broadly, To it's

is -- the an towards anything, best So that cloud. of seeing for way the optimizing shift bill. spend the demand moving increased if example, in your and is with Because And fact, one then, uncertainty, shape course, we're to of to the cloud your right? things

And coming that that's force. does of of volatility in We numbers benefits ensure shows the in are that, the for will our even public that's even crisis, big as cloud. even bigger because think why be deflationary out public act the a it of own macroeconomic fact, this I our of winner cloud customers some in up the And the Azure incenting that down. one because field our to bills come

So we numbers. that's are what Azure sort of the in seeing

our businesses core be SMBs. stronger and some to at consumer-driven in commercial. level, the a exposed company much will But strength as is We

that I think fine So we'll there. do

and Cosmos triple-digit that DB are The growth other in people about. talked the growth triple-digit X new applications a I also One container frontier. in new numbers completely app at X is mean, building services. is I there

frontier those serverless take writing applications. container-based efficiency, and things a cloud-native say, what of you X types doing? at People different applications people You are is which are completely of

IT goes that way your make another And a that's for so this. way in like to spend you time me, to long sure a

Operator

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

Brent Thill

of hear to many worsening you we're get environment growth? a guess embedding macro a that or double-digit Amy, in great to guidance. the type that similar are are to asking, I environment

Amy Hood

Brent. Thanks,

over said, As if best I trying as year. thought macro through into take we And we fiscal X say, what -- some we the current try over of look of said, took year of the I it's you in environment. course a as about I course I the think you and to time. of the okay, that course things with point And how would that applied to out could June, changed versus the my the the HX account if in comments, it bit you'd saw HX,

of in headwind headwind talking USD less be a would about FX, we're in First, of it's HX. if bigger course, it's a HX,

thing second The OpEx. to I point would would be

And starting talked QX. lot about you Nuance still then get and as we the XX,XXX this the we've on have acquisitions, productivity get that done of over the our all year. and that obviously focus lot of a We've got quarter. in OEM Xandr hiring We different into we've we from XX% HX added past still HX. we anniversary and in when focus hires a in of As have comparables obviously the we've headcount hiring HX,

the you're think sort account, and took in did applied been I we as the those it, best how trends I them trying to seeing about of June can. so we've shape about And things thought and as into consider

Operator

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

Karl Keirstead

quarter, very on And quarter likely X-point of slope about solid. XX when decel the September you how next bit the the probe I'd business couple that what I all softness. this growth talked robust of in that was? love about in Satya more and Azure June a mind put you're the to feeling constant of quarters mention new little bit in thought a you Amy, the is Azure. the of your to activity. large did for little But deceleration? explaining Azure consumption deal you experienced guidance you you fairly a together, Do currency of in terms

Amy Hood

you, Maybe and some you the to obviously and said I'll would really comments, Karl, add is, mentioned, things of to Karl. Satya in I point commentary. our then, Satya, should the we start, across Thanks, on expected we and, course which in across more It we did segments see side applied some in had applied deceleration, a geographies. little through the customer than consumption the a point QX. all of general, really

pure they're QX, like really can take are customers share. in starting QX and sure in we're still the sure to on help that customers, guidance. mentioned to the Satya make signed Satya about specifically we them as to think the we feel frame And good that the investing taken focus that and like feel that we we projects we We've larger on projects and we're very saw focus probably our good than and save You that them the do, which can they that's I assume as value, just X discussed, really and I consumption HX about workloads to that continuing where that optimization does taking it focused always on number. about prioritize new time patterns can quick money, feel innovate. start. points It consumption much workflows have working continued thought think seeing. at deployment, quarter-to-quarter. same rather to deceleration I with the applied But the of some making time, to agreements

Operator

is Lenschow Barclays. with line of from Raimo the Our next coming question

Raimo Lenschow

you're kind use What customers kind to you're kind -- environment, a seeing much of with as to having further? Office this aspects? terms of you priorities are very slightly of Along seeing kind willingness of this more talk customers of getting is comprehensive more those to Office what a lines of obviously, because, can they in maneuver offering there spending about you little in your to on kind consolidate of competitive on time that EX, different the solution very, try several bit

Satya Nadella

user mean, the then I to, of number numbers, I'll just value the you the that in usage again, XX% Maybe XXX and add. the core in right, speak think, start our that seats and Microsoft Yes. can of EX -- our EX. and in of Amy, I numbers the growth X best-of-suite XX%, growth growth

So we're those. of that's on growth. seeing very, what very you're competitive And seat both that in

Amy Hood

I And maybe, add point just I little think where would a to bit. to

both value suite. There's we've with to EX. that do building competitive, value that so level has on we we've focused sure become as been customers the the continue in and at added get of suite level, at you As making value And really SKU. are see, more EX much add can the category and every more think I and momentum very bit and to value

some there, we of get resources sure past the point over most strong in to their out will renewals people customers investment moving adding X of in hiring of that we've usage, bookings increasing numbers, both our be existing and spent a SKU, months the are terms that forward team and EX EX the looking in QX deployment, make and specifically in was and on focus contract. some So helping for of those areas the to

Operator

question Phil Suisse. is coming Winslow with next from Our Credit

Philip Winslow

you relative be customer your instances, sort some in as this sort and of changes around of chain any issues be of wanted you your where on where Congrats mentioned but about I of you on demand capital focus increased cetera? spending actually think supply about are in That behavior, comments focus to on the about reserved And Wanted feeling would right now? Azure. utilization And whether just driving sense to stands quarter. just stands strong before. obviously, to a chain, is of sort Azure, utilization capacity trends also a supply it Amy, how get et within great.

Amy Hood

Maybe talking newbuilds of QX's was adding driver the capital let and big new you. me spend. spend, capacity Obviously, this both about existing as Thank growth center data to as data in quarter start by our centers. well

seeing, obviously, good demand signal. are We

hence, capital. of in So we've another spending terms to quarter guided strong QX in

in We can move just bit or around data It's sure wanted place think anything on to know, the being based about need builds can capacity focused as units it's I Satya, Although would the we've on more to making gotten they come a when little on new are customers our when timing. drive that a new global shipments basis in. -- good don't sequential are a centers. a complete those need, add always if you usage decline, do they that feel on in on and I that.

Satya Nadella

it that it Yes. customers instances. captured I think are I right. more is And you also mean, right that reserved using

you And see. so like kind optimization right? that's the essentially that's of price a discount, So that

-- growing consumption growth that with are we're posting that is place. optimization we in in all So numbers

Operator

question the ISI. from with next coming Our line Kirk of is Evercore Materne

Kirk Materne

that more of to talk Amy, weakness opportunity segment. business Is some you you or couple Can it you see do of better going helpful. how if the little there? suite? it sell what's go guess seeing in a I just So on more be all business, on try to of color that worse? that bit much in of noted part just times about you small an bundles and getting just a your add more drag has you and would your And been? a could for

Amy Hood

related couple the SMB it's did I that Kirk. times commercial. well service EMS Microsoft deals, question, to of new noted, course, And great we discussing per-user allude particularly to a all in of it I XXX. as the segment did selling And weakness Windows a as outside of or because when see, is in Office some That's as EX. Azure

of through which before that audience partner. from talked type customer we are that came things, And think point, couple of -- SKUs as sold are your Kirk, of about base. primarily really them is to So a intended, and of we right, is for one that it

we we value that need we've last that small it. prop price quarter, working best partner. is executing We've sure and right, on make is and business to We're need the still and that are customers And about right the so that sure value great value, what we're sure to so middle in talked keep got make props. tuning which the got to transition offers of we through today, we'll make

is of transition is comment feels tend macro I thing where to which macro, both. that spot also because see particular, my tell some versus would we part of we're is in to second partner alluded doing certainly I itself, as work The that like it you, you well show can't say in the weakness that a while and

that's certainly And watching. so we're a spot that

it shows have caveat making of shows would feed, the through growth in help sure right absolutely point itself, think I you you growth as XXX itself that suites. the way quarter. in And expected you your both number might more got can that is a QX, and lighter we've Office saw the great And important to notice saw little the and seat less value than that. that get around is do be bit in as it's then little decel But a we quarter-to-quarter. the with which you modernize an

Brett Iversen

last for question. time have we Jesse, X

Operator

Our final with come Wolfe Alex question Research. line will from Zukin the of

Alex Zukin

to the wanted I respect Azure. with to on guess commentary consumption I double down

think, and general is about are posture. conversations? that contracts, those dynamics, though any internationally as customers a different moderating if I in to patterns then a you it you the longer Are those different I you guess, consumption on you just confident domestically them their starts -- linearity And guidance, seeing global do you're that Specifically, visibility there kind therefore, basis, commit think of When [indiscernible] optimization has think of your it about or optimize consumption into clearly, pace? feel seeing duration versus project is you the -- very spend? very

Amy Hood

in quarter, When Maybe it in is seen and have customer QX the we're general, talked about across through as consumption was we we really and and then add. what across workloads deceleration Satya those that's June start geos. course about thinking through segments. I let whether absolutely in we continue, implies occurs. And apply commitments saw see that work gets it, any of I'll I optimization is as that plus the expect And growth, very actual certainly, continuing we specific logic at any showing for completed that time we is implies. I to have what speaks wouldn't And not it pattern than customers which -- guide geo which to that do QX. think takes contracts projects new consumption to instance, different reserved customer to start it particular and as as add other in geo. point said, as our we've the and large it's a to what I optimize, Satya it applied the it project because these both to the to to And the that help, existing and that through see year, purchase through whether new that convert and patterns. the until with Azure whether you'll signed we it's

talked we -- certainly It's that would seen So this about. a really it doesn't that not to to have just being consistent point. as it I point we've different deceleration

Brett Iversen

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

Amy Hood

Thank you.

Satya Nadella

Thank Thank all. you. you,

Operator

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

Microsoft (MSFT) 27 Jul 222022 Q4 Earnings call transcript