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CEO Satya Nadella compared the AI shift to the server-to-cloud transition, predicting a massive expansion in compute usage and application capabilities, citing GitHub Copilot's evolution as an example. CFO Amy Hood added that monetization will involve a blend of per-user, tiered, and consumption-based models that will evolve with AI capabilities.

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CEO Satya Nadella compared the AI shift to the server-to-cloud transition, predicting a massive expansion in compute usage and monetization opportunities. He cited GitHub Copilot's evolution as a model for M365 and Dynamics. CFO Amy Hood added that monetization will blend per-user tiers and consumption models, offering flexibility.

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CEO Satya Nadella stated that in a recession, Microsoft's focus would be on helping customers leverage the cloud's efficiency to do more with less, positioning its software as a key tool to fight inflationary and growth pressures. He indicated the company would concentrate on delivering value and gaining market share through this approach.

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CFO Amy Hood confirmed the beat was driven by both stronger-than-expected Azure AI services and robust Microsoft 365 Copilot performance. For Copilot, she highlighted strength in new customer seats, expansion seats from existing customers, and healthy price per seat, indicating strong value perception.

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CFO Amy Hood drew a parallel to the early cloud transition, stating that Microsoft must build to meet the global, parallel demand for AI. She confirmed that over time, CapEx growth will slow as revenue growth increases, causing the two rates to converge. The pace of this convergence, she noted, depends entirely on the pace of customer adoption for AI services.

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CFO Dominik Asam expressed confidence in maintaining operating leverage, with total expense growth contained relative to revenue growth. He noted the largest improvements come from selling expenses. While the cloud gross margin expanded significantly by 1.8% in Q2, he stated the pace of improvement will slow but continue to grind upwards as one-off effects diminish.

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CEO Christian Klein explained that their multi-year contracts with hyperscalers provide price security, and they are not planning to increase customer prices due to tariffs. CFO Dominik Asam added that the data center supply chain is largely outside the U.S., making the direct impact not meaningful enough to alter guidance.

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CFO Dominik Asam stated that while the long-term AI margin impact is speculative, it is expected to add incremental gross profit and poses no risk to the 2025 margin targets. CEO Christian Klein explained that large customers are using RISE to de-complexify processes, not just lift-and-shift. He emphasized that the need for business transformation is the primary driver for cloud moves, outweighing macro concerns or maintenance deadlines.

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CEO Christian Klein attributed SAP's resilience to a strong sales and innovation pipeline, particularly in GenAI, and the success of its integrated 'best of suite' strategy. He noted customers are actively moving from on-premise to SAP's cloud solutions. CFO Dominik Asam added that a favorable revenue mix shift towards the high-growth Cloud ERP Suite is reducing the dilutive effect from other cloud services, bolstering overall growth.

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Chairman and CTO Larry Ellison explained that Oracle's key advantage is its 23AI vector database, which enables enterprises to use popular AI models on their own private, secure data. He emphasized that since most of the world's valuable enterprise data resides in Oracle databases, this capability is a critical enabler that competitors lack, which will drive significant growth in Oracle's database business.

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Executive Chairman and CTO Lawrence Ellison explained that Oracle's lower CapEx stems from its strategy of starting data centers smaller and expanding based on demand, which leads to higher utilization. He also cited a high degree of automation, which lowers operating costs and improves reliability and security by minimizing human intervention and error.

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Chairman and CTO Larry Ellison explained that OCI's standardized, modular rack design allows for regions to scale from a small 50-kilowatt footprint to a massive 1.6-gigawatt data center. This standardization enables high automation, lower costs, and the ability to offer dedicated regions to individual customers. CEO Safra Catz added that this flexibility allows Oracle to align CapEx directly with customer consumption, enhancing profitability by avoiding underutilized capacity.

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Chairman and CTO Larry Ellison argued that GenAI is not a separate feature to be sold but is becoming the core of all applications. He used healthcare as a prime example, where AI is already integral to the Cerner systems for tasks like creating patient summaries, transcribing doctor consultations, and ordering prescriptions. He stated that the monetization is the entire health business itself, which is expanding because it is based on AI, rather than selling AI as a separate line item.

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EVP and CFO Daniel Durn explained the change better reflects the company's strategy of selling cross-cloud solutions to specific customer groups. Chair and CEO Shantanu Narayen added it provides clearer visibility into the Acrobat business and the 'One Adobe' enterprise motion with offerings like GenStudio. Regarding the AI ARR disclosure, Shantanu Narayen stated it would be provided 'periodically.'

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