Q4 2025 Microsoft Corp Earnings Call

By fourth quarter earnings Conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce Jonathan Nielsen Vice President of Investor Relations.

Good afternoon, and thank you for joining us today on the call with me Sachin and data Chairman and Chief Executive Officer.

Hood Chief Financial Officer.

<unk> Chawla, Chief Accounting officer, and Keith to all of the corporate Secretary and Deputy General Counsel.

Jonathan Neilson: Greetings and welcome to the Microsoft Fiscal Year 2025 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jonathan Neilson, Vice President of Investor Relations.

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

Greetings, and welcome to the Microsoft fiscal year 2025 fourth quarter earnings conference call.

At this time, all participants are in a listen-only mode.

A question-and-answer session will follow the formal presentation.

More detailed outlook slides will be available on the Microsoft Investor Relations website, when we provide outlook commentary on today's call.

If anyone should require operator assistance, please press star zero on your telephone keypad.

On this call, we will discuss certain non-GAAP items.

As a reminder, this conference is being recorded. It is now my pleasure to introduce Jonathan Nielsen vice president of investor relations.

Jonathan Neilson: Good afternoon and thank you for joining us today. On the call with me are Satya Nadella, Chairman and Chief Executive Officer; Amy Hood, Chief Financial Officer; Alex Jolla, Chief Accounting Officer; and Keith D'Oliver, Corporate Secretary and 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 the reconciliation of differences between GAAP and non-GAAP financial measures. More detailed Outlook slides will be available on the Microsoft Investor Relations website when we provide Outlook commentary on today's call. On this call, we will discuss certain non-GAAP items. 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.

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.

Good afternoon and thank you for joining us today.

They are included as additional clarifying items to aid investors in further understanding the company's fourth quarter performance. In addition to the impact these items and events have on the financial results.

On the call with me, our Sacha Nadella chairman and chief executive officer, Amy Hood Chief Financial Officer, Alex jaller chief accounting officer and Keith Oliver, corporate secretary and Deputy general counsel.

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

He 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.

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 the reconciliation of differences between gaap and non-gaap financial measures.

More detailed Outlook, slides will be available on the Microsoft investor relations website when we provide Outlook commentary on today's call.

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

On this call, we will discuss certain non-GAAP items.

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

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.

Jonathan Neilson: They are included as additional clarifying items to aid investors in further understanding the company's fourth quarter performance, in addition to the impact these items and events have on the financial results. 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 the growth rate only. 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.

Today's call is being webcast live and recorded if you ask a question. It will be included in our life 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.

They are included as additional clarifying items to Aid investors in further understanding the company's fourth quarter performance. In addition to the impact, these items and events have on the financial results.

During this call we will be making forward looking statements, which are predictions projections or other statements about future events.

all growth comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted

Statements are based on current expectations and assumptions that are subject to risks and uncertainties.

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.

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 factor section of our Form 10-K forms 10-Q, and other reports and filings with the Securities and Exchange Commission.

The growth rates are the same in constant currency. We will refer to the growth rate only

We will post their prepared remarks to our website immediately following the call until the complete transcript is available.

Today's call is being webcast live and recorded.

We do not undertake any duty to update any forward looking statements.

And with that I'll turn the call over to Seth here. Thanks.

Jonathan Neilson: 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 section 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.

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

Thank you Jonathan It was a very strong close to what was a record fiscal year for us all up Microsoft cloud surpassed $168 billion in annual revenue up 23%.

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.

The rate of innovation and the speed of diffusion is unlike anything we have seen.

To that end, we are building the most comprehensive suite of <unk> products and tech stock at massive scale and to provide more context I want to walk up the stack starting with Azure.

These statements are based on current expectations and assumptions that are subject to risks and uncertainties.

Agile surpassed $75 billion in annual revenue up 34% driven by growth across all workloads. We continue to lead the AI infrastructure wave and took share every quarter this year.

Actual results could materially differ because of factors discussed in today's earnings, press release in the comments, majoring this conference call, and in the risk factor section of our form. 10K 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.

Satya Nadella: Thank you, Jonathan. It was a very strong close to what was a record fiscal year for us. All up, Microsoft Cloud surpassed $168 billion in annual revenue, up 23 percent. The rate of innovation and the speed of diffusion is unlike anything we have seen. To that end, we are building the most comprehensive suite of AI products and tech stack at massive scale. To provide more context, I want to walk up the stack, starting with Azure. Azure surpassed $75 billion in annual revenue, up 34 percent, driven by growth across all workloads. We continue to lead the AI infrastructure wave and took share every quarter this year. We opened new DCs across six continents and now have over 400 data centers across 70 regions, more than any other cloud provider.

I'll turn the call over to Zetia.

We opened new Dcs across six continents, and now have over 400, datacenters across 70 regions more than any other cloud provider.

There is a lot of talk in the industry about building the first gigawatt and multi gigawatt datacenters re stood up more than two gigawatts of new capacity over the past 12 months alone and we continue to scale our own data center capacity faster than any other competitor.

Thank you, Jonathan, it was a very strong close to what was a record fiscal year for us? All up, Microsoft cloud, surpassed 168 billion in annual revenue up. 23%,

The rate of innovation and the speed of diffusion are unlike anything we have seen.

Every Azure region is now AI first all of our regions can now support liquid cooling increasing the fungibility and the flexibility of our fleet.

To that end. We are building the most comprehensive Suite of AI products and Tech stack at massive scale and to provide more context. I want to walk up the stack, starting with azure

And we are driving and driving a set of compounding S curves across silicon systems and models to continuously improve efficiency and performance for our customers.

Azure surpassed $75 billion in annual revenue, up 34% driven by growth across all workloads. We continue to lead the AI infrastructure wave and took market share every quarter this year.

Take for example, GBT for old family of models, which have the highest volume of influence Jordans two software optimizations alone we are delivering 90% more tokens for the same GPU compared to a year ago.

Satya Nadella: There is a lot of talk in the industry about building the first gigawatt and multi-gigawatt data centers. We stood up more than two gigawatts of new capacity over the past 12 months alone, and we continue to scale our own data center capacity faster than any other competitor. Every Azure region is now AI-first. All of our regions can now support liquid cooling, increasing the fungibility and the flexibility of our fleet. We are driving and riding a set of compounding S-curves across silicon systems and models to continuously improve efficiency and performance for our customers. Take, for example, GPT-4o family of models, which have the highest volume of inference tokens. Through software optimizations alone, we are delivering 90 percent more tokens for the same GPU compared to a year ago.

Beyond the AI fleet, we continue to build our commercial cloud to address customers' unique data residency and solvency requirements. This quarter, we introduced the Microsoft sovereign cloud the industry's most comprehensive solution spanning both public and private cloud deployments.

We opened new DCS ACS across 6 continents and now have over 400 data centers across 70 regions more than any other cloud provider. There is a lot of talk in the industry about building the first gigawatt and multi gigawatt data centers. We stood up more than 2 gigawatts of new capacity over the past 12 months alone and we continue to scale our own Data Center capacity faster than any other competitor.

All of this innovation is driving our strong results, we saw accelerating growth from migrations again this quarter necessarily for example migrated more than 200 SAP be instances 10000, plus servers, one two petabytes of data to Azure with near zero business disruption that makes it one of the largest and most.

Every Azure region is now ai first. All of our regions can now support liquid cooling. Increasing the fungibility and the flexibility of our Fleet.

And we are driving and riding a set of compounding S-curves across silicon systems and models to continuously improve efficiency and performance for our customers.

Successful migrations in business history.

for example, gbd 40, family of models, which have the highest volume of inference tokens through software optimization,

The next big accelerator in the cloud will be quantum and I am excited about our progress in fact earlier this month, we announced the world's first operational deployment of a level two quantum computer in partnership with Adam Computing. This is how we will continue to think and make investments with a decade long arcs, while making progress every quarter.

Satya Nadella: Beyond the AI fleet, we continue to build our commercial cloud to address customers' unique data residency and sovereignty requirements. This quarter, we introduced the Microsoft Sovereign Cloud, the industry's most comprehensive solution spanning both public and private cloud deployments. All of this innovation is driving our strong results. We saw accelerating growth from migrations again this quarter. Nestle, for example, migrated more than 200 SAP instances, 10,000 plus servers, 1.2 petabytes of data to Azure with near zero business disruption. That makes it one of the largest and most successful migrations in business history. The next big accelerator in the cloud will be quantum, and I'm excited about our progress. In fact, earlier this month, we announced the world's first operational deployment of a level two quantum computer in partnership with Atom Computing.

Loan. We are delivering 90% more tokens for the same GPU compared to a year ago.

Beyond the AI Fleet. We continue to build our commercial Cloud to address customers unique data, residency and sovereignty. Requirements this quarter, we introduced the Microsoft Sovereign Cloud, the industry's most comprehensive Solutions, spanning both public and private cloud deployments.

The next layer is data, which is foundational to every AI application, Microsoft fabric is becoming the complete data and analytics platform for the AI era spanning everything from sequel to no sequel to analytics workloads. It continues to gain momentum with revenue up 55% year over year and.

Over 25000 customers.

The fastest growing database product in our history fabric, one les expands all databases and clouds, including semantic models from power bi and therefore, it is the best source of knowledge and grounding for AI applications and context engineering.

Satya Nadella: This is how we will continue to think and make investments with decade-long arcs while making progress every quarter. The next layer is data, which is foundational to every AI application. Microsoft Fabric is becoming the complete data and analytics platform for the AI era, spanning everything from SQL to NoSQL to analytics workloads. It continues to gain momentum with revenue up 55 percent year over year and over 25,000 customers. It's the fastest growing database product in our history. Fabric One Lake spans all databases and clouds, including semantic models from Power BI, and therefore it is the best source of knowledge and grounding for AI applications and context engineering. Azure Databricks and Snowflake on Azure both accelerated as well. Cosmos DB and Azure PostgreSQL are both powering mission-critical workloads at scale.

All of this Innovation is driving our strong results. We saw accelerating growth from migrations again. This quarter Nestle for example, migrated more than 200 sap instances, 10,000 plus servers. 1.2 perab of data to Azure with near zero business disruption, that makes it 1 of the largest and most successful, migrations in business history. The next big accelerator in the cloud will be Quantum and I'm excited about our progress. In fact, earlier this month, we announced the world's first operational deployment of a level 2, quantum computer in partnership with atom Computing. This is how we will continue.

<unk> data bricks and snowflake on Azure, both accelerated as well Cosmos DB and Azure posted a sequel of both powering mission critical workloads at scale opening I for example, users Cosmos DB in the heart of every chat GPT interaction storing chat history user profiles and conversational state.

And as opposed to sequel stores metadata critical to the operation of chat GPT as well as opening hours developer API.

This year, we launched Azure AI foundry to help customers design, customize and manage AI applications and agents that scale foundry features best in class tooling management availability and building controls for trustworthy AI customers increasingly want to use multiple AI models to meet their specific performance cost.

And use case requirements and with foundry, they can provision influencing throughput ones and apply it across more models than any other hyper scaler, including models from open AI deep Sea meta X Ai's grok and very soon Black Forest labs, and Mistral AI <unk>.

Satya Nadella: OpenAI, for example, uses Cosmos DB in the hot path of every ChatGPT interaction, storing chat history, user profiles, and conversational state. Azure PostgreSQL stores metadata critical to the operation of ChatGPT, as well as OpenAI's developer APIs. This year, we launched Azure AI Foundry to help customers design, customize, and manage AI applications and agents at scale. Foundry features best-in-class tooling, management, observability, and built-in controls for trustworthy AI. Customers increasingly want to use multiple AI models to meet their specific performance, cost, and use case requirements. With Foundry, they can provision inferencing throughput once and apply it across more models than any other hyperscaler, including models from OpenAI, DeepSeek, Meta, xAI's Grok, and very soon Black Forest Labs and Mistral AI. We SIM shipped 15 models from OpenAI alone on Foundry this year, providing same-day access to state-of-the-art models deeply integrated with our infrastructure and tools.

Azure Databricks and Snowflake on Azure both accelerated as well. Cosmos DB and Azure PostgreSQL are both powering mission-critical workloads at scale.

<unk> shipped 15 models from open AI alone on foundry this year, providing same day access to state of the art models deeply integrated with our infrastructure and tools and we're seeing accelerated adoption of our new foundry agent service, which is now being used by 14000 customers to build agents that automate complex.

OpenAI, for example, uses Cosmos DB in the hot path of every ChatGPT interaction, storing chat history, user profiles, and conversational state, and Azure Postgres SQL stores metadata critical to the operation of ChatGPT as well as OpenAI's developer API.

For example, NASDAQ is using foundry to build the agents that help customers prepare for board meetings cutting prep time by up to 25%.

All up 80% of Fortune 500 already use foundry and when we look not only at just the number of tokens served by foundry Apis, we processed over 500 trillion this year up over seven X.

This year, we launched Azure AI Foundry to help customers design, customize, and manage AI applications and agents at scale. Foundry features best-in-class tooling, management observability, and built-in controls for trustworthy AI. Customers increasingly want to use multiple AI models to meet their specific performance, cost, and use case requirements. With Foundry, they can provision inferencing throughput options and apply them across more models than any other hyperscaler, including models from OpenAI, DeepMind, Meta, XAI's Grok, and very soon, Black Forest Labs and Mistral AI.

This is a good indicator of true platform diffusion beyond a few head apps and services.

Talking about the App layer. These applications are becoming embedded in our daily work and life.

Satya Nadella: We are seeing accelerated adoption of our new Foundry agent service, which is now being used by 14,000 customers to build agents that automate complex tasks. For example, Nasdaq is using Foundry to build agents that help customers prepare for board meetings, cutting prep time by up to 25 percent. All up, 80 percent of Fortune 500 already use Foundry. When we look narrowly at just the number of tokens served by Foundry APIs, we processed over 500 trillion this year, up over 7x. This is a good indicator of true platform diffusion beyond a few head apps and services. Talking about the app layer, these applications are becoming embedded in our daily work and life. Our family of Copilot apps has surpassed 100 million monthly active users across commercial and consumer.

Normally a copilot apps has surpassed 100 million monthly active users across commercial and consumer.

And when you take a broader look at the engagement of AI features across our products, we have over 800 million monthly active users.

Microsoft three six my copilot is becoming the new way to organize work and workflow and work out effects, we rolled out our biggest update to Microsoft 365, copilot to date this quarter, bringing together chat search create notebooks as well as agents into one intuitive scaffolding with this generation and continued product improvement.

For example, NASDAQ is using Foundry to build agents that help customers prepare for board meetings, cutting prep time by up to 25%.

All up, 80% of Fortune 500 companies already use Foundry. And when we look narrowly at just the number of tokens served by Foundry APIs, we processed over 500 trillion this year, up over 7X.

This is a good indicator of true platform. Diffusion Beyond a few head, apps and services.

We are seeing real momentum customers continue to adopt co pilot at a faster rate than any other new Microsoft 360, <unk> suite with strong usage intensity as shown by a week over week retention and we saw the largest quarter of seat adds since launch with a record number of customers returning to buy more seats.

Satya Nadella: When you take a broader look at the engagement of AI features across our products, we have over 800 million monthly active users. Microsoft 365 Copilot is becoming the new way to organize work and workflow and work artifacts. We rolled out our biggest update to Microsoft 365 Copilot to date this quarter, bringing together chat, search, create, notebooks, as well as agents into one intuitive scaffolding. With this innovation and continued product improvements, we are seeing real momentum. Customers continue to adopt Copilot at a faster rate than any other new Microsoft 365 suite, with strong usage intensity as shown by our week-over-week retention. We saw the largest quarter of seat ads since launch, with a record number of customers returning to buy more seats. Barclays, for example, will roll out Microsoft 365 Copilot to 100,000 employees globally, following a successful initial deployment of 15,000.

Talking about the app layer, these applications are becoming embedded in our daily work in life, our family of co-pilot apps has surpassed 100 million monthly active users across commercial and consumer.

Barclays for example will rollout Microsoft 365, copilot to 100000 employees globally. Following a successful initial deployment of 15000 UBS is expanding its deployment to all of its employees. After initially rolling it out to 55000 of them in Adobe KPMG Pfizer Wells Fargo all purchased over 25.

And when you take a broader, look at the engagement of AI features across our products, we have over 800 million monthly active users.

Thousands seats this quarter.

Thousands of organizations have already used our research on the analyst deep reasoning agents in the first weeks of availability and we have introduced group level agents and teams like facilitate an interpreter, which generate real time translation notes in meetings hundreds of partners like Adobe Sep's service now and work there.

Microsoft 365 co-pilot is becoming the new way to organize work and workflow and work artifacts we rolled out our biggest update to Microsoft 365 co-pilot today. This quarter bringing together a chat search create notebooks as well as agents into 1 int scaffolding with this Innovation and continued product improvements. We are seeing real momentum. Customers continue to adopt co-pilot at a faster rate than any other new Microsoft 365 Suite with strong usage intensity as shown by our week-over-week retention and we saw the largest quarter of C

<unk> built there.

Our own third party agents that integrate with copilot and teams. We're also seeing more customers use copilot studio to extend Microsoft 365, copilot and build their own agents. This year customers created 3 million agents, using sharepoint and copilot Stu.

Satya Nadella: UBS is expanding its deployment to all of its employees after initially rolling it out to 55,000 of them. Adobe, KPMG, Pfizer, Wells Fargo all purchased over 25,000 seats this quarter. Tens of thousands of organizations have already used our researcher and analyst deep reasoning agents in the first weeks of availability. We have introduced group-level agents in Teams like Facilitator and Interpreter, which generate real-time translation and notes in meetings. Hundreds of partners like Adobe, SAP, ServiceNow, and Workday have built their own third-party agents that integrate with Copilot and Teams. We are also seeing more customers use Copilot Studio to extend Microsoft 365 Copilot and build their own agents. This year, customers created 3 million agents using SharePoint and Copilot Studio. With Copilot tuning, they can easily create agents fine-tuned on their company's data, workflow, and style that reflect their unique tone, language, and expertise.

And with copilot tuning they can easily create agents fine tuned on the company's data workflow and style that reflect the unique dawn language and expertise.

Had since launched with a record number of customers returning to buy more seats. Barclays, for example, will roll out, Microsoft 365, co-pilot to 100,000 employees globally. Following a successful initial deployment of 15,000. UBS is expanding, its deployment to all of its employees after initially, rolling it out, to 55,000 of them and Adobe KPMG. Fisa Wells, Fargo, all purchased over 25,000 seats this quarter.

We're also seeing great traction amongst specific roles and functions starting with developers get up copilot continues to have great momentum in <unk> with agent mode, and new form factors like quoting agent, which is capable of as synchronous we executing develop a toss rehab 20 million get up copilot users get up copilot.

<unk> customers increased 75% quarter over quarter as companies tailor copilot to their own code basis, and 90% of the Fortune 100, now use get up co pilot more broadly get up usage and repos are seeing explosive growth because of AI AI projects don't get up more than doubled over the last year the surge.

Satya Nadella: We're also seeing great traction among specific roles and functions, starting with developers. GitHub Copilot continues to have great momentum in IDE with agent mode and new form factors like Coding Agent, which is capable of asynchronously executing developer tasks. We have 20 million GitHub Copilot users. GitHub Copilot Enterprise customers increased 75 percent quarter over quarter as companies tailor Copilot to their own code bases, and 90 percent of the Fortune 100 now use GitHub Copilot. More broadly, GitHub usage and repos are seeing explosive growth because of AI. AI projects on GitHub more than doubled over the last year. The surge in web coding projects and AI coding agents, whether it is Cloud Code, Codex, Cursor, or GitHub Copilot, are generating more pull requests and more repos on GitHub. Our code review agent is being used heavily across the platform, performing millions of code reviews each month.

Tens of thousands of organizations have already used our researcher and analyst deep reasoning agents in the first weeks of availability. And we have introduced group level agents in teams like facilitator and interpreter which generate real-time transformation and notes in meetings hundreds of Partners like Adobe sap service now and workday have built their own third-party agents that integrate with co-pilot and teams. We are also seeing more customers use co-pilot Studio to extend Microsoft 365, co-pilot and build their own agents. This year, customers created 3, million agents, using SharePoint, and co-pilot studio. And with co-pilot tuning, they can easily create agents fine-tuned on their company's data workflow and style that reflect their unique tone language and expertise.

<unk> in wipe coating projects and AI coating agents, whether it is claude called codex cause or get up copilot are generating more pull requests and more repos on github.

And our code review agent is being used heavily across the platform performing millions of code reviews each month.

We're also seeing great traction, among specific roles and functions. Starting with developers, get up co-pilot continues to have great momentum in ide with agent mode, and new form factors like coding agent, which is capable of a synchronously, executing developer tasks.

In healthcare, we had a breakout year for Dragon co pilot customers used our ambient AI solutions to document over 13 million physician patient encounters this quarter up nearly seven X year over year. For example at Mercy health system more than 1000 physicians are already using copilot to reduce.

Whose administrative burden so that they can focus on providing better care. They have saved more than 100000 hours to date and plan to expand to all 5000 providers.

As one physician put it the best thing to happen to my practice in 10 years.

In security we were the first in the industry to introduce agents to help defenders autonomously handle high volume security. It tell us more broadly AI is driving a fundamental change in the biz apps market as customers shift from legacy systems to a gen take business applications dynamics, 365%.

Satya Nadella: In healthcare, we had a breakout year for Dragon Copilot. Customers used our Ambient AI solutions to document over 13 million physician-patient encounters this quarter, up nearly 7x year over year. For example, at Mercy Health System, more than 1,000 physicians are already using Copilot to reduce administrative burden so that they can focus on providing better care. They have saved more than 100,000 hours to date and plan to expand to all 5,000 providers. As one physician put it, "The best thing to happen to my practice in 10 years." In security, we were the first in the industry to introduce agents to help defenders autonomously handle high-volume security and IT tasks. More broadly, AI is driving a fundamental change in the biz apps market as customers shift from legacy systems to agentic business applications.

We have 20 million, get up co-pilot users, get up co-pilot Enterprise customers increase 75% quarter over quarter as companies. Tailor co-pilot to their own code bases and 90% of the Fortune 100. Now use get up co-pilot more broadly GitHub usage and repost are seeing explosive growth because of ai ai projects on GitHub more than doubled over the last year. The surge in W coding projects in AI coding agents, whether it is Claude code, kodak's cursor or get up. Co-pilot are generating more pull requests and more repos on GitHub. And our code review. Agent is being used heavily across the platform performing millions of code reviews each month.

Sure this year and we are winning customers in every industry like Verizon with sales Domino's Pizza group with ERP run 800 flaws with contact center.

In healthcare, we had a breakout year for Dragon co-pilot customers. Used our ambient AI solutions to document over 13 million. Physicians patient, Encounters, this quarter up nearly 7x year-over-year, for example, at Mercy Health System, more than a thousand Physicians are already using co-pilot to reduce administrative burden so that they can focus on providing better care. They have saved more than 100,000 hours.

When it comes to consumer apps, we're innovating across all surfaces. In fact on Monday, we introduced copilot mode and edge, it's especially exciting to see the innovation coming back to browsers co pilot mode brings together copilot composer chat discovery search and actions to build the next generation of browser.

Yesterday and plan to expand to all 5,000 providers.

As 1 Physicians.

For the AI age our copilot consumer App also continue to see strong growth in engagement and successful sessions and we are bringing copilot to every windows 11, PC with copilot vision you can share your screen with co pilot and get real time insights and assistance on anything.

Satya Nadella: Dynamics 365 took share this year, and we're winning customers in every industry, like Verizon with Sales, Domino's Pizza Group with ERP, 1-800-FLOWERS with Contact Center. When it comes to consumer apps, we're innovating across all surfaces. In fact, on Monday, we introduced Copilot Mode in Edge. It's especially exciting to see the innovation coming back to browsers. Copilot Mode brings together Copilot Composer, Chat, Discover, Search, and Actions to build the next generation of browser for the AI age. Our Copilot consumer app also continues to see strong growth in engagement and successful sessions. We are bringing Copilot to every Windows 11 PC. With Copilot Vision, you can share your screen with Copilot and get real-time insights and assistance on anything.

And we are well positioned as we approach Windows 10 end of support in October Thanks to Windows, 11, and copilot, plus species, which offer customers compelling security as well as AI value.

Talking about security it underlies our cloud and AI infrastructure as well as our co pilots and agents, we have launched over 100, new capabilities over the past year, just last week, we added a modern data lake to a Sim Microsoft Sentinel, bringing together customer data across our first party tools as well as third party ecosystem.

Over 350 connectors.

We're also extending the systems customers already use for governance identity security and management to protect every AI agent intra now extends identity permissions policies and access controls to agents defenders secures nearly $2 million AI apps purview is used.

Satya Nadella: We are well positioned as we approach Windows 10 end of support in October, thanks to Windows 11 and Copilot+ PCs, which offer customers compelling security as well as AI value. Talking about security, it underlies our cloud and AI infrastructure, as well as our Copilots and agents. We have launched over 100 new capabilities over the past year. Just last week, we added a modern data lake to our SIEM, Microsoft Sentinel, bringing together customer data across our first-party tools as well as third-party ecosystem over 350 connectors. We're also extending the systems customers already use for governance, identity, security, and management to protect every AI agent. Entra now extends identity permissions, policies, and access controls to agents. Defender secures nearly 2 million generative AI apps. Purview is used by three-quarters of the Microsoft 365 Copilot customers to protect their data.

ERP 1800 flaws with contact center when it comes to consumer apps. We are innovating across all surfaces. In fact, on Monday, we introduced Co-pilot mode in Edge. It's especially exciting to see the innovation coming back to browsers. Co-pilot mode brings together Co-pilot composer chat, Discover search, and actions to build the next generation of browser for the AI age. Our Co-pilot consumer app also continues to see strong growth in engagement and successful sessions, and we are bringing Co-pilot to every Windows 11 PC. With Co-pilot Vision, you can share your screen with Co-pilot and get real-time insights and assistance on anything.

And we are well positioned as we approach Windows 10, end of support in October, thanks to Windows 11 and co-pilot plus PCS, which offer customers compelling security as well as AI value.

By three quarters of the Microsoft 365, co pilot customers to protect their data.

And all up we now have nearly one 5 million security customers and continue to take share across all major categories. We serve.

Before I wrap I want to talk about two consumer businesses of ours with massive end user reach Linkedin and Xbox Linkedin is home to one 2 billion members with four consecutive years of double digit member growth.

Talking about security, it underlies our cloud and AI infrastructure as well as our co-pilots and agents. We have launched over a 100 new capabilities over the past year. Just last week, we added a modern data Lake to our Sim Microsoft Sentinel bringing together customer data across our first party tools, as well as third-party ecosystem, over 350 connectors.

All up comments on Linkedin rose over 30% and video uploads increased over 20% this year.

We continue to bring AI to every part of Linkedin experience introducing agents across hiring as well as sales when it comes to gaming we have 500 million monthly active users across platforms and devices. We are now the top publisher on both Xbox and Playstation this quarter with successful launches of <unk>.

Satya Nadella: All up, we now have nearly 1.5 million security customers and continue to take share across all major categories we serve. Before I wrap, I want to talk about two consumer businesses of ours with massive end-user reach: LinkedIn and Xbox. LinkedIn is home to 1.2 billion members with four consecutive years of double-digit member growth. All up, comments on LinkedIn rose over 30 percent, and video uploads increased over 20 percent this year. We continue to bring AI to every part of LinkedIn experience, introducing agents across hiring as well as sales. When it comes to gaming, we have 500 million monthly active users across platforms and devices. We are now the top publisher on both Xbox and PlayStation this quarter, with successful launches of Forza Horizon 5 and Oblivion Remastered. The Call of Duty franchise has never been stronger. 50 million people have played Black Ops 6.

We're also extending the systems customers already use for governance identity security and management to protect every AI agent. Enter now extends identity, permissions policies and access controls to agents, Defender Secours. Nearly 2 million General AI apps purview is used by 3. Quarters of the Microsoft 365, co-pilot customers to protect their data.

And all up, we now have nearly 1.5 million security customers and continue to take share across all major categories. We serve.

And five in Oblivion remastered the call of duty franchise has never been stronger 50 million people played black ops six total hours surpassed $2 billion Minecraft saw a record monthly active usage in revenue this quarter. Thanks in large part to the success of the Minecraft movie and we have nearly 40 games in development.

So much much more to come we surpassed over 500 million hours of gameplay stream via the cloud this year and game pass annual revenue was nearly $5 billion for the first time.

In closing we are going through a generational tax shift where they are and I have never been more confident in microsofts opportunity to drive long term growth and define what the future looks like with that let me turn it over to Amy to walk through our financial results as well as the outlook.

Satya Nadella: Total hours surpassed 2 billion. Minecraft saw record monthly active usage and revenue this quarter, thanks in large part to the success of the Minecraft movie. We have nearly 40 games in development, so much, much more to come. We surpassed over 500 million hours of gameplay streamed via the cloud this year, and Game Pass annual revenue was nearly $5 billion for the first time. In closing, we are going through a generational tech shift with AI, and I have never been more confident in Microsoft's opportunity to drive long-term growth and define what the future looks like. With that, let me turn it over to Amy to walk through our financial results as well as the outlook.

Thank you Satya and good afternoon, everyone. This year, we delivered over $281 billion in revenue up 15% year over year, which reflects the broad strength of our products and services.

Before I wrap, I want to talk about two consumer businesses of ours, with massive end-user reach: LinkedIn and Xbox. LinkedIn is home to 1.2 billion members, with four consecutive years of double-digit member growth. All-up comments on LinkedIn rose over 30%, and video uploads increased over 20% this year. We continue to bring AI to every part of the LinkedIn experience, introducing agents across hiring as well as sales. When it comes to gaming, we have 500 million monthly active users across platforms and devices. We are now the top publisher on both Xbox and PlayStation. This quarter, with successful launches of Forza Horizon 5 and Oblivion Remastered, the Call of Duty franchise has never been stronger. Fifty million people have played Black Ops 6, totaling over 2 billion hours. Minecraft saw a record month.

Li active usage and revenue this quarter. Thanks in large part to the success of the Minecraft movie.

<unk> income was over 128 billion up 17% year over year as we invested against the expansive opportunity ahead.

And in our largest quarter of the year, we significantly exceeded expectations with strong execution by our sales and partner teams SRT assured, we're innovating faster than ever to deliver new value to our customers.

And we have nearly 40 games in development so much, much more to come. We surpassed over 500 million hours of gameplay streamed via the cloud this year and Game Pass. Annual revenue was nearly 5 billion dollars for the first time.

This quarter revenue was $76 $4 billion up 18% and 17% in constant currency gross margin dollars increased 16% and 15% in constant currency, while operating income increased 23% and 22% in constant currency and earnings per share was $3 65.

Amy Hood: Thank you, Satya, and good afternoon, everyone. This year, we delivered over $281 billion in revenue, up 15 percent year over year, which reflects the broad strength of our products and services. Operating income was over $128 billion, up 17 percent year over year, as we invested against the expansive opportunity ahead. In our largest quarter of the year, we significantly exceeded expectations with strong execution by our sales and partner teams. As Satya shared, we're innovating faster than ever to deliver new value to our customers. This quarter, revenue was $76.4 billion, up 18 percent and 17 percent in constant currency. Gross margin dollars increased 16 percent and 15 percent in constant currency, while operating income increased 23 percent and 22 percent in constant currency. Earnings per share was $3.65, an increase of 24 percent and 22 percent in constant currency.

In closing, we are going through a generational Tech shift with AI and I have never been more confident in Microsoft's opportunity to drive long-term growth and Define what the future looks like with that. Let me turn it over to Amy to walk through our financial results as well as the Outlook.

An increase of 24% and 22% in constant currency.

For the first time commercial bookings were over $100 billion.

Thank you. Sat here and good afternoon, everyone. This year, we delivered over $281 billion in revenue, up 15% year-over-year, which reflects the broad strength of our products and services. Operating income was over $128 billion, up 17% year-over-year, as we invested against the expansive opportunity ahead.

Increasing 37% and 30% in constant currency on a strong prior year comparable.

Strong execution across our core annuity sales motions, including healthy renewals as well as an increase in the number of $10 million and $101 million plus contracts for both Azure and Microsoft 365 helped drive these results.

And in our largest quarter of the year, we significantly exceeded expectations with strong execution by our sales and partner teams at Setia. We're innovating faster than ever to deliver new value to our customers.

Commercial remaining performance obligation increased to 368 billion.

Up 37% and 35% in constant currency, roughly 35% will be recognized in revenue in the next 12 months up 21% year over year. The remaining portion recognized beyond the next 12 months increased 49% and this quarter, our annuity mix was again, 98% FX.

Amy Hood: For the first time, commercial bookings were over $100 billion, increasing 37 percent and 30 percent in constant currency on a strong prior year comparable. Strong execution across our core annuity sales motions, including healthy renewals, as well as an increase in the number of 10 million and $100 million plus contracts for both Azure and Microsoft 365, helped drive these results. Commercial remaining performance obligation increased to $368 billion, up 37 percent and 35 percent in constant currency. Roughly 35 percent will be recognized in revenue in the next 12 months, up 21 percent year over year. The remaining portion recognized beyond the next 12 months increased 49 percent. This quarter, our annuity mix was again 98 percent. F/X was roughly in line with expectations on total company revenue, segment-level revenue, COGS, and operating expense growth.

This quarter Revenue was 76.4 billion of 18% and 17% in constant currency gross margin dollars increased 16% and 15% in constant currency while operating income increased 23% and 22% in constant currency and earnings per share was 3.65 and the increase of 24% and 22% in constant currency.

For the First Time, commercial bookings were over 100 billion dollars, increasing 37% and 30% in constant currency on a strong prior year comparable.

FX was roughly in line with expectations on total company revenue segment level revenue Cogs and operating expense growth.

Microsoft Cloud revenue was $46 $7 billion ahead of expectations and grew 27% and 25% in constant currency, Microsoft cloud gross margin percentage was slightly better than expected at 68% down two points year over year from the impact of scaling our AI infrastructure, partially offset by continued efficiency gain.

Strong execution across our core annuity sales motions, including healthy renewals, as well as an increase in the number of $10 million and $100 million plus contracts. For both Azure and Microsoft 365, helped drive these results.

<unk> and Azure and M 365, commercial cloud company gross margin percentage was 69% down one point year over year, driven by sales mix shift to Azure and the lower Microsoft Cloud gross margin noted earlier.

Commercial remaining performance. Obligation increased to 368 billion up 37% and 35% in constant currency roughly 35% will be recognized in Revenue in the next 12 months up, 21% year-over-year. The remaining portion recognized beyond the next 12 months increased 49% and this quarter, our annuity mix was again 98%.

Operating expenses increased 6% and 5% in constant currency and operating margins increased two points year over year to 45%.

Amy Hood: Microsoft Cloud revenue was $46.7 billion ahead of expectations and grew 27 percent and 25 percent in constant currency. Microsoft Cloud gross margin percentage was slightly better than expected at 68 percent, down two points year over year from the impact of scaling our AI infrastructure, partially offset by continued efficiency gains in Azure and M365 commercial Cloud. Company gross margin percentage was 69 percent, down one point year over year, driven by sales mix shift to Azure and the lower Microsoft Cloud gross margin noted earlier. Operating expenses increased 6 percent and 5 percent in constant currency, and operating margins increased two points year over year to 45 percent. Better than expected revenue growth, coupled with a focus on operating efficiently, drove the margin expansion. At a total company level, headcount at the end of June was relatively unchanged year over year. Now to our segment results.

FX was roughly in line with expectations on total company. Revenue segment level Revenue cogs and operating expense growth.

Better than expected revenue growth, coupled with our focus on operating efficiently drove the margin expansion at.

At a total company level head count at the end of June was relatively unchanged year over year.

Now to our segment results revs.

Revenue from productivity and business processes was $33 $1 billion and grew 16% and 14% in constant currency better than expected driven by <unk> hundred 65, commercial products and cloud services and <unk> hundred 65, consumer products and cloud services and through 65 commercial cloud revenue was ahead of expectations and increased <unk>.

Microsoft cloud Revenue was 46.7 billion ahead of expectations and grew 27% and 25% in constant currency. Microsoft, cloud, gross margin percentage was slightly better than expected at 68% down to 0.0 year-over-year from the impact of scaling. Our AI infrastructure partially offset by continued efficiency, gains in Azure and M365 commercial cloud.

Company gross margin percentage with 69% down 1.0 year-over-year driven by sales mixed shift to Azure and the lower Microsoft cloud gross margin noted earlier.

10% and 16% in constant currency with two points of benefit from in period revenue recognition.

Operating expenses increased 6% and 5% in constant currency and operating margins, increased 2.0 over a year to 45%.

This is trends remained relatively stable to the prior quarter when excluding the end period revenue recognition with <unk> growth again, driven by <unk> and M 365 co pilot.

Better-than-expected revenue growth, coupled with a focus on operating efficiently, drove the margin expansion.

At a total company level head count. At the end of June was relatively unchanged year-over-year.

And for 65 commercial seats grew 6% year over year with installed base expansion across all customer segments.

Amy Hood: Revenue from productivity and business processes was $33.1 billion and grew 16 percent and 14 percent in constant currency, better than expected, driven by M365 commercial products and Cloud services and M365 consumer products and Cloud services. M365 commercial Cloud revenue was ahead of expectations and increased 18 percent and 16 percent in constant currency, with two points of benefit from in-period revenue recognition. Business trends remained relatively stable to the prior quarter when excluding the in-period revenue recognition, with ARPU growth again driven by E5 and M365 Copilot. Paid M365 commercial seats grew 6 percent year over year, with a stalled base expansion across all customer segments, though primarily in our small and medium business and frontline worker offerings. M365 commercial products revenue increased 9 percent and 7 percent in constant currency, ahead of expectations due to higher than expected Office 2024 transactional purchasing.

Now to our segment results.

Primarily in our small and medium business and frontline worker offerings.

65, commercial products revenue increased 9% and 7% in constant currency ahead of expectations due to higher than expected office 2020 for transactional purchasing empty 65 consumer cloud revenue was better than expected, increasing 20% driven by ARPA growth from the January price increase and subscriber growth of 8%.

Revenue from productivity and business processes was $33.1 billion and grew 16% and 14% in constant currency, better than expected, driven by M365 commercial products from cloud services, and M365 consumer products and cloud services. M365 commercial Cloud Revenue was ahead of expectations and increased 18%, and 16% in constant currency, with 2 points of benefit from in-period revenue recognition.

Linkedin revenue increased 9% and 8% in constant currency with growth across all businesses.

<unk> solutions continues to be impacted by weakness in the hiring market dynamic.

<unk> hundred 65 revenue increased 23% and 21% in constant currency with strong execution in our core annuity sales motions, leading to growth across all workloads segment gross margin dollars increased 16% and 15% in constant currency and gross margin percentage increased slightly driven by the efficiency gains noted earlier even ask.

Trends remained relatively stable to the prior quarter. When excluding the end period, revenue recognition with RPU growth again, driven by E5 and M365, Co-Pilot paid M365 commercial seats, grew 6% year-over-year.

Amy Hood: M365 consumer Cloud revenue was better than expected, increasing 20 percent, driven by ARPU growth following the January price increase and subscriber growth of 8 percent. LinkedIn revenue increased 9 percent and 8 percent in constant currency, with growth across all businesses. The talent solutions continue to be impacted by weakness in the hiring market. Dynamics 365 revenue increased 23 percent and 21 percent in constant currency, with strong execution in our core annuity sales motions, leading to growth across all workloads. Segment gross margin dollars increased 16 percent and 15 percent in constant currency, and gross margin percentage increased slightly, driven by the efficiency gains noted earlier, even as we deliver more AI features across our products and scale our AI infrastructure. Operating expenses increased 7 percent and 6 percent in constant currency, and operating income increased 21 percent and 19 percent in constant currency.

We deliver more AI features across our products and scale our AI infrastructure.

Operating expenses increased 7% and 6% in constant currency and operating income increased 21% and 19% in constant currency next the intelligent cloud segment.

subbase expansion across all customer segments, though primarily in our small and medium business and Frontline worker, offerings M365 commercial products, Revenue increased 9% and 7% in constant currency ahead of expectations due to higher than expected office 2024 transactional, purchasing M365 consumer Cloud. Revenue was better than expected. Increasing 20% driven by our crew growth following the January price, increase and subscriber growth of 8% LinkedIn, Revenue increased 9% and 8% in constant currency with growth.

Revenue was $29 9 billion and grew 26% and 25% in constant currency head of expectations, driven by Azure and our on premises server business and.

Across all businesses, the Talent Solutions continues to be impacted by weakness in the hiring market.

In Azure and other cloud services revenue grew 39% significantly ahead of expectations driven by accelerated growth in our core infrastructure business, primarily from our largest customers as a reminder, new cloud and AI workloads are built and scaled using the breadth of our services.

Revenue from Azure AI services was generally in line with expectations.

And while we brought additional data center capacity online this quarter demand remains higher and supply.

Amy Hood: Next, the intelligent Cloud segment. Revenue was $29.9 billion and grew 26 percent and 25 percent in constant currency, ahead of expectations, driven by Azure and our on-premises server business. In Azure and other Cloud services, revenue grew 39 percent, significantly ahead of expectations, driven by accelerated growth in our core infrastructure business, primarily from our largest customers. As a reminder, new Cloud and AI workloads are built and scaled using the breadth of our services. Revenue from Azure AI services was generally in line with expectations. While we brought additional data center capacity online this quarter, demand remains higher than supply. In our on-premises server business, revenue decreased 2 percent and 3 percent in constant currency, ahead of expectations, primarily driven by transactional purchasing, which also has higher in-period revenue recognition.

On premises server business revenue decreased 2% and 3% in constant currency ahead of expectations, primarily driven by transactional purchasing which also has higher in period revenue recognition enterprise and partner services revenue increased 7% and 6% in constant currency with growth in enterprise support services, partially offset by a decline in <unk>.

Dynamics 365 revenue increased 23% and 21% in constant currency, with strong execution. In our core annuity sales, motions leading to growth across all workloads and segments are evident. Gross margin dollars increased 16% and 15% in constant currency, and gross margin percentage increased slightly, driven by the efficiency gains noted earlier. Even as we deliver more AI features across our products and scale, our AI infrastructure operating expenses increased 7% and 6% in constant currency, while operating income increased 21% and 19% in constant currency. The Intelligent Cloud segment revenue was $29.9 billion and grew 26% and 25% in constant currency, ahead of expectations, driven by Azure and our on-premises server business.

Industry solutions.

Segment gross margin dollars increased 17% and 16% in constant currency and gross margin percentage decreased four points year over year, driven by scaling our AI infrastructure, partially offset by Azure efficiency gains noted earlier.

In Azure and other cloud services, Revenue grew 39% significantly. Ahead of expectations. Driven by accelerated growth in our core infrastructure, business primarily from our largest customers as a reminder, new cloud and AI workloads are built and scaled using the breadth of our services.

Revenue from Azure AI Services was generally in line with expectations.

Operating expenses increased 6% and 4% in constant currency and operating income grew 23%.

And while we brought additional data center capacity online, this quarter demand remains higher than supply.

Now to more personal computing revenue was $13 5 billion and grew 9% exceeding expectations, primarily due to windows OEM as well as Xbox content and services.

Amy Hood: Enterprise and partner services revenue increased 7 percent and 6 percent in constant currency, with growth in enterprise support services partially offset by a decline in industry solutions. Segment gross margin dollars increased 17 percent and 16 percent in constant currency, and gross margin percentage decreased four points year over year, driven by scaling our AI infrastructure, partially offset by Azure efficiency gains noted earlier. Operating expenses increased 6 percent and 4 percent in constant currency, and operating income grew 23 percent. Now to more personal computing. Revenue was $13.5 billion and grew 9 percent, exceeding expectations primarily due to Windows OEM as well as Xbox content and services. Windows OEM and devices revenue increased 3 percent year over year, ahead of expectations, as inventory levels remained elevated.

Windows OEM and devices revenue increased 3% year over year ahead of expectations as inventory levels remained elevated.

In our on-premises server, business revenue decreased 2% and 3% in constant currency, ahead of expectations, primarily driven by transactional purchasing, which also has higher in-period revenue recognition. Enterprise and Partner Services revenue increased 7% and 6% in constant currency, with growth in Enterprise Support Services, partially offset by a decline in Industry Solutions.

Search and news advertising revenue ex Tac increased 21% and 20% in constant currency driven by continued growth in both volume and revenue per search.

Well as roughly eight points of favorable impact from third party partnerships, including the benefit of a low prior year comparable.

Segment gross margin dollars increased 17% and 16% in constant currency, while gross margin percentage decreased 4 points year-over-year. This was driven by scaling our AI infrastructure, partially offset by Azure efficiency gains noted earlier.

And in gaming revenue increased 10% Xbox content and services revenue increased 13% and 12% in constant currency driven by better than expected performance from first party content and Xbox game pass.

now, to more personal computing,

Segment gross margin dollars increased 15%.

Gross margin percentage increased three points year over year with improvement across all businesses.

Amy Hood: Search and news advertising revenue ex-tach increased 21 percent and 20 percent in constant currency, driven by continued growth in both volume and revenue per search, as well as roughly eight points of favorable impact from third-party partnerships, including the benefit of a low prior year comparable. And in gaming, revenue increased 10 percent. Xbox content and services revenue increased 13 percent and 12 percent in constant currency, driven by better than expected performance from first-party content and Xbox Game Pass. Segment gross margin dollars increased 15 percent. Gross margin percentage increased three points year over year, with improvement across all businesses. Operating expenses increased 4 percent and 3 percent in constant currency. Operating income increased 34 percent and 33 percent in constant currency, driven by continued prioritization of higher margin opportunities. Now back to total company results.

Revenue was $13.5 billion and grew 9%, exceeding expectations, primarily due to Windows OEM as well as Xbox content and services. Windows OEM and devices revenue increased 3% year-over-year, ahead of expectations, as inventory levels remained elevated.

Operating expenses increased 4% 10, 3% in constant currency operating income increased 34% and 33% in constant currency driven by continued prioritization of higher margin opportunities now back to total company results.

Search and news advertising revenue, X-TAC, increased by 21% and 20% in constant currency, driven by continued growth in both volume and revenue per search.

Expenditures were $24 2 billion, including $6 $5 billion of finance leases, where we recognize the full value at the time of lease commencement.

As well as roughly 8 points. A favorable impact from third-party Partnerships including the benefit of a low prior year comparable.

Cash paid for PP&E was $17 1 billion.

The difference is primarily due to finance leases more than half of our spend with a long lived assets that will support monetization over the next 15 years and beyond the remaining spend was primarily for servers, both Cpus and Gpus and driven by strong demand signals.

Ending gaming revenue increased 10%. Xbox content and services revenue increased 13% and 12% in constant currency, driven by better than expected performance from first-party content and Xbox Game Pass.

Segment, growth margin dollars, increased 15%, gross, margin percentage. Increased 3.0 over a year with Improvement across all businesses.

Cash flow from operations was $42 $6 billion up 15% driven by strong cloud billings and collections, partially offset by higher supplier payments and this quarter free cash flow was $25 6 billion.

Operating expenses increased 4% and 3% in constant currency operating income increased 34% and 33% in constant currency driven by continued, prioritization of higher margin opportunities.

Amy Hood: Capital expenditures were $24.2 billion, including $6.5 billion of financed leases, where we recognize the full value at the time of lease commencement. Cash paid for PP&E was $17.1 billion. The difference is primarily due to financed leases. More than half our spend was on long-lived assets that will support monetization over the next 15 years and beyond. The remaining spend was primarily for servers, both CPUs and GPUs, and driven by strong demand signals. Cash flow from operations was $42.6 billion, up 15 percent, driven by strong Cloud billings and collections, partially offset by higher supplier payments. This quarter, free cash flow was $25.6 billion. Other income and expense was negative $1.7 billion, primarily due to losses on investments accounted for under the equity method. Our effective tax rate was approximately 17 percent.

Now, back to total company results.

Other income and expense was negative $1 7 billion, primarily due to losses on investments accounted for under the equity method.

Capital expenditures were 24.2 billion including 6.5 billion of Finance leases where we recognize the full value. At the time of lease commencement cash paid for pp&e was 17.1 billion.

Our effective tax rate was approximately 17%.

And finally, we returned $9 4 billion to shareholders through dividends and share repurchases, bringing our total cash returned to shareholders to over $37 billion for the full fiscal year <unk>.

Now moving to our outlook.

Difference is primarily due to finance leases more than half. Our spend was a long-lived assets that will support monetization over the next 15 years and Beyond the remaining spin was primarily for service both CPUs and gpus and driven by strong demand signals.

My commentary for both the full year and next quarter is on a us dollar basis, unless specifically noted otherwise let me start with some full year commentary for FY 'twenty six.

First FX.

Assuming current rates remain stable, we expect FX to increase full year revenue growth in Cogs growth by approximately two points and to increase operating expense growth by one point.

Cash flow from operations was 42.6 billion of 15% driven by strong Cloud Billings and collections, partially offset by higher supplier payments. And this quarter free cash flow was 25.6 billion.

Next building.

Building on the strong momentum we saw this past year, we expect to deliver another year of double digit revenue and operating income growth in FY 'twenty, we will continue to invest against the expansive opportunity ahead across both capital expenditures and operating expenses, given our leadership position in commercial cloud strong demand signals for.

Amy Hood: Finally, we returned $9.4 billion to shareholders through dividends and share repurchases, bringing our total cash return to shareholders to over $37 billion for the full fiscal year. Now moving to our outlook. My commentary for both the full year and next quarter is on a US dollar basis unless specifically noted otherwise. Let me start with some full-year commentary for FY26. First, F/X. Assuming current rates remain stable, we expect F/X to increase full-year revenue growth and COGS growth by approximately two points and to increase operating expense growth by one point. Next, building on the strong momentum we saw this past year, we expect to deliver another year of double-digit revenue and operating income growth in FY26.

Other income and expense was negative - 1.7 billion primarily due to losses on investments. Accounted for under the equity method, our effective tax rate was approximately 17%

And finally, we return $9.4 billion to shareholders through dividends and share repurchases, bringing our total cash return to shareholders to over $37 billion for the full fiscal year. Now, moving to our outlook.

Our cloud and AI offerings and significant contracted backlog.

Expenditure growth as we shared last quarter will moderate compared to FY 'twenty five with a greater mix of short lived assets due to the timing of delivery of additional capacity in each one including large finance lease sites, we expect growth rates in each one will be higher than in H. Two we remain focused on delivering revenue grew.

My commentary for both the full year. And next quarter is on a US dollar basis unless specifically noted otherwise let me start with some full year commentary for FY. 26, first FX.

Assuming current rates remain stable, we expect FX to increase full year. Revenue growth in cogs growth by approximately 2 points and to increase operating expense growth by 1 Point.

Next.

<unk> and increasing our operational agility and as a result, we expect operating margins to be relatively unchanged year over year.

Amy Hood: We will continue to invest against the expansive opportunity ahead across both capital expenditures and operating expenses, given our leadership position in commercial Cloud, strong demand signals for our Cloud and AI offerings, and significant contracted backlog. Capital expenditure growth, as we shared last quarter, will moderate compared to FY25 with a greater mix of short-lived assets. Due to the timing of delivery of additional capacity in H1, including large finance lease sites, we expect growth rates in H1 will be higher than in H2. We remain focused on delivering revenue growth and increasing our operational agility, and as a result, we expect operating margins to be relatively unchanged year over year. Finally, we expect our FY26 effective tax rate to be between 19 and 20 percent. Now to our outlook for the first quarter. Based on current rates, we expect F/X to increase total revenue growth by two points.

And finally, we expect our FY 'twenty six effective tax rate to be between 19 and 20%.

Now to our outlook for the first quarter.

Based on current rates, we expect FX to increase total revenue growth by two points within the segments. We expect FX to increase revenue growth by roughly three points in productivity and business processes and roughly one point in intelligent cloud and more personal computing, we expect FX to increase Cogs and operating expense growth by roughly one point and <unk>.

Building on the strong momentum. We saw this past year, we expect to deliver another year of double-digit Revenue and operating income growth in FY 26, we will continue to invest against the expansive opportunity ahead across both Capital expenditures and operating expenses given our leadership position in commercial Cloud. Strong demand signals for our cloud and AI offerings and significant contracted backlog.

Capital expenditure growth, as we shared last quarter, will moderate compared to FY2, with a greater mix of short-lived assets.

<unk> bookings, we expect healthy growth on a growing ex freebase.

Bookings growth will again be driven by strong execution across our core annuity sales motions and long term commitments to our platform. As a reminder, larger long term azure contracts, which are more unpredictable and their timing drive increased quarterly volatility in our bookings growth rate.

Due to the timing of delivery of additional capacity in H1, including large Finance lease sites, we expect growth rates in H1 will be higher than in H2. We remain focused on delivering Revenue growth and increasing our operational agility and as a result we expect operating margins to be relatively unchanged year-over-year.

And finally we expect our FY 26 effective tax rate to be between 19 and 20%. Now to our outlook for the first quarter.

Microsoft Cloud gross margin percentage should be roughly 67% down year over year, driven by the impact of continuing to scale. Our AI infrastructure, we expect Q1 capital expenditures to be over $30 billion driven by the continued strong demand signals we see.

Amy Hood: Within the segments, we expect F/X to increase revenue growth by roughly three points in productivity and business processes, and roughly one point in intelligent Cloud and more personal computing. We expect F/X to increase COGS and operating expense growth by roughly one point. In commercial bookings, we expect healthy growth on a growing expiry base. Bookings growth will again be driven by strong execution across our core annuity sales motions and long-term commitments to our platform. As a reminder, larger long-term Azure contracts, which are more unpredictable in their timing, drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should be roughly 67 percent, down year over year, driven by the impact of continuing to scale our AI infrastructure. We expect Q1 capital expenditures to be over $30 billion, driven by the continued strong demand signals we see.

Based on current rates, we expect FX to increase total revenue growth by 2 points within the segments. We expect FX to increase Revenue growth by roughly 3 points and productivity and business processes and roughly 1 point in intelligent cloud and more personal Computing. We expect FX to increase cogs and operating expense growth by roughly 1 Point.

As a reminder, there can be quarterly spend variability from cloud infrastructure build outs and the timing of delivery of finance leases next to segment guidance in productivity and business processes. We expect revenue of 32, 2% to $32 5 billion U S dollars or growth of 14% to 15% with roughly three points of.

In commercial bookings, we expect healthy growth on a growing X-ray base.

Benefit from FX as noted earlier.

Looking's growth will, again be driven by strong execution across our core annuity sales, motions and long-term commitments to our platform as a reminder, larger long-term measure contracts, which are more unpredictable in their timing driving Drive. Increased quarterly, volatility in our bookings growth rate.

And then for 65 commercial cloud, we expect revenue growth to be between 13, and 14% in constant currency with business trends that remained relatively stable compared to the prior quarter ARPA growth will again be driven by a five and M 365, copilot and for 65 commercial products revenue growth should be in the mid to high single digits.

Microsoft cloud growth margin percentage should be roughly 67% down year-over-year, driven by the impact of continuing to scale our AI infrastructure.

Amy Hood: As a reminder, there can be quarterly spend variability from Cloud infrastructure buildouts and the timing of delivery of financed leases. Next, to segment guidance. In productivity and business processes, we expect revenue of $32.2 to $32.5 billion US dollars, or growth of 14 to 15 percent, with roughly three points of benefit from F/X, as noted earlier. In M365 commercial Cloud, we expect revenue growth to be between 13 and 14 percent in constant currency, with business trends that remain relatively stable compared to the prior quarter. ARPU growth will again be driven by E5 and M365 Copilot. M365 commercial products revenue growth should be in the mid to high single digits. As a reminder, M365 commercial products include both the Windows commercial on-premises components of M365 suites and Office transactional purchasing, both of which can be variable due to in-period revenue recognition dynamics.

Driven by the continued strong demand signals, we see.

As a reminder, and for 65 commercial products includes both the windows commercial on premises components of <unk> hundred 65 suites and office transactional purchasing both of which can be variable due to increased revenue recognition dynamics and for 65 consumer cloud revenue growth should be in the low twenties driven by the January price increase.

As a reminder, there can be quarterly spend variability from cloud infrastructure builds and the timing of delivery of finance leases next to segment guidance in productivity and business processes. We expect revenue of $32.2 to $32.5 billion. Our growth is projected at 14% to 15%, with roughly 3 points of benefit from FX, as noted earlier.

And we expect revenue growth in the high single digits and in dynamics for 65, we expect revenue growth to be in the high teens with continued growth across all workloads.

An M365 commercial class will be expected revenue growth to be between 13% and 14% in constant currency, with business trends that remain relatively stable compared to the prior quarter.

For intelligent cloud, we expect revenue of 31 to 34 billion U S dollars or growth of 25% to 26% with roughly one point of benefit from FX as noted earlier.

Revenue will continue to be driven by Azure, which can have quarterly variability in year on year growth rates, depending on the timing of capacity delivery and when it comes online as well as from in period revenue recognition, depending on the mix of contracts and Azure.

Amy Hood: M365 consumer Cloud revenue growth should be in the low 20s, driven by the January price increase. For LinkedIn, we expect revenue growth in the high single digits. In Dynamics 365, we expect revenue growth to be in the high teens, with continued growth across all workloads. For intelligent Cloud, we expect revenue of $30.1 to $30.4 billion US dollars, or growth of 25 to 26 percent, with roughly one point of benefit from F/X, as noted earlier. Revenue will continue to be driven by Azure, which can have quarterly variability in year-on-year growth rates depending on the timing of capacity delivery and when it comes online, as well as from in-period revenue recognition, depending on the mix of contracts. In Azure, we expect Q1 revenue growth of approximately 37 percent in constant currency, driven by strong demand for our portfolio of services on a significant base.

Our poo growth will again be driven by E5 and M365 Copilot M365 commercial products. Revenue growth should be in the mid to high single digits. As a reminder, M365 commercial products include both the Windows commercial on-premises components of M365, Suites, and Office transactional purchasing, both of which can be variable due to in-period revenue recognition dynamics.

Our Q1 revenue growth of approximately 37% in constant currency driven by strong demand for our portfolio of services on a significant base, even as we continue bringing more data center capacity online. We currently expect to remain capacity constrained through the first half of our fiscal year <unk>.

M365 consumer cloud revenue growth should be in the low 20s, driven by the January price increase for LinkedIn. We expect revenue growth in the high single digits in Dynamics 365. We expect revenue growth to be in the high teens, with continued growth across all workloads.

And our on premises server business, we expect revenue to decline in the low to mid single digits with the ongoing customer shift to cloud offerings and more personal computing, we expect revenue to be $12 four to $12 $9 billion windows OEM and devices revenue should decline in the mid to high single digits. We expect the elevated inventory levels at the end of Q4.

For Intelligent Cloud, we expect revenue of $30.1 to $30.4 billion or growth of 25% to 26%, with roughly 1 point of benefit from FX, as noted earlier.

Revenue will continue to be driven by Azure, which can have quarterly variability and year-on-year growth rates. This variability depends on the timing of capacity delivery and when it comes online, as well as revenue recognition depending on the mix of contracts.

For to come down through the quarter in Windows OEM, although the range of potential outcomes remains a wider than normal devices revenue should decline.

Amy Hood: Even as we continue bringing more data center capacity online, we currently expect to remain capacity constrained through the first half of our fiscal year. In our on-premises server business, we expect revenue to decline in the low to mid-single digits with the ongoing customer shift to Cloud offerings. In more personal computing, we expect revenue to be $12.4 to $12.9 billion US dollars. Windows OEM and devices revenue should decline in the mid to high single digits. We expect the elevated inventory levels at the end of Q4 to come down through the quarter in Windows OEM, although the range of potential outcomes remains wider than normal. Devices revenue should decline. Search and news advertising ex-tach revenue growth should be in the low to mid-teens, down sequentially as growth rates normalize following the benefit from third-party partnerships noted earlier.

Search and news advertising ex Tac revenue growth should be in the low to mid teens down sequentially as growth rates normalize following the benefit from third party partnerships noted earlier.

In Azure, we expect Q1 revenue growth of approximately 37% in constant currency, driven by strong demand for our portfolio of services on a significant base.

Even as we continue bringing more data center capacity online, we currently expect to remain capacity constrained through the first half of our fiscal year.

Growth will continue to be driven by volume and revenue per search across edge and being overall search and news advertising revenue growth should be in the low double digits and.

And in gaming, we expect revenue to decline in the mid to high single digits against a strong prior year comparable we expect Xbox content and services revenue to decline in the basin.

Yes.

Now back to company guidance, we expect Cogs of 24, 3% to $24 5 billion U S dollars or growth of 21% to 22% and operating expense of $15 seven to $15 8 billion U S dollars a growth of 5% to 6%.

In our on-premises server business, we expect revenue to decline in the low to mid-single digits with the ongoing customer shift to cloud offerings, with revenue for Windows OEM and devices expected to be between $12.4 billion and $12.9 billion. Revenue should decline in the mid to high single digits. We expect the elevated inventory levels at the end of Q4 to come down through the quarter. Although the range of potential outcomes remains wider than normal, Windows OEM revenue and devices are expected to decline.

Other income and expense is estimated to be negative $1 $3 billion, primarily due to investments accounted for under the equity method. As a reminder, we do not recognize mark to market gains or losses on equity method investments and lastly, we expect our Q1 effective tax rate to be between 19 and 20%.

Amy Hood: Growth will continue to be driven by volume and revenue per search across Edge and Bing. Overall, search and news advertising revenue growth should be in the low double digits. In gaming, we expect revenue to decline in the mid to high single digits against a strong prior year comparable. We expect Xbox content and services revenue to decline in the mid-single digits. Now back to company guidance. We expect COGS of $24.3 to $24.5 billion US dollars, or growth of 21 to 22 percent, and operating expense of $15.7 to $15.8 billion US dollars, or growth of 5 to 6 percent. Other income and expense is estimated to be negative $1.3 billion, primarily due to investments accounted for under the equity method. As a reminder, we do not recognize mark-to-market gains or losses on equity method investments.

Search and news advertising revenue growth should be in the low to mid-teens, down sequentially as growth rates normalize following the benefit from third-party partnerships. Noted earlier, growth will continue to be driven by volume and revenue per search across Edge and Bing overall. Search and news advertising revenue growth should be in the low double digits.

In closing.

We finished the year with double digit revenue and operating income growth and exceeded the FY 'twenty five operating margin commitment, we shared a year ago.

Ending gaming, we expect revenues to decline in the mid to high single digits, against a strong prior year comparable. We expect Xbox content and services revenue to decline in the mid single digits.

Our focus remains on investing in security quality, and AI platform and product innovation that delivers value and opportunity to our customers. We are excited for FY 'twenty with.

Now, back to company guidance. We expect COGS of $24.3 to $24.5 billion, or growth of 21% to 22%, and operating expense of $15.7 to $15.8 billion, or growth of 5% to 6%.

With that let's go to Q&A Jonathan.

Thanks, Amy we'll now move over to Q&A.

With respect to the nickel.

We request that participants please only ask one question.

Amy Hood: Lastly, we expect our Q1 effective tax rate to be between 19 and 20 percent. In closing, we finished the year with double-digit revenue and operating income growth and exceeded the FY25 operating margin commitment we shared a year ago. Our focus remains on investing in security, quality, and AI platform and product innovation that delivers value and opportunity to our customers. We are excited for FY26. With that, let's go to Q&A, Jonathan.

Can you please repeat your instructions.

Other income and expenses are estimated to be negative $1.3 billion, primarily due to investments accounted for under the equity method. As a reminder, we do not recognize mark-to-market gains or losses on equity method investments. Lastly, we expect our Q1 effective tax rate to be between 19% and 20%.

In closing.

Thank you.

Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line within the question queue.

We finished the year with double-digit revenue and operating income growth, exceeding the FY2 operating margin commitment we shared a year ago.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

Our focus remains on investing in security quality and AI platform and product innovation that delivers value and opportunity to our customers. We are excited for FY26 with that. Let's go to Q&A. Jonathan.

And our first question comes from the line of Keith Weiss with Morgan Stanley. Please proceed.

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

Thanks, Amy. We'll now move over to the Q&A.

Thank you guys for taking the question and congratulations on a fantastic end to FY 'twenty five.

Out of respect for us on the call.

We request the participants, please. Only ask one question.

I think I realized you saw for a while I don't think that's that are seeing a quarter, where everything came together this will offer congratulations on that execution.

Operator, can you please repeat your instructions?

Operator: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. Our first question comes from the line of Keith Weiss with Morgan Stanley. Please proceed.

Thank you.

Maybe a little bit longer term focused question to start out.

You guys have always had software startups at as customers and traditionally hurricane competitors, but the AI lab to now feel different investors are ascribing valuations, which assume these companies become major players and software their underwriting revenue forecast measured in the tens of billions if not hundreds of billions.

Ladies and gentlemen, if you would like to ask a question, please press *1 on your telephone keypad, and the confirmation tone will indicate your line is in the question queue.

You may press star 2 if you would like to remove your question from the queue.

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

Question comes from the line of Keith Weiss with Morgan Stanley. Please proceed.

And these startups have also grown to do some of your biggest customers.

Keith Weiss: Thank you guys for taking the question, and congratulations on a fantastic end to FY25. I've been covering Microsoft for a while, and I don't think I've ever seen a quarter where everything came together this well. Congratulations on that effort.

They're contributing significantly to Microsoft today, so it seems like Theres a lot of potential opportunity in supporting those businesses, but also.

It's not certain that theyre going to stay at your customers as they scale they could in source some of that infrastructure and they very likely emerge as potential competitors. So.

Thank you, guys, for taking the question, and congratulations on a fantastic end to FY2. I've been covering lack of software for a while; I don't think I've ever seen a quarter where everything came together this well. Um, so congratulations on that.

As managers of Microsoft is managed at the capital how do you guys manage that risk versus reward with the quickly emerging AI labs and these AI startups.

Yeah.

Thanks, Keith for the question.

I don't think it's that.

From even sort of the previous era, there has always been I'll call. It.

Head App saw head count.

Companies that emerge.

That in fact are very needed in order to launch the new platform.

Back in the day when I was.

Getting started on Azure to look over the lake and sort of see Netflix and Amazon and say I wish Netflix ran on Azure and in some sense, that's kind of what we know which is the.

Largest AI workloads run on Azure and when that happens you among the workload fast.

You optimize the entire platform fast everything from what Youre doing what youre doing with cost Cosmos DB or.

A chat interface like chat GPT autopilot is guess what going to be the most relevant for any application going forward.

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Diodes data stack that we have now built is going to be optimized for what people would describe as one of the hardest challenges of any AI application or context to engineering packages. How do you collect your data and then make sure that.

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The context around the problems remained stable over a long period. So that you get the intelligence to actually deliver the results you want. So these are multiyear results that are invaluable.

US too long to build both the products as well as the platform.

And then broadly.

All other overtime, there will be broad diffusion in fact, one of the things that Amy and I track is not just the head app usage, but also.

Sort of all of the tier two applications are being built.

Understood.

Okay.

So that sort of speaks a little bit.

<unk> I think your question is as long as we have had apps shaping the platform and then after that we have the broad.

Satya Nadella: So these are workload results that are invaluable, for us to learn to build both the products as well as the platform. and then broadly, you know, therefore, rather over time, there will be broad diffusion. In fact, one of the things that Amy and I track is not just the head app usage, but also what's the sort of all the tier two applications that are being built.

Diffusion happen, which is sometimes with both of those.

So I feel very good about albeit staffing going forward.

Thanks Keith.

The next question please.

The next question comes from the line of more modular with Bernstein Research. Please proceed.

All right, so these are workload results that are invaluable uh, for us to learn to build both the products as well as the platform. Uh, and then broadly, you know, they for rather over time they will be brought. Diffusion, in fact, 1 of the things that Amy and I track is not just the head app usage, but also what's the sort of all the tier 2 applications that are being built?

Alright.

Also give you my congratulations amazing.

um,

Operator: So that sort of speaks a little bit, Keith, to I think your question is as long as we have head apps shaping the platform, and then after that, we have the broad diffusion happen, which in some sense we both of those is what we're seeing. I feel very good about being in decent standing going forward.

Hey wouldn't be last quarter and you did it so congratulations.

Thank you for taking my question Satya and Amy we're now plus years into the journey a revolution that adoption is still early in ramping.

Do you think is the best way that software companies are going to be able to monetize AI for the SaaS do you believe there are differences in monetization of horizontal more general apps like M. <unk> co pilot or dynamic CRM co pilot.

So that's sort of that speaks a little bit, uh, Keith, uh, to, I think your question is, as long as we have head apps shaping the platform. And then after that, uh, we have the broad uh uh, diffusion happen. Which in some sense we're both of those is what we're seeing. So I feel very good about, uh, being in in standing going forward,

Jonathan Neilson: Thanks, Keith. Operator, next question, please.

Thanks, Keith. All right, the next question, please.

Operator: The next question comes from the line of Mark Mordler with Bernstein Research. Please proceed.

Versus very targeted capacities.

Si and also how should we think about the trajectory of SaaS AI and margins over the long term. Thank you.

Mark Moerdler: Thank you. I'd like to also give you my congratulations. Amazing. I didn't know how you were going to beat last quarter, and you did it, so congratulations. Thank you for taking my question. Satya and Amy, we're now two plus years into the Gen AI revolution, and adoption is still early and ramping. What do you think is the best way that software companies are going to be able to monetize AI for SaaS? Do you believe there are differences in monetization for horizontal, more general apps like M365 Copilot or Dynamics CRM Copilot versus very targeted capacities on the agentic side? Also, how should you think about the trajectory of SaaS AI margins over the long term? Thank you.

The next question comes from the line of Mark Mortilor with Bernstein Research. Please proceed.

Yes, I will.

And maybe you should feel free to add.

Broaden out beyond just fast with your category.

I think.

Just like.

Thank you, Eric. Uh, also give you my congratulations. It's amazing. I didn't know how you were going to beat last quarter, and you did it. So congratulations. Uh, and thank you for taking my question. Such and Amy, we're now over 2 years since the jaw revolution, and adoption is still early in ramping.

Four two.

To cloud transition.

It was an expansion of essentially usage of floaters that is essentially what happened to depart languages. We did a bunch of silvers, except that the export each require capital required.

Time required to bring up server build out scale at all.

Our hard and so therefore, the market with a certain size matters.

What do you think is the best way that software companies are going to be able to monetize AI for that? Do you believe there are differences in monetization for horizontal, more general apps like M365 Copilot or Dynamics CRM Copilot versus very targeted capacities on the agentic side? And also, how should you think about the trajectory of SaaS AI margins over the long term? Thank you.

Satya Nadella: Yeah, I'll start, and Amy, you should feel free to add. I mean, if I just broaden out beyond just SaaS as a category, I think just like the server to Cloud transition was an expansion of essentially usage of servers. That is essentially what happened with the Cloud, right? Which is we did a bunch of servers, except that the expertise required, the capital required, the time required to bring up servers, build it out, scale it was just all hard. Therefore, the market was a certain size, whereas with the Cloud, you could sort of buy it with flexibility, you could burst, and you could spin up and spin down. The expertise required came down. It was just orders of magnitude. That's what's happening.

You could buy it with flexibility.

And you could spin up and spin down the expertise required to keep the answer.

Yeah, I'll start, enemy; you should feel free to add. I mean, if I just broaden out beyond just SAS as a category.

I think.

Orders of magnitude, that's what happening, let's say, if you sort of even subscribe to this point of view of that intelligence.

Just like, you know, the server.

Is basically log of compute.

That means it's going to grow and your guidance it as efficiently as possible to just keep creating intelligent.

Uh, that was an expansion of the essential usage of servers. That is essentially what happened.

Servers.

<unk>.

Now how does it manifest.

Yes.

Dry cough.

Keith earlier question, I talked a little bit about how infrastructure getting shape data navigating so.

These are all.

Categories of infrastructure.

<unk>.

Order to magnitude more.

So literally like pipeline things, we track every GPU requires storage and compute at ratio is another thing that is really exponential.

Satya Nadella: If you sort of even subscribe to this point of view that intelligence is basically log of compute, that means compute is going to grow, and you've got to use it as efficiently as possible to just keep creating intelligence. Now, how does it manifest beyond just the infrastructure? To Keith's earlier question, I talked a little bit about how the infrastructure is getting shaped, data layer is getting shaped, the app server is getting built. These are all classic categories of infrastructure that will continue, but they will be an order or two of magnitude more. Literally, in fact, one of the other things we track is every GPU requires storage and compute. That ratio is another thing that is really exponential for infrastructure growth.

Infrastructure growth. So when you go to the App layer. The SaaS apps themselves are now building in effectively in genetic and chat interfaces with intelligence and they are also building autonomous agents or agents are kind of like applications like a database application perhaps.

The expertise required, the capital required, the time required. To bring up servers. Build it out scale. It was just all hard. And so therefore uh the market was a certain size, whereas with the cloud you could sort of buy it with flexibility, you could burst and you could spin up and spin down the expertise required came down. So it was just, you know, orders of magnitude. That's what's happening, you know? So if you sort of even subscribe to this point of view that intelligence uh, is basically log of compute, uh, that means computes going to grow, uh, and you've got to use it as efficiently as possible to just keep creating uh, intelligence

But they are being used increasingly.

In our application inside of a user interaction.

A good example.

It got started.

CT completions E. Then we added a chat interface to it then we added the agent more to it and now we have an autonomous agent, which in fact books completely asynchronous.

Satya Nadella: When you go to the app layer, the SaaS apps themselves are now building in effectively agentic and chat interfaces with intelligence, and they're also building autonomous agents. Agents are kind of like applications, like a database application perhaps, but they are being used increasingly inside of a user interaction. I think a good example is GitHub Copilot. It got started as code completions on an IDE. Then we added the chat interface to it. Then we added the agent mode to it, and now we have an autonomous agent, which in fact works completely asynchronously. All those four things are now part of essentially GitHub. By the way, it also turns out that every other tool that is also doing any form of coding is adding more and more GitHub repositories.

Now how does it manifest, uh, beyond just the infrastructure? I kind of, you know, to keep the earlier question I talked a little bit about how infrastructure is getting shaped, the data layer is getting shaped, and the app server is getting built. These are all classic categories of infrastructure, uh, that will continue, but they will be an order or two of magnitude more. Uh, so literally, like we—in fact, one of the other things we track is every GPU requires storage and compute. That ratio is another thing that is really exponential for infrastructure growth.

So, when you go to the app layer,

All those four things are now part of essentially get out and by the way. It also turns out that every other tool that is also doing any form of coding.

Adding more and more data reports so if I had to think about get up monetization. We have an opportunity around just monetizing get up enterprise and then we have the ability to think about get a copilot.

And get a copilot as with all of these form factors.

Exactly the same thing that's happening with Microsoft repeats.

Thinking what's happening with dynamics 365, so you have to be open.

To date.

Data to your business logic year on year, you, Ikea and sort of being more expensive than it as long as you do that.

Just as usage goes up and that's what I think it shows up in the results.

And I think Mark if you wanted to think about.

All the things in the layers have been talked about is really.

Satya Nadella: If I have to think about GitHub monetization, we have an opportunity around just monetizing GitHub Enterprise, and then we have the ability to think about GitHub Copilot, and GitHub Copilot as with all these form factors. That's exactly the same thing that's happening with Microsoft 365. That's the same thing that's happening with Dynamics 365. You have to be very open to taking your data tier, your business logic tier, and your UI tier and sort of being more expansive in it. As long as you do that, it's just that usage goes up, and that's what I think shows up in the results.

We're seeing very similar monetization tools exist in this transition.

The SAS apps themselves are now building in effectively, agentic and chat interfaces with intelligence and they're also building autonomous agents. Uh, agents are kind of like applications like a database application perhaps. Uh, but they are being used increasingly um, in uh you know, inside of a user interaction. Um, I think a good example is get up co-pilot. It got started as an you know, code completions on an IDE. Then we added the chat interface to it. Uh, then we added the agent mode to it. Uh, and now we have an autonomous agent, which in fact works completely asynchronously, right? So all those 4 things, uh, are now part of essentially GitHub. And by the way, it also turns out that every other tool that is also doing any form of coding, uh, is adding more and more GitHub repos, so if I had to think about GitHub monetization, we have an opportunity around

Right, there's a per user logic, there's tiers of per user sometimes those tiers relate to consumption, sometimes there's pure consumption model.

And you see a blending of these especially as the AD model capability grows.

You'll end up with ways.

And it seems to me I don't want to throttle back usage used it as models for the best job.

I think the blending of these models will continue to be something we see on the go forward basis.

Uh, just monetizing GitHub Enterprise and then we have the ability to think about GitHub co-pilot, uh, and get a co-pilot as with all these form factors. And so that's exactly the same thing that's happening with Microsoft 365. That's the same thing that's happening with Dynamics 365. So you have to be very open, uh, to taking your data, tier your business logic, tier and your UI tear, and sort of being more expansive in it, as long as you do that. Uh, it's just that usage goes up.

Amy Hood: I think, Mark, if you wanted to think about all the things in the layers that you talked about, is really we're seeing very similar monetization tools exist in this transition too. There's a per-user logic, there's tiers of per-user. Sometimes those tiers relate to consumption, sometimes there's pure consumption models. I think you'll continue to see a blending of these, especially as the AI model capability grows. You'll end up with ways that teams are going to want to throttle that usage, use the best models for the best job. I think the blending of these models will continue to be something we see on the go-forward basis.

And that's what I think shows up in the results.

Thank you I appreciate it.

Thanks, Mark Operator next question please.

The next question comes from the line of Karl Keirstead with UBS. Please proceed.

Okay. Thanks, Satya and Amy this is the second quarter in a row of pretty material Azure upside from what sounds like an acceleration and on Prem to Azure migration activity I'm. Just wondering if you can comment on the plethora of customer conversations you've had weather that there are a couple of two or three.

And I think, Mark, if you wanted to think about, you know, all the things in the layers, have you talked about, is really um, we're seeing very similar monetization tools exist in this transition too, right? There's a per user logic. There's tiers of per user. Sometimes those tiers relate to consumption. Sometimes there's pure consumption models. I think you'll continue to see a blending of these, especially as the AI model capability grows. Uh, you'll end up with ways.

Specific catalysts that are driving that migration and how durable a trend do you think that is thank you.

That teams are going to want to throttle that usage, use the best models for the best job. Um, I think the blending of these models will continue to be something we see on a go-forward basis.

Mark Moerdler: Thank you. I appreciate it.

Yes.

Thank you, I appreciate it.

Jonathan Neilson: Thanks, Mark. Operator, next question, please.

Three things are really happening one is the migration is a good example would be what.

Thanks, Mark. Operators, the next question, please.

Operator: The next question comes from the line of Karl Kirsten with UBS. Please proceed.

Referenced in my remarks, with Nestle with the S&P since as they move along with a lot of the data that's associated with it.

The next question comes from the line of Carl Kirsten with UBS. Please proceed.

Karl Keirstead: Thanks. Satya, Amy, this is the second quarter in a row of pretty material Azure upside from what sounds like an acceleration in on-prem to Azure migration activity. I'm just wondering if you can comment on the plethora of customer conversations you've had, whether there are a couple of two or three specific catalysts that are driving that migration, and how durable a trend do you think that is? Thank you.

So that's kind of a classic example, I think.

Vmware migrations off.

Migrations of SAP already with just our own silver migrations are pretty healthy.

Bob that there still are not anywhere close to the finish line.

First maybe in the middle innings of that.

Second thing Thats also happening is all cloud native applications that are scaling because EBIT ex.

Okay. Uh, thanks, Amy. This is the second quarter in a row of pretty material Azure upside from what sounds like an acceleration in on-prem to Azure migration activity. I'm just wondering if you can comment on the plethora of customer conversations you've had. Whether there are a couple of two or three specific catalysts that are driving that migration and how durable a trend do you think that is? Thank you.

Satya Nadella: Yeah, I mean, just there are three things that are really happening. One is the migrations. A good example would be what I referenced in my remarks with Nestle with the SAP instances. They moved along with a lot of the data that's associated with it in a bunch of servers. That's kind of a classic example. I think whether it's VMware migrations or migrations of SAP or even just our own server migrations, they're pretty healthy. It turns out that we're still not anywhere close to the finish line, if at best maybe in the middle innings of that. The second thing that's also happening is Cloud-native applications that are scaling. This is even excluding all of the AI stuff, just the classic Cloud-native e-commerce company, let's say. These are scaling in a big way.

Excluding all of the AI.

The classic Clogs me an E Commerce company, let's say.

These are scaling in a big way.

All of those customers were not on Azure previously, but now they're increasingly that exist there.

For AI, perhaps with the announced state were enrolled in AI and so to me.

Along with the niche you see an overall, what's happening across the Azure and then of course, there are the new AI workflow for both the three things that are all in.

Okay.

Building on these jobs.

That we are still, uh, not anywhere close to the finish line. Uh, if at best, maybe in the middle innings of that.

The second thing.

But that's kind of what's driving that growth.

Got it thank you.

Yeah.

Please call operator next question please.

The next question comes from the line of filled with Jefferies. Please proceed.

That are scaling. This is even, uh, excluding all of the AI stuff, just the classic.

Cloud native e-commerce company. Let's say.

So to get back to the strength.

Satya Nadella: Some of those customers were not on Azure previously, but now they're increasingly there because they have come for AI perhaps, but they now stay for more than AI. To me, that's another thing you see in overall what's happening across the Azure number. Then, of course, there are the new AI workloads. Those are three things that are all in some sense building on each other, but that's kind of what's driving our growth.

The board in the quarter was there anything that jumped out Youre surprised you that you didn't think you were going to see that you did see in the quarter. It's just the magnitude of upside I think.

<unk> had shock many here.

Yeah, I don't know.

What if any really surprised but I think what.

Oh, you are noticing in our own build out of these AI applications and in general as the platform, becoming more then you go to the model and the other is an API make some call.

These are scaling in a big way, uh, and some of those customers were not on Azure previously, but now they're increasingly there because they have come for AI, perhaps but they now stay for more than Ai. And so, to me, uh, that's another thing is. You see in overall, uh, what's happening across the Azure number? And then, of course, there are the new AI workloads. So those are 3 things that are all uh in some sense uh building on each other. Uh but that's kind of what's driving our growth.

Karl Keirstead: Got it. Thank you.

Got it. Thank you.

Jonathan Neilson: Thanks, Karl. Operator, next question, please.

Thanks, call operator. Next question, please.

Operator: The next question comes from the line of Brent Biddle with Jefferies. Please proceed.

It was.

It was a bit of the state of the art, maybe even a year ago, whereas now you essentially these race date for Apple.

The next question comes from the line of Brentfield with Jeffrey's. Please proceed.

Keith Weiss: Satya, back to the strength across the board in the quarter. Was there anything that jumped out that surprised you that you didn't think you were going to see, but you did see in the quarter? The magnitude of upside, I think, had shocked many here.

Lodging that require quite a bit at all.

Thinking of even the App stack I think given the storage tier stopped right. The degree of sophistication you have indicated how much of an index do you really want a bill by preprocessing, So that Youll prompt engineering of complex engineering as I call. It can be better at a higher quality.

Setia back to the strength uh across the board in the quarter. I was there anything that's that? Jumped out. You're surprised you that you didn't think you were going to see that you did see in the quarter. It it just it the magnitude of upside, I think had, uh, had had shocked many here.

Satya Nadella: Yeah, I don't know, Brent, if anything really surprised us, but I think what you're noticing in our own buildout of these AI applications and in general is the platform is becoming more than, "Here's a model, and here's an API, make some calls." I mean, that in some sense was a bit of the state of the art maybe even a year ago, whereas now you have essentially these very stateful app patterns that are emerging that require quite a bit of rethinking of even the app stack. I mean, take even the storage tier stuff, the degree of sophistication you have and, "Hey, how much of an index do you really want to build by preprocessing so that your prompt engineering or context engineering, as I call it, can be better and higher quality?" I think all of that is emerging.

Yeah, I don’t know. Uh, a brand didn’t really surprise us, but I think what...

So I think all of that is emerging.

Look at a product like Azure search fabric and Cosmos DB all of the things the frameworks around it are just becoming robust to build serious applications.

Um, we're noticing in our own build-out of these AI applications that, in general, the platform is becoming more than just a model and an API; you know, make some calls. Right? I mean, that in some sense was a bit of a transformation.

That's what I feel great about it.

<unk>.

Si the company outside of the company the diffusion of this debt.

The art, maybe even a year ago. Whereas now, you have essentially these very stateful app patterns that are emerging that require quite a bit of rethinking of even the app stack.

Speed with which that's emerging.

You can build applications is much faster.

<unk>.

First of all I can say.

Relational database came out.

I mean, take even the storage tier stuff, right? The degree of sophistication you have. And hey, how much of an index do you really want to build by pre-processing so that your prompt engineering, or context engineering as I called it, is optimized?

While for people to build that ERP system, let's say in this thing.

Satya Nadella: When I look at a product like Azure Search, Fabric, and Cosmos DB, all of the things, the frameworks around it are just becoming robust to build serious applications. That's what I feel great about is the learning curve inside the company, outside the company, the diffusion of the stack, the speed with which that's emerging that you can build applications is much faster. I always go back and say, "Hey, when our relational database came out, it took a while for people to build an ERP system, let's say." This thing, we're kind of building pretty sophisticated applications at a very, very fast clip based on, I think, the degree of maturity that's emerging.

Building pretty sophisticated applications at already very fast clip based on I think the degree of maturity that too much.

Yeah.

Thanks Pat.

The next question please.

The next question comes from the line of Raimo lunch, So with Barclays. Please proceed.

Perfect. Thank you congrats from me as well and I had one question around co pilot and I'm, obviously happy happy user here at Barclays.

You think about it.

One thing that we all are realizing is that co pilot.

Data is becoming more and more important and then from there on the construct thinking about the agents where is the what are you seeing in your customer conversations talk here about like that understanding the co pilot is actually just the starting point and then from there on.

And higher quality. Uh, so I think all of that is emerging. Uh, so when I look at a product like Azure search Fabric and the cosmos DB, uh, all of the things, the Frameworks around it are just becoming robust to build serious applications. Um, and so, that's what I feel great about is the learning curve inside the company outside, the company, the diffusion of the stack, uh, the speed with which that's emerging uh, that you can build. Uh, applications is much faster, right? You know, uh, I I always go back and say, hey, when uh, I don't know our relational database came out. They took a while for

People to build an ERP system. Let's say, and this thing, uh, we're kind of building pretty sophisticated applications at a very, very fast clip based on the, I think, the degree of maturity that's emerging.

<unk>, becoming like months.

Jonathan Neilson: Thanks, Brent. Operator, next question, please.

Much much broader thank you.

Thank you. Thanks Brent.

Yeah, I can take that thats right, even inside a copilot I'm sure you're seeing it drive you now have analyst and research. It to just talk about two examples and of course people also third party agents. So yes. There is a lot more of just just not request response, it's about spawning essentially applications.

Operator next question, please.

Operator: The next question comes from the line of Raymond Lenshaw with Barclays. Please proceed.

Raymond Linshaw: Perfect. Thank you. Congrats from me as well. I had one question around Copilot, and I'm obviously a happy user here at Barclays. If you think about it, the one thing that we're all realizing is that Copilot is the AI part, but data is becoming more and more important. Then from there on, we can start thinking about agents. What are you seeing in your customer conversations, Satya, about that understanding that Copilot is actually just the starting point, and then from there on, it's becoming much, much broader? Thank you.

The next question comes from the line of Ramo Leno with Buck Waze. Please proceed.

That then go to work and come back.

I still remains very important even for a syncrude as well.

Property asynchronous walk you need UI and to monitor asynchronous walk you need you are maybe different it may not be a chat interface.

And of course, you need to.

And inspect what do you think is walk is right. So you would take the example, I was giving on get up.

Satya Nadella: Yeah, I think that that's right. Even inside of Copilot, I'm sure you're seeing it. You now have analysts and researchers to just talk about two examples, and of course, people, all the third-party agents. Yeah, there is a lot more of, it's just not request response. It's about spawning essentially applications that then go do work and come back. But the UI still remains very important. Even for asynchronous work, to instruct the asynchronous work, you need UI, and to monitor asynchronous work, you need UI. It may be different. It may not be a chat interface. Of course, you need a way to then inspect what the asynchronous work is. Even take the example I was giving on GitHub.

Perfect. Thank you. Congrats from me as well. Um, I had one question around Copilot, and I'm obviously a happy user here at Barclays. Um, if you think about it, the one thing that we’re all realizing is that Copilot is the AI part, but data is becoming more and more important. And then, from there on, we can start thinking about agents. Where is the, where what are you seeing in your customer conversations? Start here about like that understanding. That core part is actually just the starting point, and then from there on, you know it's becoming much, much, much broader. Thank you.

Even if you're not using get up copilot to create the coat check in all of the requests interestingly enough with the massive increases to get our core pilot quarterly review agent, even if you used maybe claw.

Code or whatever else.

All right.

So that's I think what's happening.

Across all of these systems, so youre absolutely right.

You need starch with some kind of UI, that's more chat focus quickly goes beyond it and youll see it in <unk> Youll see it in dynamic street expired and get up.

Yeah, I think that that's right. Even inside of Copilot, I'm sure you're seeing it, right? Do you now have analysts and researchers to talk about two examples? And of course, people, all the third-party agents. So yeah, there is a lot more of, it's just not request-response. It's about spawning, essentially, applications that then go do work and come back. But the UI still remains very important, right? Even for asynchronous work, to instruct the asynchronous work, you need UI, and to monitor asynchronous work, you need UI. It may be different.

Satya Nadella: Even if you're not using GitHub Copilot to create the code check-in or the pull request, interestingly enough, we're seeing a massive increase to GitHub Copilot code review agent, even if you used maybe Cloud Code or whatever else to write the code. That's, I think, what's happening across all of these systems. You're absolutely right that it starts with some kind of a UI that's more chat-focused, but it quickly goes beyond that, and you see it in M365, you see it in Dynamics 365, and you see it in GitHub.

Thank you.

Thanks Ryan.

Ready. It may not be a chat interface, and of course, you need a way to then inspect what the asynchronous work is. Even take the example I was giving on GitHub; even if you're not using GitHub code.

Operator next question please.

The next question comes from the line of Kash Rangan with Goldman Sachs. Please proceed.

Pilot to create the code check-in or the pull request. Interestingly enough, we're seeing a massive increase.

To get a co-pilot.

Code review agent.

Alright. Thank you very much Amy I will acknowledge that I think a few quarters ago. You said that you reach a point in time, where you can accelerate azure was slowing down capex. So you did it.

Even if you use, maybe call.

But what is the outlook when I looked at the Capex guidance for the upcoming quarters certainly.

I would view that as a positive indicator.

The book of business you have for both services, but how should we think about the shape of the curve of our capex.

I think what's happening, um, across all of these systems. So, you're absolutely right that, uh, it needs to start with some kind of a UI that's more chat focused, but it quickly goes beyond it. You see it in M365, you see it in Dynamics 365, and you see it in GitHub.

Raymond Linshaw: Thank you.

Jonathan Neilson: Thanks, Raymond. Operator, next question, please.

Azure growth rate in the years ahead, particularly as it moves into its up your comments on the AI start consuming more and more infrastructure or are we at a point, where we're going to have to continue to do this and we magically wait for inference and applications to kick in and therefore create a richer gross margin mix. Thank you so much for your comments.

Thank you.

Thanks, Rhino. Operator, next question, please.

Operator: The next question comes from the line of Cash Rangan with Goldman Sachs. Please proceed.

The next question comes from the line of Kash Rangan with Goldman Sachs. Please proceed.

Mark Moerdler: Hi, thank you very much. Amy, I want to acknowledge that I think a few quarters ago you said that you'll reach a point in time where you can accelerate Azure while slowing down Capex. You did it. But what is the outlook? When I look at the Capex guidance for the upcoming quarter, certainly I would view that as a positive indicator of the book of business you have for your Cloud services. But how should we think about the shape of the curve of Capex vis-à-vis Azure growth rate in the years ahead, particularly as I listen to Satya's comments on the AI stack consuming more and more infrastructure? Are we at a point where we're going to have to continue to do this, and then we magically wait for inference and applications to kick in and therefore create a richer gross margin mix?

That's on the core.

Thanks, Kash, let me, let me back up and per Se.

When you think about.

Full year comments I've made on Capex.

As well as the Q1 guidance of over $30 million.

You don't have to ground yourself in the fact that we have $368 billion of contracted backlog, we need to deliver not just across azure, but across the breadth of the Microsoft cloud.

So in terms of feeling good about the ROI and the growth rate and the correlation I feel very good that the spend that we're making.

Mark Moerdler: Thank you so much for your comments, and congrats on the quarter.

Hi, thank you very much, Amy. I want to acknowledge that. Uh I think a few quarters ago you said that you reached a point in time where you can accelerate Azure was slowing down. Capex. So you did it. Uh but what is the Outlook? When I look at the capex guidance for the upcoming quarter? Certainly, uh, I I would view that as a positive indicator of, uh, the book of business you have for, for your cloud services. But how should we think about the shape of the curve of capex? Visa we Azure growth rate in the years ahead. Particularly as we listen to satya's comments on the AI stack, consuming more and more infrastructure or are we at a point where we're going to have to continue to do this? And then we magically wait for inference and applications to take in and they therefore create a richer, gross margin mix. Um thank you so much for your comments and um, congrats on the quarter.

Amy Hood: Thanks, Cash. Let me back up and first say, when you think about the full-year comments I've made on Capex as well as the Q1 guidance of over $30 billion, you first have to ground yourself in the fact that we have $368 billion of contracted backlog we need to deliver, not just across Azure, but across the breadth of the Microsoft Cloud. In terms of feeling good about the ROI and the growth rates and the correlation, I feel very good that the spend that we're making is correlated to basically contracted on the books business that we need to deliver, and we need the teams to execute at their very best to get the capacity in place as quickly and effectively as they can.

Is correlated to basically contracted on the books business.

Uh, thanks, Cash. Let me, let me back up and first say, um,

That we need to deliver and we need the team to execute at.

You know, when you think about, um,

At their very best to get the capacity in place as quickly and effectively as they can and so when you look.

The full year comments I've made on CapEx.

And we've talked about the growth rate will decline year over year, but at its core our investments.

Kelly and short lived assets like servers, Gpus Cpus networking storage.

Uh, as well as the Q1 guidance of over $30 billion, you know, you first have to ground yourself in the fact that we have, you know, $368 billion of contracted backlog. We need to deliver not just across Azure, but across the breadth of the Microsoft Cloud.

Really correlated to the backlog, we see and the curve of demand.

And I talked about gosh in January and said I thought we'd be entire supply demand shape.

Hi, Jim.

And now I'm, saying I hope I'm in better shape by December and that's not because we slow capex even with accelerating.

Amy Hood: When you look, we've talked about the growth rate will decline year over year, but at its core, our investments, particularly in short-lived assets like servers, GPUs, CPUs, networking storage, is just really correlated to the backlog we see and the curve of demand. I talked about it, my gosh, in January and said I thought we'd be in better supply-demand shape by June. Now I'm saying I hope I'm in better shape by December. That's not because we slowed Capex. Even with accelerating the spend and trying to pull leases in and get CPUs and GPUs in the system as quickly as we can, we are still seeing demand improve. I am not as focused, Cash, on trying to pick a date at which revenue growth and Capex growth will meet and cross.

The spend and trying to pull leases and get.

Um, so and terms of feeling good about the ROI and the growth rates and the correlation, I feel very good that the spend that we're making is correlated to basically contracted on the books business, uh, that we need to deliver. And we need the teams to execute, uh, at their very best, uh, to get the capacity in place as quickly and effectively, as they can. And so when you look,

<unk> and Gpus in the system as quickly as we can we are still seeing demand improve.

And so I I am not as focused cash on trying to pick a date.

And we've talked about the growth rate will decline year-over-year, but at its core, our investments, particularly in short-lived assets like servers, GPUs, CPUs, networking, and storage.

At which revenue growth and Capex growth.

Yeah.

Meat and cross I'm focused on building backlog building business and delivering capacity, which we are seeing has a good ROI today.

In terms of our ability to get that done so I don't want people to get overly focused on a pivot point because when you are in sort of these expansive moment.

Picking a data point, usually means you're going to pay.

To be too conservative.

Uh, it's just really correlated to the backlog, we see and the curve of demand and you know I talked about it, I gosh in January and said I thought we'd be in better Supply, demand shape, uh by June. And now I'm saying. I hope I'm in better shape by December. And that's not because we slowed capex, even with accelerating, um, the spend and trying to pull leases in and get uh, CPUs and gpus in the system, as quickly as we can, we are still seeing demand improved

In terms of market share gain and in terms of winning and.

So I tend to put my energy more there yeah I think one of the other things Scott is that I think I said this in our previous earnings as well, which is the difference between a holster and our hyperscale.

And so I am not as focused on trying to pick a date.

At which revenue growth and CapEx growth?

Will.

Amy Hood: I'm focused on building backlog, building business, and delivering capacity, which we are seeing has a good ROI today in terms of our ability to get that done. I don't want people to get overly focused on a pivot point because when you're in these expansive moments, picking a data point usually means you're going to pick to be too conservative in terms of market share gain and in terms of winning. I tend to put my energy more there.

Meet and cross.

Software and the same is going to be true here that Germany. For example, I gave is.

All software optimization, even in the last year. So we know how to use the software skills to take any piece of hardware and make it.

I'm focused on building backlog, building business, and delivering capacity, which we are seeing has a good ROI today.

Multiplex better and so that's kind of where the yield will come right as Amy said why.

In terms of our ability to get that done, I don't want people to get overly focused on a pivot point. Because when you're in sort of these expansive moments,

Picking a data point usually means you're going to pick.

Really going and building out the plan you don't want to sort of.

You realize if you just want to go in parallel on all of these funds and that sort of wahoo compounding overtime and.

To be too conservative in terms of market share gain, and in terms of winning.

Mark Moerdler: Yeah, I think one of the other things, Cash, is that I think I said this in the previous learnings as well, which is the difference between a holster and a hyperscaler is software, and the same is going to be true here. That GPT-4o example I gave is all software, the optimization even in the last year. We know how to use the software skills to take any piece of hardware and make it multiple X better. That's kind of where the yield will come. But as Amy said, while you're really going and building out the plant, you don't want to serialize it. You just want to go in parallel on all of these funds, and that's what will compound over time.

I do think it's important when I've talked about.

Tupperware is talking about in his comments to connect it back to the compounding S curve since I would remind people.

And so I tend to put my energy more there. Yeah, I think one of the other things Cash is that I think I said this in a previous earnings call as well, which is the difference between a Hoster and a hyperscaler is software. And the same is going to be true here. That GPT-4 example I gave is all.

That is something that we saw through the prior cloud transition is how we operated through that one and the same sort of skills and logic on at an even faster pace is what will apply the same transition.

Sounds very encouraging thank you so much.

Thanks, Kash operator next question please.

The next question comes from the line of Michael <unk> with Wells Fargo. Please proceed.

Amy Hood: I do think it's important when Flux talks about the software layer, he's talking about in his comments to connect this back to the compounding S curves. I would remind people that is something that we saw through the prior Cloud transition. It's how we operated through that one, and the same skills and logic done at an even faster pace is what will apply this same transition.

Hey, great. Thanks, very much for taking the questions and congrats from me as well on the metrics working in concert here.

Right, the optimization, even in the last year. So we know how to use the software skills to take any piece of hardware and make it, you know, multiple times better. And so that's kind of where the yield will come. But as Amy said, while you're really going and building out the plant, you don't want to sort of serialize it; you just want to go in and paddle a little on all of these fronts, and that's sort of what will compound over time. And um,

I do think it's important when the platform talks about.

Amy maybe on margin impressive to your expectations for flat operating margin in the upcoming year as you absorb some of the mix shift towards Azure and some of the more AI focused offerings.

Speak in more detail just around your ability to manage those trade offs and offset some of the mix shift and I'm wondering specifically just on any productivity gains youre seeing from leveraging.

Mark Moerdler: Sounds very encouraging. Thank you so much.

Done at an even faster pace; this is what will apply the same transition.

Sounds very encouraging. Thank you so much.

Jonathan Neilson: Thanks, Cash. Operator, next question, please.

Thanks Cash.

AI internally that you highlight or anything else you'd just mentioned an underpinning the full your expectation there. Thank you.

Operating next question, please.

Operator: The next question comes from the line of Michael Turin with Wells Fargo. Please proceed.

Thanks, Michael I think really the area to focus on is when.

Keith Weiss: Hey, great. Thanks very much for taking the questions, and congrats from me as well on the metrics working in concert here. Amy, maybe on margin, impressive to hear expectations for flat operating margin in the upcoming year as you absorb some of the mix shift towards Azure and some of the more AI-focused offerings. Can you speak in more detail just around your ability to manage those trade-offs and offset some of the mix shift? I'm wondering specifically just on any productivity gains you're seeing from leveraging AI internally that you'd highlight or anything else you'd just mention in underpinning the full-year expectation there. Thank you.

The next question comes from the line of Michael Turan with Wells Fargo. Please proceed.

When you think about margin.

I think sometimes people get on and energy around cost control as a driver of margin the other driver.

Is to focus on making sure you're delivering great product, that's competitive and innovative and can take share because that drives revenue and.

Revenue itself in revenue growth as you all know better.

And I do is a durable way to see margin improvement.

It builds on itself.

That being said the second thing I would point to is really when I talk to cash a little bit about before and I. Both mentioned that is.

Amy Hood: Thanks, Michael. I think really the area to focus on is when you think about margin. I think sometimes people get a lot of energy around cost control as a driver of margin. The other driver is to focus on making sure you deliver great product that's competitive and innovative and can take share because that drives revenue. Revenue itself and revenue growth, as you all know better, even perhaps than I do, is a durable way to see margin improvement. It builds on itself. That being said, the second thing I would point to is really what I talked to Cash a little bit about before. Satya and I both mentioned it is applying all of our skill set here to deliver efficiencies, whether that's at whatever layer of the stack that exists. The S curves compound, and we are doing that work, and we're focused on it.

Hey great. Thanks very much for taking the questions and congrats for me as well on the metrics working in concert here. Um, Amy maybe on margin impressive to hear expectations for flat operating margins in the upcoming year as you absorb some of the mix shift towards Azure and, and some of the more AI focused offerings. Can you speak in more detail? Just around your ability to manage those trade-offs and offset some of the mixed shift. And I'm wondering specifically, just on any productivity gains, you're seeing from leveraging, AI internally that you'd highlight or anything else you just mentioned and underpinning the fully, your expectation there. Thank you.

Thanks, Michael. I think really, um, the area to focus on.

Applying all of our skill set here to deliver efficiencies.

Margin.

Whether that whatever layer of the stack that exists the S curves compound and we are doing that work and we're focused on it at the same time, we're doing the build out that you'll see improvement there even as we continue.

And then of course, it's about continuing to have.

Great talent here focus on products and opportunities, where we have the biggest market.

I think sometimes people get a lot of energy around cost control as a driver of margin. The other driver is to focus on making sure you deliver a great product that's competitive and innovative and can take care because that drives revenue. Uh, and revenue itself and revenue growth, as you all know better, even perhaps than I do, is the durable way to see margin improvement.

And the most likelihood of success.

So when we have those three things happened in the energy is right and our focus is there and gives me confidence in terms of margin delivery, but make no mistake. It starts and ends really with product.

Builds on itself. That being said, the second thing I would point to is really what I talked to Cash a little bit about before. So, I think I both mentioned it is...

Which is what we're really focused on here and delivering that to customers.

That all sounds pretty good thanks very much.

Amy Hood: At the same time, we're doing the buildout. You'll see improvements there even as we continue to invest. Then, of course, it's about continuing to have great talent here, focus on products and opportunities where we have the biggest markets and the most likelihood of success. When we have those three things happen and the energy is right and the focus is there, it gives me confidence in terms of margin delivery. But make no mistake, it starts and ends really with product, which is what we're really focused on here and delivering that to customers.

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

Applying all of our skill set here to deliver efficiencies, whether that's at whatever layer of the stack that exists, the S-curves, compound, and we are doing that work and we're focused on it. At the same time, we're doing the build-out, so you'll see improvements there even as we continue to invest.

Thank you. Thank you.

Of course, it's about continuing to have.

This concludes today's conference you may disconnect your lines at this time.

Uh, great talent here. Focus on products and opportunities where we have the biggest markets.

Thank you for your participation.

Keith Weiss: That all sounds pretty good. Thanks very much.

And the likelihood of success, uh, and so when we have those three things happen and the energies, right? And the focus is there, um, it gives me confidence in terms of margin delivery. But make no mistake, it starts and ends really with product, uh, which is what we're really focused on here and delivering that to customers.

That all sounds pretty good. Thanks very much.

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

Mark Moerdler: Thank you.

Amy Hood: Thank you.

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

Thank you. Thank you.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

This concludes today's conference. You may disconnect your lines at this time.

Thank you for your participation.