Q2 2020 Earnings Call

January 29, 2020

Welcome to the Microsoft fiscal year 2022nd quarter.

Welcome to the Microsoft Fiscal Year 2020 second quarter.

Welcome to the Microsoft Fiscal Year 2020 second quarter earnings conference call. Earnings conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset prior to pressing the star keys.

Earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

Earnings Conference call at this time, all participants Arnie listen only mode. A brief question and answer session will follow the formal presentation.

If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset prior to pressing the star keys. If anyone should require operator assistance during the conference, please press star 0. As a reminder, this conference is being recorded. I would like to turn the call over to Mike Spencer, General Manager of Investor Relations. Thank you. Please proceed.

If you would like to ask the question. Please press star one on your telephone keypad confirmation total indicator line isn't the question cue.

If anyone should require operator assistance during the conference, please press star 0. As a reminder, this conference is being recorded. I would like to turn the call over to Mike Spencer, General Manager of Investor Relations. Thank you. Please proceed. (Operator Instructions) As a reminder, this conference is being recorded. I would like to turn the call over to Mike Spencer, General Manager of Investor Relations. Thank you. Please proceed. Thank you. Please proceed. Good afternoon, and thank you for joining us today. On the call with me are Satya Nadella, Chief Executive Officer; Amy Hood, Chief Financial Officer; Frank Brod, Chief Accounting Officer; and Keith Dolliver, Deputy General Counsel.

<unk> start to to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your hands that prior depressing the star cues if anyone should require offer assistance. During the conference. Please press start zero as a reminder, this conference is being recorded and.

In the call over to my expenses General manager of Investor Relations. Thank you. Please proceed.

Good afternoon, Thank you for joining us today.

Michael Spencer: Good afternoon. Thank you for joining us today. On the call with me are Satya Nadella, Chief Executive Officer, Amy Hood, Chief Financial Officer, Frank Broad, Chief Accounting Officer, and Keith Oliver, Deputy General Counsel.

Michael Spencer: Good afternoon. Thank you for joining us today. On the call with me are Satya Nadella, Chief Executive Officer; Amy Hood, Chief Financial Officer; Frank Broad, Chief Accounting Officer; and Keith Oliver, Deputy General Counsel.

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

On Microsoft Investor Relations website, you can find earnings press release, and financial summary, slide deck, which is intended to supplement or remarks drink today's call and provides reconciliation of differences between <unk> financial matters.

Michael Spencer: Unless otherwise specified, we will refer to non-GAAP metrics on the call.

Michael Spencer: Unless otherwise specified, we will refer to non-GAAP metrics on the call. However, the non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. Unless otherwise specified, we will refer to non-GAAP metrics on the call. However, the non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP.

Otherwise specified we refer to non get metrics on the call.

Michael Spencer: The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP.

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

<unk> financial measures provided should not be considered as sub sued for or spirit to the measures of financial performance prepared in accordance with <unk>.

Michael Spencer: They are included as additional clarifying items to aid investors in further understanding the company's second quarter performance in addition to the impact these items and events have on the financial results. All growth comparisons we make on the call day relate to the corresponding period of last year, unless otherwise noted. All growth comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted. We will also provide growth rates in constant currency when available as a framework for assessing how our underlying businesses performed, excluding the effect of foreign currency rate fluctuations. Where growth rates are the same in constant currency, we will refer to growth rates only.

They are included as additional clarifying items to investors in further understanding the company second quarter performance. In addition to the impact these items that have on the financial results.

Off grow comparisons we make on a cold they relate to the corresponding period of last year unless otherwise noted.

Michael Spencer: All growth comparisons we make on the call day relate to the corresponding period of last year, unless otherwise noted.

Michael Spencer: All growth comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted. All growth comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted. We will also provide growth rates in constant currency when available as a framework for assessing how our underlying businesses performed, excluding the effect of foreign currency rate fluctuations. Where growth rates are the same in constant currency, we will refer to growth rates only.

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

Michael Spencer: We also provide growth rates and constant currency when available as a framework for assessing how our underlying business is performed, excluding the effect of foreign currency rate fluctuations.

Michael Spencer: We also provide growth rates and constant currency when available as a framework for assessing how our underlying business is performing, excluding the effect of foreign currency rate fluctuations. We also provide growth rates in constant currency when available as a framework for assessing how our underlying businesses performed, excluding the effect of foreign currency rate fluctuations. We also provide growth rates in constant currency when available as a framework for assessing how our underlying businesses performed, excluding the effect of foreign currency rate fluctuations.

You also provide growth rates and cons currency what available as framework for assessing her underlying businesses performed excluding the effect of foreign currency rate fluctuations.

Michael Spencer: Where growth rates are the same in constant currency, we refer to growth rate only.

Michael Spencer: Where growth rates are the same in constant currency, we refer to growth rates only. Where growth rates are the same in constant currency, we refer to growth rates only.

Where growth rates are the same and cons currency, we refer to growth rate on me.

Michael Spencer: Where growth rates are the same in constant currency, we refer to growth rates only.

Michael Spencer: We will post our prepared remarks to our website immediately following the call until a complete transcript is available.

We will poster prayer remarks to our website immediately following the call until we complete transcript is available.

Michael Spencer: We will post our prepared remarks on our website immediately following the call until the complete transcript is available.

Michael Spencer: We will post our prepared remarks to our website immediately following the call until the complete transcript is available. Today's call is being webcast live and recorded. If you ask a question, it will be included in our live transmission, in the transcript, and in any future use of the recording. You can replay the call and view the transcript on the Microsoft investor relations website.

Michael Spencer: Today's call is being webcast live and recorded. If you ask a question, it will be included in our live transmission, in the transcript, and in any future use of the recording. You can replay the call and view the transcript on the Microsoft Investor Relations website.

Cosby Webcasts liven recorded if you ask questions. It will be included in our life transmission in the transcript isn't any future you said the recording.

Replay the calls and be the transcript from Microsoft Investor Relations website.

Michael Spencer: During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the risk factor sections of our Form 10-K, Forms 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. And with that, I'll turn the call over to Satya.

Michael Spencer: During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release and the comments made during this conference call, and in the risk factors sections of our Form 10-K, Forms 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. And with that, I'll turn the call over to Satya.

Michael Spencer: These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the risk factors sections of our Form 10-K, Forms 10-Q, and other reports and filings with the Securities and Exchange Commission. And with that, I'll turn the call over to Satya. Thank you, Mike. It was another strong quarter with double-digit top and bottom line growth, driven by the strength of our commercial Cloud.

During this call we will be making forward looking statements, which are predictions projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to rescind uncertainties extra results couldn't materially different because the factors discussed in today's earnings press release in the comments made during this conference call and then the risk factor sections or a form 10, K. forms 10, q. and other reports.

Michael Spencer: And with that, I'll turn the call over to Satya. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the risk factors sections of our Form 10-K, Forms 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. And with that, I'll turn the call over to Satya. Thank you, Mike. It was another strong quarter with double-digit top and bottom line growth, driven by the strength of our commercial Cloud.

Michael Spencer: These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the risk factors sections of our Form 10-K, Forms 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.

Michael Spencer: During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. The actual results could materially differ because of factors discussed in today's earnings press release and the comments made during this conference call, and in the risk factors sections of our Form 10-K, Forms 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.

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And take any duty update any forward looking statements and with that <unk>.

Michael Spencer: And with that, I'll turn the call over to Satya. Thank you, Mike. It was another strong quarter with double-digit top and bottom line growth, driven by the strength of our commercial Cloud.

Thank you Mike it within one of the strong quarter rubber double digit top and bottom line growth driven by the strength of all commercial cloud.

Satya Nadella: Thank you, Mike. It was another strong quarter with double-digit top and bottom line growth driven by the strength of our commercial cloud.

Satya Nadella: Thank you, Mike. It was another strong quarter with double-digit top and bottom line growth driven by the strength of our commercial cloud. Thank you, Mike. It was another strong quarter with double-digit top and bottom line growth driven by the strength of our commercial cloud. Stepping back from the quarter and reflecting more broadly on the next decade, the defining secular trend will be the increasing rate of digitization of people, places, and things. Thank you, Mike. It was another strong quarter with double-digit top and bottom line growth driven by the strength of our commercial cloud.

Satya Nadella: Stepping back from the quarter and reflecting more broadly on the next decade, the defining secular trend will be the increasing rate of digitization of people, places, and things.

Satya Nadella: Stepping back from the quarter and reflecting more broadly on the next decade, the defining secular trend will be the increasing rate of digitization of people, places, and things. This malleable part of software will drive productivity growth across all industries, leading to more inclusive economic growth far beyond the domains of consumer tech today. Stepping back from the quarter and reflecting more broadly on the next decade, the defining secular trend will be the increasing rate of digitization of people, places, and things. This malleable part of software will drive productivity growth across all industries, leading to more inclusive economic growth far beyond the domains of consumer tech today.

Stepping back from the quarter and reflecting more broadly on the next decade.

Defining secular trend will be be increasing rage of digitization of people places and things.

Satya Nadella: This malleable power of software will drive productivity growth across all industries, leading to more inclusive economic growth far beyond the domains of consumer tech today.

Satya Nadella: This malleable power of software will drive productivity growth across all industries, leading to more inclusive economic growth far beyond the domains of consumer tech today. This malleable power of software will drive productivity growth across all industries, leading to more inclusive economic growth far beyond the domains of consumer tech today. This malleable power of software will drive productivity growth across all industries, leading to more inclusive economic growth far beyond the domains of consumer tech today.

Malleable power of software, but to drive productivity growth across all industries, leading to more inclusive economic growth far beyond the domains of consumer tech today.

Satya Nadella: Tax spend as a percentage of GDP is projected to double over the next decade.

Satya Nadella: Tech spend as a percentage of GDP is projected to double over the next decade.

Satya Nadella: Tech spend as a percentage of GDP is projected to double over the next decade. At Microsoft, we are focused on building the most differentiated tech stack to enable every organization in every industry to build their own digital capability and tech intensity, with a business model that is trusted and aligned with their success in this new era.

Satya Nadella: Tech spend as a percentage of GDP is projected to double over the next decade.

Text spend as a percentage of gdps projected to double over the next decade.

At Microsoft via focused on building the most differentiated text actor enabled every organization in every industry to build their own digital capability and tech intensity with a business model that is trusted in aligned with the success in this new era.

Satya Nadella: Now I'll briefly highlight our innovation momentum starting with Azure.

Satya Nadella: Now I'll briefly highlight our innovation momentum, starting with Azure. Every customer will need a distributed computing fabric across the Cloud and the Edge to power their mission-critical workloads and meet regulatory as well as operational sovereignty needs. We have more data center regions than any other cloud provider and will be the first to open in Israel and Qatar, expanding our footprint to 56 in total. Azure is the only cloud that offers consistency across operating models, development environments, and infrastructure stacks, enabling customers to bring cloud computing intelligence to any connected or disconnected environment.

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Every customer will need a distributed computing fabric.

Satya Nadella: Every customer will need a distributed computing fabric across the cloud and the edge to power their mission-critical workloads and meet regulatory as well as operational sovereignty needs. Every customer will need a distributed computing fabric across the cloud and the edge to power their mission-critical workloads and meet regulatory as well as operational sovereignty needs. We have more data center regions than any other cloud provider and will be the first to open in Israel and Qatar, expanding our footprint to 56 in total.

The cloud in the edge.

Satya Nadella: We have more data center regions than any other cloud provider and will be the first to open in Israel and Qatar, expanding our footprint to 56 in total.

Followed that mission critical workloads and meet regulatory as well as operations sovereignty needs.

Satya Nadella: We have more data center regions than any other cloud provider and will be the first to open in Israel and Qatar, expanding our footprint to 56 in total. Azure is the only cloud that offers consistency across operating models, development environments, and the infrastructure stack, enabling customers to bring cloud compute and intelligence to any connected or disconnected environment. Azure is the only cloud that offers consistency across operating models, development environments, and the infrastructure stack, enabling customers to bring cloud compute and intelligence to any connected or disconnected environment. Azure is the only cloud that offers consistency across operating models, development environments, and the infrastructure stack, enabling customers to bring cloud compute and intelligence to any connected or disconnected environment.

Have more data center regions in any other cloud provide a and it'd be the first to open in Israel and cathar, expanding our footprint to 56 in total.

The only cloud that office consistency across operating models development environments and infrastructure stock, enabling customers to bring cloud computing intelligence do any connected or disconnected environment.

Satya Nadella: This quarter, we expanded our portfolio of edge appliances.

Satya Nadella: This quarter we expanded our portfolio of edge appliances. Azure Stack Edge brings rapid machine learning inferencing closer to where data is generated, and the new ruggedized Azure Stack form factors provide cloud capabilities in even the harshest of conditions like disaster response.

Satya Nadella: This quarter, we expanded our portfolio of edge appliances. Azure Stack Edge brings rapid machine learning inferencing closer to where data is generated, and the new ruggedized Azure Stack form factors provide cloud capabilities in even the harshest of conditions like disaster response. This quarter, we expanded our portfolio of Edge appliances. Azure Stack Edge brings rapid mission-learning inferencing closer to where data is generated. And the new ruggedized Azure stack form factors provide Cloud capabilities in even the harshest of conditions like disaster response. Azure Stack Edge brings rapid machine learning inferencing closer to where data is generated. And the new ruggedized Azure Stack form factors provide cloud capabilities in even the harshest of conditions like disaster response. With Azure Arc, we are defining the next generation of hybrid computing.

This quarter be expanded our portfolio of edge appliances, How's your stock edge brings a rapid machine learning influencing closer to where data is generated and the new rocket <unk> stack form factors provide plowed capabilities and even the harshest of conditions like disaster response.

Satya Nadella: This quarter, we expanded our portfolio of Edge appliances. Azure Stack Edge brings rapid mission-learning inferencing closer to where data is generated. And the new ruggedized Azure stack form factors provide Cloud capabilities in even the harshest of conditions like disaster response. Azure Stack Edge brings rapid machine learning inferencing closer to where data is generated. And the new ruggedized Azure Stack form factors provide cloud capabilities in even the harshest of conditions like disaster response.

Satya Nadella: With Azure Arc, we are defining the next generation of hybrid computing.

Satya Nadella: With Azure Arc, we are defining the next generation of hybrid computing. Arc is an industry-first control plane built for a multi-Cloud, multi-Edge world, helping partners like HPE meet their customers' complex hybrid needs. Our differentiated approach across the Cloud and Edge is winning customers. The U.S. Department of Defense chose Azure to support our men and women in uniform at home, abroad, and at their tactical edge. And our exclusive partnership with SAP makes Azure the preferred destination for every SAP customer with large migrations in every industry, from Accenture to Coca-Cola to Rio Tinto to Walgreens Boots Alliance.

As your arc, we're defining the next generation of hybrid computing.

Satya Nadella: Arc is an industry-first control plane built for a multi-cloud, multi-edge world, helping partners like HPE meet their customers' complex hybrid needs. With Azure Arc, we are defining the next generation of hybrid computing. Arc is an industry-first control plane built for a multi-Cloud, multi-Edge world, helping partners like HPE meet their customers' complex hybrid needs. Our differentiated approach across the Cloud and Edge is winning customers. The U.S. Department of Defense chose Azure to support our men and women in uniform at home, abroad, and at their tactical edge. And our exclusive partnership with SAP makes Azure the preferred destination for every SAP customer with large migrations in every industry, from Accenture to Coca-Cola to Rio Tinto to Walgreens Boots Alliance.

Satya Nadella: Arc is an industry-first control plane built for a multi-cloud, multi-edge world, helping partners like HPE meet their customers' complex hybrid needs.

Satya Nadella: Arc is an industry-first control plane built for a multi-cloud, multi-edge world, helping partners like HPE meet their customers' complex hybrid needs. Our differentiated approach across the cloud and the edge is winning customers. Our differentiated approach across the cloud and the edge is winning customers.

Arc is an industry first controlled plane built for a multi cloud multi edge world, helping partners like H.B.E. meet their customers complex hybrid needs.

Satya Nadella: Our differentiated approach across the cloud and edge is winning customers. The U.S. Department of Defense chose Azure to support our men and women in uniform at home, abroad, and at the tactical edge.

Satya Nadella: Our differentiated approach across the cloud and the edge is winning customers. For example, the U.S. Department of Defense chose Azure to support our men and women in uniform at home, abroad, and at the tactical edge. The U.S. Department of Defense chose Azure to support our men and women in uniform at home, abroad, and at the tactical edge. And our exclusive partnership with SAP makes Azure the preferred destination for every SAP customer with large migrations in every industry, from Accenture to Coca-Cola to Rio Tinto to Walgreens Boots Alliance.

Differentiated approach across the cloud an edge is winning customers. The U.S. department of defense chose Azure to support our men and women in uniform at home abroad and that the tactical edge.

Satya Nadella: The U.S. Department of Defense chose Azure to support our men and women in uniform at home, abroad, and at the tactical edge. And our exclusive partnership with SAP makes Azure the preferred destination for every SAP customer with large migrations in every industry, from Accenture to Coca-Cola to Rio Tinto to Walgreens Boots Alliance.

Satya Nadella: And our exclusive partnership with SAP makes Azure the preferred destination for every SAP customer with large migrations in every industry from Accenture to Coca-Cola to Rio Tinto to Walgreens Boots Alliance.

Satya Nadella: And our exclusive partnership with SAP makes Azure the preferred destination for every SAP customer with large migrations in every industry, from Accenture to Coca-Cola to Rio Tinto to Walgreens Boots Alliance. We're also going beyond conventional computing architecture, ushering in a new era with Azure Quantum, a full stack open ecosystem that enables customers like Ford Motor Company to apply the power of quantum computing today.

And our exclusive partnership with S.A.B. makes azure prefer destination for every S.A.B. customer with large migrations in every industry from Accenture, two Coca Cola to Rio Tinto Walgreens Boots Alliance.

Satya Nadella: We're also going beyond conventional computing architecture, ushering in a new era with Azure Quantum, a full-stack open ecosystem that enables customers like Ford Motor Company to apply the power of quantum computing today.

Satya Nadella: We're also going beyond conventional computing architectures, ushering in a new era with Azure Quantum, a full-stack open ecosystem that enables customers like Ford Motor Company to apply the power of quantum computing today.

Satya Nadella: We're also going beyond conventional computing architectures, ushering in a new era with Azure Quantum, a full stack open ecosystem that enables customers like Ford Motor Company to apply the power of Quantum computing today. There will be 175 terabytes of data by 2025, up from 40 terabytes today. Processing the data in real time will be an operational imperative for every organization. There will be 175 zettabytes of data by 2025, up from 40 zettabytes today. There will be 175 zettabytes of data by 2025, up from 40 zettabytes today.

But also going beyond conventional computing architecture ushering in a new era with Azure quantum a full stock open ecosystem that enables customers like Ford motor company to apply the powder quantum computing today.

It'd be 175, veta bytes of data by 2025 up from 40 is that a bites today.

Satya Nadella: There will be 175 zettabytes of data by 2025, up from 40 zettabytes today. Processing this data in real time will be an operational imperative for every organization. Azure Synapse is our limitless analytics service. It brings together big data analytics and data warehousing with unmatched performance, scale, and security. In concert with Power BI, it enables data scientists to generate immediate insights from structured and unstructured data and build custom AI models. Walgreens Boots Alliance is using Synapse to analyze more than 200 million item store combinations, so millions of customers can rely on items always being in stock. In AI, we are seeing rapid adoption across our comprehensive portfolio of AI tools, infrastructure, and services. Six billion transactions on Azure Cognitive Services each month. Seven billion documents processed daily with Azure Cognitive Search. Two billion predictions a month using Azure Machine Learning. And 3,500 new conversational agents, bots, created each week with Azure Bot Service.

Satya Nadella: Processing this data in real time will be an operational imperative for every organization. Azure Synapse is our limitless analytics service. It brings together big data analytics and data warehousing with unmatched performance, scale, and security. In concert with Power BI, it enables data scientists to generate immediate insights from structured and unstructured data and build custom AI models. Walgreens Boots Alliance is using Synapse to analyze more than 200 million item store combinations so millions of customers can rely on items always being in stock. In AI, we are seeing rapid adoption across a comprehensive portfolio of AI tools, infrastructure, and services. Six billion transactions on Azure Cognize Services each month, seven billion documents processed daily with Azure Cognitive Search, two billion predictions a month using Azure machine learning, and 3,500 new conversational agents boxes created each week with Azure Box Service.

Satya Nadella: Azure Synapse is our limitless analytics service. It brings together big data analytics and data warehousing with unmatched performance, scale, and security. In concert with Power BI, it enables data scientists to generate immediate insights from structured and unstructured data and build custom AI models. Walgreens Boots Alliance is using Synapse to analyze more than 200 million item-store combinations, so millions of customers can rely on items always being in stock. In AI, we are seeing rapid adoption across our comprehensive portfolio of AI tools, infrastructure, and services. For example, 6 billion transactions on Azure Cognitive services each month, 7 billion documents processed daily with Azure cognitive search, 2 billion predictions a month using Azure machine learning, and 3,500 new conversational agents bots created each week with Azure Bot Service. Nationwide is using Azure Bot Service to simplify how millions of customers submit claims.

<unk> data in real time will be an operational imperative for every organization ashes Synopses are limitless analytic service. It brings together big data analytics and data warehousing with unmatched performance scale and security.

Satya Nadella: 6 billion transactions on Azure Cognitive services each month, 7 billion documents processed daily with Azure cognitive search, 2 billion predictions a month using Azure machine learning, and 3,500 new conversational agents bots created each week with Azure Bot Service. Nationwide is using Azure Bot Service to simplify how millions of customers submit claims.

Satya Nadella: It brings together big data analytics and data warehousing with unmatched performance, scale, and security. In concert with Power BI, it enables data scientists to generate immediate insights from structured and unstructured data and build custom AI models. Walgreens Boots Alliance is using Synapse to analyze more than 200 million item-store combinations, so millions of customers can rely on items always being in stock. In AI, we are seeing rapid adoption across our comprehensive portfolio of AI tools, infrastructure, and services.

Satya Nadella: In AI, we are seeing rapid adoption across our comprehensive portfolio of AI tools, infrastructure, and services. For example, six billion transactions on Azure Cognitive Services each month. Seven billion documents processed daily with Azure Cognitive Search and two billion predictions a month using Azure Machine Learning. And 3,500 new conversational agents, or bots, are created each week with Azure Bot Service. Processing this data in real time will be an operational imperative for every organization. Azure Synapse is our limitless analytics service. It brings together big data analytics and data warehousing with unmatched performance, scale, and security. In concert with Power BI, it enables data scientists to generate immediate insights from structured and unstructured data and build custom AI models.

In concert with <unk>. It enables data scientist to generate immediate insights from structured and unstructured data and build custom yeah I models.

Greens boots alliances using <unk> more than 200 million items store combination so millions of customers can rely on items always be in stock.

C rapidly adoption across a comprehensive portfolio V.I. tools infrastructure and services 6 billion transactions on as your cognitive services. Each month 7 billion documents process day leave a dodger cognitive search 2 billion predictions a month using Azure machine learning and 3500 new.

Satya Nadella: Walgreens Boots Alliance is using Synapse to analyze more than 200 million item store combinations so millions of customers can rely on items always being in stock. In AI, we are seeing rapid adoption across a comprehensive portfolio of AI tools, infrastructure, and services. Six billion transactions on Azure Cognize Services each month, seven billion documents processed daily with Azure Cognitive Search, two billion predictions a month using Azure machine learning, and 3,500 new conversational agents boxes created each week with Azure Box Service.

Conversational agents box created each week without your bought service.

Satya Nadella: Nationwide is using Azure Bot Service to simplify how millions of customers submit claims, and KPMG is using Azure Cognitive Services to transcribe and catalog thousands of hours of calls, reducing compliance costs for its clients by as much as 80%. Nationwide is using Azure Box services to simplify how millions of customers submit claims. And KPMG is using Azure Cognitive Services to transcribe and catalogue thousands of hours of calls, reducing compliance costs for its clients by as much as 80%. And KPMG is using Azure Cognitive Services to transcribe and catalog thousands of hours of calls, reducing compliance costs for its clients by as much as 80%.

Nationwide is using Azure bought service to simplify how millions accustomed to submit claims and K.P.M.G. of using agile cognitive services to transcribe and catalog thousands of hours of calls reducing compliance costs for its clients by as much as 80%.

Satya Nadella: Now to security. Cybercrime will cost businesses, governments, and individuals $1 trillion this year. Nationwide is using Azure Box services to simplify how millions of customers submit claims, and KPMG is using Azure Cognitive Services to transcribe and catalogue thousands of hours of calls, reducing compliance costs for its clients by as much as 80%. And KPMG is using Azure Cognitive Services to transcribe and catalog thousands of hours of calls, reducing compliance costs for its clients by as much as 80%. Now, to security. Cybercrime will cost businesses, governments, and individuals $1 trillion this year.

Satya Nadella: Now to security. Cybercrime will cost businesses, governments, and individuals $1 trillion this year.

Satya Nadella: Now to security. Cybercrime will cost businesses, governments, and individuals $1 trillion this year. Now to security. Cybercrime will cost businesses, governments, and individuals $1 trillion this year. We are the only company that offers integrated end-to-end identity, security, and compliance solutions to protect people and organizations, spanning identity management, devices, Cloud apps, data, and infrastructure. Recent CI Service results affirm our leadership and strong structural position, and customers from Maersk to Vodafone are increasingly turning to us to simplify security integration and speed their responses to issues.

Now the security Cybercrime will cost businesses governments and individually one trillion this year.

Satya Nadella: Four months since launch, more than 3,500 customers already rely on Azure Sentinel to detect and mitigate threats. It's early days, and we are accelerating our investments. We are the only company that offers integrated end-to-end identity, security, and compliance solutions to protect people and organizations, spanning identity management, devices, cloud apps, data, and infrastructure. Now, for security. Cybercrime will cost businesses, governments, and individuals $1 trillion this year. We are the only company that offers integrated end-to-end identity, security, and compliance solutions to protect people and organizations, spanning identity management, devices, Cloud apps, data, and infrastructure. Recent CI Service affirms our leadership and strong structural position, and customers from Maersk to Vodafone are increasingly turning to us to simplify security integration and speed their responses to issues. Four months since launch, more than 3,500 customers already rely on Azure Sentinel to detect and mitigate threats. It's early days, and we are accelerating our investments.

Satya Nadella: We are the only company that offers integrated end-to-end identity, security, and compliance solutions to protect people and organizations, spanning identity management, devices, cloud apps, data, and infrastructure.

Satya Nadella: We are the only company that offers integrated end-to-end identity, security, and compliance solutions to protect people and organizations spanning identity management, devices, cloud apps, data, and infrastructure.

Satya Nadella: We are the only company that offers integrated end-to-end identity, security, and compliance solutions to protect people and organizations across identity management, devices, cloud apps, data, and infrastructure. Recent CIO surveys affirm our leadership and strong structural position, and customers from Maersk to Vodafone are increasingly turning to us to simplify security integration and speed their responses to issues. Recent CIO surveys affirm our leadership and strong structural position, and customers from Maersk to Vodafone are increasingly turning to us to simplify security integration and speed their responses to issues.

We are the only company that offers integrated end to end identity security and compliance solutions to protect people and organizations spanning identity management devices cloud apps data and infrastructure.

Satya Nadella: Recent CIO surveys affirm our leadership and strong structural position, and customers from Maersk to Vodafone are increasingly turning to us to simplify security integration and speed their responses to issues. Four months since launch, more than 3,500 customers already rely on Azure Sentinel to detect and mitigate threats. Four months since launch, more than 3,500 customers already rely on Azure Sentinel to detect and mitigate threats.

Recent CIO surveys of from our leadership and strong structural position then customers from Merce Vodafone are increasingly turning to us to simplify security integration and speed their responses sturdy shoes.

Satya Nadella: Four months since launch, more than 3,500 customers already rely on Azure Sentinel to detect and mitigate threats.

<unk> four months since launch more than 3500 customers already rely on <unk> sentinel to detect and mitigate threats.

Satya Nadella: It's early days and we are accelerating our investments. Now on to developer tools. From Azure DevOps to Visual Studio to GitHub, we offer the most complete developer tool chain independent of language, framework, or cloud. New capabilities make it easier for any developer to go from idea to code and from code to cloud. Developers can collaborate on the go with new GitHub mobile app, and GitHub Security Lab addresses the important need to keep open source software secure. More than 10,000 developers at Adobe are using GitHub to collaborate and create software. Stripe is using GitHub to build the online payment platform of choice for millions of customers, and Chipotle is using our dev tools to power their online ordering system.

Satya Nadella: It's early days, and we are accelerating our investments. Now on to developer tools. From Azure DevOps to Visual Studio to GitHub, we offer the most complete developer tool chain independent of language, framework, or cloud. New capabilities make it easier for any developer to go from idea to code and from code to cloud. Developers can collaborate on the go with the new GitHub mobile app, and GitHub Security Lab addresses the important need to keep open source software secure. More than 10,000 developers at Adobe are using GitHub to collaborate and create software. Stripe is using GitHub to build the online payment platform of choice for millions of customers, and Chipotle is using our developer tools to power their online ordering system.

Satya Nadella: New capabilities make it easier for any developer to go from idea to code and from code to the Cloud. And developers can collaborate on the go with new Get UP mobile apps. And Get Up's security lab addresses the important need to keep open source software secure. More than 10,000 developers at Adobe are using Get Up to collaborate and create software. Stripe is using Get UP to build the online payment platform of choice for millions of customers, and Chipotle is using our developer tools to power their online ordering system. New capabilities make it easier for any developer to go from idea to code, and from code to the cloud. And developers can collaborate on the go with the new GitHub mobile app. And GitHub Security Lab addresses the important need to keep open source software secure.

Early days and good accelerating our investments no onto developer tools from <unk>.

Visual studio to get out we all for the most complete develop a tool chain independent of language framework o'clock.

Satya Nadella: New capabilities make it easier for any developer to go from idea to code and from code to the cloud.

Capabilities make it easier for any develop ought to go from idea to code and from code to clog developers can collaborate on the goal with new good have more overlap and get up security lab addresses the important need to keep open source software secure.

Satya Nadella: Developers can collaborate on the go with the new GitHub mobile app, and GitHub Security Lab addresses the important need to keep open source software secure.

Satya Nadella: Now on to developer tools. From Azure DevOps to Visual Studio to GitHub, we offer the complete developer tool chain, independent of language, framework, or cloud. Now on to developer tools. From Azure DevOps to Visual Studio to Get Up, we offer the most complete developer toolchain independent of language, framework, or cloud. New capabilities make it easier for any developer to go from idea to code and from code to the Cloud. And developers can collaborate on the go with new Get UP mobile apps. And Get Up's security lab addresses the important need to keep open source software secure. More than 10,000 developers at Adobe are using Get Up to collaborate and create software. Stripe is using Get UP to build the online payment platform of choice for millions of customers, and Chipotle is using our developer tools to power their online ordering system.

Satya Nadella: We are empowering not only professional developers but those closest to the business problem, from citizen developers to businesses -- business decision-makers with no-code, low-code tools so they can create apps and intelligent workflows that solve unique needs. We are empowering not only professional developers but those closest to the business problem, from citizen developers to businesses -- business decision-makers with no-code, low-code tools so they can create apps and intelligent workflows that solve unique needs.

More than 10000 developers that adobe or using get help to collaborate and create software stripe is using get help to build the online payment platform of choice for millions of customers and <unk> using oh, they have tools to follow that online ordering system.

Satya Nadella: Now on to the Power platform. We are empowering not only professional developers but those closest to the business problem, from citizen developers to businesses -- business decision-makers with no-code, low-code tools so they can create apps and intelligent workflows that solve unique needs.

Satya Nadella: Now on to Power Platform. We are empowering not only professional developers, but those closest to the business problem, from citizen developers to business decision makers with no-code, low-code tools so they can create apps and intelligent workflows that solve unique needs.

Satya Nadella: Now on to Power Platform. We are empowering not only professional developers but those closest to the business problem, from citizen developers to business decision makers, with no-code, low-code tools so they can create apps and intelligent workflows that solve unique needs. Now on to Power Platform. We are empowering not only professional developers but those closest to the business problem, from citizen developers to business decision-makers, with no code local tools so they can create apps and intelligent workflows that solve unique needs.

I want to follow platform.

Probably not only professional developers, but those closest to the business problem from citizen developers to businesses business decision makers with no court local tools. So they can they can create apps and intelligent <unk>, that's all unique needs.

Satya Nadella: Now on to Power Platform. We are empowering not only professional developers but those closest to the business problem, from citizen developers to business decision-makers, with no code local tools so they can create apps and intelligent workflows that solve unique needs. Today, 2.6 million citizen developers use Power Platform to make better decisions using self-service analytics, build a mobile app, automate a business process, or even create a virtual agent, all with no coding experience. We're innovating robotic process automation

Satya Nadella: Power Automate enables customers to turn manual tasks into automated workflows, and Power Virtual Agent enables anyone to build an intelligent bot with just point-and-click. True Green, the largest lawn care company in the United States, is using both these solutions to handle customer inquiries and take action. Today, 2.6 million citizen developers use the Power platform to make better decisions using self-service analytics, build mobile apps, automate a business process, or even create a virtual agent, all with no coding experience.

Satya Nadella: Today, 2.6 million citizen developers use Power Platform to make better decisions using self-service analytics, build a mobile app, automate a business process, or even create a virtual agent, all with no coding experience. We're innovating robotic process automation Power Automate enables customers to turn manual tasks into automated workflows, and Power Virtual Agent enables anyone to build an intelligent bot with just point-and-click. True Green, the largest lawn care company in the United States, is using both these solutions to handle customer inquiries and take action. Today, 2.6 million citizen developers use the Power platform to make better decisions using self-service analytics, build mobile apps, automate a business process, or even create a virtual agent, all with no coding experience.

Satya Nadella: Today, 2.6 million citizen developers use Power Platform to make better decisions using self-service analytics, build a mobile app, automate a business process, or even create a virtual agent, all with no coding experience. We're innovating in robotic process automation. Power Automate enables customers to turn manual tasks into automated workflows, and Power Virtual Agents enables anyone to build an intelligent bot with just point and click. We're innovating in robotic process automation. Power Automate enables customers to turn manual tasks into automated workflows, and Power Virtual Agent enables anyone to build an intelligent bot with just point and click.

Today 2.6 million citizen developers use power platform to make better decisions using self service analytics building mobile lap automate of business process or even creative what you'll agent all with no coding experience.

Satya Nadella: We're innovating in robotic process automation. Power Automate enables customers to turn manual tasks into automated workflows, and Power Virtual Agents enables anyone to build an intelligent bot with just point and click. TrueGreen, the largest lawn care company in the United States, is using both these solutions to handle customer inquiries and take action.

Reading and robotic process automation power automated enables customers to done manual tasks into automated walk flows and power what you'll agents enables anyone to build an intelligent bought with just point and click trugreen the largest lawn care company in the United States is using both be solutions to handle customer inquiries and take action.

Satya Nadella: Now on to Dynamics 365. The competitiveness of every business going forward will be defined by its ability to harness the full value of its data. TruGreen, the largest lawn care company in the United States, is using both these solutions to handle customer inquiries and take action. Now on to Dynamics 365. The competitiveness of every business going forward will be defined by its ability to harness the full value of its data.

Now wanted dynamic 365.

Satya Nadella: Now on to Dynamics 365.

Satya Nadella: Now on to Dynamics 365. The competitiveness of every business going forward will be defined by its ability to harness the full value of its data. Dynamics 365 enables organizations to move from reactive, siloed transactional processes to proactive, repeatable, and predictable business outcomes. Dynamics 365 enables organizations to move from reactive, siloed transactional processes to proactive, repeatable, and predictable business outcomes. Dynamics 365 Customer Insights, which is layered and built on Azure Synapse, is the only customer data platform operating at scale today. The competitiveness of every business going forward will be defined by its ability to harness the full value of its data.

Satya Nadella: The competitiveness of every business going forward will be defined by their ability to harness the full value of their data. Dynamics 365 enables organizations to move from reactive, siloed transactional processes to proactive, repeatable, and predictable business outcomes.

The competitiveness of every business going forward will be defined by the ability to harness the full value of the data dynamic 365 enables organizations from moved to move from reactive silo transactional processed these two proactive repeatable unpredictable business outcomes.

Satya Nadella: Dynamics 365 Customer Insights, that's layered and built on Azure Synapse, is the only customer data platform operating at scale today. AEP Energy is using it to unify first and third party customer data to increase upsell and reduce churn. In retail, Canada Goose is using Dynamics 365 Commerce to unify data across back office, in-store, and call centers to deliver more personalized shopping experiences.

Satya Nadella: Dynamics 365 Customer Insights, which is layered and built on Azure Synapse, is the only customer data platform operating at scale today. AEP Energy is using it to unify first and third-party customer data to increase upsell and reduce churn. In retail, Canada Goose is using Dynamics 365 Commerce to unify data across back office, in-store, and call centers to deliver more personalized shopping experiences. AEP Energy is using it to unify first- and third-party customer data to increase, upsell, and reduce churn. In retail, Canada Goose is using Dynamics 365 Commerce to unify data across back-office, in-store, and call centers to deliver more personalized shopping experiences. AEP Energy is using it to unify first- and third-party customer data to increase, upsell, and reduce churn. In retail, Canada Goose is using Dynamics 365 Commerce to unify data across back-office, in-store, and call centers to deliver more personalized shopping experiences.

365 customer insights.

Satya Nadella: Dynamics 365 enables organizations to move from reactive, siloed transactional processes to proactive, repeatable, and predictable business outcomes. Dynamics 365 enables organizations to move from reactive, siloed transactional processes to proactive, repeatable, and predictable business outcomes. Dynamics 365 Customer Insights, which is layered and built on Azure Synapse, is the only customer data platform operating at scale today.

<unk> is the only customer data platform operating at scaled today H.P. energies using it to unify first and third party customer data to increase up sell introduce chart.

Retail, Canada Goose is using dynamic through six five commerce to unify data across back office in store and call centres to deliver more personalized shopping experiences.

Satya Nadella: AEP Energy is using it to unify first- and third-party customer data to increase, upsell, and reduce churn. In retail, Canada Goose is using Dynamics 365 Commerce to unify data across back-office, in-store, and call centers to deliver more personalized shopping experiences.

Satya Nadella: And in training, ABB is using Dynamics 365 Guides and Remote Assist to bridge the physical and digital worlds.

Satya Nadella: And in training, ABB is using Dynamics 365 guides and remote-assisted to bridge the physical and digital worlds, and Qantas is utilizing HoloLens 2 for immersive new training experience.

Satya Nadella: And in training, ABB is using Dynamics 365 guides and remote assistance to bridge the physical and digital worlds, and Qantas is utilizing HoloLens 2 for immersive new training experiences. Now on to LinkedIn. LinkedIn continues to create economic opportunity for every member of the global workforce, and Qantas is using HoloLens 2 for immersive new training experiences.

And in training abbey's using dynamic 365 guides and remote assistance to bridge, the physical and digital walls and Quantus with Ulysses <unk> for immersive new training experiences.

Satya Nadella: Now on to LinkedIn. LinkedIn continues to create economic opportunity for every member of the global workforce.

Satya Nadella: Now on to LinkedIn. LinkedIn continues to create economic opportunity for every member of the global workforce. Every seven seconds, someone is hired on LinkedIn. We saw record levels of member engagement again this quarter. Marketing Solutions remains our fastest-growing business as marketeers leverage the enhanced tools and LinkedIn pages to connect with our nearly 675 million members. New data validation features in LinkedIn Sales Navigator help sellers use the power of their LinkedIn network to drive more meaningful customer engagement.

Satya Nadella: Now on to LinkedIn. LinkedIn continues to create economic opportunity for every member of the global workforce. Every seven seconds, someone is hired on LinkedIn. We saw record levels of member engagement again this quarter. Marketing Solutions remains our fastest-growing business as marketers leverage the enhanced tools and LinkedIn pages to connect with our nearly 675 million members. New data validation features in LinkedIn Sales Navigator help sellers use the power of their LinkedIn network to drive more meaningful customer engagement.

Satya Nadella: New data validation features in LinkedIn Sales Navigator help sellers use the power of their LinkedIn network to drive more meaningful customer engagement. We continue to innovate across our talent portfolio, including talent solutions, talent insights, Glint, and LinkedIn Learning, to help organizations attract, retain, and develop the best talent. More than 5 million members have already completed LinkedIn skills assessments since the launch last quarter. We continue to innovate across our Talent portfolio, including Talent Solutions, Talent Insights, Glint, and LinkedIn Learning, to help organizations attract, retain, and develop the best talent.

I want to linked in.

Linked in continues to create economic opportunity for every member of the global workforce every seven seconds someone is hired on linked it we saw record levels of members engagement again this quarter marketing solutions remains fosters growing businesses marketeer leverage the enhance tools and linked in pages to connect with our.

Satya Nadella: Every 7 seconds, someone is hired on LinkedIn. Now on to LinkedIn. LinkedIn continues to create economic opportunity for every member of the global workforce. Every seven seconds, someone is hired on LinkedIn. We saw record levels of member engagement again this quarter. Marketing solutions remain our fastest-growing business, as marketers leverage the enhanced tools and LinkedIn pages to connect with our nearly 675 million members. We saw record levels of member engagement again this quarter. Marketing solutions remains our fastest-growing business as marketers leverage the enhanced tools and LinkedIn pages to connect with our nearly 675 million members. New data validation features in LinkedIn Sales Navigator help sellers use the power of their LinkedIn network to drive more meaningful customer engagement.

Nearly 675 million members new data validation features and linked in sales navigator help sellers use the power of that Lincoln network to drive more meaningful customer engagement.

Satya Nadella: We continue to innovate across our Talent portfolio, including Talent Solutions, Talent Insights, Glint, and LinkedIn Learning, to help organizations attract, retain, and develop the best talent.

Satya Nadella: We continue to innovate across our talent portfolio, including Talent Solutions, Talent Insights, Glint, and LinkedIn Learning to help organizations attract, retain, and develop the best talent. More than 5 million members have already completed LinkedIn Skills Assessments since the launch last quarter.

Satya Nadella: We continue to innovate across our talent portfolio, including Talent Solutions, Talent Insights, Glint, and LinkedIn Learning, to help organizations attract, retain, and develop the best talent. More than 5 million members have already completed LinkedIn Skills Assessments since the launch last quarter. More than 5 million members have already completed the LinkedIn skills assessment since its launch last quarter.

Continue to innovate across or talent portfolio, including talent solutions talent inside glint and linked in the money to help organizations attract retain and develop the best talent more than 5 million members have already completed linked in skills assessments since the launch last quarter.

Satya Nadella: Now turning to Microsoft 365. Microsoft 365 is the only solution that empowers everyone with an integrated, secure experience on any device. Microsoft 365 is the only solution that empowers everyone with an integrated, secure experience on any device.

Satya Nadella: Now turning to Microsoft 365.

Satya Nadella: Now turning to Microsoft 365. Microsoft 365 is the only solution that empowers everyone with an integrated secure experience on any device. Every day, AI and Microsoft 365 are helping create, collaborate, and convert content into knowledge in a world where computing is abundant, but attention is scarce. Presentations are more persuasive in PowerPoint; data is more insightful in Excel; videos are more searchable in Stream, and e-mail is more actionable with Cortana.

Now turning to Microsoft 365.

Satya Nadella: Microsoft 365 is the only solution that empowers everyone with an integrated, secure experience on any device.

Satya Nadella: Microsoft 365 is the only solution that empowers everyone with an integrated, secure experience on any device. Everyday AI and Microsoft 365 are helping create, collaborate, and convert content into knowledge in a world where computing is abundant, but attention is scarce. Everyday AI and Microsoft 365 are helping create, collaborate, and convert content into knowledge in a world where computing is abundant. However, attention is scarce.

Microsoft or six five is the only solution that empowers everyone with an integrated secure experience on any device.

Satya Nadella: Everyday AI in Microsoft 365 is helping create, collaborate, and convert content into knowledge in a world where computing is abundant, however, attention is scarce. Presentations are more persuasive in PowerPoint, data is more insightful in Excel, videos are more searchable in Stream, and email more actionable with Cortana.

Satya Nadella: Everyday AI in Microsoft 365 is helping create, collaborate, and convert content into knowledge in a world where computing is abundant, but attention is scarce. Presentations are more persuasive in PowerPoint, data is more insightful in Excel, videos are more searchable in Stream, and email is more actionable with Cortana. Presentations are more persuasive in PowerPoint, data is more insightful in Excel, videos are more searchable in Stream, and e-mail is more actionable with Cortana.

Everyday ally in Microsoft 365 is helping create collaborating can what content into knowledge in the world where computing is abundance. However attention is scarce presentations are more persuasive in Powerpoint data is more insightful in excel videos are more sociable and stream and email more actionable with cortana.

Satya Nadella: The new Project Cortex analyzes massive amounts of information to give people precisely the knowledge they need in the context of their work. Presentations are more persuasive in PowerPoint, data is more insightful in Excel, videos are more searchable in Stream, and e-mail is more actionable with Cortana. The new Project Cortex analyzes massive amounts of information to give people precisely the knowledge they need in the context of their work.

Satya Nadella: The new Project Cortex analyzes massive amounts of information to give people precisely the knowledge they need in the context of their work. And the new Microsoft Edge with Enterprise Class Security protects your privacy online and makes it easier to find information at your work with Microsoft Search. The new Project Cortana analyzes massive amounts of information to give people precisely the knowledge they need in the context of their work. And the new Microsoft Edge with enterprise cloud security protects your privacy online and makes it easier to find information at your work with Microsoft Search. Microsoft Teams is the leading hub for teamwork.

The new project cortex analyzes massive amounts of information to give people precisely the knowledge they need in the context of the book and the new Microsoft edge with Anna price cost security protects your privacy on line and makes it easier to find information at your work with Microsoft search.

Satya Nadella: The new Project Cortana analyzes massive amounts of information to give people precisely the knowledge they need in the context of their work. And the new Microsoft Edge with enterprise cloud security protects your privacy online and makes it easier to find information at your work with Microsoft Search. Microsoft Teams is the leading hub for teamwork. Now with more than 20 million daily active users, people are increasingly engaged across the platform and in richer forms of communication and collaboration, participating in more than 27 million meetings a month. Integrated calendaring, pop-out chats, and One Touch to join meetings from your phone keep work, conversations, and meetings in context, eliminating the need to bounce back and forth between apps.

Satya Nadella: And the new Microsoft Edge with enterprise-class security protects your privacy online and makes it easier to find information at your work with Microsoft Search. Microsoft Teams is the leading hub for teamwork, now with more than 20 million daily active users. People are increasingly engaged across the platform in richer forms of communication and collaboration, participating in more than 27 million meetings a month.

Satya Nadella: Now with more than 20 million daily active users, people are increasingly engaged across the platform and in richer forms of communication and collaboration, participating in more than 27 million meetings a month. Integrated calendaring, pop-out chats, and One Touch to join meetings from your phone keep work, conversations, and meetings in context, eliminating the need to bounce back and forth between apps. And the new Microsoft Edge with enterprise-class security protects your privacy online and makes it easier to find information at your work with Microsoft Search. Microsoft Teams is the leading hub for teamwork, now with more than 20 million daily active users.

Satya Nadella: Microsoft Teams is the leading hub for teamwork. Now with more than 20 million daily active users, people are increasingly engaged across the platform in richer forms of communication and collaboration, participating in more than 27 million meetings a month. Integrated calendaring, pop-out chats, and one-touch-to-join meetings from your phone keeps work, conversations, and meetings in the context, eliminating the need to bounce back and forth between apps.

Satya Nadella: People are increasingly engaged across the platform in richer forms of communication and collaboration, participating in more than 27 million meetings a month.

Satya Nadella: Microsoft Teams is the leading hub for teamwork. Now with more than 20 million daily active users, people are increasingly engaged across the platform in richer forms of communication and collaboration, participating in more than 27 million meetings a month. Integrated calendaring, pop-out chats, and one-touch-to-join meetings from your phone keep work, conversations, and meetings in context, eliminating the need to bounce back and forth between apps.

Microsoft teams is the leading Hob 14 book now with more than 20 million daily active users people are increasingly engaged across the platform and richer forms of communication and collaboration participating in more than 27 million meetings a month.

Satya Nadella: We are reimagining the meeting rooms of the future with Teams integration with Cisco's Webex and new devices from Lenovo. Integrated calendaring, pop-out chats, and one touch to join meetings from your phone keep work, conversations, and meetings in context, eliminating the need to bounce back and forth between apps. We are reimagining the meeting rooms of the future with Teams integration with Cisco's Webex and new devices from Lenovo.

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

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

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

<unk> re imagining the meeting rooms of the future with teams integration with Cisco's, Webex and new devices from the noble and our partnership it's Samsung along with the new Walkie talkie feature in teams gives first line workers the technology, they need to be more collaborative productive and secure on the go.

Satya Nadella: We are reimagining the meeting rooms of the future with Teams integration, with Cisco's WebEx and new devices from Lenovo. And our partnership with Samsung, along with the new walkie-talkie feature in Teams, gives first-line workers the technology they need to be more collaborative, productive, and secure on the go. All this innovation is driving usage. 64,000 employees at L'Oreal are using Teams, and more than 70,000 first-line employees at IKEA are moving to Teams for shift management. From Nestl to Tesco, the world's largest companies are choosing Microsoft 365, and we continue to see increased demand for our premium offerings from customers like AXA, Rockwell Automation, Berkshire Hathaway Specialty Insurance, and Duracell.

Satya Nadella: And our partnership with Samsung, along with a new walkie-talkie feature in Teams, gives first-line workers the technology they need to be more collaborative, productive, and secure on the go. All this innovation is driving usage. 64,000 employees at L'Oréal are using Teams, more than 70,000 first-line employees at IKEA are moving to Teams for shift management, and from Nestlé to Tesco, the world's largest companies are choosing Microsoft 365.

Satya Nadella: 64,000 employees at L'Oreal are using Teams, and more than 70,000 first-line employees at IKEA are moving to Teams for shift management. From Nestl to Tesco, the world's largest companies are choosing Microsoft 365, and we continue to see increased demand for our premium offerings from customers like AXA, Rockwell Automation, Berkshire Hathaway Specialty Insurance, and Duracell. And our partnership with Samsung, along with a new walkie-talkie feature in Teams, gives first-line workers the technology they need to be more collaborative, productive, and secure on the go. All this innovation is driving usage. 64,000 employees at L'Oréal are using Teams, more than 70,000 first-line employees at IKEA are moving to Teams for shift management, and from Nestlé to Tesco, the world's largest companies are choosing Microsoft 365.

Satya Nadella: All this innovation is driving usage. 64,000 employees at L'Oreal are using Teams. More than 70,000 first-line employees at IKEA are moving to Teams for shift management. From Nestle to Tesco, the world's largest companies are choosing Microsoft 365, and we continue to see increased demand for our premium offerings from customers like AXA, Rockwell Automation, Berkshire Hathaway Specialty Insurance, and Duracell.

Satya Nadella: All this innovation is driving usage. For example, 64,000 employees at L'Oreal are using Teams. More than 70,000 first-line employees at IKEA are moving to Teams for shift management. From Nestle to Tesco, the world's largest companies are choosing Microsoft 365, and we continue to see increased demand for our premium offerings from customers like AXA, Rockwell Automation, Berkshire Hathaway Specialty Insurance, and Duracell.

All this innovation is driving usage 64000 employees that l'oreal are using teams more than 70001st line employees at Ikea, a moving to teams for shift management from Nestle <unk>. The world's largest companies are choosing Microsoft 365, and we continue to see increase demand for up premium offerings.

Satya Nadella: And we continue to see increased demand for our premium offerings from customers like AXA, Rockwell Automation, Berkshire Hathaway Specialty Insurance, and Duracell. And we continue to see increased demand for our premium offerings from customers like AXA, Rockwell Automation, Berkshire Hathaway Specialty Insurance, and Duracell.

Satya Nadella: This holiday, we expanded our family of Surface devices, creating new categories that benefit the entire OEM ecosystem. And at CES, our partners showcased innovative Windows 10 devices, from incredibly thin and light laptops to powerful gaming rigs to new dual-screen designs. And at CES, our partners showcased innovative Windows 10 devices, from incredibly thin and light laptops to powerful gaming rigs to new dual-screen designs.

Customers like X., Rockwall automation, Berkshire, Hathaway specialty insurance and duracell.

Satya Nadella: This holiday, we expanded our family of Surface devices, creating new categories that benefit the entire OEM ecosystem, and at CES, our partners showcased innovative Windows 10 devices from incredibly thin and light laptops to powerful gaming rigs to new dual-screen designs. And at CES, our partner showcased innovative Windows 10 devices, from incredibly thin and light laptops to powerful gaming rigs to new dual-screen designs. Finally, gaming.

This holiday be expanded our family of surface devices, creating new categories that benefit the entire where U.M. ecosystem and at C.S.R. partner showcased innovative windows 10 devices from incredibly thin and light laptops too powerful gaming rigs do new dual screen designs.

Satya Nadella: Finally, gaming. We continue to invest to reach gamers across every end point, mobile, PC and console, xCloud is off to a very strong start, transforming how games are distributed, played and viewed with hundreds of thousands of people participating in initial trials, xCloud is off to a very strong start, transforming how games are distributed, played and viewed with hundreds of thousands of people participating in initial trials.

Satya Nadella: We continue to invest to reach gamers across every end point, mobile, PC and console, xCloud is off to a very strong start, transforming how games are distributed, played and viewed with hundreds of thousands of people participating in initial trials, xCloud is off to a very strong start, transforming how games are distributed, played and viewed with hundreds of thousands of people participating in initial trials.

Satya Nadella: Finally Gaming

Satya Nadella: Finally, gaming We continue to invest in reaching gamers across every endpoint, mobile, PC, and console. xCloud is off to a very strong start, transforming how games are distributed, played, and viewed, with hundreds of thousands of people participating in initial trials. Finally, gaming. We continue to invest to reach gamers across every endpoint, including mobile. PC and console. xCloud is off to a very strong start, transforming how games are distributed, played, and viewed with hundreds of thousands of people participating in initial trials.

Finally gaming.

Satya Nadella: We continue to invest to reach gamers across every endpoint, mobile, PC, and console. xCloud is off to a very strong start, transforming how games are distributed, played, and viewed, with hundreds of thousands of people participating in initial trials.

Continue to invest reach gamers across every endpoint mobile P.C. and console X. cloud, it's off to a very strong stock transforming how games distribute it played and viewed with hundreds of thousands of people participating in the initial trials, we set a new record for X. box live monthly active users again this quarter led by the.

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

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

Satya Nadella: We set a new record for Xbox Live monthly active users again this quarter, led by the strength of console. Xbox Game Pass subscribers more than doubled this quarter, and Xbox Series X, announced last month, will be our most powerful console ever.

<unk> off consul X. box game past subscribers more than doubled the squad to an X. box series <unk> announced last month will be a most powerful console level.

Satya Nadella: In closing, we are expanding our opportunity across all our businesses. Along with this opportunity, we recognize the responsibility we have to ensure the technology we build is always inclusive, trusted, and is creating a more sustainable world. Our customers see this urgent need and are looking to us in partnership with them to take action. That's why we announced an ambitious new sustainability commitment. Microsoft will be carbon-negative by 2030, and by 2050, we will remove all the carbon we have emitted since the company was founded in 1975. And our $1 billion Climate Innovation Fund will accelerate the development of carbon reduction and removal technologies. We will continue to innovate alongside customers with profitable, sustainable solutions that expand our opportunity.

Satya Nadella: In closing, we are expanding our opportunity across all our businesses. Along with this opportunity, we recognize the responsibility we have to ensure the technology we build is always inclusive, trusted, and is creating a more sustainable world. Our customers see this urgent need and are looking to us, in partnership with them, to take action. That's why we announced an ambitious new sustainability commitment. Microsoft will be carbon-negative by 2030, and by 2050, we will have removed all the carbon we have emitted since the company was founded in 1975. And our $1 billion Climate Innovation Fund will accelerate the development of carbon reduction and removal technologies. We will continue to innovate alongside customers with profitable, sustainable solutions that expand our opportunities.

Satya Nadella: In closing, we are expanding our opportunities across all our businesses. Along with this opportunity, we recognize the responsibility we have to ensure the technology we build is always inclusive, trusted, and is creating a more sustainable world. Our customers see this urgent need and are looking to us, in partnership with them, to take action. That's why we announced an ambitious new sustainability commitment. Microsoft will be carbon-negative by 2030, and by 2050, we will remove all the carbon we have created since the company was founded in 1975, and our $1 billion climate innovation fund will accelerate the development of carbon reduction and removal technologies.

Satya Nadella: We will continue to innovate alongside customers with profitable, sustainable solutions that expand our opportunities. Our customers see this urgent need and are looking to us, in partnership with them, to take action. That's why we announced an ambitious new sustainability commitment: Microsoft will be carbon negative by 2030. And by 2050, we will remove all the carbon we have emitted since the company was founded in 1975. And our $1 billion Climate Innovation Fund will accelerate the development of carbon reduction and removal technologies. We will continue to innovate alongside customers with profitable, sustainable solutions that expand our opportunities.

In closing, we are expanding our opportunity across all our businesses.

Satya Nadella: Our customers see this urgent need and are looking to us, in partnership with them, to take action. That's why we announced an ambitious new sustainability commitment. Microsoft will be carbon negative by 2030, and by 2050, we will have removed all the carbon we have emitted since the company was founded in 1975. And our $1 billion Climate Innovation Fund will accelerate the development of carbon reduction and removal technologies. We will continue to innovate alongside customers with profitable, sustainable solutions that expand our opportunities.

Along with this opportunity to recognize the responsibility be have to ensure the technology rebuild is always inclusive trusted and is creating more sustainable wall.

Satya Nadella: That's why we announced an ambitious new sustainability commitment: Microsoft will be carbon negative by 2030. And by 2050, we will remove all the carbon we have emitted since the company was founded in 1975. And our $1 billion Climate Innovation Fund will accelerate the development of carbon reduction and removal technologies. We will continue to innovate alongside customers with profitable, sustainable solutions that expand our opportunities.

<unk> need and are looking to Austin partnership with them to take action, that's why be announced an ambitious new sustainability commitment Microsoft will be carbon negative by 2030 and by 2050, we would remove all the carbon be limited since the company was founded in 1975, and I'll 1 billion climate innovation.

Satya Nadella: In closing, we are expanding our opportunities across all our businesses. Along with this opportunity, we recognize the responsibility we have to ensure the technology we build is always inclusive, trusted, and is creating a more sustainable world. Our customers see this urgent need and are looking to us, in partnership with them, to take action. That's why we announced an ambitious new sustainability commitment. Microsoft will be carbon-negative by 2030, and by 2050, we will remove all the carbon we have absorbed since the company was founded in 1975, and our $1 billion climate innovation fund will accelerate the development of carbon reduction and removal technologies. We will continue to innovate alongside customers with profitable, sustainable solutions that expand our opportunities.

Fund will accelerate the development of carbon reduction in removal technologies.

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

The innovate alongside customers with profitable sustainable solutions that expand our opportunity.

Satya Nadella: With that, I'll hand it over to Amy, who will cover our financial results in detail and share our outlook. I look forward to rejoining you after for questions. Thank you, Satya, and good afternoon, everyone. This quarter, revenue was $36.9 billion, up 14% and 15% in constant currency. Growth margin dollars increased 22% and 25% in constant currency. Operating income increased 35% and 39% in constant currency. And earnings per share was $1.51, increasing 37% and 41% in constant currency, which is a lot of money. When adjusting for the net charges related to TCJA from the prior year.

Satya Nadella: With that, I'll hand it over to Amy, who will cover our financial results in detail and share our outlook. I look forward to rejoining you after for questions. Thank you, Satya, and good afternoon, everyone. This quarter, revenue was $36.9 billion, up 14% and 15% in constant currency. Growth margin dollars increased 22% and 25% in constant currency. Operating income increased 35% and 39% in constant currency. And earnings per share was $1.51, increasing 37% and 41% in constant currency, which is a lot of money. But when adjusting for the net charges related to TCJA from the prior year.

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

Satya Nadella: With that, I'll hand it over to Amy, who will cover our financial results in detail and share our outlook. I look forward to rejoining you after for questions. This quarter, revenue was $36.9 billion, up 14% and 15% in constant currency. Gross margin dollars increased 22% and 25% in constant currency. Thank you, Satya, and good afternoon, everyone. This quarter, revenue was $36.9 billion, up 14% and 15% in constant currency. Gross margin dollars increased 22% and 25% in constant currency. Operating income increased 35% and 39% in constant currency, and earnings per share was $1.51, increasing 37% and 41% in constant currency when adjusting for the net charges related to TCJA from the prior year.

Satya Nadella: Operating income increased 35% and 39% in constant currency, and earnings per share were $1.51, increasing 37% and 41% in constant currency when adjusting for the net charges related to TCJA from the prior year. Our sales teams and partners again delivered strong commercial results, and we continue to benefit from favorable secular trends. From a geographic perspective, we saw broad-based strength across all markets. Our sales teams and partners again delivered strong commercial results, and we continue to benefit from favorable secular trends.

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This quarter revenue was $36.9 billion up, 14% and 15% and constant currency gross margin dollars increased 22% and 25% and constant currency operating income increased 35% and 39% and constant currency and earnings per share it with a dollar.

Satya Nadella: With that, I'll hand it over to Amy, who will cover our financial results in detail and share our outlook. I look forward to rejoining you after for questions. Thank you, Satya, and good afternoon, everyone. This quarter, revenue was $36.9 billion, up 14% and 15% in constant currency. Gross margin dollars increased 22% and 25% in constant currency. Operating income increased 35% and 39% in constant currency, and earnings per share was $1.51, increasing 37% and 41% in constant currency when adjusting for the net charges related to TCJA from the prior year.

<unk>, one increasing 37% and 41% and constant currency when adjusting for that charges relating to T.C.J. from the prior year.

Satya Nadella: From a geographic perspective, we saw broad-based strength across all markets.

Amy E. Hood: Our sales teams and partners again delivered strong commercial results, and we continued to benefit from favorable secular trends.

Amy E. Hood: Our sales teams and partners again delivered strong commercial results, and we continued to benefit from favorable secular trends. From a geographic perspective, we saw broad-based strength across all markets. In our commercial business, we continued to see strong demand for our differentiated hybrid and cloud offerings with increased customer commitment to the Azure platform, and the unique value of Microsoft 365, which brings together Office 365, Windows 10, and enterprise mobility and security as a secure intelligent solution, again drove adoption by both new and existing customers. As a result, commercial bookings growth was ahead of expectations, increasing 31% and 30% in constant currency, with a high volume of new business and strong renewal execution.

Our sales teams and partners again delivered strong commercial results and we continued to benefit from favorable secular trends.

Amy E. Hood: In our commercial business, we continued to see strong demand for our differentiated hybrid and cloud offerings, with increased customer commitment to the Azure platform.

Amy E. Hood: In our commercial business, we continued to see strong demand for our differentiated hybrid and cloud offerings, with increased customer commitment to the Azure platform. Our sales teams and partners again delivered strong commercial results, and we continued to benefit from favorable secular trends. From a geographic perspective, we saw broad-based strength across all markets. In our commercial business, we continued to see strong demand for our differentiated hybrid and cloud offerings with increased customer commitment to the Azure platform, and the unique value of Microsoft 365, which brings together Office 365, Windows 10, and enterprise mobility and security as a secure intelligent solution, again drove adoption by both new and existing customers. As a result, commercial bookings growth was ahead of expectations, increasing 31% and 30% in constant currency, with a high volume of new business and strong renewal execution.

Amy E. Hood: From a geographic perspective, we saw broad-based strength across all markets.

<unk> perspective, we saw broad base strength across all markets.

Amy E. Hood: And the unique value of Microsoft 365, bringing together Office 365, Windows 10, and Enterprise Mobility and Security as a secure intelligent solution, again drove adoption by both new and existing customers.

Amy E. Hood: In our commercial business, we continued to see strong demand for our differentiated hybrid and cloud offerings, with increased customer commitment to the Azure platform. And the unique value of Microsoft 365, bringing together Office 365, Windows 10, and Enterprise Mobility and Security as a secure, intelligent solution, again drove adoption by both new and existing customers.

Amy E. Hood: In our commercial business, we continued to see strong demand for our differentiated hybrid and cloud offerings, with increased customer commitment to the Azure platform. And the unique value of Microsoft 365, bringing together Office 365, Windows 10, and Enterprise Mobility and Security as a secure, intelligent solution, again drove adoption by both new and existing customers. As a result, commercial bookings growth was ahead of expectations, increasing 31% and 30% in constant currency, with a high volume of new business and strong renewal execution. Our commercial remaining performance obligation was $90 billion, up 30% year-over-year, driven by long-term customer commitments.

In our commercial business, we continued to see strong demand for our differentiated hybrid and cloud offerings with increased customer commitment to the Asher platform.

Unique value of Microsoft 365 brings together office 365 Windows Tan enterprise mobility and security as a secure intelligent solution again drove adoption by those new and existing customers.

Amy E. Hood: As a result, commercial bookings growth was ahead of expectations, increasing 31% and 30% in constant currency, with a high volume of new business and strong renewal execution. Our commercial remaining performance obligation was $90 billion, up 30% year-over-year, driven by long-term customer commitments.

Amy E. Hood: As a result, commercial bookings growth was ahead of expectations, increasing 31% and 30% in constant currency, with a high volume of new business and strong renewal execution.

Amy E. Hood: As a result, commercial bookings growth was ahead of expectations, increasing 31% and 30% in constant currency, with a high volume of new business and strong renewal execution. Commercial cloud revenue was $12.5 billion, growing 39% and 41% in constant currency. Commercial cloud revenue was $12.5 billion, growing 39% and 41% in constant currency.

As a result commercial bookings growth was ahead of expectations, increasing 31% and 30% in constant currency with a high volume of new business and strong renewal execution.

Amy E. Hood: Our commercial remaining performance obligation was $90 billion, up 30% Euro per year, driven by long-term customer commitment.

Amy E. Hood: Our commercial remaining performance obligation was $90 billion, up 30% Euro per year, driven by long-term customer commitments. Commercial remaining obligation with $90 billion, up 30% year-over-year driven by long-term customer commitments Commercial cloud revenue was $12.5 billion, growing 39% and 41% in constant currency. Commercial Cloud gross margin percentage increased five points year-over-year to 67%, driven again by a material improvement in Azure gross margin percentage, which more than offset sales and mix shift to Azure. Commercial cloud gross margin percentage increased 5 points year-over-year to 67%, driven again by a material improvement in Azure gross margin percentage, which more than offset sales mix shift to Azure.

A commercial remaining performance application was $90 billion 30 per cent euro for gear driven by long term customer commitments.

Amy E. Hood: Commercial remains an obligation with $90 billion, up 30% year-over-year driven by long-term customer commitments. Commercial cloud revenue was $12.5 billion, growing 39% and 41% in constant currency. Commercial Cloud gross margin percentage increased five points year-over-year to 67%, driven again by a material improvement in Azure gross margin percentage, which more than offset sales and mix shift to Azure. Commercial cloud gross margin percentage increased 5 points year-over-year to 67%, driven again by a material improvement in Azure gross margin percentage, which more than offset sales mix shift to Azure.

Amy E. Hood: Commercial cloud revenue was $12.5 billion, growing 39% and 41% in constant currency. Commercial cloud gross margin percentage increased five points year-over-year to 67%, driven again by a material improvement in Azure gross margin percentage, which more than offset sales mixed shift to Azure. Our commercial remaining performance obligation was $90 billion, up 30% year over year, driven by long-term customer commitments. Commercial cloud revenue was $12.5 billion, growing 39% and 41% in constant currency. Commercial cloud gross margin percentage increased five points year over year to 67%, driven again by a material improvement in Azure growth margin percentage, which more than offset sales mix shift to Azure. Company growth margin percentage was 67%, up five points year over year, driven by favorable sales mix and improvement across all three of our segments.

Amy E. Hood: Our commercial remaining performance obligation was $90 billion, up 30% year over year, driven by long-term customer commitments. Commercial cloud revenue was $12.5 billion, growing 39% and 41% in constant currency. Commercial cloud gross margin percentage increased five points year over year to 67%, driven again by a material improvement in Azure growth margin percentage, which more than offset sales mix shift to Azure. Company growth margin percentage was 67%, up five points year over year, driven by favorable sales mix and improvement across all three of our segments. In the quarter, gross margin percentage benefited from lower console sales, stronger-than-expected software licensing results, and improvement in our Commercial cloud gross margin percentage.

Amy E. Hood: Company gross margin percentage was 67%, up 5 points year-over-year, driven by favorable sales mix and improvement across all 3 of our segments. In the quarter, gross margin percentage benefited from lower console sales, stronger-than-expected software licensing results, and improvement in our commercial cloud gross margin percentage.

<unk> revenue was $12.5 billion growing 39% and 41% in constant currency commercial cloud gross margin percentage increase to five points for every year to 67% driven again by material improvement and Asher gross margin percentage, which more than offset sales mix shift to asher.

Amy E. Hood: In the quarter, gross margin percentage benefited from lower console sales, stronger-than-expected software licensing results, and improvement in our Commercial cloud gross margin percentage. Company gross margin percentage was 67%, up 5 points year-over-year, driven by a favorable sales mix and improvement across all 3 of our segments. In the quarter, gross margin percentage benefited from lower console sales, stronger-than-expected software licensing results, and improvement in our commercial cloud gross margin percentage.

Amy E. Hood: Company growth margin percentage was 67%, up five points year over year, driven by favorable sales mix and improvement across all three of our segments.

Amy E. Hood: Company growth margin was 67%, up five points year over year, driven by favorable sales mix and improvement across all three of our segments. In line with expectations, FX reduced revenue growth by 1 point and had no impact on operating expense growth. In line with expectations, FX reduced revenue growth by 1 point and had no impact on operating expense growth.

Company gross margin percentage was 67%.

5.2 year over year, driven by favorable sales mix and improvement across all three of our segments.

Amy E. Hood: In the quarter, gross margin percentage benefited from lower console sales, stronger than expected software licensing results, and improvement in our commercial cloud gross margin percentage. FX impact on COGS growth was slightly more favorable than expected and reduced growth by 1 point. Operating expense grew 9%, slightly below expectations, primarily driven by lower program spend. The FX impact on COGS growth was slightly more favorable than expected and reduced growth by 1 point. Operating expense grew 9%, slightly below expectations, primarily driven by lower program spend.

The quarter gross margin percentage benefited from lower console sales stronger than expected software licensing results and improvement our commercial cloud gross margin percentage.

Amy E. Hood: In line with expectations, FX reduced revenue growth by one point and had no impact on operating expense growth. FX impact on COGS growth was slightly more favorable than expected and reduced growth by one point. Operating expense grew 9%, slightly below expectations, primarily driven by lower program spend. And operating margins expanded this quarter as a result of higher gross margins and operating leverage. Through disciplined decisions to invest in strategic and high growth areas. Now to our segment results.

Amy E. Hood: In line with expectations, FX reduced revenue growth by one point and had no impact on operating expense growth. However, the FX impact on COGS growth was slightly more favorable than expected and reduced growth by one point. Operating expense grew 9%, slightly below expectations, primarily driven by lower program spend. And operating margins expanded this quarter as a result of higher gross margins and operating leverage. Through disciplined decisions to invest in strategic and high-growth areas. Now to our segment results.

In line with expectations effects reduced revenue growth by one point and had no impact on operating expense gross affects impact on <unk> slightly more favorable than expected and reduce cross by one point.

Amy E. Hood: And operating margins expanded this quarter as a result of higher gross margins and operating leverage through disciplined decisions to invest in strategic and high-growth areas. Now to our segment results. Revenue from Productivity and Business Processes was $11.8 billion, increasing 17% and 19% in constant currency, ahead of expectations, driven by both our commercial and consumer businesses.

Amy E. Hood: Office commercial revenue grew 16% and 18% in constant currency with roughly 3 points of on-premises benefit, primarily from transactional strength in Japan. Office commercial revenue grew 16% and 18% in constant currency with roughly 3 points of on-premises benefit, primarily from transactional strength in Japan.

Amy E. Hood: In line with expectations, FX reduced revenue growth by one point and had no impact on operating expense growth. However, the FX impact on COGS growth was slightly more favorable than expected and reduced growth by one point. Operating expense grew 9%, slightly below expectations, primarily driven by lower program spend. And operating margins expanded this quarter as a result of higher gross margins and operating leverage through disciplined decisions to invest in strategic and high-growth areas. Now to our segment results.

Being expense screw nine per cent slightly below expectations, primarily driven by lower program stand.

Amy E. Hood: Revenue from Productivity and Business Processes was $11.8 billion, increasing 17% and 19% in constant currency, ahead of expectations, driven by both our commercial and consumer businesses. Office commercial revenue grew 16% and 18% in constant currency with roughly 3 points of on-premises benefit, primarily from transactional strength in Japan.

Amy E. Hood: In line with expectations, FX reduced revenue growth by one point and had no impact on operating expense growth. However, the FX impact on COGS growth was slightly more favorable than expected and reduced growth by one point. Operating expense grew 9%, slightly below expectations, primarily driven by lower program spend. And operating margins expanded this quarter as a result of higher gross margins and operating leverage through disciplined decisions to invest in strategic and high-growth areas.

Operating margins expanded this quarter as a result of hair gross margins and operating leverage to discipline decisions to invest in strategic and high growth areas now tore segment results.

Amy E. Hood: Revenue from productivity and business processes was $11.8 billion, increasing 17% and 19% in constant currency, ahead of expectations, driven by both our commercial and consumer businesses. Office commercial revenue grew 16% and 18% in constant currency, with roughly three points of on-premises benefit, primarily from transactional strength in Japan. Office 365 commercial revenue growth of 27% and 30% in constant currency was again driven by installed-based growth across all workloads and customer segments, as well as higher ARPU. Office 365 commercial seats grew 21%, with an increasing mix from our Microsoft 365 suite.

Revenue from productivity and business processes was $11.8 million, increasing 17% and 19 per cent and constant currency ahead of expectations.

Amy E. Hood: Now to our segment results. Revenue from productivity and business processes was $11.8 billion, increasing 17% and 19% in constant currency, ahead of expectations, driven by both our commercial and consumer businesses. Office commercial revenue grew 16% and 18% in constant currency, with roughly three points of on-premise benefit primarily from transactional strength in Japan. Office 365 commercial revenue growth of 27% and 30% in constant currency was again driven by installed base growth across all workloads and customer segments as well as higher ARPU. Office 365 commercial revenue growth of 27% and 30% in constant currency was again driven by installed base growth across all workloads and customer segments as well as higher ARPU. Office 365 Commercial seats grew 21% with an increasing mix from our Microsoft 365 suite.

Amy E. Hood: Office consumer revenue grew 19% and 20% in constant currency, driven by growth in Office 365 subscription revenue. This quarter, growth was also impacted by roughly seven points of benefit from transactional strength in Japan and five points of benefit from the low prior year comparable related to the timing of Office 2019 purchases. Office 365 commercial seats grew 21% with an increasing mix from our Microsoft 365 suite. Office consumer revenue grew 19% and 20% in constant currency, driven by growth in Office 365 subscription revenue. This quarter, growth was also impacted by roughly 7 points of benefit from transactional strength in Japan and 5 points of benefit from the low prior year comparable related to the timing of Office 2019 purchases.

Amy E. Hood: Office 365 Commercial seats grew 21% with an increasing mix from our Microsoft 365 suite. Office consumer revenue grew 19% and 20% in constant currency, driven by growth in Office 365 subscription revenue. This quarter, growth was also impacted by roughly seven points of benefit from transactional strength in Japan and five points of benefit from the low prior year comparable related to the timing of Office 2019 purchases.

Amy E. Hood: Office 365 commercial seats grew 21% with an increasing mix from our Microsoft 365 suite. Office consumer revenue grew 19% and 20% in constant currency, driven by growth in Office 365 subscription revenue. This quarter, growth was also impacted by roughly 7 points of benefit from transactional strength in Japan and 5 points of benefit from the low prior year comparable related to the timing of Office 2019 purchases.

By both our commercial and consumer businesses office commercial revenue grew 16% and 18% in constant currency was roughly three points of on premises benefit primarily from transactional strength in Japan, Officethree 65, commercial revenue growth at 27% and 30 per cent in constant currency.

Amy E. Hood: Now to our segment results. Revenue from productivity and business processes was $11.8 billion, increasing 17% and 19% in constant currency, ahead of expectations, driven by both our commercial and consumer businesses. Office commercial revenue grew 16% and 18% in constant currency, with roughly three points of on-premises benefit, primarily from transactional strength in Japan. Office 365 commercial revenue growth of 27% and 30% in constant currency was again driven by installed-based growth across all workloads and customer segments, as well as higher ARPU. Office 365 commercial revenue growth of 27% and 30% in constant currency was again driven by installed-based growth across all workloads and customer segments, as well as higher ARRPU.

Again, driven by installed base growth across all workloads and customer segments as well as higher are too.

Mystery 65 commercial seats grew 21 per cent within increasing mix from Microsoft 365 Sweet.

Amy E. Hood: Office consumer revenue grew 19% and 20% in constant currency, driven by growth in Office 365 subscription revenue. This quarter, growth was also impacted by roughly 7 points of benefit from transactional strength in Japan and 5 points of benefit from the low prior year comparable related to the timing of Office 2019 purchases. Office 365 consumer subscriptions grew to 37.2 million, and Dynamics revenue grew 12% and 15% in constant currency. Dynamics 365 revenue increased 42% and 45% in constant currency, with continued momentum in the number of customers adopting multiple Dynamics 365 workloads.

Office consumer revenue grew 19% and 20 per cent in constant currency driven by growth in office 365 subscription revenue this quarter.

Of course was awful impacted by roughly seven points to benefit from transactional strength in Japan, and five points to benefit from the low prior your comparable related to the timing of the office funny 19 purchases.

Amy E. Hood: Office 365 consumer subscriptions grew to 37.2 million. Dynamics revenue grew 12% and 15% in constant currency. Dynamics 365 revenue increased 42% and 45% in constant currency, with continued momentum in the number of customers adopting multiple Dynamics 365 workloads.

Amy E. Hood: Office 365 consumer subscriptions grew to 37.2 million, and Dynamics revenue grew 12% and 15% in constant currency. Dynamics 365 revenue increased 42% and 45% in constant currency, with continued momentum in the number of customers adopting multiple Dynamics 365 workloads. Office 365 consumer subscriptions grew to 37.2 million. Dynamics revenue grew 12% and 15% in constant currency, and Dynamics 365 revenue increased 42% and 45% in constant currency, with continued momentum in the number of customers adopting multiple Dynamics 365 workloads.

Officer 65, consumer subscription grew to 37.2 million.

<unk> revenue grew 12% and 15% constant currently dynamics 365 revenue increase 42% and 45% and constant currency with continued momentum and the number of customers adopting multiple dynamics 365 workload.

Amy E. Hood: LinkedIn revenue increased 24% and 26% in constant currency, with continued strength across all businesses, highlighted by marketing solutions growth of 42%. LinkedIn sessions grew 25% with record levels of engagement again this quarter. Segment gross margin dollars increased 21% and 23% in constant currency, and gross margin percentage increased 2 points year-over-year as improvements in Office 365 and LinkedIn margins more than offset an increase in cloud revenue mix. Office 365 consumer subscriptions grew to 37.2 million. Dynamics revenue grew 12% and 15% in constant currency, and Dynamics 365 revenue increased 42% and 45% in constant currency, with continued momentum in the number of customers adopting multiple Dynamics 365 workloads. LinkedIn revenue increased 24% and 26% in constant currency, with continued strength across all businesses, highlighted by marketing solutions growth of 42%.

Amy E. Hood: LinkedIn sessions grew 25% with record levels of engagement again this quarter. Segment gross margin dollars increased 21% and 23% in constant currency, and gross margin percentage increased 2 points year-over-year as improvements in Office 365 and LinkedIn margins more than offset an increase in cloud revenue mix.

Amy E. Hood: LinkedIn revenue increased 24% and 26% in constant currency, with continued strength across all businesses, highlighted by marketing solutions growth of 42%. LinkedIn sessions grew 25% with record levels of engagement again this quarter. LinkedIn revenue increased 24% and 26% in constant currency, with continued strength across all businesses, highlighted by marketing solutions growth of 42%. LinkedIn sessions grew 25%, with record levels of engagement again this quarter. Segment gross margin dollars increased 21% and 23% in constant currency, and gross margin percentage increased two points year over year, as improvements in Office 365 and LinkedIn margins more than offset an increase in Cloud revenue mix. Operating expense increased 12%, driven by continued investment in LinkedIn and cloud engineering. And operating income increased by 29% and 33% in constant currency.

And revenue increase 24%, 26% in constant currency with continued strength across all businesses highlighted by marketing solutions growth a 42%.

Amy E. Hood: Operating expense increased 12%, driven by continued investment in LinkedIn and cloud engineering, and operating income increased 29% and 33% in constant currency. LinkedIn revenue increased 24% and 26% in constant currency, with continued strength across all businesses, highlighted by marketing solutions growth of 42%. LinkedIn sessions grew 25%, with record levels of engagement again this quarter. Segment gross margin dollars increased 21% and 23% in constant currency, and gross margin percentage increased two points year over year, as improvements in Office 365 and LinkedIn margins more than offset an increase in Cloud revenue mix. Operating expense increased 12%, driven by continued investment in LinkedIn and cloud engineering. And operating income increased by 29% and 33% in constant currency.

Amy E. Hood: Operating expense increased 12%, driven by continued investment in LinkedIn and cloud engineering, and operating income increased 29% and 33% in constant currency.

Concessions grew 25% with record levels of engagement again this quarter.

Amy E. Hood: Segment gross margin dollars increased 21% and 23% in constant currency, and gross margin percentage increased two points year over year as improvements in Office 365 and LinkedIn margins more than offset an increase in cloud revenue mix. Next, the Intelligent Cloud segment. Revenue was $11.9 billion, increasing 27% and 28% in constant currency, ahead of expectations, driven by continued customer demand for our hybrid offerings. Next, the Intelligent Cloud segment. Revenue was $11.9 billion, increasing 27% and 28% in constant currency, ahead of expectations, driven by continued customer demand for our hybrid offerings.

Segment gross margin dollars increased 21% to 23% in constant currency and gross margin percentage increase to point, you're over a year as improvements in office 365 and linked in margins more than all set an increase in cloud revenue next.

Amy E. Hood: Operating expense increased 12%, driven by continued investment in LinkedIn and cloud engineering. And operating income increased 29% and 33% in constant currency.

Amy E. Hood: Operating expense increased 12%, driven by continued investment in LinkedIn and cloud engineering. And operating income increased 29% and 33% in constant currency. On a significant basis, server products and cloud services revenue increased by 30% and 32% in constant currency. On a significant basis, server products and cloud services revenue increased by 30% and 32% in constant currency.

Great expense increase 12% driven by continued investment and linked in an cloud engineering.

Operating income increased 29% and 33% and constant currency.

Amy E. Hood: Next, the Intelligent Cloud segment.

Amy E. Hood: Next, the Intelligent Cloud segment. Azure revenue grew 62% and 64% in constant currency, driven by another quarter of strong growth in our consumption-based business across all customer segments. Azure revenue grew 62% and 64% in constant currency, driven by another quarter of strong growth in our consumption-based business across all customer segments.

Next the intelligent clouds segment.

Amy E. Hood: Revenue was $11.9 billion, increasing 27% and 28% in constant currency, ahead of expectations, driven by continued customer demand for our hybrid offering.

Amy E. Hood: Revenue was $11.9 billion, increasing 27% and 28% in constant currency, ahead of expectations, driven by continued customer demand for our hybrid offering. Next, the intelligent cloud segment. Revenue was $11.9 billion, increasing 27% and 28% in constant currency, ahead of expectations, driven by continued customer demand for our hybrid offerings. On a significant basis, server products and cloud services revenue increased 30% and 32% in constant currency. Azure revenue grew 62% and 64% in constant currency, driven by another quarter of strong growth in our consumption-based business across all customer segments. In our per user business, our enterprise mobility install base grew 35% to over 127 million seats, with continued benefit from Microsoft 365 suite momentum.

He was $11.9 billion, increasing 27% and 28% in constant currency head of expectations.

Amy E. Hood: In our per-user business, our enterprise mobility installed base grew 35% to over 127 million seats, with continued benefit from Microsoft 365 suite momentum. Next, the intelligent cloud segment. Revenue was $11.9 billion, increasing 27% and 28% in constant currency, ahead of expectations, driven by continued customer demand for our hybrid offerings. On a significant basis, server products and cloud services revenue increased 30% and 32% in constant currency. Azure revenue grew 62% and 64% in constant currency, driven by another quarter of strong growth in our consumption-based business across all customer segments. In our per user business, our enterprise mobility install base grew 35% to over 127 million seats, with continued benefit from Microsoft 365 suite momentum.

By continued customer demand for our hybrid offering.

Amy E. Hood: In our per-user business, our enterprise mobility installed base grew 35% to over 127 million seats, with continued benefit from Microsoft 365 suite momentum.

Amy E. Hood: On a significant base, server products and cloud services revenue increased 30% and 32% in constant currency. Azure revenue grew 62% and 64% in constant currency, driven by another quarter of strong growth in our consumption-based business across all customer segments. In our per-user business, our enterprise mobility install base grew 35% to over 127 million seats, with continued benefit from Microsoft 365 Suite Momentum.

Amy E. Hood: On a significant basis, server products and cloud services revenue increased 30% and 32% in constant currency. Azure revenue grew 62% and 64% in constant currency, driven by another quarter of strong growth in our consumption-based business across all customer segments. In our per-user business, our enterprise mobility install base grew 35% to over 127 million seats, with continued benefit from Microsoft 365 Suite Momentum. And our on-premises server business grew 10% and 12% in constant currency, with roughly 4 points of benefit from the end of support for Windows Server 2008, in addition to the continued strength of our hybrid and premium solutions.

Significant base surfer products and services revenue increase 30 per cent and 32% and constant currency.

<unk> revenue grew 62% and 64% and constant currency driven by another quarter of strong growth in our consumption based business across all customers segments.

Amy E. Hood: Nearly 1/3 of our Windows Server and SQL Server enterprise customers are already using our hybrid use benefits to deploy Azure, reflecting the value and flexibility of these offerings. And our on-premises server business grew 10% and 12% in constant currency, with roughly 4 points of benefit from the end of support for Windows Server 2008, in addition to the continued strength of our hybrid and premium solutions. Nearly 1/3 of our Windows Server and SQL Server enterprise customers are already using our hybrid use benefits to deploy Azure, reflecting the value and flexibility of these offerings.

In our per user business are enterprise mobility install base, 35% over 127 million seat, but continued benefit from Microsoft 365 sweeter momentum.

Amy E. Hood: and our on-premises server.

Amy E. Hood: and our on-premises server. Business grew 10% and 12% in constant currency, with roughly four points of benefit from the end of support for Windows Server 2008, in addition to the continued strength of our hybrid and premium solutions. And our on-premises server business grew 10% and 12% in constant currency, with roughly 4 points of benefit from the end of support for Windows Server 2008, in addition to the continued strength of our hybrid and premium solutions. Nearly one-third of our Windows Server and SQL Server enterprise customers are already using our hybrid use benefits to deploy Azure, reflecting the value and flexibility of these offerings.

And her on premises server.

There's a screw, 10% and 12% and constant currency was roughly four points of benefit from the end of support for Windows Server 2008. In addition to the continued strength of our hybrid and premium solutions.

Amy E. Hood: Enterprise Services revenue increased 6% and 7% in constant currency, driven by growth in Premier Support Services. Segment gross margin dollars increased 28% and 31% in constant currency, and gross margin percentage increased 1 point year-over-year as another quarter of material improvement in Azure gross margin more than offset the growing mix of Azure IaaS and PaaS revenue. Segment gross margin dollars increased 28% and 31% in constant currency, and gross margin percentage increased 1 point year-over-year as another quarter of material improvement in Azure gross margin more than offset the growing mix of Azure IaaS and PaaS revenue.

Amy E. Hood: Business grew 10% and 12% in constant currency, with roughly four points of benefit from the end of support for Windows Server 2008, in addition to the continued strength of our hybrid and premium solutions. And our on-premises server business grew 10% and 12% in constant currency, with roughly 4 points of benefit from the end of support for Windows Server 2008, in addition to the continued strength of our hybrid and premium solutions. Nearly one-third of our Windows Server and SQL Server enterprise customers are already using our hybrid use benefits to deploy Azure, reflecting the value and flexibility of these offerings.

Amy E. Hood: Nearly one-third of our Windows Server and SQL Server Enterprise customers are already using our hybrid use benefits to deploy Azure, reflecting the value and flexibility of these offerings. Enterprise services revenue increased 6% and 7% in constant currency, driven by growth in Premier support services. Segment gross margin dollars increased 28% and 31% in constant currency, and gross margin percentage increased one point year over year, as another quarter of material improvement in Azure gross margin more than offset the growing mix of Azure IaaS and PaaS revenue. Operating expense increased 18%, primarily driven by continued investments in Azure. Operating income grew 38% and 42% in constant currency.

Nearly one third of our Windows server and sequel server enterprise customers are already using our hyper you spend offense to deploy <unk>, reflecting the value and flexibility of these offering.

Amy E. Hood: Enterprise services revenue increased 6% and 7% in constant currency, driven by growth in Premier support services. Segment gross margin dollars increased 28% and 31% in constant currency, and gross margin percentage increased one point year over year, as another quarter of material improvement in Azure gross margin more than offset the growing mix of Azure IaaS and PaaS revenue. Operating expense increased 18%, primarily driven by continued investments in Azure. Operating income grew 38% and 42% in constant currency. Now to more personal computing.

Amy E. Hood: Enterprise services revenue increased 6% and 7% in constant currency, driven by growth in Premier support services. Segment gross margin dollars increased 28% and 31% in constant currency, and gross margin percentage increased one point year over year, as another quarter of material improvement in Azure gross margin more than offset the growing mix of Azure IaaS and PaaS revenue. Operating expenses increased 18%, primarily driven by continued investments in Azure. However, operating income grew 38% and 42% in constant currency. Now to more personal computing.

Enterprise services revenue increase 6% and seven per cent in constant currency driven by growth in premiere support services segment gross margin dollars increased 28% than 31 per cent in constant currency and gross margin percentage increase 1.2 year over year as another quarter of material improvement and Asher gross margin more than offset the growing.

Amy E. Hood: Operating income grew 38% and 42% in constant currency.

Amy E. Hood: Now to More Personal Computing. Revenue was $13.2 billion, increasing 2% and 3% in constant currency, ahead of expectations as better-than-expected performance across our Windows businesses more than offset lower-than-expected Search and Surface revenue. In Windows, overall PC market growth was stronger than we expected and benefited from the low prior year comparable related to the timing of chip supply to our OEM partners.

Amy E. Hood: Enterprise Services revenue increased 6% and 7% in constant currency, driven by growth in premier support services. Segment gross margin dollars increased 28% and 31% in constant currency, and gross margin percentage increased one point year-over-year, as another quarter of material improvement in Azure gross margin more than offset the growing mix of Azure I ask for in past revenue. Operating expenses increased 18%, primarily driven by continued investment in Azure. However, operating income grew 38% and 42% in constant currency. Operating expenses increased 18%, primarily driven by continued investments in Azure. However, operating income grew 38% and 42% in constant currency. Now to More Personal Computing.

Amy E. Hood: Now to more personal computing. Enterprise Services revenue increased 6% and 7% in constant currency, driven by growth in premier support services. Segment gross margin dollars increased 28% and 31% in constant currency, and gross margin percentage increased one point year-over-year, as another quarter of material improvement in Azure gross margin more than offset the growing mix of Azure I ask for in past revenue. Operating expense increased 18%, primarily driven by continued investment in Azure. Operating income grew 38% and 42% in constant currency. However, operating expense increased 18%, primarily driven by continued investments in Azure.

Asher I asked and pass revenue.

Printing expense increased 18%, primarily driven by the continued investments and Asher operating income group, 38% and 42% and constant currency.

Amy E. Hood: Revenue was $13.2 billion, increasing 2% and 3% in constant currency, ahead of expectations as better-than-expected performance across our Windows businesses more than offset lower-than-expected Search and Surface revenue. In Windows, overall PC market growth was stronger than we expected and benefited from the low prior year comparable related to the timing of chip supply to our OEM partners.

Now two more personal computing.

Amy E. Hood: Revenue was $13.2 billion, increasing 2% and 3% in constant currency, ahead of expectations as better than expected performance across our Windows businesses, more than offset, lower than expected search and surface revenue.

Amy E. Hood: Revenue was $13.2 billion, increasing 2% and 3% in constant currency, ahead of expectations as better than expected performance across our Windows businesses more than offset lower than expected search and surface revenue. Now to More Personal Computing. Revenue was $13.2 billion, increasing 2% and 3% in constant currency, ahead of expectations, as better-than-expected performance across our Windows businesses more than offset lower-than-expected Search and Surface revenue. In Windows, overall PC market growth was stronger than we expected and benefited from the low prior-year comparable related to the timing of chip supply to our OEM partners. OEM Pro revenue, which makes up roughly 40% of total Windows revenue, grew 26%, driven by continued momentum in advance of Windows 7's end of support and strong Windows 10 demand. The benefit from the low prior-year comparable drove roughly 11 points of that growth.

Revenue was $13.2 billion, increasing two per cent and 3% and constant currency headed expectations as better than expected performance across our windows businesses more than offset lower than expected search and surface revenue.

Amy E. Hood: OEM Pro revenue, which makes up roughly 40% of total Windows revenue, grew 26%, driven by continued momentum in advance of Windows 7's end of support and strong Windows 10 demand.

Host: Welcome to the Microsoft Fiscal Year 2020 second quarter earnings conference call. At this time, all participants are in a listen only mode.

Amy E. Hood: OEM Pro revenue, which makes up roughly 40% of total Windows revenue, grew 26%, driven by continued momentum in advance of Windows 7's end of support and strong Windows 10 demand. Now to More Personal Computing. Revenue was $13.2 billion, increasing 2% and 3% in constant currency, ahead of expectations, as better-than-expected performance across our Windows businesses more than offset lower-than-expected Search and Surface revenue. In Windows, overall PC market growth was stronger than we expected and benefited from the low prior-year comparable related to the timing of chip supply to our OEM partners. OEM Pro revenue, which makes up roughly 40% of total Windows revenue, grew 26%, driven by continued momentum in advance of Windows 7's end of support and strong Windows 10 demand. The benefit from the low prior-year comparable drove roughly 11 points of that growth.

Amy E. Hood: In Windows, overall PC market growth was stronger than we expected, and benefited from the low prior-year comparable related to the timing of chip supply to our OEM partners. OEM Pro revenue, which makes up roughly 40% of total Windows revenue, grew 26%, driven by continued momentum in advance of Windows 7, end of support, and strong Windows 10 demand. The benefit from the low prior-year comparable drove roughly 11 points of that growth.

Amy E. Hood: The benefit from the low prior year comparable drove roughly 11 points of that growth. OEM non-Pro revenue, which makes up roughly 20% of total Windows revenue, increased 4%. OEM non-Pro revenue, which makes up roughly 20% of total Windows revenue, increased 4%. This quarter, continued pressure in the entry-level category was more than offset by roughly 7 points of benefit from the low prior-year comparable and the timing of license purchases from an OEM partner. Inventory levels ended the quarter in the normal range. This quarter, continued pressure in the entry-level category was more than offset by roughly 7 points of benefit from the low prior year comparable and the timing of license purchases from an OEM partner. Inventory levels ended the quarter in the normal range.

Amy E. Hood: Windows commercial products and cloud services revenue, which makes up roughly 30% of total Windows revenue, grew 25% and 27% in constant currency, again driven by strong demand for Microsoft 365, which carries higher in-quarter revenue recognition.

Windows overall P.C. market growth was stronger than we expected and benefited from the low prior your comparable related to the timing of chips supply to our early and partners.

Host: A brief question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue.

I'm pro revenue, which makes up roughly 40% of total windows revenue grew 26% driven by continued momentum in advance of windows, seven and to support and strong windows 10 demand.

Amy E. Hood: This quarter, continued pressure in the entry-level category was more than offset by roughly 7 points of benefit from the low prior-year comparable and the timing of license purchases from an OEM partner. Inventory levels ended the quarter in the normal range. This quarter, continued pressure in the entry-level category was more than offset by roughly 7 points of benefit from the low prior year comparable and the timing of license purchases from an OEM partner. Inventory levels ended the quarter in the normal range.

From the low prior you're comfortable drove roughly 11 points of that growth.

Amy E. Hood: OEM non-pro revenue, which makes up roughly 20% of total Windows revenue, increased 4%. This quarter, continued pressure in the entry-level category was more than offset by roughly 7 points of benefit from the low prior year comparable and the timing of license purchases from an OEM partner. Inventory levels ended the quarter in the normal range. Windows Commercial, Products, and Cloud Services revenue, which makes up roughly 30% of total Windows revenue, grew 25% and 27% in constant currency, again driven by strong demand for Microsoft 365, which carries higher in-quarter revenue recognition. The remainder of the Windows business is made up of our other licensing and service components. Service revenue increased 6% and 8% in constant currency, lower than expected, as continued, strong momentum in the Commercial segment was partially offset by execution challenges in the Consumer segment.

Oh, we have non pro revenue, which makes up roughly 20 per cent of total windows revenue increase 4%.

This corner continued pressure in the entry level category was more than offset I roughly seven points to benefit from the low part of your comparable and the timing of license purchases from an L.M. partner.

Amy E. Hood: The remainder of the Windows business is made up of our other licensing and services components. Surface revenue increased 6% and 8% in constant currency, lower than expected, as continued strong momentum in the commercial segment was partially offset by execution challenges in the consumer segment. Windows Commercial, Products, and Cloud Services revenue, which makes up roughly 30% of total Windows revenue, grew 25% and 27% in constant currency, again driven by strong demand for Microsoft 365, which carries higher in-quarter revenue recognition. The remainder of the Windows business is made up of our other licensing and service components. Service revenue increased 6% and 8% in constant currency, lower than expected, as continued strong momentum in the Commercial segment was partially offset by execution challenges in the Consumer segment.

Been toward levels and the the quarter and the normal range.

Amy E. Hood: Windows Commercial Products and Cloud Services Revenue, which makes up roughly 30% of total Windows revenue, grew 25% and 27% in constant currency, again driven by strong demand from Microsoft 365, which carries higher in-quarter revenue recognition. The remainder of the Windows business is made up of our other licensing and services components. The remainder of the Windows business is made up of our other licensing and services components.

Windows commercial products and cloud services revenue, which makes up roughly 30% of total windows revenue grew 25% I 27 per cent in constant currency.

Host: For participants using speaker equipment, it may be necessary to pick up your handset prior to pressing the star keys. If anyone should require operator assistance during the conference, please press star 0. As a reminder, this conference is being recorded. I would like to turn the call over to Mike Spencer, General Manager of Investor Relations. Thank you.

Amy E. Hood: Search revenue ex TAC increased 6% and 7% in constant currency, below expectations, primarily driven by lower Bing volume. And in gaming, revenue declined 21% and 20% in constant currency, in line with expectations, driven by lower console sales as we approach the next Xbox launch. Search revenue ex TAC increased 6% and 7% in constant currency, below expectations, primarily driven by lower Bing volume. And in gaming, revenue declined 21% and 20% in constant currency, in line with expectations, driven by lower console sales as we approach the next Xbox launch.

Driven by strong demand for Microsoft 365, which carries higher in quarter revenue recognition.

The Windows business is made up of our other licensing and surfaces component.

Amy E. Hood: Surface revenue increased 6% and 8% in constant currency, lower than expected as continued strong momentum in the commercial segment was partially offset by execution challenges in the consumer segment. Xbox content and services revenue declined 11% and 9% in constant currency as the impact of a strong third-party title in the prior year more than offset continued growth in Game Pass subscribers and Minecraft. Xbox content and services revenue declined 11% and 9% in constant currency as the impact of a strong third-party title in the prior year more than offset continued growth in Game Pass subscribers and Minecraft.

Surface revenue increase 6%, an eight per cent in constant currency lower than expected as continued strong momentum in the commercial segment was partially offset by execution challenges into consumer segment.

Amy E. Hood: Search revenue XTAC increased 6% and 7% in constant currency, below expectations, primarily driven by lower Bing volume. And in gaming, revenue declined 21% and 20% in constant currency, in line with expectations, driven by lower console sales as we approach the next Xbox launch. Search revenue ex TAC increased 6% and 7% in constant currency, below expectations, primarily driven by lower Bing volume. And in Gaming, revenue declined 21% and 20% in constant currency, in line with expectations, driven by lower console sales as we approach the next Xbox launch. Xbox content and services revenue declined 11% and 9% in constant currency, as the impact from a strong third-party title in the prior year more than offset continued growth in game subscribers and Minecraft. Segment gross margin dollars increased 18% and 20% in constant currency, and gross margin percentage increased 7 points year-over-year due to higher margin sales mix.

Search revenue X. tack increase 6% and seven per cent in constant currency.

Expectations, primarily driven by lower paying volume.

Gaming revenue declined, 21% and 20 per cent and constant currency in line with expectations driven by lower console sales as we approach. The next X. box launch X. box content and services revenue declined 11% and nine per cent in constant currency as the impact from a strong third party title and the prior year more than.

Amy E. Hood: Segment gross margin dollars increased 18% and 20% in constant currency, and gross margin percentage increased 7 points year-over-year due to a higher margin sales mix.

Amy E. Hood: Search revenue ex TAC increased 6% and 7% in constant currency, below expectations, primarily driven by lower Bing volume. And in Gaming, revenue declined 21% and 20% in constant currency, in line with expectations, driven by lower console sales as we approach the next Xbox launch. Xbox content and services revenue declined 11% and 9% in constant currency, as the impact of a strong third-party title in the prior year more than offset continued growth in game subscribers and Minecraft.

Amy E. Hood: Xbox content and services revenue declined 11% and 9% in constant currency as the impact from a strong third-party title in the prior year more than offset continued growth in Game Pass subscribers and Minecraft.

Amy E. Hood: Xbox content and services revenue declined 11% and 9% in constant currency as the impact of a strong third-party title in the prior year more than offset continued growth in Game Pass subscribers and Minecraft. Operating expense declined 5% as redeployment of engineering resources to higher-growth opportunities was partially offset by gaming investments, primarily in first-party content. As a result, operating income grew 41% and 45% in constant currency.

Amy E. Hood: Operating expense declined 5% as redeployment of engineering resources to higher-growth opportunities was partially offset by gaming investments, primarily in first-party content. As a result, operating income grew 41% and 45% in constant currency.

Offset continued growth and game pad subscribers and minecraft.

Amy E. Hood: Segment gross margin dollars increased 18% and 20% in constant currency, and gross margin percentage increased 7 points year over year due to higher margin sales mix.

Amy E. Hood: Segment gross margin dollars increased 18% and 20% in constant currency, and gross margin percentage increased 7 points year over year due to a higher margin sales mix. And gross margin percentage increased 7.0 percent per year due to higher-margin sales mix. Operating expense declined 5% as redeployment of engineering resources to higher growth opportunities was partially offset by gaming investments, primarily in first-party content. As a result, operating income grew 41% and 45% in constant currency. Now back to total company results.

Michael Spencer: Good afternoon, and thank you for joining us today. On the call with me are Satya Nadella, Chief Executive Officer; Amy Hood, Chief Financial Officer; Frank Broad, Chief Accounting Officer; and Keith Oliver, Deputy General Counsel. On the Microsoft Investor Relations website, you can find our earnings press release and financial summary slide deck, which is intended to supplement our prepared remarks during today's call and provides a reconciliation of differences between GAAP and non-GAAP financial measures. Unless otherwise specified, we will refer to non-GAAP metrics on the call. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP.

Segment gross margin dollars increased 18% and 20 per cent in constant currency and gross margin percentage increase seven points year over year due to higher margin sales next.

Amy E. Hood: In line with expectations, capital expenditures, including finance leases, were $4.5 billion, up 17% year-over-year, driven by an ongoing investment to meet growing demand for our cloud services.

Amy E. Hood: Segment gross margin dollars increased 18% and 20% in constant currency, and gross margin percentage increased 7.0 per year due to a higher margin sales mix. Operating expense declined 5% as redeployment of engineering resources to higher growth opportunities was partially offset by gaming investments, primarily in first-party content. As a result, operating income grew 41% and 45% in constant currency. Now back to the total company results.

Amy E. Hood: Operating expense declined 5% as redeployment of engineering resources to higher growth opportunities was partially offset by gaming investments, primarily in first-party content. As a result, operating income grew 41% and 45% in constant currency. Cash paid for PP&E was $3.5 billion, and cash flow from operations was $10.7 billion and increased 20% year-over-year, driven by healthy cloud billings and collections. Cash paid for PP&E was $3.5 billion, and cash flow from operations was $10.7 billion and increased 20% year-over-year, driven by healthy cloud billings and collections.

Printing expense declined 5% as redeployment of engineering resources to hire gross opportunities was partially offset by gaming investments primarily in first party content as a result, operating income group, 41% and 45% in constant currency.

Amy E. Hood: Now back to total company results.

Amy E. Hood: Now back to total company results. In line with expectations, capital expenditures, including finance leases, were $4.5 billion, up 17% year-over-year, driven by ongoing investment in the growing demand for our Cloud services. Cash paid for PP&E was $3.5 billion, and cash flow from operations was $10.7 billion and increased 20% year-over-year, driven by healthy Cloud billings and collections. Free cash flow was $7.1 billion and increased 37%, reflecting the timing of cash payments for PP&E. Other income was $194 million, higher than anticipated due to the recording of mark-to-market gains in our equity portfolio. Our effective tax rate was slightly above 17%, in line with expectations. And, finally, we returned $8.5 billion to shareholders through share repurchases and dividends.

Back to total company results.

Amy E. Hood: In line with expectations, capital expenditures, including finance leases, were $4.5 billion, up 17% year-over-year, driven by ongoing investment to meet growing demand for our cloud services. Cash paid for PP&E was $3.5 billion. Cash flow from operations was $10.7 billion and increased 20% year-over-year, driven by healthy cloud billings and collections. Free cash flow was $7.1 billion and increased 37%, reflecting the timing of cash payments for PP&E. Free cash flow was $7.1 billion and increased 37%, reflecting the timing of cash payments for PP&E.

I would expectations capital expenditures, including finance leases were $4.5 billion up 17% year over year, driven by an ongoing investment to meet growing demand for our cloud services cash paid for P.P.N.A. was $3.5 billion cash flow from operations with 10.7.

Amy E. Hood: Other income was $194 million, higher than anticipated, due to the recording of mark-to-market gains in our equity portfolio. Our effective tax rate was slightly above 17%, in line with expectations. And finally, we returned $8.5 billion to shareholders through share repurchases and dividends. Our effective tax rate was slightly above 17%, in line with expectations. And finally, we returned $8.5 billion to shareholders through share repurchases and dividends.

In dollars and increased 20% year over year to them by healthy clout billings and collections.

Amy E. Hood: Free cash flow was $7.1 billion and increased 37%, reflecting the timing of cash payments for PP&E.

Amy E. Hood: Free cash flow was $7.1 billion and increased 37%, reflecting the timing of cash payments for PP&E. Now, let's move to our outlook. Assuming current rates remain stable, we expect FX to decrease revenue at both the company and individual segment level by approximately 1 point and have no impact on total company COGS and operating expense growth. Now, let's move to our outlook. Assuming current rates remain stable, we expect FX to decrease revenue at both the company and individual segment level by approximately 1 point and have no impact on total company COGS and operating expense growth.

Free cash flow with $7.1 billion and increase 37%, reflecting the timing of cash payments for P.P. any.

Amy E. Hood: Other income was $194 million higher than anticipated due to the recording of mark-to-market gains in our equity portfolio. Our effective tax rate was slightly above 17%, in line with expectations. And finally, we returned $8.5 billion to shareholders through share repurchases and dividends.

Other income was $194 million higher than anticipated digit of recording of Mark to market games in our equity portfolio.

Active tax rate was slightly about 17% in line with expectations and finally, they returned $8.5 billion to shareholders through share repurchases and dividends.

Amy E. Hood: Now let's move to our outlook.

Amy E. Hood: Now let's move to our outlook. Assuming current rates remain stable, we expect FX to decrease revenue at both the company and individual segment level by approximately one point and have no impact on total company COGS and operating expense growth. In our commercial business, we expect consistent execution and continued demand for our hybrid solutions to drive another strong quarter. Commercial bookings growth should again be healthy but will be impacted by a materially lower growth in our Q3 x base. Commercial Cloud gross margin percentage will continue to improve year-over-year, although at a lower rate than last quarter given the growing mix of Azure consumption-based services. And we expect a sequential dollar increase in our capital expenditures as we continue to invest to support growing demand.

Now, let's move to our outlook.

Amy E. Hood: Assuming current rates remain stable, we expect FX to decrease revenue at both the company and individual segment level by approximately one point and have no impact on total company COGS and operating expense growth. Commercial cloud gross margin percentage will continue to improve year-over-year, although at a lower rate than last quarter, given the growing mix of Azure consumption-based services. And we expect a sequential dollar increase in our capital expenditure as we continue to invest to support growing demand.

Current rates remain stable, we expect F.X. to decrease revenue at both the company and individual segment level by approximately one point and have no impact on total company Cogs and operating expense growth.

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

Amy E. Hood: And we expect a sequential dollar increase in our capital expenditure as we continue to invest to support growing demand.

Amy E. Hood: In our commercial business, we expect consistent execution and continued demand for our hybrid solutions to drive another strong quarter. Commercial bookings growth should again be healthy, but will be impacted by a materially lower growth in our Q3 expiry base. Now to segment guidance. For Productivity and Business Processes, we expect revenue between $11.5 billion and $11.7 billion, driven by continued double-digit growth across Office commercial, Dynamics, and LinkedIn. Now to segment guidance. For Productivity and Business Processes, we expect revenue between $11.5 billion and $11.7 billion, driven by continued double-digit growth across Office commercial, Dynamics, and LinkedIn.

In our commercial business, we expect consistent execution and continued demand for our hybrid solutions to drive another strong corridor.

Commercial bookings gross should again be healthy, but we'll be impacted by immaterially lower growth in our Q3 <unk>.

Amy E. Hood: Commercial cloud gross margin percentage will continue to improve year over year, although at a lower rate than last quarter given the growing mix of Azure consumption-based services. For Intelligent Cloud, we expect revenue between $11.85 billion and $12.05 billion. For Intelligent Cloud, we expect revenue between $11.85 billion and $12.05 billion.

Commercial cloud gross margin percentage will continue to improve your over here, although at a lower rate than last quarter, given the growing next of actual consumption based services.

Amy E. Hood: and we expect a sequential dollar increase in our capital expenditure as we continue to invest to support growing demand.

Amy E. Hood: and we expect a sequential dollar increase in our capital expenditure as we continue to invest to support growing demand. In Azure, revenue growth will continue to reflect the balance of our strong growth in our consumption-based business and moderating growth in our per-user business, given the size of the installed base. In Azure, revenue growth will continue to reflect the balance of our strong growth in our consumption-based business and moderating growth in our per-user business, given the size of the installed base.

And we expect a sequential dollar increase in our capital expenditure as we continue to invest to support growing demand.

Amy E. Hood: Now to segment guidance.

Amy E. Hood: Now to segment guidance. In productivity and business processes, we expect revenue between $11.5 and $11.7 billion, driven by continued double-digit growth across Office 365 commercial, dynamics, and LinkedIn. Now to segment guidance. In Productivity and Business Processes, we expect revenue between $11.5 billion and $11.7 billion, driven by continued double-digit growth across Office Commercial, Dynamics, and LinkedIn. For Intelligent Cloud, we expect revenue between $11.85 billion and $12.05 billion. For Azure, revenue growth will continue to reflect a balance of our strong growth in our consumption-based business and moderating growth in our per user business, given the size of the installed base. Growth in our on-premise server business should be high single digits, again driven by strong hybrid demand as well as some continued benefits related to the end of support for Windows Server 2008.

Now the segment guidance.

Amy E. Hood: In productivity and business processes, we expect revenue between $11.5 and $11.7 billion, driven by continued double-digit growth across office commercial, dynamics, and LinkedIn.

Amy E. Hood: In productivity and business processes, we expect revenue between $11.5 and $11.7 billion, driven by continued double-digit growth across Office commercial, dynamics, and LinkedIn. Now to segment guidance. In Productivity and Business Processes, we expect revenue between $11.5 billion and $11.7 billion, driven by continued double-digit growth across Office Commercial, Dynamics, and LinkedIn. For Intelligent Cloud, we expect revenue between $11.85 billion and $12.05 billion. In Azure, revenue growth will continue to reflect a balance of our strong growth in our consumption-based business and moderating growth in our per user business, given the size of the install base. Growth in our on-premise server business should be high single digits, again driven by strong hybrid demand as well as some continued benefits related to the end of support for Windows Server 2008.

Productivity and business processes, we expect revenue between 11.5 and $11.7 billion driven by continued double digit growth across office commercial dynamics and like then.

Amy E. Hood: Now to segment guidance. In Productivity and Business Processes, we expect revenue between $11.5 billion and $11.7 billion, driven by continued double-digit growth across Office Commercial, Dynamics, and LinkedIn. For Intelligent Cloud, we expect revenue between $11.85 billion and $12.05 billion. For Azure, revenue growth will continue to reflect a balance of our strong growth in our consumption-based business and moderating growth in our per user business, given the size of the installed base.

Amy E. Hood: Growth in our on-premise server business should be high single digits, again driven by strong hybrid demand as well as some continued benefits related to the end of support for Windows Server 2008.

Amy E. Hood: For Intelligent Cloud, we expect revenue between $11.85 and $12.05 billion. In Azure, revenue growth will continue to reflect a balance of our strong growth in our consumption-based business and moderating growth in our per-user business, given the size of the installed base.

Amy E. Hood: For Intelligent Cloud, we expect revenue between $11.85 and $12.05 billion. For Azure, revenue growth will continue to reflect a balance of our strong growth in our consumption-based business and moderating growth in our per-user business, given the size of the installed base. In Enterprise Services, we expect revenue growth to be slightly higher than last quarter. In More Personal Computing, we expect revenue between $10.75 billion and $11.15 billion. In Windows, overall, OEM revenue growth should be in the low to mid-single digits and continue to reflect healthy Windows 10 demand, the end of support for Windows 7 and the supply chain's ability to meet demand.

For intelligent cloud, we expect revenue between 11.85 and $12.5 billion in Asher revenue growth will continue to reflect the balance of our strong growth in our consumption based business and moderating grows in our per user business given the size of the installed days.

Michael Spencer: They are included as additional clarifying items to aid investors in further understanding the company's second quarter performance in addition to the impact these items and events have on the financial results. All growth comparisons we make on a call day relate to the corresponding period of last year, unless otherwise noted. We also provide growth rates and constant currency when available as a framework for assessing how our underlying business is performing, excluding the effect of foreign currency rate fluctuations. Where growth rates are the same in constant currency, we refer to growth rates only.

Amy E. Hood: In Enterprise Services, we expect revenue growth to be slightly higher than last quarter. In More Personal Computing, we expect revenue between $10.75 billion and $11.15 billion. In Windows, overall, OEM revenue growth should be in the low to mid-single digits and continue to reflect healthy Windows 10 demand, the end of support for Windows 7 and the supply chain's ability to meet demand.

Amy E. Hood: Growth in our on-premise server business should be high single digits, again driven by strong hybrid demand, as well as some continued benefit related to the end of support for Windows Server 2008.

Amy E. Hood: Growth in our on-premise server business should be high single digits, again driven by strong hybrid demand, as well as some continued benefits related to the end of support for Windows Server 2008. In Enterprise Services, we expect revenue growth to be slightly higher than last quarter. In More Personal Computing, we expect revenue between $10.75 billion and $11.15 billion. In Windows, overall OEM revenue growth should be in the low to mid-single digits and continue to reflect healthy Windows 10 demand, the end of support for Windows 7, and the supply chain's ability to meet demand.

Growth in our on promised her business should be high single digits.

Amy E. Hood: Growth in our on-premise server business should be high single digits, again driven by strong hybrid demand, as well as some continued benefits relating to the end of support for Windows Server 2008. For Enterprise Services, we expect revenue growth to be slightly higher than last quarter. In More Personal Computing, we expect revenue between $10.75 billion and $11.15 billion. In Windows, overall OEM revenue growth should be in the low to mid-single digits and continue to reflect healthy Windows 10 demand, the end of support for Windows 7, and the supply chain's ability to meet demand.

Driven by strong hyper demand as well as some continued benefit related to the end to support for Windows server 2008.

Amy E. Hood: The wider than usual range and the More Personal Computing segment reflect uncertainty related to the public health situation in China. The wider-than-usual range in the More Personal Computing segment reflects uncertainty related to the public health situation in China. The wider-than-usual range in the More Personal Computing segment reflects uncertainty related to the public health situation in China.

Amy E. Hood: Enterprise Services, we expect revenue growth to be slightly higher than last quarter.

Amy E. Hood: In Enterprise Services, we expect revenue growth to be slightly higher than last quarter. In more personal computing, we expect revenue between $10.75 and $11.15 billion. In Windows commercial products and cloud services, we expect another quarter of healthy double-digit revenue growth, driven by continued Microsoft 365 suite momentum and some benefit from Windows 7 extended support agreements.

Enterprise services, we expect revenue growth to be slightly higher than last quarter.

Amy E. Hood: In more personal computing, we expect revenue between $10.75 and $11.15 billion.

And more personal computing, we expect revenue between 10.75 and $11.15 billion and Windows overall revenue growth she'd be in the low to mid single digits I continue to reflect healthy windows can demand ended support for windows, seven and a supply chains ability to me.

Amy E. Hood: In more personal computing, we expect revenue between $10.75 and $11.15 billion. In Windows commercial products and cloud services, we expect another quarter of healthy double-digit revenue growth, driven by continued Microsoft 365 suite momentum and some benefit from Windows 7 extended support agreements.

Amy E. Hood: In Windows, overall OEM revenue growth should be in the low to mid single digits and continue to reflect healthy Windows 10 demand, the end of support for Windows 7, and the supply chain's ability to meet demand. The wider than usual range and more personal computing segment reflect uncertainty related to the public health situation in China. In Surface, we expect revenue growth in the low single digits as we work through the execution challenges in the consumer segment. In search ex TAC, we expect revenue growth similar to Q2. And in gaming, we expect revenue to decline in the low double-digit range, driven by the continuation of the console trend as we near the launch of Xbox Series X as well as lower transaction volume on a third-party title.

Amy E. Hood: In Surface, we expect revenue growth in the low single digits as we work through the execution challenges in the consumer segment. In search ex TAC, we expect revenue growth similar to Q2. And in gaming, we expect revenue to decline in the low double-digit range, driven by the continuation of the console trend as we near the launch of Xbox Series X as well as lower transaction volume on a third-party title.

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Wider than usual ranging more personal computing segment reflects uncertainty related to the public health situation in China.

Amy E. Hood: In Windows commercial products and cloud services, we expect another quarter of healthy double-digit revenue growth, driven by continued Microsoft 365 suite momentum and some benefit from Windows 7 extended support agreements. In Surface, we expect revenue growth in the low single digits as we work through the execution challenges in the Consumer segment. In search ex-TAC, we expect revenue growth similar to Q2. And in Gaming, we expect revenue to decline in the low double-digit range, driven by the continuation of the console trend as we near the launch of Xbox Series X as well as lower transaction volume on a third-party title. Now back to the overall company guidance.

And windows commercial product from cloud services, we expect another quarter of healthy double digit revenue growth driven by continued Microsoft 365, Sweet momentum and some benefit from Windows seven extended support agreements.

Amy E. Hood: In Windows Commercial Products and Cloud Services, we expect another quarter of healthy double-digit revenue growth, driven by continued Microsoft 365 suite momentum and some benefit from Windows 7 expended support agreements. In Surface, we expect revenue growth in the low single digits as we work through the execution challenges in the Consumer segment. In search ex-TAC, we expect revenue growth similar to Q2. And in gaming, we expect revenue to decline in the low double-digit range, driven by the continuation of the console trend as we near the launch of Xbox Series X as well as lower transaction volume on a third-party title.

Amy E. Hood: Now back to the overall company guidance.

Amy E. Hood: In surface, we expect revenue growth in the low single digits as we work through the execution challenges in the consumer segment.

Amy E. Hood: In Surface, we expect revenue growth in the low single digits as we work through the execution challenges in the consumer segment. We expect COGS of $11.05 billion to $11.25 billion and operating expense of $11.2 billion to $11.3 billion. We expect COGS of $11.05 billion to $11.25 billion and operating expenses of $11.2 billion to $11.3 billion.

And surface, we expect revenue growth in the low single digits.

Work through the execution challenges and the consumer segment.

Amy E. Hood: In Search X Tech, we expect revenue growth similar to Q2. And in gaming, we expect revenue to decline in the low double-digit range driven by the continuation of the console trend as we near the launch of Xbox Series X, as well as lower transaction volume on a third-party title. Now back to the overall company guidance.

And search X. tack, we expect revenue growth similar to to to.

And and gaming, we expect revenue to decline in the low double digit range driven by the continuation at the console trend as we near the launch an x. box theories acts as well as lower transaction volume on a third party title.

Amy E. Hood: In other income and expense, interest income and expense should offset each other. And finally, we expect our Q3 effective tax rate to be slightly below our full-year rate of 17% due to the timing of equity vests. Now back to the overall company guidance. We expect COGS of $11.05 billion to $11.25 billion and operating expenses of $11.2 billion to $11.3 billion. In other income and expense, income and expense should offset each other. And, finally, we expect our Q3 effective tax rate to be slightly below our full-year rate of 17% due to the timing of equity vests.

Amy E. Hood: Now, let me share some additional comments on the full year. Now, back to the overall company guidance. We expect COGS of $11.05 billion to $11.25 billion and operating expense of $11.2 billion to $11.3 billion. In other income and expense, income and expense should offset each other. And, finally, we expect our Q3 effective tax rate to be slightly below our full-year rate of 17% due to the timing of equity vests. Now, let me share some additional comments on the full year.

Amy E. Hood: And finally, we expect our Q3 effective tax rate to be slightly below our full year rate of 17% due to the timing of equity vests. Now back to the overall company guidance. We expect COGS of $11.05 billion to $11.25 billion and operating expense of $11.2 billion to $11.3 billion. In other income and expense, income and expense should offset each other. And, finally, we expect our Q3 effective tax rate to be slightly below our full-year rate of 17% due to the timing of equity vests. Now, let me share some additional comments on the full year.

Michael Spencer: We will post our prepared remarks to our website immediately following the call until a complete transcript is available. Today's call is being webcast live and recorded. If you ask a question, it will be included in our live transmission, in the transcript, and in any future use of the recording. You can replay the call and view the transcript on the Microsoft Investor Relations website. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the risk factor sections of our Form 10-K, Forms 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. And with that, I'll turn the call over to Satya.

Now back to the overall company guidance.

Amy E. Hood: We expect COGS of $11.05 to $11.25 billion and operating expense of $11.2 to $11.3 billion.

Amy E. Hood: We expect COGS of $11.05 to $11.25 billion and operating expenses of $11.2 to $11.3 billion. At the company level, we continue to expect double-digit revenue and operating income growth, driven by the continued strength of our commercial business. For operating expense, as a result of lower spend in H1, we now expect full year growth between 10% and 11%.

Mix that causes of $11.05 billion to $11.25 billion and operating expensive 11.22 $11.3 million.

Amy E. Hood: At the company level, we continue to expect double-digit revenue and operating income growth, driven by the continued strength of our commercial business. For operating expense, as a result of lower spend in H1, we now expect full year growth between 10% and 11%.

Amy E. Hood: and other income and expense, interest income and expense should offset each other. And finally, we expect our Q3 effective tax rate to be slightly below our full year rate of 17% due to the timing of equity vests.

Amy E. Hood: And other income and expense, interest income, and expense should offset each other. And finally, we expect our Q3 effective tax rate to be slightly below our full-year rate of 17% due to the timing of equity vests.

Other income and expense interest in common expense should upset to each other.

Amy E. Hood: And finally, given our strong H1 results, particularly in high-margin businesses, as well as the expected sales mix for the remainder of the year, we now expect operating margins to be up roughly 2 points year-over-year, even as we invest with significant ambition in strategic and high-growth areas in the second half of this year. And finally, given our strong H1 results, particularly in high-margin businesses, as well as the expected sales mix for the remainder of the year, we now expect operating margins to be up roughly 2 points year-over-year, even as we invest with significant ambition in strategic and high-growth areas in the second half of this year.

And finally, we effect I expect R. Q3 effective tax rate to be slightly below our full year rate of 17%.

Due to the timing of equity fast.

Amy E. Hood: Now let me share some additional comments on the full year.

Amy E. Hood: Now, let me share some additional comments on the full year. At the company level, we continue to expect double-digit revenue and operating income growth, driven by the continued strength of our Commercial business. For operating expense, as a result of lower spend in H1, we now expect full year growth between 10% and 11%.

Now, let me share some additional comments on the full here.

Amy E. Hood: At the company level, we continue to expect double-digit revenue and operating income growth, driven by the continued strength of our commercial business.

Amy E. Hood: At the company level, we continue to expect double-digit revenue and operating income growth, driven by the continued strength of our commercial business. For operating expense, as a result of lower spend in H-1, we now expect full year growth between 10 and 11%. For operating expense, as a result of lower spend in H-1, we now expect full year growth between 10 and 11%.

The company level, we continued to expect double digit revenue and operating income growth driven by the continued strength of our commercial business.

Amy E. Hood: For operating expense, as a result of lower spend in H-1, we now expect full year growth between 10 and 11%.

For operating expense as a result of lower spending H. One we now expect full year growth between 10 and 11%.

Amy E. Hood: With that, Mike, let's go to Q&A. Thanks, Amy. We'll now move over to Q&A. Thanks, Amy.

Amy E. Hood: We'll now move over to Q&A.

Amy E. Hood: And finally, given our strong H-1 results, particularly in high margin businesses, as well as the expected sales mix for the remainder of the year, we now expect operating margins to be up roughly two points year over year, even as we invest with significant ambition in strategic and high growth areas in the second half of this year. With that, Mike, let's go to Q&A.

And finally, given our strong H., one result, particularly and high margin businesses as well as the expected sales mix for the remainder of the year. We now expect operating margins to be up roughly two points year over year.

Amy E. Hood: (Operator Instructions). Operator, can you please repeat your instructions?

Amy E. Hood: Operator, can you please repeat your instructions?

Amy E. Hood: And, finally, given our strong H1 results, particularly in high-margin businesses, as well as the expected sales mix for the remainder of the year, we now expect operating margins to be up roughly two points year-over-year, even as we invest with significant ambition in strategic and high-growth areas in the second half of this year.

Even as we invest with significant ambition.

T chicken high growth areas and the second half of this year.

With that Mike, Let's go to an act.

Amy E. Hood: With that, Mike, let's go to Q&A.

Michael Spencer: Thanks, Amy. We'll now move over to Q&A. Out of respect to others on the call, we request that participants please only ask one question. Operator, can you please repeat your instructions? Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You'll press star 2 if you would like to remove your question from the queue. Thanks, Amy. We'll now move over to Q&A. Out of respect to others on the call, we request that participants please only ask one question. Thanks, Amy. We'll now move over to Q&A. Out of respect to others on the call, we request that participants please only ask one question. (Operator Instructions) Our first question comes from the line of Mark Moerdler with Bernstein. Operator, can you please repeat your instructions?

<unk> well number will be <unk> I respect to others on the call. We requested participants please only ask one question.

Michael Spencer: (Operator Instructions) Our first question comes from the line of Mark Moerdler with Bernstein.

Can you please repeat your instructions.

Michael Spencer: Operator, can you please repeat your instructions?

Michael Spencer: Congratulations on a really strong quarter.

Thank you at this time only conducting a question and answer session. If you'd like to ask a question five star one on your telephone keypad.

Michael Spencer: I'd like to look at Azure.

Michael Spencer: Can you give a little bit of more details on what's driving the Q-over-Q acceleration in revenue growth? Are we seeing large contracts starting to ramp up? Are there other factors that are kicking in that are helping this?

Information, telling will indicate airliners and the question cue.

Michael Spencer: Are we seeing large contracts starting to ramp up? Are there other factors that are kicking in that are helping that?

Start to remove your question from the queue.

Michael Spencer: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Michael Spencer: And Satya, can you also give us some sense of what you think the impact would be if xCloud is successful on Azure?

Shooting speed or equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: And thank you. Our first question comes from the line of Mark Moerdler with Bernstein. Please proceed.

Thank you are first question comes from a line of Mark mother with Bernstein. Please proceed.

Mark L. Moerdler: Thank you very much and congratulations on the

Mark L. Moerdler: Thank you very much and congratulations on a job well done.

Mark L. Moerdler: Sure. Thanks, Mark, for the question. I think overall, in terms of the Azure momentum, it's sort of the thing that we have seen even in the previous quarters, which is we have a stack that is -- from infrastructure to the PaaS services, that's fairly differentiated. Thanks, Mark, for the question. I think overall, in terms of Azure momentum, it's sort of the thing that we have seen even in the previous quarters, which is that we have a stack that is -- from infrastructure to the PaaS services, that's fairly differentiated.

Mark L. Moerdler: Thank you very much and congratulations on a job well done.

You very much and congratulations on a really.

Mm.

Mark L. Moerdler: I'd like to look at Azure. Can you give a little bit of more details on what's driving the Q over Q acceleration and the revenue growth? Are we seeing large contracts starting to ramp up? Are there other factors that are kicking in that are helping that? And Satya, can you also give us some sense of what you think the impact would be if xCloud is successful on Azure? Thank you. I mean, I went through some of the things that we even announced at our Ignite Conference. Take something like Azure Arc. The fact that we have a control plane for hybrid computing that is multi-cloud and multi-edge, that's a pretty differentiated aspect of it.

I'd like to look at at Asher can you give a little bit of a more details on what's driving the q. over q. acceleration and the revenue growth are we seeing lords contract starting to ramp other other factors that are kicking in that are hoping that and and such a can you also give us some sense of what you think about the impact if x. cloud is is successful.

Mark L. Moerdler: Sure. Thanks, Mark, for the question. I think overall, in terms of the Azure momentum, it's sort of the thing that we've seen even in the previous quarters, which is we have a stack that is from infrastructure to past services that's fairly differentiated. I went through some of the things that we even announced at our Ignite conference. Take something like Azure Arc. The fact that we have a control plane for hybrid computing that is multi-Cloud, multi-Edge. That's a pretty good differentiated aspect of it. On the data side, both on the transactions on the OGP side as well as on the analytics side, we now have Cloud native databases. And Azure Synapse, I think, is a very competitive product.

Mark L. Moerdler: I mean, I went through some of the things that we even announced at our Ignite Conference. Take something like Azure Arc. The fact that we have a control plane for hybrid computing that is multi-cloud, multi-edge, that's a pretty differentiated aspect of it. Thanks, Mark, for the question. I think overall, in terms of the Azure momentum, it's sort of the thing that we've seen even in the previous quarters, which is we have a stack that is from infrastructure to past services that's fairly differentiated. I went through some of the things that we even announced at our Ignite conference.

Mark L. Moerdler: Take something like Azure Arc. The fact that we have a control plane for hybrid computing that is multi-Cloud, multi-Edge. That's a pretty good differentiated aspect of it. On the data side, both on the transactions on the OGP side as well as on the analytics side, we now have Cloud native databases. And Azure Synapse, I think, is a very competitive product.

Mark L. Moerdler: Take something like Azure Arc. The fact that we have a control plane for hybrid computing that is multi-cloud, multi-edge, that's a pretty differentiated aspect of it. Sure. Thanks, Mark, for the question. I think overall, in terms of the Azure momentum, it's sort of the thing that we've seen even in the previous quarters, which is we have a stack that is from infrastructure to past services that's fairly differentiated. I went through some of the things that we even announced at our Ignite conference. Take something like Azure Arc. The fact that we have a control plane for hybrid computing that is multi-Cloud, multi-Edge. That's a pretty good differentiated aspect of it. On the data side, both on the transactions on the OGP side as well as on the analytics side, we now have Cloud native databases. And Azure Synapse, I think, is a very competitive product.

On Asher thank you.

Satya Nadella: Thanks, Mark, for the question. I think overall, in terms of the Azure momentum, it's sort of the thing that we've seen even in the previous quarter, which is we have a stack that is from infrastructure to the past services that's fairly differentiated. I mean, I went through some of the things that we even announced at our Ignite conference. Take something like Azure Arc. The fact that we have a control plane for hybrid computing that is multi-cloud, multi-edge, that's a pretty differentiated aspect of it. And the data side, both on the transactions, on the OLTP side, as well as on the analytics side, we now have cloud-native databases. And Azure Synapse, I think, is a very competitive product. So that's what you see play out in terms of a customer adoption and the growth there. XCloud, I think, is a great workload. I mean, we always have the mantra of first-party equals third-party, whether it is any of the workloads internally, really helping us understand the new patterns, which then, of course, third-party. And you can see that even in terms of how Sony will use some of the same infrastructure capabilities. So we are excited about what XCloud teaches us, but more importantly, we're excited about how others in the ecosystem can use the same capability for their streaming.

Sure. Thanks, Mark for the question I think overall.

Satya Nadella: And on the data side, both on the transactions side of the OLTP side as well as on the analytics side, we now have cloud-native databases. And Azure Synapse, I think, is a very competitive product. And Azure Synapse, I think, is a very competitive product.

<unk> as your momentum sort of the thing that we've seen even in the previous quarters. So which is we have a stack that is from infrastructure to the past services. That's barely differentiated I mean I went through some of the things to be even announced it out ignite conference. If you you know even think pick something like adger arc. The fact it'd be out of control the plane for.

Satya Nadella: So that's what you see play out in terms of customer adoption and growth there. xCloud, I think, is a great workload. I mean, we always have the mantra of first party equals third party, whether it is any of the workloads internally really helping us understand the new patterns, which then, of course, third parties can use. And you can see that even in terms of how Sony will use some of the same infrastructure capabilities. So that's what you see play out in terms of customer adoption and growth there.

Satya Nadella: xCloud, I think, is a great workload. We always have the mantra of first party equals third party, whether it is any of the workloads internally really helping us understand the new factors, which then, of course, third parties can use. And you can see that even in terms of how Sony will use some of the same infrastructure capabilities.

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

Satya Nadella: I mean, we always have the mantra of first party equals third party, whether it is any of the workloads internally really helping us understand the new patterns, which then, of course, third parties can use. And you can see that even in terms of how Sony will use some of the same infrastructure capabilities. So that's what you see play out in terms of customer adoption and growth there. xCloud, I think, is a great workload. We always have the mantra of first party equals third party, whether it is any of the workloads internally really helping us understand the new factors, which then, of course, third parties can use.

Satya Nadella: And you can see that even in terms of how Sony will use some of the same infrastructure capabilities. So we are excited about what xCloud will teach us. But, more importantly, we're excited about how others in the ecosystem can use the same capability for their streaming needs. So we are excited about what xCloud teaches us, but more importantly, we're excited about how others in the ecosystem can use the same capability for their streaming needs. And Mark, to your question on -- a little bit about the reacceleration in the Azure growth rate, let me divide that into its components.

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

Hybrid computing that is multi cloud multi edge, that's a pretty differentiated aspect of it and the data side.

Out on the transactions on the or G.P. side as well as on the analytic side. We now have cloud native databases and now just to Naps I think is a very competitive products. So that's what you see play out in in terms of a customer adoption and the girl that X. cloud I think is a great workload.

Satya Nadella: And Azure Synapse, I think, is a very competitive product, so that's what you see play out in terms of customer adoption and growth there. XCloud, I think, is a great workload. I mean, we always have the mantra of first-party equals third-party, whether it is any of the workloads internally, really helping us understand the new patterns, which then, of course, are third-party. And you can see that even in terms of how Sony will use some of the same infrastructure capabilities. So we are excited about what XCloud will teach us, but more importantly, we're excited about how others in the ecosystem can use the same capability for their streaming.

Satya Nadella: And Mark, to your question on -- a little bit about the reacceleration in the Azure growth rate, let me divide that into its components. We did have very good and healthy, broad-based consumption growth, especially in IaaS and PaaS. I think actually, Satya touched on one of the important parts that we started to see this quarter. It was not only good workload migration work, strong growth, and the optimization of the workloads already running, but also some of these new PaaS workloads like Synapse and Cosmos DB and Arc are really starting to add some momentum to that part of the stack as well, which is important.

Have them on trial for his body equals stood body, whether it is any of the workloads into and the lead really helping those understand the new backbones, which then of course third parties can use and you can see that even in terms of Sony will use all the same infrastructure capabilities. So we're excited about what x. clout teaches us, but more importantly would excited about how others.

In the ecosystem can use the same capability for their streaming.

Speaker Change: And Mark, to your question on a little bit about the reacceleration and the Azure growth rate, let me divide that into its components. We did have a very good and healthy broad-based consumption growth, especially in IaaS and PaaS. And I think actually Satya touched on one of the important parts that we started to see this quarter was not only good workload migration work, a strong growth in the optimization of the workloads already running, but also some of these new PaaS workloads like Synapse and Cosmos DB and Arc are really starting to add some momentum in that part of the stack as well, which is important. The SaaS component or the per user component also tends to be where you'll get some variability as well. We did have a good SaaS component quarter in addition to the healthy base. And that does result in some movement in that number from quarter to quarter. And in particular, I think Microsoft 365 Suite actually and the momentum we've got in security and management and mobility is a big contributor to that. And of course, just the type of contracts that get signed, whether that's for the consumption layer in particular, can have some impact quarter to quarter in a couple of points. So there will be some variability. There will be some uncertainty in that number. But the underlying fundamentals across both the consumption and per user were quite good.

Speaker Change: And Mark, to your question about a little bit about the reacceleration and the Azure growth rate, let me divide that into its components. We did have very good and healthy broad-based consumption growth, especially in IaaS and PaaS. And I think actually Satya touched on one of the important parts that we started to see this quarter. Not only good workload migration work, a strong growth in the optimization of the workloads already running, but also some of these new PaaS workloads like Synapse and Cosmos DB and Arc are really starting to add some momentum to that part of the stack as well, which is important.

And Mark to your question on a little bit about the Reacceleration and the Asher <unk>, let me divided into its components. We did have a very good unhealthy broad base consumption growth, especially in I asked him pass I think actually socket touched on one of the important part that we started to see this quarter with not only.

Speaker Change: And, Mark, to your question on a little bit about the recalibration in Azure, let me divide that into its components. We did have very good and healthy broad-based consumption growth, especially in IAS and PaaS. I think, actually, Satya touched on one of the important parts that we started to see this quarter. Not only was good workload migration work, strong growth in the optimization of the workloads already running, but also some of these new path workloads like Synapse and Cosmos DB and Arc are really starting to add some momentum to that part of this stack as well, which is important.

I'm good at work load migration work strong growth in the optimization of the work was already running but also some of these new pass workloads like synopsis Cosmos T.V. and arc are really starting to add some momentum and not part of the stock as well which is important.

Speaker Change: And in particular, I think Microsoft 365 and the momentum we've got in security, management, and mobility are a big contributor to that. And, of course, just the type of contracts that get signed, whether that's for the consumption layer, in particular, can have some impact quarter-to-quarter by a couple of points. The SAS component, or the per user component, also tends to be where you'll get some variability as well. We did have a good SAS component quarter in addition to the healthy base. And that does result in some movement in that number from quarter to quarter, and in particular, I think Microsoft 365 suite actually. And the momentum we got in security and management immobility is a big contributor to that.

Speaker Change: So there will be some variability in that number, but the underlying fundamentals across both the consumption and per user levels were quite good. And, of course, just the type of contracts that get signed, whether that's for the consumption layer, in particular, can have some impact quarter to quarter by a couple of points. So there will be some variability in that number, but the underlying fundamentals across both consumption and per user were quite good.

Speaker Change: And of course, just the type of contracts that get signed, whether that's for the consumption layer, in particular, can have some impact quarter-to-quarter on a couple of points. The SAS component, or the per user component, also tends to be where you'll get some variability as well. We did have a good SAS component quarter in addition to the healthy base. And that does result in some movement in that number from quarter to quarter, and in particular, I think Microsoft 365 suite. And the momentum we got in security and management immobility is a big contributor to that. So there will be some variability in that number, but the underlying fundamentals across both consumption and per user were quite good.

Speaker Change: And, of course, just the type of contracts that get signed, whether that's for the consumption layer, in particular, can have some impact quarter to quarter by a couple of points. So there will be some variability in that number, but the underlying fundamentals across both the consumption and per user were quite good.

Speaker Change: The SaaS component or the per user component also tends to be where you'll get some variability as well. We did have a good SaaS component quarter in addition to the healthy base. And that does result in some movement in that number from quarter to quarter. And in particular, I think Microsoft 365 Suite and the momentum we've got in security, management, and mobility are a big contributors to that. And of course, just the type of contracts that get signed, whether that's for the consumption layer in particular, can have some impact quarter to quarter by a couple of points. So there will be some variability. There will be some uncertainty in that number, but the underlying fundamentals across both consumption and per user were quite good.

Speaker Change: The SAS component, or the per user component, also tends to be where you'll get some variability as well. We did have a good SAS component quarter in addition to the healthy base. And that does result in some movement in that number from quarter to quarter, and in particular, I think Microsoft 365 suite actually. And the momentum we got in security and management immobility is a big contributor to that. So there will be some variability in that number, but the underlying fundamentals across both consumption and per user were quite good.

Fast component or that per user compound that also tends to be where you'll get some variability as well. We did have a good staff component quarter. In addition to the healthy base and that does result in some movement in that number from quarter to quarter and in particular, I think Microsoft for 65 Sweet actually.

Mentioned, we've got and security and management and mobility is a big contributor to that and of course, just to type of contracts that get signed a whether that for the consumption layer in particular can have some impact quarter to quarter I'm in a couple of points. So there will be some variability.

Speaker Change: Our next question comes from the line of Keith Weiss with Morgan Stanley.

And that number but the underlying fundamentals across on both the consumption per user were quite good.

Speaker Change: Sorry, guys; I was on mute.

Speaker Change: A very, very nice quarter.

Speaker Change: Coming out of the Ignite conference, I wanted to sort of get your views on progress with developers broadly, particularly after the GitHub acquisition.

Speaker Change: Perfect. I really do appreciate it. Thank you, and again, congrats.

Speaker Change: Perfect. I really do appreciate it. Thank you. And, again, congrats.

Speaker Change: Perfect. I really do appreciate it. Thank you, and again, congrats.

Speaker Change: Perfect. I really do appreciate it. Thank you. And, again, congrats.

Perfect I really do appreciate that you won't get undergrad.

Speaker Change: Thanks, Mark. Operator, we'll take the next question, please. Thank you. Our next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed.

Speaker Change: Thanks, Mark. Operator, we'll take the next question, please. Thank you. Our next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed. Thanks, Mark. Operator, we'll take the next question, please. Thank you. Our next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed. Keith Weiss, your line is live. Please proceed with your question. Thank you. Our next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed. Keith Weiss, your line is live. Please proceed with your question. Can you talk to us a little bit about how that kind of impacted your traction with stuff like DevOps Studio and your developer tools? And also, how that's kind of changed the dynamic around Azure?

It makes more operator will take the next question. Please.

Thank you are next question concern line of keys twice with Morgan Stanley . Please proceed.

Speaker Change: Can you talk to us a little bit about how that kind of impacted your traction with stuff like DevOps Studio and your developer tools? And also, how that's kind of changed the dynamic around Azure?

Speaker Change: Thank you. Our next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed. Keith Weiss, your line is live. Please proceed with your question. Can you talk to us a little bit about how that kind of impacted your traction with stuff like DevOps Studio and your developer tools? And also, how has that kind of changed the dynamic around Azure?

Key twice your line of five please proceed with your question.

Speaker Change: Keith Weiss, your line is live. Please proceed with your question.

Speaker Change: Keith Weiss, your line is live. Please proceed with your question. Has that become a real competitive differentiation and changed the competitive dynamic at all with guys like AWS and GCP out there in the marketplace? Has that become a real competitive differentiation and changed the competitive dynamic at all with guys like AWS and GCP out there in the marketplace?

Sorry, guys on mute. Thanks, Thanks for taking the question and and very very nice quarter coming out of eating they cock for someone to sort of.

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

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

Keith Eric Weiss: Yes.

Keith Eric Weiss: First of all, thanks, Keith, for the question. We are very excited about what's happening with the developer offering. I mean, at some level, I think of what we're doing between Visual Studio and Azure DevOps and GitHub as effectively coming together as a compelling developer SaaS solution in the same class as any other SaaS solution from Microsoft around productivity or communication because 1 of the data points I love to use is that the number of developers in the non-tech sector is now more than in the tech sector. I mean, at some level, I think of what we're doing between Visual Studio and Azure DevOps and GitHub as effectively coming together as a compelling developer SaaS solution in the same class as any other SaaS solution from Microsoft around productivity or communication because 1 of the data points I love to use is that the number of developers in the non-tech sector is now more than in the tech sector.

Keith Eric Weiss: Yes.

Keith Eric Weiss: We are very excited about what's happening with the developer offering. I mean, at some level, I think of what we're doing between Visual Studio and Azure DevOps and GitHub as effectively coming together as a compelling developer SaaS solution in the same class as any other SaaS solution from Microsoft around productivity or communication because 1 of the data points I love to use is that the number of developers in the non-tech sector is now more than in the

Your views on progress with developers broadly, particularly after the Kid hub acquisition, he touches a little bit about how that's kind of impacted your attraction with stuff like they've off studio in your developer tools and also how that's kind of change that <unk>. It has that become a real competitive differentiation.

And change at all the competitive dynamic with guys like a W.S. and she C.P. out during the marketplace.

Speaker Change: First of all, thanks Keith for the question. We are very excited about what's happening with the developer offering. At some level, I think of what we're doing between Visual Studio and Azure DevOps and GitHub as effectively coming together as a compelling developer SaaS solution in the same class as any other SaaS solution from Microsoft or on productivity or communication. Because one of the data points I love to use is the number of developers in the non-tech sector is now more than in the tech sector. This is software engineers, and that's going to only increase in the world going forward. So we want to build the best tool chain. After all, that's who we are as a company. We love building tools for developers. And by the way, we're not focused only on Azure. For developers who use our tool chain, they can target any cloud, any edge device. And so this is not sort of me. We've always been clear about it. It's an end to itself. But that said, of course, having this tool chain will help us overall, both with essentially what is by itself a high margin tools as a SaaS business, as well as, of course, developers who are going to be in our ecosystem. But we want to stay true to that ethos of open source, GitHub, and do the best tools. In fact, just this last quarter, you saw even some of the tools being adopted by Facebook engineering. And that's, I think, a testament to the progress that's been made. And I would just add to that, Keith. This is an important area for us to continue to invest in. The opportunity, Satya talked about, is at the developer SaaS level. And so whether you see us...

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

Speaker Change: So we want to build the best tool chain. After all, that's who we are as a company. We love building tools for developers. And so -- and by the way, we're not only focused on Azure. For developers who use our tool chain, they can target any cloud, any edge device, and so this is not some sort of means to some end. We want to build the best toolchain. After all, that's who we are as a company; we love building tools for developers. And so, and by the way, we're not only focused on Azure. For developers who use our toolchain, they can target any cloud, any Edge device, and so this is not sort of a means to some end. We've always been clear about it; it's an end in itself.

Yeah first of all thanks for the question very excited about what's happening with the the developer offering I mean at some level I think of what we're doing between Ah Ah visual studio and <unk> as effectively coming together as a compelling develop or sat solution in the same.

Speaker Change: This is software engineers, and that's going to only increase in the world going forward. So we want to build the best tool chain. After all, that's who we are as a company. We love building tools for developers. And so -- and by the way, we're not focused only on Azure. For developers who use our tool chain, they can target any cloud, any edge device, and so this is not some sort of means to some end. So we want to build the best toolchain. After all, that's who we are as a company; we love building tools for developers.

Speaker Change: And so, and by the way, we're not focused only on Azure. For developers who use our toolchain, they can target any cloud, any Edge device, and so this is not sort of a means to some end. We've always been clear about it; it's an end to itself. It's an end in itself. But that said, of course, having this tool chain will help us overall, both with essentially what is, by itself, a high-margin tool as a SaaS business as well as, of course, developers who are going to be in our ecosystem.

Speaker Change: But we want to stay true to that ethos of open source and GitHub and make the best tools. In fact, just this last quarter, you saw some of the tools being adopted by Facebook engineering, and that's, I think, a testament to the progress that's been made by Microsoft. And I would just add to that, Keith, this is an important area for us to continue to invest in. But that said, of course, having this toolchain will help us overall, both with essentially what is by itself a high-margin tools-as-a-SAS business, as well as, of course, developers who are going to be in our ecosystem.

Loss as any other fast solution from Microsoft or on duty or communication, because I I see one of the data points I love to use is the number of developers in the non tech sector is now more than in the tech sector. This is software engineers and that's going to come the increase in the world going forward. So we want to build the best to channel.

Speaker Change: We've always been clear about it.

Speaker Change: It's an end in itself. But that said, of course, having this tool chain will help us overall, both with essentially what is, by itself, a high-margin tool as a SaaS business as well as, of course, developers who are going to be in our ecosystem. But we want to stay true to that ethos of open source and GitHub and make the best tools. In fact, just this last quarter, you saw some of the tools being adopted by Facebook engineering, and that's, I think, a testament to the progress that's been made by Microsoft. And I would just add to that, Keith; this is an important area for us to continue to invest in.

Speaker Change: But that said, of course, having this toolchain will help us overall, both with essentially what is by itself a high-margin tools-as-a-SAS business, as well as, of course, developers who are going to be in our ecosystem. But we want to stay true to that ethos of open source, GitHub, and make the best tools. In fact, just this last quarter, you saw some of the tools being adopted by Facebook engineering, and that's, I think, a testament to the progress that's been made by Microsoft.

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

Speaker Change: So we want to build the best tool chain. After all, that's who we are as a company. We love building tools for developers. And by the way, we're not only focused on Azure. For developers who use our tool chain, they can target any cloud, any edge device. And so this is not sort of about me. We've always been clear about it. It's an end in itself. But that said, of course, having this tool chain will help us overall, both with essentially what is by itself a high-margin tool as a SaaS business, as well as, of course, developers who are going to be in our ecosystem.

That's who we are as a company, we would love building tools for developers and so and by the way if you're not focused on the on Asher for developers, who use ought to train they can target any cloud 80 edge device and so this is not sort of means to some N.B. will always be glad about it. It's an n. do itself, all but that set of course, having this.

Speaker Change: In fact, just this last quarter, you saw some of the tools being adopted by Facebook engineering, and that's, I think, a testament to the progress that's been made by Microsoft. And I would just add to that, Keith, this is an important area for us to continue to invest in. But that said, of course, having this toolchain will help us overall, both with essentially what is by itself a high-margin tools-as-a-SAS business, as well as, of course, developers who are going to be in our ecosystem. But we want to stay true to that ethos of open source, GitHub, and make the best tools.

Speaker Change: In fact, just this last quarter, you saw some of the tools being adopted by Facebook engineering, and that's, I think, a testament to the progress that's been made by Microsoft. The opportunity Satya talked about is at the developer SaaS level. And so whether you see us investing in GitHub or in the Azure tool chain, this will be a place that we'll continue to see as an opportunity for growth. And I would just add to that, Keith, this is an important area for us to continue to invest in. The opportunities Satya talked about are at the developer SAS level, and so whether you see us investing in GitHub or in the Azure toolchain, this will be a place that we will continue to see as an opportunity for growth.

Will change will help us overall, both with essentially what is that by itself a high margin tools as a fast business as well as of course, all developers who are going to be in our ecosystem, but we want to stay true to that.

Speaker Change: The opportunity Satya talked about is at the developer SaaS level, and so whether you see us investing in GitHub or in the Azure tool chain, this will be a place that we'll continue to see as an opportunity for growth. And I would just add to that, Keith, this is an important area for us to continue to invest in. The opportunities Satya talked about are at the developer SA level, and so whether you see us investing in GitHub or in the Azure toolchain, this will be a place that we will continue to see as an opportunity for growth.

Speaker Change: And so whether you see us investing in GitHub or in the Azure tool chain, this will be a place that we'll continue to see as an opportunity for growth. And I would just add to that, Keith, this is an important area for us to continue to invest in. The opportunities Satya talked about are at the developer SAS level, and so whether you see us investing in GitHub or in the Azure toolchain, this will be a place that we will continue to see as an opportunity for growth.

Speaker Change: But we want to stay true to that ethos of open source, GitHub, and make the best tools. In fact, just this last quarter, you saw some of the tools being adopted by Facebook engineering. And that's, I think, a testament to the progress that's been made. And I would just add to that, Keith. This is an important area for us to continue to invest in. The opportunity, Satya talked about, is at the developer SaaS level. And so, whether you see us...

Sores get up and do the best tools. In fact, just this last quarter you saw <unk> the tools being adopted by Facebook Engineering, and that's I think a testament to the progress that's been made by Microsoft and I would just add to that Keith. This is an important area for us to continue to invest and the opportunity talk your talked about is at the.

Speaker Change: Our next question comes from the line of Karl Keirstead with Deutsche Bank. Amy, I'd love to ask you a gross margin question. Beginning in your third quarter or the current March quarter, we've been bracing for gross margins to trend flat or even down year-over-year, given the sales mix shifts that you and your IR team have long warned us about. Beginning in your third quarter or the current March quarter, we've been bracing for gross margins to trend flat or even down year-over-year, given the sales mix shifts that you and your IR team have long warned us about.

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

For staff level, and so whether you see us.

Speaker Change: Investing in GitHub or in the Azure toolchain, this will be a place that we'll continue to see as an opportunity for growth.

Thing and get hub or in the AD or tool chain this'll be a place that will continue to see as an opportunity for growth.

Excellent.

Speaker Change: Excellent. Thank you very much, guys.

Speaker Change: Excellent. Thank you very much, guys. Excellent. Thank you very much, guys. Thanks, Keith. Operator, we'll move to the next question, please. Excellent. Thank you very much, guys. Thanks, Keith. Operator, we'll move to the next question, please.

<unk>.

Say Thanksgiving operator will move to next question. Please.

Speaker Change: Thanks, Keith. Operator, we'll move to the next question, please.

Speaker Change: Yet when I take your revs guide and your COGS guide, it equates to 3Q gross margins of 68%, which is actually up about 150 bps year-over-year.

Speaker Change: Thank you. Our next question comes from the line of Karl Keirstead with Deutsche Bank. Please proceed.

Speaker Change: Thank you. The next question comes from the line of Karl Keirstead with Deutsche Bank. Please proceed. Thank you. Our next question comes from the line of Karl Keirstead with Deutsche Bank. Please proceed.

Thank you are next question comes from line of Karl care steps.

Speaker Change: Thank you. The next question comes from the line of Karl Keirstead with Deutsche Bank. Please proceed.

Please proceed.

Karl E. Keirstead: Thanks, Amy. I'd love to ask you a gross margin question. Beginning in your third quarter or the current March quarter, we've been bracing for gross margins to trend flat or even down year over year, given the sales mix shifts that you and your IR team have long warned us about. Yet when I take your REVS guide and your COGS guide, it equates to 3Q gross margins of 68%, which are actually up about 150 bps year over year. So I just wanted to understand what's going on. Is it that the higher gross margin businesses are decelerating at a slower than expected pace in your second half, or perhaps the pace of Azure gross margin improvement is greater than you thought? A little color there might be helpful.

Karl E. Keirstead: Thanks, Amy. I'd love to ask you a gross margin question. Beginning in your third quarter or the current March quarter, we've been bracing for gross margins to trend flat or even down year over year, given the sales mix shifts that you and your IR team have long warned us about. Yet when I take your REVS guide and your COGS guide, it equates to 3Q gross margins of 68%, which is actually up about 150 bps year over year. So I just wanted to understand what's going on. Is it that the higher gross margin businesses are decelerating at a slower than expected pace in your second half, or perhaps the pace of Azure gross margin improvement is greater than you thought? A little color here might be helpful.

Thanks.

Q a gross margin question beginning in your third quarter or the current March quarter, we've been bracing for gross margins to trend flat or even.

Karl E. Keirstead: Or perhaps the pace of Azure gross margin improvement is greater than you thought? A little color there might be helpful. Thanks, Karl. Really, when you see the gross margin changes, it all comes down to sales mix. So at a fundamental level, I feel very good about the execution of each service in terms of their own gross margin goals. We saw improvement across every cloud service, not just Azure, in terms of their ability to deliver growing gross margin as they focused not only on cost but also on continuing to see ARPU growth and attach growth.

Karl E. Keirstead: We saw improvement across every cloud service, not just Azure, in terms of their ability to deliver growing gross margin as they focus not only on cost but also on continuing to see ARPU growth and attach growth.

Down your every year.

Given the sales mic ships that you and your I.R. team has long warned us about yet when I when I take your ribs God and your colleagues guide.

Karl E. Keirstead: Thanks, Karl.

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

Two three q. gross margins of 68%, which are actually up about 150, <unk>. So I just wanted to understand what's going on is it that the higher gross margin businesses are decelerating at a slower than expected pace in your second half or perhaps the pace of Asher gross.

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

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

And improvement is greater than you thought little color there might be helpful.

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

Speaker Change: Thanks, Karl. Really, when you see the gross margin changes, it all comes down to sales mix. Thanks, Karl. Really, when you see the gross margin changes, it all comes down to sales mix. So at a fundamental level, I feel very good about the execution of each service in terms of their own gross margin goals. We saw improvement across every cloud service, not just Azure, in terms of their ability to deliver growing gross margin as a focus not only on cost but also on continuing to see ARPU growth and attach growth. So, and I could say that about many of the product lines, right? I focus on them at the what can each product line do to be its best and most competitive.

Thanks, Carl I'm really when you see that gross margin changes. It all comes down to sales next so fundamental level I feel very good about the execution of each service to their own gross margin goals. We saw improvement across every cloud service not just.

Speaker Change: So -- and I could say that about many of the product lines, right? I focus on them at the -- what can each product line do to be its best and most competitive?

Speaker Change: So -- and I could say that about many of the product lines, right? I focus on them at the -- what can each product line do to be its best and most competitive? Thanks, Karl. Really, when you see the gross margin changes, it all comes down to sales mix. So at a fundamental level, I feel very good about the execution of each service in terms of their own gross margin goals. We saw improvement across every cloud service, not just Azure, in terms of their ability to deliver growing gross margin as a focus not only on cost but also on continuing to see ARPU growth and attach growth. So, and I could say that about many of the product lines, right? I focus on them at the what can each product line do to be its best and most competitive.

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

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

Karl E. Keirstead: What you saw in H1 and what you'll see in H2 is simply mixing in Q2. There was a lot of mixing into Windows away from, for example, the console, right, since we're heading into the next console cycle. There was a lot of mix into Windows away from, for example, the console, right, since we're heading into the next console cycle. At a company level, if you thought about what gross margins would have looked like without gaming, there are a couple of points of impact.

Asher in terms of their ability to deliver growing gross margin as as they focus not only on that.

Cost, but also.

Karl E. Keirstead: At a company level, if you think about what gross margins would have looked like without gaming, there are a couple of points of impact.

<unk> and attach gross.

So.

Karl E. Keirstead: And I could say that about many of the product lines, right? I focus on them at the what can each product line do to be its best and most competitive.

Karl E. Keirstead: And I could say that about many of the product lines, right? I focus on them at the what can each product line do to be its best and most competitive. And as we head to H2, what you'll see is that the mix will shift a little bit.

And I could say that about many of the product line right I focus on them at the what can each product line due to be at the best and most competitive.

Karl E. Keirstead: and many more.

Karl E. Keirstead: and many more. What you saw in H1 and what you'll see in H2 is simply mixed in Q2. What you saw in H1 and what you'll see in H2 is simply a mix. In Q2, there was a lot of mixing into Windows, away from, for example, the console, right, since we're heading into the next console cycle. At a company level, if you thought about what gross margins would have looked like without gaming, there are a couple of points of impact. And as we had to in H2, what you'll see is that the mix will shift a little bit.

Karl E. Keirstead: What you saw in H1 and what you'll see in H2 is simply mixed in Q2.

What you saw on each one and what you'll see in age too is simply mixing q. too.

Karl E. Keirstead: What you saw in H1 and what you'll see in H2 is simply a mix. In Q2, there was a lot of mixing into Windows, away from, for example, the console, right, since we're heading into the next console cycle. At a company level, if you think about what gross margins would have looked like without gaming, there are a couple of points of impact. And as we head to H2, what you'll see is that the mix will shift a little bit. The sort of end-of-support impacts tail off, whether that's in OEM or on the server side, and the contribution from gaming as well as other components in our hardware portfolio goes up a little bit.

Karl E. Keirstead: So that still does result, as you said, in a higher gross margin impact in Q3, and you'll see that continue to have a slightly different impact as we head into Q4, if that helps to give you a little sense.

Karl E. Keirstead: Yeah, thanks, Amy.

Karl E. Keirstead: The sort of end of support impacts tail off, whether that's in OEM or on the server side.

Karl E. Keirstead: The sort of end-of-support impacts tail off, whether that's in OEM or on the server side, and the contribution from gaming as well as other components in our hardware portfolio goes up a little bit. So that still does result, as you said, in a higher gross margin impact in Q3, and you'll see that continue to have a slightly different impact as we head into Q4, if that helps to give you a little sense. Yeah, thanks, Amy. The sort of end of support impacts tail off, whether that's in OEM or on the server side.

Karl E. Keirstead: There was a lot of mix into Windows away from, for example, the console, right, since we're heading into the next console cycle. At a company level, if you thought about what gross margins would have looked like without gaming, there are a couple of points of impact. And as we head to H2, what you'll see... The contribution from gaming as well as other components in our hardware portfolio goes up a little bit. So that still does result, as you said, in a higher gross margin impact in Q3, and you'll see that continue to have a slightly different impact as we head into Q4, if that helps to give you a little sense.

There was a lot of mixed into windows away from for example, the console right since we're heading into the next Ponsolle cycle.

Karl E. Keirstead: What you saw in H1 and what you'll see in H2 is simply mixed in Q2.

At a company level, if you thought about what gross margins would've looked like without gaming gets a couple of points of impact and as we had to h. two what you'll see.

Karl E. Keirstead: And the contribution from gaming as well as other components in our hardware portfolio went up a little bit. So that still does result, as you said, in a higher gross margin impact in Q3, and you'll see that continue to have a slightly different impact as we head into Q4, if that helps to give you a little sense.

Karl E. Keirstead: The mix will shift a little bit. The end of support impacts tail off, whether that's in OEM or on the server side, and the contribution from gaming as well as other components in our hardware portfolio go up a little bit. So that still does result, as you said, in a higher gross margin implication in Q3, and you'll see that continue to have a slightly different impact as we head into Q4, if that helps to give you a little sense.

Karl E. Keirstead: The mix will shift a little bit. The end of support impacts will tail off, whether that's in OEM or on the server side, and the contribution from gaming as well as other components in our hardware portfolio will go up a little bit. So that still does result, as you said, in a higher gross margin impact in Q3, and you'll see that continue to have a slightly different impact as we head into Q4, if that helps to give you a little sense.

Is that the mix will shift a little that the from the end of support impacts tail off whether that's an.

Karl E. Keirstead: Our next question comes from the line of Heather Bellini with Goldman Sachs. I just wanted to follow up on a little bit what Karl was just asking relating to gross margins. I was wondering if you could maybe help us think about the mix between PaaS and IaaS and kind of what -- if you can give us a sense of the mix shift or just kind of how that's been trending. But also, I wanted to ask about -- it's been unbelievable, every quarter, you're able to call out material gross margin improvements in Azure.

Karl E. Keirstead: I was wondering if you could maybe help us think about the mix between PaaS and IaaS and kind of what -- if you can give us a sense of the mix shift or just kind of how that's been trending. But also, I wanted to ask about -- it's been unbelievable, every quarter, you're able to call out material gross margin improvements in Azure.

Or on the server side and the contribution from gaming as well as other components in our hardware portfolio go up a little that.

Karl E. Keirstead: I just wanted to follow up on a little bit what Karl was just asking relating to gross margins. I was wondering if you could maybe help us think about the mix between PaaS and IaaS and kind of what -- if you could give us a sense of the mix shift or just kind of how that's been trending? But also, I wanted to ask you about -- it's been unbelievable, every quarter you're able to call out material gross margin improvements in Azure.

So that's still a does result, as you said in a higher it's gross margin implication in Q3, and you'll see that I continued to have a slightly different impact as we had into queue for if that helps to give you a little sense.

Speaker Change: Yep. Thanks, Amy.

Yep. Thanks.

Speaker Change: Thanks, Karl. Operator, we'll take the next question, please.

<unk> operator will take the next question please.

Speaker Change: Thanks, Karl. Operator, we'll take the next question, please.

Speaker Change: Thank you. Our next question comes from the line of Heather Bellini with Goldman Sachs. Please proceed.

Speaker Change: Thank you. Our next question comes from the line of Heather Bellini with Goldman Sachs. Please proceed. Thank you. Our next question comes from the line of Heather Bellini with Goldman Sachs. Please proceed. And I guess ultimately, what I'm asking is, given the success you've seen there, has your view for -- if you look 2 to 3 years down the road, do you just think Azure is going to be a higher gross margin business than maybe you would have thought 3 years ago? Thank you. Our next question comes from the line of Heather Bellini with Goldman Sachs.

Thank you are nice crusher concern line of Heather with Goldman Sachs. Please proceed.

Speaker Change: And I guess ultimately, what I'm asking is, given the success you've seen there, has your view for -- if you look 2 to 3 years down the road, do you just think Azure is going to be a higher gross margin business than maybe you would have thought 3 years ago?

Heather Bellini: Great, thank you. I just wanted to follow up on a little bit what Karl was just asking relating to gross margins. I was wondering if you could maybe help us think about the mix between PAS and IAS and kind of what, you know, if you can give us a sense of the mix shift or just kind of how that's been trending. But also I wanted to ask about, you know, you've been, it's been unbelievable every quarter you're able to call out material gross margin improvements in Azure. And I guess ultimately what I'm asking is given the success you've seen there, has your view for, you know, if you look two to three years down the road, do you just think Azure is going to be a higher gross margin business than maybe what you would have thought, you know, three years ago?

Heather Bellini: Great, thank you. I just wanted to follow up on a little bit what Karl was just asking relating to gross margins. I was wondering if you could maybe help us think about the mix between PAS and IAS and kind of what, you know, if you can give us a sense of the mix shift or just kind of how that's been trending. But also, I wanted to ask about, you know, it's been unbelievable every quarter that you're able to call out material gross margin improvements in Azure. And I guess ultimately what I'm asking is, given the success you've seen there, what is your view for, you know, if you look two to three years down the road, do you just think Azure is going to be a higher gross margin business than maybe you would have thought three years ago?

Heather Bellini: Specifically on Azure, I think the Azure gross margins are trending where we thought they would trend on the IaaS and PaaS layer, and they're trending where we thought they would trend on the per-user-like assets. And what you're seeing is continued improvement on that trend line that we expected. But you'll also see, as we go forward in time, those improvements will flow at the IaaS and PaaS layers. It will get better, but the nature and the sort of rate of improvement will vary.

Great. Thank you I just wanted to follow up on a little bit what Carlos just asking relating to cross Mark and I I was wondering if you can maybe help us think about the mix between pass and I asked and kind of what you know.

Heather Bellini: Specifically on Azure, I think the Azure gross margins are trending where we thought they would trend on the IaaS and PaaS layer.

You can give us a sent to the next shaft or just kind of how that's been trendy, but also I wanted to ask about you know you you've been it's been unbelievable every quarter, you're able to call up material gross margin improvement an accurate and I guess ultimately what I'm asking is given this accessing scene there.

Heather Bellini: Great. Thank you. I just wanted to follow up on a little bit about what Karl was just asking relating to gross margins. I was wondering if you could maybe help us think about the mix between PaaS and IaaS and kind of what if you could give us a sense of the mix shift or just kind of how that's been trending. But also, I wanted to ask you about how unbelievable it is that every quarter you're able to make material gross margin improvements in Azure. And I guess ultimately, what I'm asking is, given the success you've seen there, your view for if you look two to three years down the road, do you think Azure is going to be a higher gross margin business than maybe what you would've thought three years ago?

Heather Bellini: And they're trending where we thought they would trend on the per-user-like assets. And what you're seeing is continued improvement on that trend line that we expected. But you'll also see as we go forward in time, those improvements will flow at the IaaS and PaaS layers. It will get better, but the nature and the sort of rate of improvement will flow.

Heather Bellini: And what you're seeing is continued improvement on that trend line that we expected. But you'll also see, as we go forward in time, those improvements will flow at the IaaS and PaaS layers. It will get better, but the nature and the sort of rate of improvement will vary.

View for you know if you look two to three years down the road D., just think address going to be a higher gross margin business. Then maybe what you would have thought you know three years ago.

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

I think <unk> Asher gross margins are trendy, where we thought they would trend actually on the I.S. and pass flair and are trendy, where we thought they would trend on the per user like assets and what you're seeing.

Heather Bellini: And you'll see that increasing mix toward IaaS and PaaS in a way from the per user perspective just as in terms of the opportunity and the TAM.

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

Heather Bellini: So -- and for the long run, Heather, I think my view is unchanged, frankly, about what that should look like.

Heather Bellini: is continued improvement on that trend line that we expected. But you'll also see as we go forward in time, those improvements will slow at the IAS and PATH layer. It'll get better, but the nature and the rate of improvement will slow. And you'll see that increasing mix toward IAS and PATH in a way from the per user, just as in terms of the opportunity and the TAM. So, over the long run, Heather, I think my view is unchanged, frankly, about what that should look like. And, of course, over the same time period, how it would impact commercial cloud gross margins all up. But what's, I think, if you separate this from this gross margin implication, it goes to the fact of just how much revenue opportunity exists in cloud. And so, if we can continue to capture the revenue opportunity, the revenue growth, continue to meet customer needs and scenarios, pick and thoughtfully invest in industry-level solutions to grow those things, I worry less about the mechanics of the GM, which can continue to improve by service, and more, really, about our opportunity to grow revenue. Yeah. And I would say, when we think about whether it's our R&D and operating leverage there, or sales, or CapEx. Right. Or for the cloud, we don't sort of separate out these categories of IaaS, PaaS, and even SaaS. I mean, just to put it practically for you, we might do an infrastructure service around IoT. We then have PaaS services around IoT. We have apps around IoT in Dynamics 365. Similarly, we have the xCloud and Game Pass subscriptions, and we have the streaming capability in Azure. So, we think about our investments holistically in that sense, and I think that's what's going to define the long-term margin picture. And I think that's going to define the long-term profile of our companies, how well we manage all the layers, and collectively get leverage across the investment.

Heather Bellini: There is continued improvement on that trend line that we expected. But you'll also see that as we go forward in time, those improvements will slow at the IAS and PATH layers. It'll get better, but the nature and the rate of improvement will slow. And you'll see that increasing mix toward IAS and PATH in a way from the per user perspective, just as in terms of the opportunity and the TAM. So, over the long run, Heather, I think my view is unchanged, Frankly, about what that should look like and, of course, over the same time period, how it would impact commercial cloud gross margins all up.

His continued improvement on that trend mind that we expected, but you'll also see as we go forward in time those improvements will slow at the I.S. and path layer, it'll get better but that nature and you know sort of rate of improvement will slow and you'll see that increasing next toward.

Heather Bellini: And of course, over the same time period, how it would impact commercial cloud gross margins all up. But what -- I think if you separate this from this gross margin implication, it goes to the fact of just how much revenue opportunity exists in the cloud. So for the long run, Heather, I think my view is unchanged, frankly, about what that should look like.

Heather Bellini: And of course, over the same time period, how it would impact commercial cloud gross margin all up. But what I think if you separate this from this gross margin implication, it goes to the fact that just how much revenue opportunity exists in the cloud. And so if we can continue to capture revenue growth, continue to meet customer needs and scenarios, pick and thoughtfully invest in industry-level solutions to grow those things, I worry less about the mechanics of the GM, which can continue to improve with service, and more really about our opportunity to grow revenue.

Heather Bellini: But what -- I think if you separate this from this gross margin implication, it goes to the fact of just how much revenue opportunity exists in the cloud. So for the long run, Heather, I think my view is unchanged, frankly, about what that should look like. And of course, over the same time period, how it would impact commercial cloud gross margin all up. But what I think if you separate this from this gross margin implication, it goes to the fact that just how much revenue opportunity exists in the cloud. And so if we can continue to capture revenue growth, continue to meet customer needs and scenarios, pick and thoughtfully invest in industry-level solutions to grow those things, I worry less about the mechanics of the GM, which can continue to improve with service, and more really about our opportunity to grow revenue.

Heather Bellini: And so if we can continue to capture revenue growth, continue to meet customer needs and scenarios, pick and thoughtfully invest in industry-level solutions to grow those things, I worry less about the mechanics of the GM, which can continue to improve with service, and more really about our opportunity to grow revenue. And I would say when we think about whether it's our R&D and operating leverage there or sales or CapEx for the cloud, we don't sort of separate out these categories of IaaS, PaaS, and even SaaS. I mean, just to put it practically for you, we might do an infrastructure service around IoT.

Heather Bellini: We then have PaaS services around IoT. We have apps around IoT and Dynamics 365. Similarly, we have the xCloud and Game Pass subscriptions, and we have the streaming capability in Azure. Yeah, and I would say when we think about whether it's our R&D and operating leverage there or sales or CapEx for the cloud, we don't sort of separate out these categories of IaaS, PaaS, and even SaaS. I mean, just to put it practically for you, we might do an infrastructure service around IoT. We then have PaaS services around IoT. We have apps around IoT and Dynamics 365.

Heather Bellini: Similarly, we have the xCloud and game pass subscriptions, and we have the streaming capability in Azure. So we think about our investments holistically in that sense, and I think that's what's going to define the long-term margin profile of our company, how well we manage all layers and collectively get leverage across the investment.

And passing away from the per user just as in terms of the opportunity and the Tam. So it for the long run Heather I think my view is unchanged frankly about what that should look like and of course over the same time period, how it would impact commercial cloud gross margins.

Heather Bellini: But what's important, I think, if you separate this from this gross margin implication, it goes to the fact that just how much revenue opportunity exists in the cloud. And so, if we can continue to capture that revenue opportunity, the revenue growth, continue to meet customer needs and scenarios, pick and thoughtfully invest in industry-level solutions to grow those things, I worry less about the mechanics of the GM, which can continue to improve by service, and more Yeah. And I would say, when we think about whether it's our R&D and operating leverage there, or sales, or CapEx. Right. Or for the cloud, we don't sort of separate out these categories of IaaS, PaaS, and even SaaS.

All up but what I think if you separate this from this gross margin implication.

Heather Bellini: Yes. And I would say when we think about whether it's our R&D and operating leverage there or sales or CapEx for the cloud, we don't sort of separate out these categories of IaaS, PaaS, and even SaaS. I mean, just to put it practically for you, we might do an infrastructure service around IoT. We then have PaaS services around IoT. We have apps around IoT and Dynamics 365. Similarly, we have the xCloud and Game Pass subscriptions, and we have the streaming capability in Azure. Yeah, and I would say when we think about whether it's our R&D and operating leverage there, or sales or CapEx for the cloud, we don't sort of separate out these categories of IaaS, PaaS, and even SaaS.

Heather Bellini: I mean, just to put it practically for you, we might do an infrastructure service around IoT. We then have PaaS services around IoT. We have apps around IoT and Dynamics 365. Similarly, we have the xCloud and game pass subscriptions, and we have the streaming capability in Azure. So we think about our investments holistically in that sense, and I think that's what's going to define the long-term margin profile of our company, how well we manage all layers and collectively get leverage across the investment.

Heather Bellini: And I would say when we think about whether it's our R&D and operating leverage there or sales or CapEx for the cloud, we don't sort of separate out these categories of IaaS, PaaS, and even SaaS. I mean, just to put it practically for you, we might do an infrastructure service around IoT. We then have PaaS services around IoT. We have apps around IoT and Dynamics 365. Similarly, we have the xCloud and Game Pass subscriptions, and we have the streaming capability in Azure. Yeah, and I would say when we think about whether it's our R&D and operating leverage there or sales or CapEx for the cloud, we don't sort of separate out these categories of IaaS, PaaS, and even SaaS.

It goes to the fact of just how much revenue opportunity exists in cloud and so we can continue to capture the revenue growth.

Continue to me customer needs and scenarios picking spot believe invest in in industry level solutions to grow those things I worry less about the mechanics of the G.M., which can continue to improve by service and more really about our opportunity to grow rather now yeah.

I would say when we think about whether it's R.R. and d. and operating leverage their our sales or cap X. Oh for the <unk>, we don't sort of separate out these categories of I asked pass and even sat them and just to put it practically for you.

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

Heather Bellini: I mean, just to put it practically for you, we might do an infrastructure service around IoT. We then have PaaS services around IoT. We have apps around IoT in Dynamics 365. Similarly, we have the xCloud and Game Pass subscriptions, and we have the streaming capability in Azure. So, we think about our investments holistically in that sense, and I think that's what's going to define the long-term margin picture. And I think that's going to define the long-term profile of our companies, how well we manage all the layers and collectively get leverage across the investment.

<unk> on infrastructure services around IOTV. We then have passed services around <unk> dynamics 365. Similarly, we have the x. cloud and game past subscriptions and we have the streaming capability that are so we think about investments realistically in that sense that I think that's what's going to find the.

Heather Bellini: Our next question comes from the line of Brent Thill with Jefferies.

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

Heather Bellini: I'm just curious, I know you have the tailwind from the expiration, but maybe you could talk through some of the other drivers that you're seeing in the business that's causing such great growth even on the on-premise as the cloud continues to grow? Thanks, Brent.

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Profile of our company's how well, we manage all layers and collectively get leverage across the investment.

Speaker Change: Very helpful. Thank you.

Helpful. Thank you.

Speaker Change: What we've seen has been relatively consistent is that the drivers on the on-prem side have absolutely been the hybrid value prop and also premium.

Speaker Change: Thanks, Heather. Operator, we'll take the next question, please.

Makes other operator will take the next question. Please.

Speaker Change: Thank you. Our next question comes from the line of Brent Thill with Jefferies. Please proceed.

Thank you are next question comes from line of friends tell with Jeffrey's. Please proceed.

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

Brent Thill: Thanks Amy. You called out the strength of on-premise software. I'm just curious, I know you had the tailwind from the expiration, but maybe talk through some of the other drivers that you're seeing in the business that's causing such great growth, even on the on-premise as the cloud continues to grow. And they're actually related because, ultimately, the really thing that we've seen that has value for customers is that flexibility. And so the flexibility to deploy where they need it and when they need it. And if that makes sense on the edge, which some people may call on-prem, and whether that makes sense in the cloud, which people may call Azure, is relatively indifferent as long as it meets the customer solution in the way that the solution demands.

Thanks, any you call up to strike on the software.

No you have the channel one from expiration, but maybe talk through from the other drivers they you're seen in the businesses, causing.

Brent Thill: And they're actually related because ultimately, the really thing that we've seen that has value for customers is that flexibility. And so the flexibility to deploy where they need it and when they need it. And if that makes sense on the edge, which some people may call on-prem, and whether that makes sense in the cloud, which people may call Azure, is relatively indifferent as long as it meets the customer solution in the way that the solution demands.

You know such great great growth, even on on premise as a hobby.

Oh.

Thanks, Brent you know what we've seen it sort of relatively consistent is the drivers on the on prime side of absolutely band hybrid value prop and also premium.

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

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

And they're actually related because ultimately the really things that we've seen that has value for customers is that flexibility and so the flexibility to deploy where they need it and when they need it and if that makes sense on the edge, which some people may call on Prem and whether that makes sense and the cloud, which people may call at her relatively and.

Amy E. Hood: And so that And so that hybrid value prop, you start to see that flexibility in the data point I gave, which is that 1/3 of the Windows and SQL Server customers are already starting to use that right, to be able to take advantage of that flexibility for their workload solutions. And so those trends I see are relatively durable. And that's why we talked about it for a number of years. And so that hybrid value proposition, you start to see that flexibility in the data point I gave, which is that 1/3 of the Windows and SQL Server customers are already starting to use that right, to be able to take advantage of that flexibility for their workload solutions.

Amy E. Hood: And so those trends I see are relatively durable. And that's why we have talked about them, I think, for a number of years.

Different as long as it meets the customer solution in the way that the solution demands and show that.

Amy E. Hood: And I think if we think about the sort of end of support and the tail on that, it was probably 2 points on IC for the quarter, as I called out.

Amy E. Hood: and a hybrid value prop and you start to see that flexibility in the data point I gave which is that a third of the Windows and SQL Server customers are already starting to use that right, to be able to take advantage of that flexibility for their workload solutions. And so those trends I see as relatively durable and that's why we talked about it I think now for a number of years. And I think it's really important that we start to see that flexibility in the data point I think it's really important that we start to see that flexibility in the

Hybrid value profit you start to see that flexibility and data point I gave which is that a third.

Windows and sequel server customers are already starting to use that right to be able to take advantage of that flexibility for that workloads solutions and so those trends I I see it as relatively durable and that's why we talked about I think now for a number of for a number of years and.

Amy E. Hood: Our next question comes from Mark Murphy with JPMorgan. Satya, a few quarters ago, you commented that Teams was the fastest-growing app in the company's history. Satya, a few quarters ago, you commented that Teams was the fastest-growing app in the company's history.

Satya Nadella: Thank you, Mike. It was another strong quarter with double-digit top and bottom line growth driven by the strength of our commercial cloud. Stepping back from the quarter and reflecting more broadly on the next decade, the defining secular trend will be the increasing rate of digitization of people, places, and things. This malleable power of software will drive productivity growth across all industries, leading to more inclusive economic growth far beyond the domains of consumer tech today. Tax spend as a percentage of GDP is projected to double over the next decade.

Amy E. Hood: So I feel very good about the underlying trajectory. So I feel very good about the underlying trajectory.

I think.

Amy E. Hood: If we think about the end of support and the tail on that, it was probably two points on IC for the quarter, as I called out, so I feel very good about the underlying trajectory.

You know if we think about these and to support and the tail on that I. You know it was probably you know two points on I see for the quarter as I called out so I I feel very good about the underlying trajectory.

Amy E. Hood: I'm wondering if you could clarify if that is a reference to daily active user growth or bookings impact? Or is that a comment on user engagement and the time being spent in Teams or some other criteria? Or is that a comment on user engagement and the time being spent in Teams, or some other criteria?

Amy E. Hood: Thanks.

Thanks.

<unk> operator will move to next question. Please.

Speaker Change: Thanks, Brent. Operator, we'll move to the next question, please.

Speaker Change: As well, Amy, I was wondering if you could offer any kind of directional thoughts on just how to model the Windows OEM line post-Windows 7 end of support and going into fiscal year '21.

Speaker Change: Thank you. Our next question comes from the line of Mark Murphy with JP Morgan. Please proceed.

Thank you are next question comes from light of Mark Marsili J.P. Morgan. Please proceed.

Yeah. Thank you such a a few quarters ago. You had commented that teams is the fastest growing out in the company's history wondering if you could clarify if that is a reference to daily activities are gross or bookings impact or is that a comment on user engagement at the time.

Mark R. Murphy: Yes, thank you. Satya, a few quarters ago you had commented that Teams is the fastest growing app in the company's history. Wondering if you could clarify if that is a reference to daily active user growth or bookings impact or is that a comment on user engagement and the time being spent in Teams or some other criteria? As well, Amy, I'm wondering if you could offer any kind of directional thoughts on just how to model the Windows OEM line post Windows 7 end of support and going into fiscal year 21 and any high level thoughts on how you think that could trend versus what happened in the prior cycle?

Mark R. Murphy: Yes, thank you. Satya, a few quarters ago, you commented that Teams is the fastest growing app in the company's history. I'm wondering if you could clarify if that is a reference to daily active user growth or bookings impact, or is that a comment on user engagement and the time being spent in Teams or some other criteria? As well, Amy, I'm wondering if you could offer any kind of directional thoughts on just how to model the Windows OEM line post Windows 7 end of support and going into fiscal year 21, and any high-level thoughts on how you think that could trend versus what happened in the prior cycle.

Mark R. Murphy: Yes, thanks for the question, Mark.

Mark R. Murphy: My comment was mostly around deployment engagement and the depth of engagement.

Mark R. Murphy: There are very few types of products that have these platform effects. Teams is a framework that is obviously related to messaging, which has significant usage. It's also driving usage of the rest of Office because the rest of Office gets integrated into the usage patterns around channels.

The extended teams or or some other criteria as well Amy I'm wondering if you could offer any kind of directional thoughts on just how to model. The windows Zoe I'm line post windows seven end of support and going into.

Mark R. Murphy: And any high-level thoughts on how you think that could trend compared to what happened in the prior cycle. Yes, thanks for the question, Mark. My comment was mostly around the deployment engagement, the depth of engagement. There are very few types of products that have these platform effects. Teams is a framework that is obviously related to messaging, which has significant usage. It's also driving usage of the rest of Office because the rest of Office gets integrated into the usage patterns around channels.

Mark R. Murphy: Teams is a framework that is obviously related to messaging, which has significant usage. It's also driving usage of the rest of Office because the rest of Office gets integrated into the usage patterns around channels. It's obviously used in meetings, but it's also the place where business process workflows in the context of messaging happen, both for knowledge workers and first-line workers. It's also the place where business process workflows in the context of messaging happen, both for knowledge workers and first-line workers.

You're 21, and then he high level thoughts on how you think that could trend versus what happened in the prior cycle.

Mark R. Murphy: It's obviously used in meetings, but it's also the place where business process workflows in the context of messaging happen, both for knowledge workers and first-line workers.

Yeah. Thanks for the a question Mark up my comment was mostly all round deployment engagement. The depth of engagement you know, they're very few type products, which have these platform effects teams is the scaffolding that is obviously related to messaging.

Speaker Change: Thanks for the question, Mark. My comment was mostly around deployment, engagement, the depth of engagement. There are very few types of products which have these platform effects. Teams is a scaffolding that is obviously related to messaging, which has significant usage. It's also driving usage of the rest of office, because the rest of office gets integrated in usage patterns around channels. It's obviously used in meetings. It's also the place where business process workflows in context of messaging happen, and both for knowledge workers and first-line workers. So when I look at all of that cumulative effect, it's much broader than any other user experience scaffolding and in terms of its ability to drive that type of platform effect and engagement. So we're excited about it, and we continue to see that, and you saw that in my remarks as well.

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

<unk> significant usage, it's also driving usage of the rest of office because you know a rest of office gets integrated in usage <unk> around channels.

Speaker Change: So we're excited about it.

Speaker Change: And we continue to see that, and you saw that in my remarks as well. And to your question on OEM, I think what's important is if you try to take out, which is challenging, some of the comments we've had on either chip supply constraints or some of the uncertainty related to the public health situation in China, you would say what we have in terms of what the cycle would look like compared to prior cycle ends would actually be quite similar. If not, we probably have a little more opportunity in the mid and small business segment to have the tail last a little longer than it did the last time.

Speaker Change: So when I look at all of that cumulative effect, it's much broader than any other user experience scaffolding in terms of its ability to drive that type of platform effect and engagement. So we're excited about it, and we continue to see that, and you saw that in my remarks as well. So when I look at all of that cumulative effect, it's much broader than any other user experience scaffolding in terms of its ability to drive that type of platform effect and engagement. So we're excited about it. And we continue to see that, and you saw that in my remarks as well. So when I look at all of that cumulative effect, it's much broader than any other user experience scaffolding in terms of its ability to drive that type of platform effect and engagement.

It's obviously used in meetings. It's also the place where business process work flows in context of messaging happen in both for knowledge workers and forest line workers, So, but I look at all about cumulative effect, it's a much broader than any other user experience scaffolding and then dumps if it's the ability to drive that type.

Platform effect engagements will be excited about it and we continue to see that and you saw that in my remarks as well.

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

Speaker Change: And to your question on OEM, I think what's important is if you try to take out, which is challenging, some of the comments we've had on either chip supply constraints or some of the uncertainty related to the public health situation in China, you would say what we have in terms of what the cycle would look like compared to prior cycle ends would actually be quite similar. If not, we probably have a little more opportunity in the mid and small business segment to have the tail last a little longer probably than it did the last time. So we feel very good. We'll still need to work through that as we work through both the situations I've talked about frankly now for quite a few quarters and then looking forward. So we'll continue to give you guidance on what we see in the market.

Speaker Change: And to your question on OEM, I think what's important is if you try to take out, which is challenging, some of the comments we've had on either chip supply constraints or some of the uncertainty related to the public health situation in China, you would say what we have in terms of what the cycle would look like compared to prior cycle ends would actually be quite similar. If not, we probably have a little more opportunity in the mid and small business segment to have So we feel very good. We'll still need to work through that as we work through both the situations I've talked about frankly now for quite a few quarters, and then look forward.

Your question on.

I think what's what's important as if you try to take out which is.

Some of the commas, we've had on either chips supply constraints or some of the uncertainty related to public health situation in China.

Speaker Change: We'll still need to work through that as we work through both the situations I've talked about, frankly, now for quite a few quarters and then looking forward. So we'll continue to give you guidance on what we see in the market each quarter.

Satya Nadella: At Microsoft, we are focused on building the most differentiated tech stack to enable every organization in every industry to build their own digital capability and tech intensity with a business model that is trusted and aligned with their success in this new era. Now, I'll briefly highlight our innovation momentum, starting with Azure. Every customer will need a distributed computing fabric across the cloud and the edge to power their mission-critical workloads and meet regulatory as well as operational sovereignty needs. We have more data center regions than any other cloud provider and will be the first to open in Israel and Qatar, expanding our footprint to 56 in total. Azure is the only cloud that offers consistency across operating models, development environments, and the infrastructure stack, enabling customers to bring cloud compute and intelligence to any connected or disconnected environment.

Would say what we have in terms of the what the cycle would look like compared to.

Choir cycle N.'s would actually be quite similar if not we'd probably have a little more opportunity in the mid and small business segment to have the tail last a little longer probably than it did last time. So we still very good will still need to work through that actually works.

Speaker Change: Our next question comes from the line of Brad Reback with Stifel. Great. Amy, you mentioned a couple of times this evening about 1/3 of customers using hybrid rights. Within that customer base, any sense of what percent of workloads that represents for those clients? Brad, there's not really a good way for me to know that. Within that customer base, any sense of what percent of workloads that represents for those clients? Brad, there's not really a good way for me to know that.

Speaker Change: So we'll continue to give you guidance on what we see in the market. And we feel very good. We'll still need to work through that as we work through both the situations I've talked about, frankly, now for quite a few quarters and then looking forward. So we'll continue to give you guidance on what we see in the market each quarter. So we feel very good.

Speaker Change: Amy, you mentioned a couple of times this evening about 1/3 of customers using hybrid rights. Within that customer base, any sense of what percent of workloads that represents for those clients? Brad, there's not really a good way for me to know that.

<unk> I've talked about frankly now for quite a few quarters and then looking forward. So we'll continue to give you guidance on what what we see in the market.

Speaker Change: each quarter.

Speaker Change: Each quarter.

Each corner.

Speaker Change: For me, the way I think about this is like the top of a funnel.

Speaker Change: Thank you very much.

Thank you very much.

Speaker Change: Thanks, Mark. Operator, we'll take the next question, please.

<unk> operator will take my question. Please.

Speaker Change: Thank you. Our next question comes from the line of Brad Reback with Stiefel. Please proceed.

Speaker Change: It means that we've got solutions or workloads where all the corporate developers that Satya mentioned are really starting to make that transition and making decisions for themselves about how to use Azure, and how to get to experience it.

Speaker Change: Thank you. Our next question comes from the line of Brad Reback with Stiefel. Please proceed.

Thank you are next question comes on line of Bradley back lets people. Please proceed.

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

Thanks, very much Amy you mentioned a couple of times. This evening about one third of customers using hybrid breaks up.

Within that customer base any sense of what percent of workload step represents for those.

Brad Reback: For me, that is a great sign.

Brad Reback: We've always said a lot of these hybrid use rights are about investing in skilling and learning and teaching the environment and having the adoption happen for the workloads that make the most sense.

Clients. Thanks.

Brad there's not really a good way for me to know that for me the way I think about this is as hopper funnel. It means that we've got solutions are workloads, where all the corporate developers that sapient mentioned are really starting to make that transition and making.

Amy E. Hood: Brad, there's not really a good way for me to know that. For me, the way I think about this is as top of funnel. It means that we've got solutions or workloads where all the corporate developers that Satya mentioned are really starting to make that transition and making decisions for themselves about how to use Azure and how to get to experience it. For me, that is a great sign. We've always said a lot of these hybrid use rights

Amy E. Hood: Brad, there's not really a good way for me to know that. For me, the way I think about this is as the top of the funnel. It means that we've got solutions or workloads where all the corporate developers that Satya mentioned are really starting to make that transition and are making decisions for themselves about how to use Azure and how to get to experience it. For me, that is a great sign. We've always said a lot about these hybrid use rights. And then we can continue to partner with customers to help them through this process and continue to have more meaningful workload transitions. So for us, I think I tend to start at the top and say, if we've got more going into the funnel, more opportunities to partner with customers, that's a good thing.

Decisions for themselves about how to use as her and how to get to experience. It for me that is a great fine. We've always said a lot of these hybrids use rights.

Amy E. Hood: And then we can continue to partner with customers to help them through this process and continue to have more meaningful workload transitions. So for us, I think I tend to start at the top and say, if we've got more going into the funnel, more opportunities to partner with customers, that's a good thing.

Amy E. Hood: Our last question will come from the line of Phil Winslow with Wells Fargo.

Amy E. Hood: We're about investing in skilling and learning and teaching the environment and having the adoption happen for the workloads that make the most sense. And then we can continue to partner with customers to help them through this process and continue to have more meaningful workload transition. So for us, I think I tend to start at the top and say if we've got more going into the funnel, more opportunities to partner with customers, that's a good thing.

Amy E. Hood: We're about investing in skilling, learning, and teaching the environment, and having the adoption happen for the workloads that make the most sense. And then we can continue to partner with customers to help them through this process and continue to have more meaningful workload transitions. So for us, I think I tend to start at the top and say if we've got more going into the funnel, more opportunities to partner with customers, that's a good thing.

We're about investing in skilling, and learning and teaching the environment and having the adoption happen for the workloads that make the most sense and then we can continue to partner with customers to help them through this process and continue to have.

Amy E. Hood: Congratulations on a great quarter!

Amy E. Hood: I just wanted to focus in on Dynamics. I guess a question for Amy and Satya. I mean, Amy, you called out seat growth but also increasing attach to multiple products with the Dynamics driving that growth rate. Wondering if you could help us sort of parse that out. And then to Satya, when you think about just SaaS in general, how important is sort of Dynamics to the overall Microsoft strategy, particularly with what you're trying to do with the AI platform in Azure because, obviously, over the past 12 months, we've seen rollouts of some of those insights, AI products where you have -- you can use the Dynamics' data, but also data from Salesforce, Zendesk, et cetera, but as a sort of a sidecar there.

Amy E. Hood: I mean, Amy, you called out seat growth but also increasing attach to multiple products with the Dynamics driving that growth rate. Wondering if you could help us sort of parse that out. And then to Satya, when you think about just SaaS in general, how important is sort of Dynamics to the overall Microsoft strategy, particularly with what you're trying to do with the AI platform in Azure because, obviously, over the past 12 months, we've seen rollouts of some of those insights, AI products where you have -- you can use the Dynamics' data, but also data from Salesforce, Zendesk, et cetera, but as a sort of a sidecar there.

Amy E. Hood: I guess a question for Amy and Satya. I mean, Amy, you called out seat growth but also increasing attach to multiple products with the Dynamics driving that growth rate. Wondering if you could help us sort of parse that out. And then to Satya, when you think about just SaaS in general, how important is sort of Dynamics to the overall Microsoft strategy, particularly with what you're trying to do with the AI platform in Azure because, obviously, over the past 12 months, we've seen rollouts of some of those insights, AI products where you have -- you can use the Dynamics' data, but also data from Salesforce, Zendesk, et cetera, but as a sort of a sidecar there.

You know more meaningful workload transition so for US I think I tend to start at the top and say if we got more going into the final more opportunities to partner with customers. That's a good thing.

Speaker Change: Great, thank you.

Great. Thank you.

Speaker Change: Thanks, Brad. Operator, we'll take our last question now, please.

Expressed operator will take our last question no. Please.

Speaker Change: Thank you. Our last question will come from the line of Phil Winslow with Wells Fargo. Please proceed.

Thank you are last question comes on line or so and so with Wells Fargo. Please proceed.

Phil Winslow: Thanks guys for taking my question and congrats on a great quarter. I just wanted to focus in on dynamics. I guess a question for Amy and Satya. Amy, you called out both seed growth but also increasing attachment of multiple products within dynamics driving that growth rate. I'm wondering if you could help just sort of parse that out. And then to Satya, when you think about just SaaS in general, how important is sort of dynamics to the overall Microsoft strategy, particularly with what you're trying to do with the AI platform and Azure? Because obviously over the past 12 months, we've seen rollouts of some of those insights, AI products where you can use the dynamics data, but also data from Salesforce, InDesk, et cetera, but as a sort of a sidecar there. So I'm wondering if you could just sort of walk us through just sort of that, call it the application strategy. And then that in the context of what you're trying to do in the AI world.

Phil Winslow: Thanks guys for taking my question and congrats on a great quarter. I just wanted to focus in on dynamics. I guess a question for Amy and Satya. Amy, you called out both seed growth but also increased attachment of multiple products within the dynamics driving that growth rate. I'm wondering if you could help just sort of parse that out. And then, to Satya, when you think about just SaaS in general, how important is dynamics to the overall Microsoft strategy, particularly with what you're trying to do with the AI platform and Azure? Because obviously, over the past 12 months, we've seen rollouts of some of those insights, AI products where you can use Dynamics data but also data from Salesforce, InDesk, et cetera, but as a sort of a sidecar there.

Fix my question.

Quarter I, just wanted to focusing on on dynamics I I guess the question for.

I mean.

Called let's see see growth, but also increasing attach a multiple products within dynamics driving that growth rates whenever you know sort of sort of parse that out and then.

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

Phil Winslow: Yes.

Phil Winslow: No, great. Thanks, Phil, for the question. Let me start, and then Amy, you can. I mean, we are very excited about what's happening with Dynamics 365 in particular because when I look at what the world needs, it needs a business application suite that is more comprehensive. That can turn what is the real currency of this next era, which is data, into predictions, insights, and automation without boundaries. I mean, they take even the Canada Goose example that I had in my remarks, which is actually a pretty fascinating story of how they've been able to take the end-to-end nature of Dynamics 365 and really bring together the manufacturing, wholesale, and retail operations to the next level of efficiency.

Phil Winslow: Let me start, and then Amy, you can. I mean, we are very excited about what's happening with Dynamics 365 in particular because when I look at what the world needs, it needs a business application suite that is more comprehensive. That can turn what is the real currency of this next era, which is data, into predictions, insights, and automation without boundaries. I mean, they take even the Canada Goose example that I had in my remarks, which is actually a pretty fascinating story of how they've been able to take the end-to-end nature of Dynamics 365 and really bring together the manufacturing, wholesale, and retail operations to the next level of efficiency.

Phil Winslow: Thanks, Phil, for the question. Let me start, and then Amy, you can. I mean, we are very excited about what's happening with Dynamics 365 in particular because when I look at what the world needs, it needs a business application suite that is more comprehensive and that can turn what is the real currency of this next era, which is data, into predictions, insights, and automation without boundaries.

Phil Winslow: I mean, they take even the Canada Goose example that I had in my remarks, which is actually a pretty fascinating story of how they've been able to take the end-to-end nature of Dynamics 365 and really bring together the manufacturing, wholesale, and retail operations to the next level of efficiency.

You're talking about.

General how important is sort of dynamics to the overall yeah Microsoft.

Particularly with what you're trying to do with.

Platform and actually because obviously it over the past 12 months, we've seen rule out so.

Phil Winslow: So I'm wondering if you could just sort of walk us through just sort of that, call it the application strategy. And then do that in the context of what you're trying to do in the AI world. So wondering if you could just sort of walk us through just sort of the, call it, the application strategy and then that in the context of what you're trying to do in the AI world.

Inside.

Products, where you have.

Dynamics data, but also from sales were send desk et cetera, but as a as a sort of a side car. There. So I wonder if you get to sort of walk us through the sort of that got the application strategy in it that in the context of what you're trying to do an A.I. world.

Phil Winslow: Great. Thanks, Phil, for the question. Let me start and then Amy, you can ask. I mean, we're very excited about what's happening with Dynamics 365 in particular because when I look at what the world needs is it needs a business application suite that is more comprehensive, that can turn what is the real currency of this next era, which is data, into predictions, insights, and automation without boundaries. I mean, they take even the Canada goose example that I had in my remarks, which is actually a pretty fascinating story of how they've been able to take the end-to-end nature of Dynamics 365 and really bring together their manufacturing, wholesale, and retail operations to the next level of efficiency. That's, I think, what is needed. And the way we have architected it on top of Azure, it's cloud-native in terms of its use of databases. It's, for example, all these insights modules I referenced in Utah. They're all built on Azure Synapse, so it's sort of deeply integrated into Azure. It integrates into LinkedIn. It integrates into Microsoft 365. Power Platform, the extensibility model for both Microsoft 365 and Dynamics is the same, which is Power Platform. And that's a pretty, you know, there's no such thing as a canonical business and no such thing as a canonical business over time, right? The business processes change. The question is how rapidly can people and domain experts keep up with the change? And that's where Dynamics 365 absolutely shines. So we're excited about what's happening there. To your mentioned point about sidecar, we think that that's a very legitimate use case. There's a new category, in fact, and a new race starting with CDP, and we are leading. And so I feel excited about that as well. And to your question on how and the Dynamics 365, sort of the excitement we have, when I think about the comment I made around adding workloads, what's so important about what, Satya? Yeah, I think that's a great question, and one of the things that we just talked about is how this reaches into new budgets for us, new opportunity for us in terms of being able to tap growth that we had not been able to access before. And the way I tend to think about that is not dissimilar from how I think of most per-seat businesses. You add a seat and then you add workloads, and the more you can do that in terms of tapping into new budgets, that's a great opportunity for us. So I think that's a frame that I'll start to talk a little bit more about as we learn more about Dynamics 365. This is another place I would call out where I do think we can sort of focus and continue to make some investments in H2 based on the momentum we have seen in H1.

No no great. Thanks also for the question, let me start in the name and you can now I've been very excited about what's happening with dynamics 365 in particular, because when I look at what the world needs is it needs a business applications sweet that is more comprehensive that can done what is the real currency of this next Arab which is data into.

Phil Winslow: That's, I think, what is needed. And the way we have architected it on top of Azure, it's cloud native in terms of its use of databases. For example, all these insights modules I referenced and you referenced are all built on Azure Synapse. So it's sort of deeply integrated into Azure. And the way we have architected it on top of Azure, it's cloud native in terms of its use of databases. For example, all these insights modules I referenced and you referenced are all built on Azure Synapse. So it's sort of deeply integrated into Azure.

Phil Winslow: It integrates into LinkedIn. It integrates into Microsoft 365, and the Power platform; the extensibility model for both Microsoft 365 and Dynamics is the same, which is the Power platform. It integrates into Microsoft 365, and the Power platform; the extensibility model for both Microsoft 365 and Dynamics is the same, which is the Power platform. And that's pretty -- no, there's no such thing as a canonical business, and there's no such thing as a canonical business over time, right? Business processes change. The question is how rapidly can people and domain experts keep up with the changes. And that's where Dynamics 365 absolutely shines. So we're excited about what's happening there.

You know predictions insights and automation all without boundaries I mean, the kick even to Canada. Goose example, that I had in my remarks, which is actually a pretty fascinating story about they've been able to take the end to end nature of dynamics 365, and really bring together, they're manufacturing wholesale and retail operations.

Phil Winslow: That's, I think, what is needed. And the way we have architected it on top of Azure, it's cloud-native in terms of its use of databases. For example, all these insights modules I referenced in Utah. They're all built on Azure Synapse, so it's sort of deeply integrated into Azure. It integrates into LinkedIn and Microsoft 365. Power Platform, the extensibility model for both Microsoft 365 and Dynamics is the same, which is Power Platform. And that's pretty, you know, there's no such thing as a canonical business and there's no such thing as a canonical business over time, right?

Phil Winslow: And that's a pretty -- no, there's no such thing as a canonical business, and there's no such thing as a canonical business over time, right? The business processes change. The question is how rapidly can people and domain experts keep up with the change, and that's where Dynamics 365 absolutely shines. So we're excited about what's happening there.

Stir the next level of efficiency, that's I think what is needed and the wave you architected. It on top of Badger each cloud native in terms of its use of databases. It's for example, and all these insights modules <unk>.

Phil Winslow: Business processes change. The question is how rapidly can people and domain experts keep up with the changes. And that's where Dynamics 365 absolutely shines. So we're excited about what's happening there.

<unk> are all built on <unk>, so it's sort of deeply integrated into adger. It integrates into maintain it integrates into Microsoft three six by power platform. The extensibility model for both Microsoft 365, and dynamics is the same which is power blackballed and that's a pretty no there's no such thing as.

Phil Winslow: You mentioned a point about sidecar. We think that that's a very legitimate use case. We think that that's a very legitimate use case. There is a new category, in fact, and a new race starting with CDP, and we are leading. And so I feel excited about that as well. And to your question on how Dynamics 365, sort of the excitement we have, when I think about the comment I made around adding workloads, what's so important about what Satya just talked about is how this reaches into new budgets for us, new opportunities for us in terms of being able to tap growth that we had not been able to access before.

Phil Winslow: And the way I tend to think about that is not dissimilar from how I think of most per-seat businesses. You add a seat, and then you add workloads, and the more you can do that in terms of tapping into new budgets, that's a great opportunity for us. So I think that's a frame that I'll start to talk a little bit more about as we learn more about Dynamics 365 and its momentum. This is another place I would call out, where I do think we can sort of focus and continue to make some investments in H2 based on the momentum we have seen in H1.

Phil Winslow: There is a new category, in fact, and a new race starting with CDP, and we are leading. And so I feel excited about that as well.

Phil Winslow: Business processes change. The question is how rapidly can people and domain experts keep up with the changes? And that's where Dynamics 365 absolutely shines, so we're excited about what's happening there. To your mentioned point about sidecars, we think that that's a very legitimate use case. There's a new category, in fact, and a new race starting with CDP, and we are leading. And so I feel excited about that as well. And to your question on how and the Dynamics 365, sort of the excitement we have, when I think about the comment I made around adding workloads, what's so important about that, Satya?

Phil Winslow: And to your question on how the Dynamics 365, sort of the excitement we have, when I think about the comment I made about adding workloads, what's so important about what Satya just talked about is how this reaches into new budgets for us, new opportunities for us in terms of being able to tap growth that we had not been able to access before. And the way I tend to think about that is not dissimilar from how I think of most per You add a seat, and then you add workloads, and the more you can do that in terms of tapping into new budgets, that's a great opportunity for us.

Phil Winslow: So I think that's a frame that I'll start to talk a little bit more about as we learn more about Dynamics 365 and its momentum. This is another place I would call out, where I do think we can sort of focus and continue to make some investments in H2 based on the momentum we have seen in H1.

Monaco business and no no such thing as a canonical business over time, but like the business prophecies change. The question is how rapidly.

Domain experts keep up with the change and that's where the dynamics 365, absolutely shine. So very excited about what's happening that you mentioned point about site got everything that's up very legitimate use <unk> use case, there's a new category in fact at a new race, starting with C.D.B. and we are leading until I feel excited about that as well.

And to your question on how.

Phil Winslow: Yeah, I think that's a great question, and one of the things that we just talked about is how this reaches into new budgets for us, new opportunities for us in terms of being able to tap growth that we had not been able to access before. And the way I tend to think about that is not dissimilar from how I think of most per-seat businesses. You add a seat, and then you add workloads, and the more you can do that in terms of tapping into new budgets, that's a great opportunity for us. So I think that's a framework that I'll start to talk a little bit more about as we learn more about Dynamics 365. This is another place I would call out where I do think we can sort of focus and continue to make some investments in H2 based on the momentum we have seen in H1.

365 sort of the excitement we have when I think about the common I made around adding workloads. What's so important about what type you just talked about is how this reaches into new budget for us new opportunity for us in terms of being able to tap gross that we had not been able to access before.

The way I tend to think about that is not dissimilar from how I think of most per seat businesses.

Phil Winslow: Thanks, Phil. That wraps up the Q&A portion of today's earnings call. You can find additional details on the Microsoft Investor Relations website. Thanks for joining us today, and we look forward to speaking with you soon. Thank you very much. Thank you. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. That wraps up the Q&A portion of today's earnings call. You can find additional details on the Microsoft Investor Relations website. Thanks for joining us today, and we look forward to speaking with you soon. Thank you very much. Thank you. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

You add a seat and then you add workloads and more you can do that in terms of tapping into new budget. That's a great opportunity for us. So I think that's a frame that I'll start to talk a little bit more about as we learn more about dynamics 365, and it's momentum. This is another place I would call out where I do think we'll can sort of focus and continue to make some.

<unk> and H. two based on the momentum we've seen in H. one.

Right.

Speaker Change: Great, thanks guys.

Speaker Change: Great, thanks guys!

<unk>.

Q. and a portion of today's earnings call you can find additional details on the bus Microsoft Investor Relations website. Thanks for joining US then we we look forward to speaking with you soon thank you very much. Thank you.

Satya Nadella: Our differentiated approach across the cloud and the edge is winning customers. For example, the U.S. Department of Defense chose Azure to support our men and women in uniform at home, abroad, and at the tactical edge. And our exclusive partnership with SAP makes Azure the preferred destination for every SAP customer with large migrations in every industry, from Accenture to Coca-Cola to Rio Tinto to Walgreens Boots Alliance. We're also going beyond conventional computing architecture, ushering in a new era with Azure Quantum, a full-stack open ecosystem that enables customers like Ford Motor Company to apply the power of quantum computing today. There will be 175 zettabytes of data by 2025, up from 40 zettabytes today. Processing this data in real time will be an operational imperative for every organization.

Speaker Change: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Thank you.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thanks, Heather. Operator, we'll take the next question, please. Thank you. Our next question comes from the line of Brent Thill Jefferies. Please proceed. Thanks. Amy, you called out the strength of on-premise software. I'm just curious, I know you had the tailwind from the expiration, but maybe talk through some of the other drivers that you're seeing in the business that's causing such great growth, even though on-premise the cloud continues to grow. Thanks, Brent. What we've seen, and it's been relatively consistent, is that the drivers on the on prem side have absolutely been the hybrid value prop and also Premium.

Speaker Change: And they're actually related because ultimately, the really thing that we've seen that has value for customers is that flexibility. And so the flexibility to deploy where they need it and when they need it, and that makes sense on the Edge, which some people may call on prem, and whether that makes sense in the cloud, which people may call Azure. Thanks. Thanks, Brent. Operator, we'll move to the next question, please. Thank you. Our next question comes from the line of Brent Thill Jefferies. Please proceed. Thanks Amy. You called out the strength of on-premise software. I'm just curious, I know you had the tailwind from the expiration, but maybe talk through some of the other drivers that you're seeing in the business that's causing such great growth, even though on premise the cloud continues to grow.

Speaker Change: Thank you. Our next question comes from the line of Mark Murphy Morty with JPMorgan. Please proceed. Yes, Thank you. Satya, a few quarters ago, you commented that Teams is the fastest-growing app in the company's history. I'm wondering if you could clarify if that is a reference to daily active user growth or bookings impact, or is that a comment on user engagement and the time being spent in Teams, or some other criteria. As well, Amy, I'm wondering if you could offer any kind of directional thoughts on just how to model the Windows OEM line post-Windows 7 end-of-support and going into fiscal year 2021, and any high-level thoughts on how you think that could trend versus what happened in the prior cycle.

Speaker Change: Yeah, thanks for the question, Mark. My comment was mostly around deployment, engagement, and the depth of engagement. There are very few types of products which have these platform effects. Teams is the scaffolding that is obviously related to messaging, which has significant usage. It's also driving usage of the rest of Office because the rest of Office gets integrated into usage faster around channels. It's obviously used in meetings. It's also the place where business process workflows, in the context of messaging, happen, both for knowledge workers and first-line workers. So when I look at all of that cumulative effect, it's much broader than any other user experience, scaffolding, and in terms of its ability to drive that type of platform effect and engagement. So we're excited about it, and we continue to see that, and you saw that in my remarks as well.

Speaker Change: And to your question on OEMs, I think what's important is, if you try to take out, which is challenging, some of the comments we've had on either chip supply constraints or some of the uncertainty related to the public health situation in China, you would say what we have in terms of what the cycle would look like compared to prior cycle ends would actually be quite similar. If not, we probably have a little more opportunity in the mid and small business segment to have the tail last a little longer than it did the last time.

Speaker Change: So we feel very good. We'll still need to work through that as we work through both the situations I've talked about frankly now for quite a few quarters, and then looking forward, so we'll continue to give you guidance on what we see in the market each quarter.

Speaker Change: Thank you very much.

Speaker Change: Thanks, Mark. Operator, we'll take the next question, please. Thank you. Our next question comes from the line of Brad Reback with Stifel. Please proceed. Great. Thanks very much. Amy, you mentioned a couple of times this evening about one-third of customers using hybrid rights. Of the within that customer base, any sense of what percent of workloads that represents for those clients? Thanks. Brad, there's not really a good way for me to know that. For me, the way I think about this is like a top of the funnel. It means that we've got solutions or workloads where all the corporate developers that Satya mentioned are really starting to make that transition and making decisions for themselves about how to use Azure, and how to get to experience it.

Speaker Change: For me, that is a great sign. We've always said a lot of these hybrid use rights are about investing in skilling, learning, and teaching the environment and having the adoption happen for the workloads that make the most sense, and then we can continue to partner with customers to help them through this process and continue to have more meaningful workload transitions. So for us, I think I tend to start at the top and say, if we've got more going into the final, more opportunities to partner with customers, that's a good thing.

Speaker Change: Great. Thank you. Thanks, Brad. Operator, we'll take our last question now, please. Thank you. Our last question will come from the line of Phil Winslow with Wells Fargo. Please proceed. Hey, Thanks, guys, for taking my question and congrats on a great quarter. I just wanted to focus in on dynamics. I guess a question for Amy and Satya Amy, you called out increasing attachment to multiple products on the Dynamics growth rate. And if you could help us sort of parse that out and then sit you down when you think about sass in general, how important is it for Dynamics overall Microsoft, particularly in what you're trying to do with the AI platform and Azure because, obviously, you've seen some of those AI products where you had to use the Dynamics, but also anything from sales force, et cetera, sidebar there.

Speaker Change: Someone, if you could just sort of walk us through the application strategy and then that in the context of what you're trying to do and AI. Thanks for the question. Let me start and then Amy. I'm very excited about what's happening with Dynamics. I guess, of course, for Amy and Satya, I mean, Amy, you've called out those seat growth but also increased attach rates in both hold products within Dynamics and driving that growth rate. I wondered if you could help just sort of parse that out. And then to Satya, when you think about just SAS in general, how important is it for Dynamics and the overall Microsoft strategy, particularly with what you're trying to do with the AI platform and Azure, because obviously, over the past 12 months, we've seen rollouts of some of those insights.

Speaker Change: AI products where you use Dynamics data, but also data from the sales force index, et cetera. But as a service sidecar there. So wondering if you could just sort of walk us through the application strategy and then that in the context of what you're trying to do in the AI world.

Speaker Change: Thanks, Brad. Operator, we'll take our last question now, please. Thank you. Our last question will come from the line of Phil Winslow with Wells Fargo. Please proceed. Hey, Thanks, guys, for taking my question and congrats on a great quarter. I just wanted to focus in on dynamics. I guess a question for Amy and Satya Amy, you called out increasing attachment to multiple products on the Dynamics growth rate. And if you could help us sort of parse that out and then sit you down when you think about sass in general, how important is it for Dynamics overall Microsoft, particularly in what you're trying to do with the AI platform and Azure because, obviously, you've seen some of those AI products where you had to use the Dynamics, but also anything from sales force, et cetera, sidebar there.

Speaker Change: Yeah, great. Thanks, Phil, for the question. Let me start, and then Amy, you can add. We are very excited about what's happening with Dynamics 365 in particular because when I look at what the world needs, it needs a business application suite that is more comprehensive, that can turn what is the real currency of this next era, which is data, into predictions, insights, and automation without boundaries. Take even the Canada goose example that I made my remarks about. It's actually a pretty fascinating story of how they've been able to take the end-to-end nature of Dynamics 365 and really bring together their manufacturing, wholesale, and retail operations to the next level of efficiency.

Speaker Change: That's, I think, what is needed. And the way we've architectured it on top of Azure, it's cloud native in terms of its user databases. For example, all these insights, modules I referenced, and you've referenced are all built on Azure Synapse, so it's sort of deeply integrated into Azure. It integrates with LinkedIn. It integrates into Microsoft 365. Power Platform, the extensibility model for both Microsoft 365 and Dynamics is the same, which is Power Platform. And that's pretty obvious there's no such thing as a canonical business and there's no such thing as a canonical business over time, right?

Speaker Change: And to your question on Dynamics 365, sort of the excitement we have. When I think about the comment I made around adding workload, what's so important about what Satya talked about is how this reaches into new budgets for us, new opportunities for us in terms of being able to tap growth that we had not been able to access before. And the way I tend to think about that is not dissimilar from how I think about most per-seat businesses. You add a seat, and then you add workloads. And the more you can do that in terms of tapping into new budgets, that's a great opportunity for us.

Speaker Change: So I think that's a frame that I'll start to talk a little bit more about as we learn more about Dynamics 365 and its momentum. This is another area where I do think we can sort of focus and continue to make some investments in H2 based on the momentum we have seen in H1.

Speaker Change: Great. Thanks, guys. Thanks, Phil. That wraps up the Q&A portion of today's earnings call. You can find additional details on the Microsoft Investor Relations website. Thanks for joining us today, and we look forward to speaking with you soon. Thank you very much. Thank you. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Thank you very much. Thank you. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Thanks, Phil. That wraps up the Q&A portion of today's earnings call. You can find additional details on the Microsoft Investor Relations website. Thanks for joining us today, and we look forward to speaking with you soon. Thank you very much. Thank you. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thanks, Brent. What we've seen, and it's been relatively consistent, is that the drivers on the on prem side have absolutely been the hybrid value prop and also Premium. And they're actually related because ultimately, the really thing that we've seen that has value for customers is that flexibility. And so the flexibility to deploy where they need it and when they need it, and that makes sense on the Edge, which some people may call on prem, and whether that makes sense in the cloud, which people may call Azure.

Speaker Change: Thanks.

Speaker Change: Thanks, Brent. Operator, we'll move to the next question, please. Thank you. Our next question comes from the line of Mark Murphy Morty with JPMorgan. Please proceed. Yes, Thank you. Satya, a few quarters ago, you commented that Teams is the fastest-growing app in the company's history. I'm wondering if you could clarify if that is a reference to daily active user growth or bookings impact, or is that a comment on user engagement and the time being spent in Teams, or some other criteria. As well, Amy, I'm wondering if you could offer any kind of directional thoughts on just how to model the Windows OEM line post-Windows 7 end-of-support and going into fiscal year 2021, and any high-level thoughts on how you think that could trend versus what happened in the prior cycle.

Speaker Change: Yes. Thank you. Satya, a few quarters ago, you commented that Teams is the fastest-growing app in the company's history. I'm wondering if you could clarify if that is a reference to daily active user growth or bookings impact, or is that a comment on user engagement and the time being spent in Teams, or some other metric. As well, Amy, I'm wondering if you could offer any kind of directional thoughts on just how to model the Windows OEM line post-Windows 7 end-of-support and going into fiscal year 2021, and any high-level thoughts on how you think that could trend versus what happened in the prior cycle.

Speaker Change: Thank you very much.

Speaker Change: Thank you. Our next question comes from the line of Brad Reback with Stifel. Please proceed. Great. Thanks very much. Amy, you mentioned a couple of times this evening about one-third of customers using hybrid rights. Of the within that customer base, any sense of what percent of workloads that represents for those clients? Thanks. Brad, there's not really a good way for me to know that. For me, the way I think about this is like a top of the funnel. It means that we've got solutions or workloads where all the corporate developers that Satya mentioned are really starting to make that transition and making decisions for themselves about how to use Azure, and how to get to experience it.

Speaker Change: Thank you. Our last question will come from the line of Phil Winslow with Wells Fargo. Please proceed. Hey, Thanks, guys, for taking my question and congrats on a great quarter. I just wanted to focus in on dynamics. I guess a question for Amy and Satya Amy, you called out increasing attachment to multiple products on the Dynamics growth rate. And if you could help us sort of parse that out and then sit you down when you think about sass in general, how important is it for Dynamics overall Microsoft, particularly in what you're trying to do with the AI platform and Azure because, obviously, you've seen some of those AI products where you had to use the Dynamics, but also anything from sales force, et cetera, sidebar there.

Speaker Change: Business processes change; the question is how rapidly can people and domain experts keep up with the changes. And that's where Dynamics 365 absolutely shines. So we're excited about what's happening there. You mentioned a point about Sidecar. We think that is a very legitimate use case. There is a new category, in fact, and a new race starting with CDP. And we're leading. And so I feel excited about that as well. And to your question on Dynamics 365, sort of the excitement we have. When I think about the comment I made around adding workload, what's so important about what Satya talked about is how this reaches into new budgets for us, new opportunities for us in terms of being able to tap growth that we had not been able to access before.

Speaker Change: And the way I tend to think about that is not dissimilar from how I think about most per-seat businesses. You add a seat, and then you add workloads. And the more you can do that in terms of tapping into new budgets, that's a great opportunity for us. So I think that's a framework that I'll start to talk a little bit more about as we learn more about Dynamics 365 and its momentum. This is another I would call it where I do think we can sort of focus and continue to make some investments in H2 based on the momentum we have seen in H1.

Today's teleconference him I just cannot july's at this time, thank you for your participation.

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Speaker Change: All rights reserved in this video are for entertainment purposes only and are not intended for entertainment purposes only and are not intended for entertainment purposes only. © BF-WATCH TV 2021

Yeah.

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Yeah.

Satya Nadella: And 3,500 new conversational agents, or bots, created each week with Azure Bot Service. Nationwide is using Azure Bot Service to simplify how millions of customers submit claims, and KPMG is using Azure Cognitive Services to transcribe and catalog thousands of hours of calls, reducing compliance costs for its clients by as much as 80%. Now, to security.

Satya Nadella: Cybercrime will cost businesses, governments, and individuals $1 trillion this year. We are the only company that offers integrated end-to-end identity, security, and compliance solutions to protect people and organizations across identity management, devices, cloud apps, data, and infrastructure. Recent CIO surveys affirm our leadership and strong structural position, and customers from Maersk to Vodafone are increasingly turning to us to simplify security integration and speed their responses to issues. Four months since launch, more than 3,500 customers already rely on Azure Sentinel to detect and mitigate threats. It's early days, and we are accelerating our investments. Now on to developer tools.

Satya Nadella: From Azure DevOps to Visual Studio to GitHub, we offer the most complete developer tool chain independent of language, framework, or cloud. New capabilities make it easier for any developer to go from idea to code and from code to cloud. Developers can collaborate on the go with the new GitHub mobile app, and GitHub Security Lab addresses the important need to keep open source software secure.

Satya Nadella: More than 10,000 developers at Adobe are using GitHub to collaborate and create software. Stripe is using GitHub to build the online payment platform of choice for millions of customers, and Chipotle is using our dev tools to power their online ordering system. Now on to Power Platform. We are empowering not only professional developers but those closest to the business problem, from citizen developers to business decision makers, with no-code, low-code tools so they can create apps and intelligent workflows that solve unique needs. Today, 2.6 million citizen developers use Power Platform to make better decisions using self-service analytics, build a mobile app, automate a business process, or even create a virtual agent, all with no coding experience. We're innovating in robotic process automation. Power Automate enables customers to turn manual tasks into automated workflows, and Power Virtual Agents enables anyone to build an intelligent bot with just point and click.

Satya Nadella: TrueGreen, the largest lawn care company in the United States, is using both these solutions to handle customer inquiries and take action. Now, on to Dynamics 365. The competitiveness of every business going forward will be defined by their ability to harness the full value of their data. Dynamics 365 enables organizations to move from reactive, siloed transactional processes to proactive, repeatable, and predictable business outcomes. Dynamics 365 Customer Insights, which is layered and built on Azure Synapse, is the only customer data platform operating at scale today. AEP Energy is using it to unify first and third-party customer data to increase upsell and reduce churn. In retail, Canada Goose is using Dynamics 365 Commerce to unify data across back office, in-store, and call centers to deliver more personalized shopping experiences. And in training, ABB is using Dynamics 365 guides and remote-assisted to bridge the physical and digital worlds, and Qantas is utilizing HoloLens 2 for an immersive new training experience. Now on to LinkedIn. LinkedIn continues to create economic opportunity for every member of the global workforce. Every seven seconds, someone is hired on LinkedIn.

Satya Nadella: We saw record levels of member engagement again this quarter. Marketing Solutions remains our fastest-growing business as marketers leverage the enhanced tools and LinkedIn pages to connect with our nearly 675 million members. New data validation features in LinkedIn Sales Navigator help sellers use the power of their LinkedIn network to drive more meaningful customer engagement. We continue to innovate across our talent portfolio, including Talent Solutions, Talent Insights, Glint, and LinkedIn Learning, to help organizations attract, retain, and develop the best talent. More than 5 million members have already completed LinkedIn Skills Assessments since the launch last quarter.

Satya Nadella: Now turning to Microsoft 365. Microsoft 365 is the only solution that empowers everyone with an integrated, secure experience on any device. Everyday AI in Microsoft 365 is helping create, collaborate, and convert content into knowledge in a world where computing is abundant, but attention is scarce. Presentations are more persuasive in PowerPoint, data is more insightful in Excel, videos are more searchable in Stream, and email is more actionable with Cortana. The new Project Cortex analyzes massive amounts of information to give people precisely the knowledge they need in the context of their work.

Satya Nadella: And the new Microsoft Edge with Enterprise Class Security protects your privacy online and makes it easier to find information at your work with Microsoft Search. Microsoft Teams is the leading hub for teamwork. Now with more than 20 million daily active users, people are increasingly engaged across the platform in richer forms of communication and collaboration, participating in more than 27 million meetings a month. Integrated calendaring, pop-out chats, and one-touch-to-join meetings from your phone keep work, conversations, and meetings in context, eliminating the need to bounce back and forth between apps.

Satya Nadella: We are reimagining the meeting rooms of the future with Teams integration with Cisco's WebEx and new devices from Lenovo. And our partnership with Samsung, along with the new walkie-talkie feature in Teams, gives first-line workers the technology they need to be more collaborative, productive, and secure on the go. All this innovation is driving usage. For example, 64,000 employees at L'Oreal are using Teams. More than 70,000 first-line employees at IKEA are moving to Teams for shift management.

Satya Nadella: From Nestle to Tesco, the world's largest companies are choosing Microsoft 365, and we continue to see increased demand for our premium offerings from customers like AXA, Rockwell Automation, Berkshire Hathaway Specialty Insurance, and Duracell. This holiday, we expanded our family of Surface devices, creating new categories that benefit the entire OEM ecosystem, and at CES, our partners showcased innovative Windows 10 devices, from incredibly thin and light laptops to powerful gaming rigs to new dual-screen designs. Finally, gaming. We continue to invest to reach gamers across every endpoint, mobile, PC, and console. xCloud is off to a very strong start, transforming how games are distributed, played, and viewed, with hundreds of thousands of people participating in initial trials.

Satya Nadella: We set a new record for Xbox Live monthly active users again this quarter, led by the strength of Xbox One. Xbox Game Pass subscribers more than doubled this quarter, and Xbox Series X, announced last month, will be our most powerful console ever. In closing, we are expanding our opportunity across all our businesses. Along with this opportunity, we recognize the responsibility we have to ensure the technology we build is always inclusive, trusted, and is creating a more sustainable world. Our customers see this urgent need and are looking to us, in partnership with them, to take action. That's why we announced an ambitious new sustainability commitment. Microsoft will be carbon-negative by 2030, and by 2050, we will have removed all the carbon we have emitted since the company was founded in 1975. And our $1 billion Climate Innovation Fund will accelerate the development of carbon reduction and removal technologies.

Satya Nadella: We will continue to innovate alongside customers with profitable, sustainable solutions that expand our opportunities. With that, I'll hand it over to Amy, who will cover our financial results in detail and share our outlook. I look forward to rejoining you after for questions.

Amy E. Hood: Thank you, Satya, and good afternoon, everyone. This quarter, revenue was $36.9 billion, up 14% and 15% in constant currency. Growth margin dollars increased 22% and 25% in constant currency. Operating income increased 35% and 39% in constant currency. And earnings per share were $1.51, increasing 37% and 41% in constant currency, which is a lot of money. When adjusting for the net charges related to TCJA from the prior year

Amy E. Hood: Our sales teams and partners again delivered strong commercial results, and we continued to benefit from favorable secular trends. From a geographic perspective, we saw broad-based strength across all markets. In our commercial business, we continued to see strong demand for our differentiated hybrid and cloud offerings, with increased customer commitment to the Azure platform. And the unique value of Microsoft 365, bringing together Office 365, Windows 10, and Enterprise Mobility and Security as a secure, intelligent solution, again drove adoption by both new and existing customers. As a result, commercial bookings growth was ahead of expectations, increasing 31% and 30% in constant currency, with a high volume of new business and strong renewal execution.

Amy E. Hood: Our commercial remaining performance obligation was $90 billion, up 30% in euros per year, driven by long-term customer commitment. Commercial cloud revenue was $12.5 billion, growing 39% and 41% in constant currency. Commercial cloud gross margin percentage increased five points year-over-year to 67%, driven again by a material improvement in Azure gross margin percentage, which more than offset sales mixed shift to Azure. Company growth margin percentage was 67%, up five points year over year, driven by favorable sales mix and improvement across all three of our segments. In the quarter, gross margin percentage benefited from lower console sales, stronger than expected software licensing results, and improvement in our commercial cloud gross margin percentage. In line with expectations, FX reduced revenue growth by one point and had no impact on operating expense growth. The FX impact on COGS growth was slightly more favorable than expected and reduced growth by one point. Operating expense grew 9%, slightly below expectations, primarily driven by lower program spend.

Amy E. Hood: And operating margins expanded this quarter as a result of higher gross margins and operating leverage, as well as through disciplined decisions to invest in strategic and high growth areas. Now to our segment results. Revenue from productivity and business processes was $11.8 billion, increasing 17% and 19% in constant currency, ahead of expectations, driven by both our commercial and consumer businesses. Office commercial revenue grew 16% and 18% in constant currency, with roughly three points of on-premises benefit, primarily from transactional strength in Japan.

Amy E. Hood: Office 365 commercial revenue growth of 27% and 30% in constant currency was again driven by installed-based growth across all workloads and customer segments, as well as higher ARPU. Office 365 commercial seats grew 21%, with an increasing mix from our Microsoft 365 suite. Office consumer revenue grew 19% and 20% in constant currency, driven by growth in Office 365 subscription revenue. This quarter, growth was also impacted by roughly 7 points of benefit from transactional strength in Japan and 5 points of benefit from the low prior year comparable related to the timing of Office 2019 purchases. Office 365 consumer subscriptions grew to 37.2 million, and Dynamics revenue grew 12% and 15% in constant currency. Dynamics 365 revenue increased 42% and 45% in constant currency, with continued momentum in the number of customers adopting multiple Dynamics 365 workloads. LinkedIn revenue increased 24% and 26% in constant currency, with continued strength across all businesses, highlighted by marketing solutions growth of 42%. LinkedIn sessions grew 25% with record levels of engagement again this quarter.

Amy E. Hood: Next, the Intelligent Cloud segment. Revenue was $11.9 billion, increasing 27% and 28% in constant currency, ahead of expectations, driven by continued customer demand for our hybrid offering. On a significant basis, server products and cloud services revenue increased 30% and 32% in constant currency. Azure revenue grew 62% and 64% in constant currency, driven by another quarter of strong growth in our consumption-based business across all customer segments.

Amy E. Hood: In our per-user business, our enterprise mobility install base grew 35% to over 127 million seats, with continued benefit from Microsoft 365 Suite Momentum and our on-premises server. Business grew 10% and 12% in constant currency, with roughly four points of benefit from the end of support for Windows Server 2008, in addition to the continued strength of our hybrid and premium solutions. Nearly one-third of our Windows Server and SQL Server Enterprise customers are already using our hybrid use benefits to deploy Azure, reflecting the value and flexibility of these offerings. Enterprise services revenue increased 6% and 7% in constant currency, driven by growth in Premier support services.

Amy E. Hood: Segment gross margin dollars increased 28% and 31% in constant currency, and gross margin percentage increased one point year over year, as another quarter of material improvement in Azure gross margin more than offset the growing mix of Azure IaaS and PaaS revenue. Operating expense increased 18%, primarily driven by continued investments in Azure. Operating income grew 38% and 42% in constant currency.

Amy E. Hood: Now to more personal computing. Revenue was $13.2 billion, increasing 2% and 3% in constant currency, ahead of expectations as better than expected performance across our Windows businesses more than offset lower than expected search and surface revenue. In Windows, overall PC market growth was stronger than we expected, and benefited from the low prior-year comparable related to the timing of chip supply to our OEM partners. OEM Pro revenue, which makes up roughly 40% of total Windows revenue, grew 26%, driven by continued momentum in advance of Windows 7, end of support, and strong Windows 10 demand. The benefit from the low prior-year comparable drove roughly 11 points of that growth.

Amy E. Hood: Windows Commercial Products and Cloud Services revenue, which makes up roughly 30% of total Windows revenue, grew 25% and 27% in constant currency, again driven by strong demand from Microsoft 365, which carries higher in-quarter revenue recognition. The remainder of the Windows business is made up of our other licensing and services components. The remainder of the Windows business is made up of our other licensing and services components. Surface revenue increased 6% and 8% in constant currency, lower than expected as continued strong momentum in the commercial segment was partially offset by execution challenges in the consumer segment. Search revenue XTAC increased 6% and 7% in constant currency, below expectations, primarily driven by lower Bing volume. And in gaming, revenue declined 21% and 20% in constant currency, in line with expectations, driven by lower console sales as we approach the next Xbox launch. Xbox content and services revenue declined 11% and 9% in constant currency as the impact of a strong third-party title in the prior year more than offset continued growth in Game Pass subscribers and Minecraft.

Amy E. Hood: Segment gross margin dollars increased 18% and 20% in constant currency, and gross margin percentage increased 7 points year over year due to higher-margin sales mix. Operating expense declined 5% as redeployment of engineering resources to higher growth opportunities was partially offset by gaming investments, primarily in first-party content. As a result, operating income grew 41% and 45% in constant currency. Now back to total company results. In line with expectations, capital expenditures, including finance leases, were $4.5 billion, up 17% year-over-year, driven by ongoing investment to meet growing demand for our cloud services. Cash paid for PP&E was $3.5 billion.

Amy E. Hood: Cash flow from operations was $10.7 billion and increased 20% year-over-year, driven by healthy cloud billings and collections. Free cash flow was $7.1 billion and increased 37%, reflecting the timing of cash payments for PP&E. Other income was $194 million higher than anticipated due to the recording of mark-to-market gains in our equity portfolio. Our effective tax rate was slightly above 17%, in line with expectations.

Amy E. Hood: And finally, we returned $8.5 billion to shareholders through share repurchases and dividends. Now, let's move to our outlook. Assuming current rates remain stable, we expect FX to decrease revenue at both the company and individual segment level by approximately one point and have no impact on total company COGS and operating expense growth. In our commercial business, we expect consistent execution and continued demand for our hybrid solutions to drive another strong quarter. Commercial bookings growth should again be healthy, but will be impacted by a materially lower growth in our Q3 expiry base. Commercial cloud gross margin percentage will continue to improve year over year, although at a lower rate than last quarter given the growing mix of Azure consumption-based services, and we expect a sequential dollar increase in our capital expenditure as we continue to invest to support growing demand. Now to segment guidance. In productivity and business processes, we expect revenue between $11.5 and $11.7 billion, driven by continued double-digit growth across Office 365 commercial, dynamics, and LinkedIn. For Intelligent Cloud, we expect revenue between $11.85 and $12.05 billion.

Amy E. Hood: In Azure, revenue growth will continue to reflect a balance of our strong growth in our consumption-based business and moderating growth in our per-user business, given the size of the installed base. Growth in our on-premise server business should be high single digits, again driven by strong hybrid demand, as well as some continued benefits related to the end of support for Windows Server 2008. In Enterprise Services, we expect revenue growth to be slightly higher than last quarter. In more personal computing, we expect revenue between $10.75 and $11.15 billion. In Windows, overall OEM revenue growth should be in the low to mid single digits and continue to reflect healthy Windows 10 demand, the end of support for Windows 7, and the supply chain's ability to meet demand. The wider than usual range and more personal computing segment reflect uncertainty related to the public health situation in China.

Amy E. Hood: In Windows commercial products and cloud services, we expect another quarter of healthy double-digit revenue growth, driven by continued Microsoft 365 suite momentum and some benefit from Windows 7 extended support agreements. In Surface, we expect revenue growth in the low single digits as we work through the execution challenges in the consumer segment. In Search X Tech, we expect revenue growth similar to Q2. And in gaming, we expect revenue to decline in the low double-digit range driven by the continuation of the console trend as we near the launch of Xbox Series X, as well as lower transaction volume on a third-party title.

Amy E. Hood: Now back to the overall company guidance. We expect COGS of $11.05 to $11.25 billion and operating expense of $11.2 to $11.3 billion, and other income and expense, interest income, and expense should offset each other. And finally, we expect our Q3 effective tax rate to be slightly below our full-year rate of 17% due to the timing of equity vests.

Amy E. Hood: Now, let me share some additional comments on the full year. At the company level, we continue to expect double-digit revenue and operating income growth, driven by the continued strength of our commercial business. For operating expense, as a result of lower spend in H-1, we now expect full year growth between 10 and 11%.

Amy E. Hood: And finally, given our strong H-1 results, particularly in high-margin businesses, as well as the expected sales mix for the remainder of the year, we now expect operating margins to be up roughly two points year over year, even as we invest with significant ambition in strategic and high-growth areas in the second half of this year. With that, Mike, let's go to Q&A. Thanks, Amy. We'll now move over to Q&A. Out of respect to others on the call, we request that participants please only ask one question. Operator, can you please repeat your instructions?

Michael Spencer: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You'll press star 2 if you would like to remove your question from the queue.

Host: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And thank you. Our first question comes from the line of Mark Moerdler with Bernstein. Please proceed. Thank you very much and congratulations on the. I'd like to look at Azure. Can you give a little bit of more details on what's driving the Q over Q acceleration and the revenue growth? Are we seeing large contracts starting to ramp up? Are there other factors that are kicking in that are helping that?

Mark L. Moerdler: And Satya, can you also give us some sense of what you think the impact would be if xCloud is successful on Azure? Thank you. Thanks, Mark, for the question. I think overall, in terms of the Azure momentum, it's sort of the thing that we've seen even in the previous quarter, which is we have a stack that is from infrastructure to past services that's fairly differentiated. I mean, I went through some of the things that we even announced at our Ignite conference. Take something like Azure Arc.

Satya Nadella: The fact that we have a control plane for hybrid computing that is multi-cloud, multi-edge, that's a pretty differentiated aspect of it. And on the data side, both on the transactions side, on the OLTP side, as well as on the analytics side, we now have cloud-native databases. And Azure Synapse, I think, is a very competitive product, so that's what you see play out in terms of customer adoption and growth there. XCloud, I think, is a great workload solution.

Satya Nadella: I mean, we always have the mantra of first-party equals third-party, whether it is any of the workloads internally, really helping us understand the new patterns, which then, of course, are third-party. And you can see that even in terms of how Sony will use some of the same infrastructure capabilities. So we are excited about what XCloud teaches us, but more importantly, we're excited about how others in the ecosystem can use the same capability for their own streaming.

Amy E. Hood: And Mark, to your question about a little bit about the reacceleration and the Azure growth rate, let me divide that into its components. We did have very good and healthy broad-based consumption growth, especially in IaaS and PaaS. And I think actually Satya touched on one of the important parts that we started to see this quarter was not only good workload migration work, a strong growth in the optimization of the workloads already running, but also some of these new PaaS workloads like Synapse and Cosmos DB and Arc are really starting to add some momentum to that part of the stack as well, which is important. The SaaS component or the per user component also tends to We did have a good SaaS component quarter in addition to the healthy base, and that does result in some movement in that number from quarter to quarter.

Amy E. Hood: And in particular, I think Microsoft 365 Suite and the momentum we've got in security, management, and mobility are a big contributor to that. And, of course, just the type of contracts that get signed, whether that's for the consumption layer in particular, can have some impact quarter to quarter by a couple of points. So there will be some variability. There will be some uncertainty in that number. But the underlying fundamentals across both consumption and per user were quite good. Perfect. I really do appreciate it.

Mark L. Moerdler: Thank you, and again, congratulations. Thanks, Mark. Operator, we'll take the next question, please. Thank you. Our next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed. Keith Weiss, your line is live. Please proceed with your question.

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

Satya Nadella: First of all, thanks Keith for the question. We are very excited about what's happening with the developer offering. At some level, I think of what we're doing between Visual Studio and Azure DevOps and GitHub as effectively coming together as a compelling developer SaaS solution in the same class as any other SaaS solution from Microsoft or for productivity or communication. Because one of the data points I love to use is that the number of developers in the non-tech sector is now more than in the tech sector. This is software engineers, and that's going to only increase in the world going forward. So we want to build the best tool chain. After all, that's who we are as a company.

Satya Nadella: We love building tools for developers. And by the way, we're not focused only on Azure. For developers who use our tool chain, they can target any cloud, any edge device. And so this is not sort of about me.

Satya Nadella: We've always been clear about it. It's an end in itself. But that said, of course, having this tool chain will help us overall, both with essentially what is by itself a high-margin business as a SaaS business, as well as, of course, developers who are going to be in our ecosystem. But we want to stay true to that ethos of open source, GitHub, and make the best tools. In fact, just this last quarter, you saw some of the tools being adopted by Facebook engineering. And that's, I think, a testament to the progress that's been made. And I would just add to that, Keith.

Amy E. Hood: This is an important area for us to continue to invest in. The opportunity, Satya talked about, is at the developer SaaS level. And so, whether you see us...

Amy E. Hood: Investing in GitHub or in the Azure toolchain, this will be a place that we'll continue to see as an opportunity for growth. Excellent. Thank you very much, guys. Thanks, Keith.

Keith Eric Weiss: Operator, we'll move to the next question, please. Thank you. Our next question comes from the line of Karl Keirstead with Deutsche Bank. Please proceed.

Karl E. Keirstead: Thanks, Amy. I'd love to ask you a gross margin question. Beginning in your third quarter or the current March quarter, we've been bracing for gross margins to trend flat or even down year over year, given the sales mix shifts that you and your IR team have long warned us about. Yet when I take your REVS guide and your COGS guide, it equates to 3Q gross margins of 68%, which is actually up about 150 bps year over year. So I just wanted to understand what's going on. Is it that the higher gross margin businesses are decelerating at a slower than expected pace in your second half, or perhaps the pace of Azure gross margin improvement is greater than you thought? A little color here might be helpful.

Amy E. Hood: Thanks, Karl. Really, when you see the gross margin changes, it all comes down to sales mix. So at a fundamental level, I feel very good about the execution of each service against their own gross margin goals. We saw improvement across every cloud service, not just Azure, in terms of their ability to deliver growing gross margin as they focused not only on cost but also on continuing to see ARPU growth and attached growth. So... And I could say that about many of the product lines, right? I focus on them at the what can each product line do to be its best and most competitive, and many more. What you saw in H1 and what you'll see in H2 is simply mixed in Q2.

Amy E. Hood: There was a lot of mix into Windows away from, for example, the console, right, since we're heading into the next console cycle. At a company level, if you thought about what gross margins would have looked like without gaming, there are a couple of points of impact. And as we head to H2, what you'll see...

Amy E. Hood: The mix will shift a little bit. The end of support impacts tail off, whether that's in OEM or on the server side, and the contribution from gaming as well as other components in our hardware portfolio will go up a little bit. So that still does result, as you said, in a higher gross margin impact in Q3, and you'll see that continue to have a slightly different impact as we head into Q4, if that helps to give you a little sense. Yeah. Thanks, Amy. Thanks, Karl.

Amy E. Hood: Operator, we'll take the next question, please. Thank you. Our next question comes from the line of Heather Bellini with Goldman Sachs. Please proceed.

Amy E. Hood: But also, I wanted to ask you about, you know, it's been unbelievable every quarter you're able to call out material gross margin improvements in Azure. And I guess ultimately what I'm asking is, given the success you've seen there, what is your view for, you know, if you look two to three years down the road, do you just think Azure is going to be a higher gross margin business than maybe you would have thought three years ago? Specifically on Azure, I think the Azure gross margins are trending where we thought they would trend, actually, on the IaaS and PaaS layer, and they're trending where we thought they would trend on the per-user-like assets. And what you're seeing is continued improvement on that trend line that we expected. But you'll also see that as we go forward in time, those improvements will slow at the IAS and PATH layers. It'll get better, but the nature and the rate of improvement will be slow.

Amy E. Hood: And you'll see that increasing mix toward IAS and PATH in a way from the per user, just as in terms of the opportunity and the TAM. So, over the long run, Heather, I think my view is unchanged, frankly, about what that should look like. And, of course, over the same time period, how it would impact commercial cloud gross margins all up.

Amy E. Hood: But what's interesting, I think, if you separate this from this gross margin implication, it goes to the fact of just how much revenue opportunity exists in the cloud. And so, if we can continue to capture the revenue opportunity, the revenue growth, continue to meet customer needs and scenarios, pick and thoughtfully invest in industry-level solutions to grow those things, I worry less about the mechanics of the GM, which can continue to improve with service, and more, really, about our opportunity to grow revenue. Yeah,

Satya Nadella: And I would say, when we think about whether it's our R&D and operating leverage there, or sales, or CapEx. Right. Or for the cloud, we don't sort of separate out these categories of IaaS, PaaS, and even SaaS.

Satya Nadella: I mean, just to put it practically for you, we might do an infrastructure service around IoT. We then have PaaS services around IoT. We have apps around IoT in Dynamics 365. Similarly, we have the xCloud and Game Pass subscriptions, and we have the streaming capability in Azure.

Satya Nadella: So, we think about our investments holistically in that sense, and I think that's what's going to define the long-term margin picture. And I think that's going to define the long-term profile of our companies, how well we manage all the layers and collectively get leverage across the investment. Very helpful. Thank you. Thanks, Heather.

Heather Bellini: Operator, we'll take the next question, please. Thank you. Our next question comes from the line of Brent Thill with Jefferies. Please proceed.

Amy E. Hood: And they're actually related, because ultimately, the really thing that we've seen that has value for customers is that flexibility, and so the flexibility to deploy where they need it and when they need it. And if that makes sense on the edge, which some people may call on-prem, and whether that makes sense in the cloud, which people may call Azure, we're relatively indifferent as long as it meets the customer solution in the way that the solution demands. And so that, and a hybrid value proposition, and you start to see that flexibility in the data point I gave, which is that a third of the Windows and SQL Server customers are already starting to use that right to be able to take advantage of that flexibility for their workload solutions.

Amy E. Hood: And so those trends I see as relatively durable, and that's why we have talked about them, I think, for a number of years. And I think it's really important that we start to see that flexibility in the data point. I think it's really important that we start to see that flexibility in the data point. If we think about the end of support and the tail on that, it was probably two points on IC for the quarter, as I called out, so I feel very good about the underlying trajectory. Thanks. Thanks, Brent.

Amy E. Hood: Operator, we'll move to the next question, please. Thank you. Our next question comes from the line of Mark Murphy with JP Morgan. Please proceed. Yes, thank you.

Mark R. Murphy: Satya, a few quarters ago, you commented that Teams is the fastest-growing app in the company's history. I'm wondering if you could clarify if that is a reference to daily active user growth or bookings impact, or is that a comment on user engagement and the time being spent in Teams or some other metric. As well, Amy, I'm wondering if you could offer any kind of directional thoughts on just how to model the Windows OEM line post-Windows 7 end of support and going into fiscal year 21, and any high-level thoughts on how you think that could trend versus what happened in the prior cycle.

Satya Nadella: Thanks for the question, Mark. My comment was mostly around deployment, engagement, and the depth of engagement. There are very few types of products which have these platform effects.

Satya Nadella: Teams is a framework that is obviously related to messaging, which has significant usage. It's also driving usage of the rest of Office because the rest of Office gets integrated in usage patterns around channels. It's obviously used in meetings.

Satya Nadella: It's also the place where business process workflows in the context of messaging happen, and both for knowledge workers and first-line workers. So when I look at all of that cumulative effect, it's much broader than any other user experience scaffolding in terms of its ability to drive that type of platform effect and engagement. So we're excited about it, and we continue to see that, and you saw that in my remarks as well. And to your question on OEM, I think what's important is if you try to take out, which is challenging, some of the comments we've had on either chip supply constraints or some of the uncertainty related to the public health situation in China, you would say what we have in terms of what the cycle would look like compared to prior cycle ends would If not, we probably have a little more opportunity in the mid and small business segment to have the tail last a little longer than it did the last time.

Amy E. Hood: So we feel very good. We'll still need to work through that as we work through both the situations I've talked about frankly now for quite a few quarters and then look forward. So we'll continue to give you guidance on what we see in the market each quarter. Thank you very much.

Mark R. Murphy: Thanks, Mark. Operator, we'll take the next question, please. Thank you. Our next question comes from the line of Brad Reback with Stiefel.

Brad Reback: Please proceed. Amy, you mentioned a couple of times this evening about one-third of customers using hybrid rights. Within that customer base, any sense of what percent of workloads that represents for those clients? Thanks. Brad, there's not really a good way for me to know that.

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

Amy E. Hood: We've always said a lot about these hybrid use rights. We're about investing in skilling, learning, and teaching the environment and having the adoption happen for the workloads that make the most sense. And then we can continue to partner with customers to help them through this process and continue to have more meaningful workload transitions. So for us, I think I tend to start at the top and say if we've got more going into the funnel, more opportunities to partner with customers, that's a good thing. Great, thank you. Thanks, Brad.

Brad Reback: Operator, we'll take our last question now, please. Thank you. Our last question will come from the line of Phil Winslow with Wells Fargo. Please proceed.

Phil Winslow: Thanks guys for taking my question and congrats on a great quarter. I just wanted to focus in on dynamics. I guess a question for Amy and Satya.

Amy E. Hood: Amy, you called out both seed growth and also increasing attachment of multiple products within the dynamics driving that growth rate. I'm wondering if you could help just sort of parse that out. And then to Satya, when you think about just SaaS in general, how important is Dynamics to the overall Microsoft strategy, particularly with what you're trying to do with the AI platform and Azure? Because obviously, over the past 12 months, we've seen rollouts of some of those insights, AI products where you can use Dynamics data but also data from Salesforce, InDesk, et cetera, but as a sort of a So I'm wondering if you could just sort of walk us through just sort of that, call it the application strategy. And then do that in the context of what you're trying to do in the AI world. Great. Thanks, Phil, for the question. Let me start, and then Amy, you can ask.

Satya Nadella: I mean, we're very excited about what's happening with Dynamics 365 in particular because when I look at what the world needs, it needs a business application suite that is more comprehensive, that can turn what is the real currency of this next era, which is data, into predictions, insights, and automation without boundaries. I mean, they take even the Canada goose example that I had in my remarks, which is actually a pretty fascinating story of how they've been able to take the end-to-end nature of Dynamics 365 and really bring together their manufacturing, wholesale, and retail operations to the next level of efficiency. That's, I think, what is needed.

Satya Nadella: And the way we have architected it on top of Azure, it's cloud-native in terms of its use of databases. It's, for example, all these insights modules I referenced in Utah. They're all built on Azure Synapse, so it's sort of deeply integrated into Azure. It integrates with LinkedIn. It integrates into Microsoft 365. Power Platform, the extensibility model for both Microsoft 365 and Dynamics is the same, which is Power Platform. And that's pretty, you know; there's no such thing as a canonical business and there's no such thing as a canonical business over time, right?

Satya Nadella: Business processes change. The question is how rapidly can people and domain experts keep up with the change? And that's where Dynamics 365 absolutely shines. So we're excited about what's happening there. To your mentioned point about Sidecar, we think that that's a very legitimate use case.

Satya Nadella: There's a new category, in fact, and a new race starting with CDP, and we are leading. And so I feel excited about that as well. And to your question on how and the Dynamics 365, sort of the excitement we have, when I think about the comment I made about adding workloads, what's so important about that, Satya? Yeah, I think that's a great question, and one of the things that we just talked about is how this reaches into new budgets for us, new opportunities for us in terms of being able to tap growth that we had not been able to access And the way I tend to think about that is not dissimilar from how I think of most per-seat businesses.

Amy E. Hood: You add a seat, and then you add workloads, and the more you can do that in terms of tapping into new budgets, that's a great opportunity for us. So I think that's a framework that I'll start to talk a little bit more about as we learn more about Dynamics 365. This is another place I would call out where I do think we can sort of focus and continue to make some investments in H2 based on the momentum we have seen in H1.

Amy E. Hood: Great, thanks guys. Thanks, Phil. That wraps up the Q&A portion of today's earnings call. You can find additional details on the Microsoft Investor Relations website.

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