| Metric [USD Million] | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 |
|----------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| United States        | **33,913**  **[0000950170-24-118967_msft-20240930.htm:22]**  | N/A     | **31,437**  **[0000950170-24-048288_msft-20240331.htm:24]**  | **32,295**  **[0000950170-24-008814_msft-20231231.htm:23]**  | **28,812**  **[0000950170-23-054855_msft-20230930.htm:19]**  | N/A     | **26,007**  **[0000950170-23-014423_msft-20230331.htm:22]**  | **26,976**  **[0001564590-23-000733_msft-10q_20221231.htm:22]**  |
| Other Countries      | **31,672**  **[0000950170-24-118967_msft-20240930.htm:22]**  | N/A     | **30,421**  **[0000950170-24-048288_msft-20240331.htm:24]**  | **29,725**  **[0000950170-24-008814_msft-20231231.htm:23]**  | **27,705**  **[0000950170-23-054855_msft-20230930.htm:19]**  | N/A     | **26,850**  **[0000950170-23-014423_msft-20230331.htm:22]**  | **25,771**  **[0001564590-23-000733_msft-10q_20221231.htm:22]**  |
| Total Revenue        | **65,585**  **[0000950170-24-118967_msft-20240930.htm:22]**  | N/A     | **61,858**  **[0000950170-24-048288_msft-20240331.htm:24]**  | **62,020**  **[0000950170-24-008814_msft-20231231.htm:23]**  | **56,517**  **[0000950170-23-054855_msft-20230930.htm:19]**  | N/A     | **52,857**  **[0000950170-23-014423_msft-20230331.htm:22]**  | **52,747**  **[0001564590-23-000733_msft-10q_20221231.htm:22]**  |

14e334134cbb1974070529ad336465fc6c18362984607d7c8e4a2f5236e6d0fc

| Metric | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 |
|--------|---------|---------|---------|---------|---------|---------|---------|---------|
| LinkedIn Revenue (Million USD) | **$3,876**  **[0001564590-23-000733_msft-10q_20221231.htm:22]**  | **$3,697**  **[0000950170-23-014423_msft-20230331.htm:22]**  | **$3,913**  **[0000950170-23-054855_msft-20230930.htm:19]**  | **$3,913**  **[0000950170-23-054855_msft-20230930.htm:19]**  | **$4,195**  **[0000950170-24-008814_msft-20231231.htm:23]**  | **$4,013**  **[0000950170-24-048288_msft-20240331.htm:24]** **[0000950170-24-048288_msft-20240331.htm:32]**  | **$4,292**  **[0000950170-24-118967_msft-20240930.htm:22]**  | **$4,292**  **[0000950170-24-118967_msft-20240930.htm:22]**  |
| Dynamics 365 Growth (%) | **21%**  **[0001193125-23-014230_d406070dex991.htm:3]** **[0001193125-23-014230_d406070dex991.htm:1]**  | **25%**  **[0000950170-23-014423_msft-20230331.htm:31]**  | **26%**  **[MSFT_3255423_5]**  | **28%**  **[MSFT_3361689_6]**  | **27%**  **[MSFT_3371186_6]**  | **23%**  **[MSFT_3380792_6]**  | **24%**  **[0000950170-24-087843_msft-20240630.htm:80]**  | **18%**  **[MSFT_3404745_6]**  |
| Xbox Content and Services Growth (%) | **-12%**  **[0001564590-23-000733_msft-10q_20221231.htm:32]**  | **3%**  **[MSFT_3247232_6]** **[0001193125-23-115280_d321368dex991.htm:1]**  | **5%**  **[0000950170-23-034400_msft-ex99_1.htm:0]** **[0000950170-23-034400_msft-ex99_1.htm:3]**  | **13%**  **[0000950170-23-054855_msft-20230930.htm:22]**  | **61%**  **[0000950170-24-008814_msft-20231231.htm:26]**  | **62%**  **[0000950170-24-048288_msft-20240331.htm:27]**  | **61%**  **[MSFT_3395040_17]** **[0000950170-24-087835_msft-ex99_1.htm:0]**  | **61%**  **[0000950170-24-118967_msft-20240930.htm:25]**  |
| Search and News Advertising Growth (%) | **10%**  **[0001564590-23-000733_msft-10q_20221231.htm:32]**  | **10%**  **[0001193125-23-115280_d321368dex991.htm:1]**  | **8%**  **[0000950170-23-034400_msft-ex99_1.htm:0]**  | **10%**  **[0000950170-23-054848_msft-ex99_1.htm:0]**  | **8%**  **[MSFT_3371186_7]** **[0000950170-24-008809_msft-ex99_1.htm:1]**  | **12%**  **[0000950170-24-048288_msft-20240331.htm:27]**  | **19%**  **[0001193125-24-204403_d846847dex991.htm:4]**  | **18%**  **[0000950170-24-118967_msft-20240930.htm:30]**  |

c5399c2fa1db8deb5020983d3a7c250ff36e1ceeedc219d4e77b9c309a637640

| Segment/Product | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 |
|-----------------|---------|---------|---------|---------|---------|---------|---------|---------|
| **Productivity and Business Processes** ($ billion) | **28.3**  **[MSFT_3404745_6]**  | **20.3**  **[MSFT_3395040_6]**  | **19.57**  **[0000950170-24-048288_msft-20240331.htm:24]**  | **19.2**  **[0000950170-24-008814_msft-20231231.htm:31]** **[0000950170-24-008809_msft-ex99_1.htm:0]**  | **18.6**  **[0000950170-23-054855_msft-20230930.htm:19]** **[0000950170-23-054855_msft-20230930.htm:26]**  | **18.3**  **[MSFT_3255423_5]**  | **17.5**  **[0000950170-23-014423_msft-20230331.htm:22]**  | **17.0**  **[MSFT_3144158_5]**  |
| **Intelligent Cloud** ($ billion) | **24.1**  **[MSFT_3404745_6]**  | **28.5**  **[MSFT_3395040_6]**  | **26.71**  **[0000950170-24-048288_msft-20240331.htm:24]**  | **25.9**  **[0000950170-24-008814_msft-20231231.htm:31]** **[0000950170-24-008809_msft-ex99_1.htm:0]**  | **24.3**  **[0000950170-23-054855_msft-20230930.htm:19]** **[0000950170-23-054855_msft-20230930.htm:26]**  | **24.0**  **[MSFT_3255423_5]**  | **22.1**  **[0000950170-23-014423_msft-20230331.htm:22]**  | **21.5**  **[MSFT_3144158_5]**  |
| **More Personal Computing** ($ billion) | **13.2**  **[MSFT_3404745_6]**  | **15.9**  **[MSFT_3395040_6]**  | **15.58**  **[0000950170-24-048288_msft-20240331.htm:24]**  | **16.9**  **[0000950170-24-008814_msft-20231231.htm:31]** **[0000950170-24-008809_msft-ex99_1.htm:0]**  | **13.7**  **[0000950170-23-054855_msft-20230930.htm:19]** **[0000950170-23-054855_msft-20230930.htm:26]**  | **13.9**  **[MSFT_3255423_5]**  | **13.3**  **[0000950170-23-014423_msft-20230331.htm:22]**  | **14.2**  **[MSFT_3144158_5]**  |

1477c16a616d650871924b6ecce742c65944a729a3568e9bb90d3d2f1cb3e46d

Microsoft is a technology company that develops and supports a wide range of software, services, devices, and solutions aimed at empowering individuals and organizations globally. Their offerings include cloud-based solutions, operating systems, productivity and collaboration applications, server applications, business solutions, desktop and server management tools, software development tools, and video games. They also design and sell devices such as PCs, tablets, gaming consoles, and related accessories **[0000950170-24-087843_msft-20240630.htm:3]** **[0000950170-24-132722_msft-ex99_1.htm:0]**.

1. **Intelligent Cloud** - Drives substantial growth with Azure and other cloud services, including server products and cloud services **[0000950170-24-087835_msft-ex99_1.htm:0]**.
2. **Productivity and Business Processes** - Includes Office 365 and LinkedIn, with Office Commercial products and cloud services showing consistent growth **[0000950170-24-087843_msft-20240630.htm:9]** **[0000950170-24-087835_msft-ex99_1.htm:0]**.
   - **LinkedIn** - Comprises talent solutions, advertising, sales insights, and premium consumer services, contributing significantly to the segment **[MSFT_3391934_2]**.
3. **More Personal Computing** - Encompasses Windows, devices, and Xbox, with notable revenue increases in Xbox content and services, particularly after the Activision Blizzard acquisition **[0000950170-24-087835_msft-ex99_1.htm:0]** **[0000950170-24-087843_msft-20240630.htm:75]**.

b8734c3479135b4b1a3b17f5abc0e4c370353e782c965fef9e85bf283061fa7a

1. Given the significant **capital expenditure growth** required to meet **AI infrastructure demand**, can you elaborate on how you plan to balance these investments with expected revenue growth, and when we might see **CapEx growth** align more closely with **cloud revenue growth**?  **[MSFT_3404745_12]** 

2. With the rising costs of training large AI models and your substantial investments in OpenAI, how do you manage the financial impact of these investments on your margins, especially considering the **$1.5 billion** expected loss reflected in your other income and expense line?  **[MSFT_3404745_13]** **[MSFT_3404745_9]** 

3. Considering the external constraints like **data center capacity** and **power availability** that you've faced due to rapid **AI demand growth**, what steps are you taking to mitigate these challenges and ensure **sustainable expansion** without compromising on **environmental commitments**?  **[MSFT_3404745_10]** 

4. As you build out your AI business towards a **$10 billion** annual revenue run rate, can you provide more clarity on the monetization strategies for AI products like GitHub Copilot and M365 Copilot, and how they contribute to your top-line growth versus the costs involved in providing these services?  **[MSFT_3404745_9]** **[MSFT_3404745_14]** **[MSFT_3404745_1]** 

5. Given the reported growth in gaming and the record performance of titles like **Call of Duty Black Ops 6**, which was the **biggest Call of Duty release ever**, how do you plan to sustain this momentum in the gaming division, and what are the implications for your broader strategy, especially in integrating gaming with your AI and cloud services?  **[MSFT_3404745_4]** 

f96cf737da8e8fed841a97b45e1da675fa41e5a9716ca92c20eb7171673becdf

United States

Other countries

Total Revenue

930953f5104c15d976346dd745381314c822b004d45d29292044df9ba8f536eb

- Apple: Distributes versions of its pre-installed application software through its PCs, tablets, and phones  **[0000950170-24-087843_msft-20240630.htm:12]** .
- Cisco Systems: Uses its position in enterprise communications equipment to grow its unified communications business  **[0000950170-24-087843_msft-20240630.htm:12]** .
- Google: Provides a hosted messaging and productivity suite  **[0000950170-24-087843_msft-20240630.htm:12]** .
- Meta: Offers communication tools to enable productivity and engagement within organizations  **[0000950170-24-087843_msft-20240630.htm:12]** .
- Proofpoint: Provides security solutions across email security, information protection, and governance  **[0000950170-24-087843_msft-20240630.htm:12]** .
- Symantec: Provides security solutions across email security, information protection, and governance  **[0000950170-24-087843_msft-20240630.htm:12]** .
- Slack: Provides teamwork and collaboration software  **[0000950170-24-087843_msft-20240630.htm:12]** .
- Zoom: Offers videoconferencing and cloud phone solutions  **[0000950170-24-087843_msft-20240630.htm:12]** .
- Oracle: Competes with Dynamics in cloud-based and on-premises business solutions  **[0000950170-24-087843_msft-20240630.htm:12]** .
- Salesforce: Competes with Dynamics in cloud-based and on-premises business solutions  **[0000950170-24-087843_msft-20240630.htm:12]** .
- SAP: Competes with Dynamics in cloud-based and on-premises business solutions  **[0000950170-24-087843_msft-20240630.htm:12]** .
- Service Now: Competes with Dynamics in cloud-based and on-premises business solutions  **[0000950170-24-087843_msft-20240630.htm:12]** .
- UI Path: Competes with Dynamics in cloud-based and on-premises business solutions  **[0000950170-24-087843_msft-20240630.htm:12]** .
- WorkDay: Competes with Dynamics in cloud-based and on-premises business solutions  **[0000950170-24-087843_msft-20240630.htm:12]** .

4a3216e01d4280753a7f85b5bb684aa4854e3b7c370f5d0ee7cae8e7e036f948

2b387a32f2e93254de7c88bd0d561bb0010c468e41de586dbd92491bb6f22de3

Adjustments for Non-Cash Items [USD, Millions]

Stock-Based Compensation [USD, Millions]

Changes in Working Capital [USD, Millions]

Capital Expenditures (CapEx) [USD, Millions]

Proceeds from Debt [USD, Millions]

Repayments of Debt [USD, Millions]

Share Repurchases [USD, Millions]

Dividend Payments [USD, Millions]

Net Change in Cash [USD, Millions]

9bfc73b3e0720a48d04ac9fa31ce15e849155b33daf1088a82f4ef0ba9b9c460

### Q1 2025 Earnings Call
- **Issued Period**: Q1 2025
- **Guided Period**: Q2 2025
- **Guidance**:
  1. **Cost of Goods Sold (COGS)**: Expected to grow between **11% and 13%** in constant currency, or to be between **USD 21.9 billion to USD 22.1 billion**  **[MSFT_3404745_9]** .
  2. **Operating Expenses**: Expected to grow approximately **7%** in constant currency, or to be between **USD 16.4 billion and USD 16.5 billion**  **[MSFT_3404745_9]** .
  3. **Operating Margin**: Expected to expand  **[MSFT_3404745_9]** .
  4. **Other Income and Expense**: Expected to be roughly **negative $1.5 billion**  **[MSFT_3404745_9]** .
  5. **Effective Tax Rate**: Expected to be approximately **19%**  **[MSFT_3404745_9]** .
  6. **Microsoft Cloud Gross Margin Percentage**: Expected to be roughly **70%**  **[MSFT_3404745_7]** .
  7. **Capital Expenditures**: Expected to increase  **[MSFT_3404745_7]** .
  8. **Productivity and Business Processes Revenue**: Expected to grow between **10% and 11%**  **[MSFT_3404745_7]** .
  9. **M365 Commercial Cloud Revenue Growth**: Expected to be approximately **14%**  **[MSFT_3404745_7]** .
  10. **Intelligent Cloud Revenue**: Expected to grow between **18% and 20%**  **[MSFT_3404745_8]** .
  11. **Azure Revenue Growth**: Expected to be **31% to 32%**  **[MSFT_3404745_8]** .
  12. **More Personal Computing Revenue**: Expected to be USD **13.85 billion to USD 14.25 billion**  **[MSFT_3404745_8]** .
  13. **Windows OEM and Devices Revenue**: Expected to decline  **[MSFT_3404745_8]** .
  14. **Search and News Advertising ex TAC Revenue Growth**: Expected to be in the high teens  **[MSFT_3404745_8]** .
  15. **Gaming Revenue**: Expected to decline  **[MSFT_3404745_8]** .

### Q4 2024 Earnings Call
- **Issued Period**: Q4 2024
- **Guided Period**: Q1 2025 and FY 2025
- **Guidance**:
  1. **Microsoft Cloud Gross Margin**: Expected to be roughly **70%**  **[MSFT_3395040_8]** .
  2. **Capital Expenditures**: Expected to increase  **[MSFT_3395040_8]** .
  3. **Productivity and Business Processes Revenue**: Expected to grow between **10% and 11%**  **[MSFT_3395040_8]** .
  4. **Office 365 Revenue Growth**: Expected to be approximately **14%**  **[MSFT_3395040_8]** .
  5. **Office Consumer Revenue Growth**: Expected in the low to mid-single digits  **[MSFT_3395040_8]** .
  6. **LinkedIn Revenue Growth**: Expected in the high single digits  **[MSFT_3395040_8]** .
  7. **Dynamics Revenue Growth**: Expected in the low to mid-teens  **[MSFT_3395040_8]** .
  8. **Intelligent Cloud Revenue**: Expected to grow between **18% and 20%**  **[MSFT_3395040_8]** .
  9. **Azure Revenue Growth**: Expected to be **28% to 29%**  **[MSFT_3395040_8]** .
  10. **More Personal Computing Revenue**: Expected to grow between **9% and 12%**  **[MSFT_3395040_8]** .
  11. **Windows OEM Revenue Growth**: Expected to be relatively flat  **[MSFT_3395040_8]** .
  12. **Windows Commercial Products and Cloud Services Revenue Growth**: Expected in the mid-single digits  **[MSFT_3395040_8]** .
  13. **Devices Revenue Growth**: Expected in the low to mid-single digits  **[MSFT_3395040_8]** .
  14. **Search and News Advertising ex-TAC Revenue Growth**: Expected in the mid- to high teens  **[MSFT_3395040_8]** .
  15. **Gaming Revenue Growth**: Expected in the mid-30s  **[MSFT_3395040_8]** .
  16. **COGS**: Expected between USD **19.95 billion to USD 20.5 billion**  **[MSFT_3395040_9]** .
  17. **Operating Expense**: Expected to be USD **15.2 billion to USD 15.3 billion**  **[MSFT_3395040_9]** .
  18. **Other Income and Expense**: Expected to be roughly negative **$650 million**  **[MSFT_3395040_9]** .
  19. **Effective Tax Rate**: Expected to be approximately **19%**  **[MSFT_3395040_9]** .
  20. **FX Impact**: Expected to have no meaningful impact  **[MSFT_3395040_7]** .
  21. **FY '25 Operating Margins**: Expected to be down about 1 point  **[MSFT_3395040_7]** .
  22. **FY '25 Capital Expenditures**: Expected to be higher  **[MSFT_3395040_7]** .

### Q3 2024 Earnings Call
- **Issued Period**: Q3 2024
- **Guided Period**: Q4 2024 and FY 2025
- **Guidance**:
  1. **Productivity and Business Processes**: Revenue growth expected between **9% and 11%**  **[MSFT_3380792_8]** .
  2. **Office 365 Revenue Growth**: Expected to be approximately **14%**  **[MSFT_3380792_8]** .
  3. **On-premises Business Revenue**: Expected to decline  **[MSFT_3380792_8]** .
  4. **Office Consumer Revenue Growth**: Expected in the low to mid-single digits  **[MSFT_3380792_8]** .
  5. **LinkedIn Revenue Growth**: Expected in the mid- to high single digits  **[MSFT_3380792_8]** .
  6. **Dynamics Revenue Growth**: Expected in the low to mid-teens  **[MSFT_3380792_8]** .
  7. **Intelligent Cloud**: Revenue growth expected between **19% and 20%**  **[MSFT_3380792_8]** .
  8. **Azure Revenue Growth**: Expected to be **30% to 31%**  **[MSFT_3380792_8]** .
  9. **On-premises Server Business Revenue Growth**: Expected in the low to mid-single digits  **[MSFT_3380792_8]** .
  10. **Enterprise and Partner Services Revenue**: Expected to decline  **[MSFT_3380792_8]** .
  11. **More Personal Computing**: Revenue growth expected between **10% and 13%**  **[MSFT_3380792_8]** .
  12. **Windows OEM Revenue Growth**: Expected in the low to mid-single digits  **[MSFT_3380792_8]** .
  13. **Windows Commercial Products and Cloud Services Revenue Growth**: Expected in the mid-single digits  **[MSFT_3380792_8]** .
  14. **Devices Revenue**: Expected to decline  **[MSFT_3380792_8]** .
  15. **Search and News Advertising ex TAC Revenue Growth**: Expected in the low to mid-teens  **[MSFT_3380792_8]** .
  16. **Gaming Revenue Growth**: Expected in the low to mid-40s  **[MSFT_3380792_8]** .
  17. **Xbox Content and Services Revenue Growth**: Expected in the high 50s  **[MSFT_3380792_8]** .
  18. **COGS**: Expected to be between USD **19.6 billion to USD 19.8 billion**  **[MSFT_3380792_8]** .
  19. **Operating Expenses**: Expected to be between USD **17.15 billion to USD 17.25 billion**  **[MSFT_3380792_8]** .
  20. **Capital Expenditures**: Expected to increase  **[MSFT_3380792_8]** .
  21. **Effective Tax Rate**: Expected to be approximately **18%**  **[MSFT_3380792_8]** .

### Q2 2024 Earnings Call
- **Issued Period**: Q2 2024
- **Guided Period**: Q3 2024 and FY 2024
- **Guidance**:
  1. **FX Impact**: Expected to increase revenue growth  **[MSFT_3371186_8]** .
  2. **Capital Expenditures**: Expected to increase  **[MSFT_3371186_8]** .
  3. **Productivity and Business Processes Revenue**: Expected to be between **$19.3 billion to $19.6 billion**  **[MSFT_3371186_8]** .
  4. **Office 365 Revenue Growth**: Expected to be approximately **15%**  **[MSFT_3371186_8]** .
  5. **Office Consumer Revenue Growth**: Expected in the mid- to high single digits  **[MSFT_3371186_8]** .
  6. **LinkedIn Revenue Growth**: Expected in the mid- to high single digits  **[MSFT_3371186_8]** .
  7. **Dynamics Revenue Growth**: Expected in the mid-teens  **[MSFT_3371186_8]** .
  8. **Intelligent Cloud Revenue**: Expected to be between **$26 billion to $26.3 billion**  **[MSFT_3371186_8]** .
  9. **Azure Revenue Growth**: Expected to remain stable  **[MSFT_3371186_8]** .
  10. **On-premises Server Business Revenue Growth**: Expected in the low to mid-single digits  **[MSFT_3371186_8]** .
  11. **Enterprise and Partner Services Revenue**: Expected to decline  **[MSFT_3371186_8]** .
  12. **More Personal Computing Revenue**: Expected to be between **$14.7 billion to $15.1 billion**  **[MSFT_3371186_8]** .
  13. **Windows OEM Revenue Growth**: Expected to be relatively flat  **[MSFT_3371186_8]** .
  14. **Windows Commercial Products and Cloud Services Revenue Growth**: Expected in the mid-teens  **[MSFT_3371186_8]** .
  15. **Devices Revenue**: Expected to decline  **[MSFT_3371186_9]** .
  16. **Search and News Advertising ex TAC Revenue Growth**: Expected in the mid- to high single digits  **[MSFT_3371186_9]** .
  17. **Gaming Revenue Growth**: Expected in the low 40s  **[MSFT_3371186_9]** .
  18. **Xbox Content and Services Revenue Growth**: Expected in the low to mid-50s  **[MSFT_3371186_9]** .
  19. **COGS**: Expected to be between **$18.6

289663a95ddc79f3288b6b6a5122f712dd053719229cbcf029406aa4c9868d56

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

LinkedIn Revenue (Million USD)

Dynamics 365 Growth (%)

Xbox Content and Services Growth (%)

Search and News Advertising Growth (%)

42aa1225c7c6ff0f9433abac6b9a16187826bc0f8c06f4ba5b1793351d10702c

**Quarterly guidance for Q2 2025:**
- **COGS**: 11–13% or USD 21.9B–22.1B  **[MSFT_3404745_9]**  (raised from USD 19.95B–20.5B  **[MSFT_3395040_9]** )  
- **Operating Expenses**: USD 16.4B–16.5B  **[MSFT_3404745_9]**  (raised from USD 15.2B–15.3B  **[MSFT_3395040_9]** )  
- **Operating Margin**: expected to expand  **[MSFT_3404745_9]**  (no prior guidance)  
- **Other Income and Expense**: roughly negative USD 1.5B  **[MSFT_3404745_9]**  (lowered from roughly negative USD 650M  **[MSFT_3395040_9]** )  
- **Effective Tax Rate**: approximately 19%  **[MSFT_3404745_9]**  (no change from approximately 19%  **[MSFT_3395040_9]** )  
- **Microsoft Cloud Gross Margin Percentage**: roughly 70%  **[MSFT_3404745_7]**  (no change from roughly 70%  **[MSFT_3395040_8]** )  
- **Capital Expenditures**: expected to increase  **[MSFT_3404745_7]**  (no change from expected to increase  **[MSFT_3395040_8]** )  
- **Productivity and Business Processes Revenue**: expected to grow between 10% and 11%  **[MSFT_3404745_7]**  (no change from 10%–11%  **[MSFT_3395040_8]** )  
- **M365 Commercial Cloud Revenue Growth**: approximately 14%  **[MSFT_3404745_7]**  (no prior guidance)  
- **Intelligent Cloud Revenue**: expected to grow between 18% and 20%  **[MSFT_3404745_8]**  (no change from 18%–20%  **[MSFT_3395040_8]** )  
- **Azure Revenue Growth**: expected to be 31%–32%  **[MSFT_3404745_8]**  (raised from 28%–29%  **[MSFT_3395040_8]** )  
- **More Personal Computing Revenue**: USD 13.85B–14.25B  **[MSFT_3404745_8]**  (no prior guidance)  
- **Windows OEM and Devices Revenue**: expected to decline  **[MSFT_3404745_8]**  (no prior guidance)  
- **Search and News Advertising ex TAC Revenue Growth**: high teens  **[MSFT_3404745_8]**  (raised from mid- to high teens  **[MSFT_3395040_8]** )  
- **Gaming Revenue**: expected to decline  **[MSFT_3404745_8]**  (lowered from mid-30s growth  **[MSFT_3395040_8]** )  

ed2f300e91fab8addd6b62da6f4f673f2a6366ee24046ee732b72faac0c04846

| Name                  | Position                                                                 | Start Date | Short Bio                                                                                                                                                                                                 |
|-----------------------|--------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Satya Nadella         | Chairman and Chief Executive Officer                                     | Feb 2014   | Satya Nadella is the **Chairman and Chief Executive Officer** of Microsoft Corporation. He became CEO in **February 2014** and Chairman in **June 2021**. He joined Microsoft in **1992**  **[0000950170-23-035122_msft-20230630.htm:25]** **[0000950170-24-087843_msft-20240630.htm:23]** .                                           |
| Judson B. Althoff     | Executive Vice President and Chief Commercial Officer                    | Jul 2021   | Judson B. Althoff is the **Executive Vice President and Chief Commercial Officer** at Microsoft. He joined Microsoft in March 2013 and was appointed to his current role in July 2021  **[0000950170-24-087843_msft-20240630.htm:23]** **[0000950170-23-035122_msft-20230630.htm:25]** .                                                  |
| Kathleen T. Hogan     | Executive Vice President and Chief Human Resources Officer               | Jun 2023   | Kathleen T. Hogan is the **Executive Vice President and Chief Human Resources Officer** at Microsoft. She joined Microsoft in **2003** and was appointed to her current role in **June 2023**  **[0000950170-24-087843_msft-20240630.htm:23]** **[0000950170-24-087843_msft-20240630.htm:24]** .                                          |
| Amy E. Hood           | Executive Vice President and Chief Financial Officer                     | May 2013   | Amy E. Hood serves as the **Executive Vice President and Chief Financial Officer** at Microsoft. She was appointed CFO in May 2013 and became Executive Vice President in July 2013  **[0000950170-24-087843_msft-20240630.htm:24]** **[0000950170-24-087843_msft-20240630.htm:23]** .                                                    |
| Takeshi Numoto        | Executive Vice President and Chief Marketing Officer                     | Oct 2023   | Takeshi Numoto is the **Executive Vice President and Chief Marketing Officer** at Microsoft. He joined Microsoft in 1997 and was appointed to his current role in October 2023  **[0000950170-24-087843_msft-20240630.htm:24]** .                                                            |
| Bradford L. Smith     | Vice Chair and President                                                 | Sep 2021   | Bradford L. Smith is the **Vice Chair and President** of Microsoft. He joined Microsoft in 1993 and was appointed to his current role in September 2021  **[0000950170-24-087843_msft-20240630.htm:24]** **[0000950170-23-035122_msft-20230630.htm:26]** .                                                                                 |
| Christopher D. Young  | Executive Vice President, Business Development, Strategy, and Ventures   | Nov 2020   | Christopher D. Young serves as the **Executive Vice President, Business Development, Strategy, and Ventures** at Microsoft. He joined Microsoft in November 2020  **[0000950170-24-087843_msft-20240630.htm:24]** **[0000950170-23-035122_msft-20230630.htm:26]** .                                                                        |

a3af56b31141ae6883b88cff00055955eaaf356d0671c3b873259226496dc557

7ebb5ebfb56167d99ef6cce115b8ec26148c93215b01268ab04d7b3c6cac7459

| Program Details          | Program 1                  | Program 2                  |
|--------------------------|----------------------------|----------------------------|
| Approval Date            | September 14, 2021  **[0000950170-24-118967_msft-20240930.htm:19]**      | September 16, 2024  **[0000950170-24-118967_msft-20240930.htm:19]**      |
| End Date/Duration        | No expiration date  **[0000950170-24-118967_msft-20240930.htm:19]**      | No expiration date  **[0000950170-24-118967_msft-20240930.htm:19]**      |
| Total additional amount  | **$60.0 billion**  **[0000950170-24-118967_msft-20240930.htm:19]**       | **$60.0 billion**  **[0000950170-24-118967_msft-20240930.htm:19]**       |
| Remaining authorization  | **$7.5 billion**  **[0000950170-24-118967_msft-20240930.htm:19]**        | Not applicable yet  **[0000950170-24-118967_msft-20240930.htm:19]**      |
| Details                  | May be terminated at any time  **[0000950170-24-118967_msft-20240930.htm:19]**  | Will commence after Program 1 completion  **[0000950170-24-118967_msft-20240930.htm:19]**  |

3cb55b8deb7d1e16fae02fd87dd1a7e286d00fdfa685fee730623092a71f4ed5

| Name                  | Start Date | End Date | Reason for Change |
|-----------------------|------------|----------|-------------------|
| Deloitte & Touche LLP | 1983  **[0000950170-24-087843_msft-20240630.htm:127]**    | Present  | Current auditor   |

9ca95228a6bf6be0556f56f31b7fb1d605d5ea6903072bf02215b30d306c332f

3e5dd1746fa8dcc5f857d7c82de5d3a5ab62cec8c5351c7126fdda29eb2aa7b6

a7dca104d9dca9c0ee6d056664247e0f57f448a79960f0aca77ebfb039f082b9

82ff5bf9bcdcc00043273c0cc99c35d72eb47c3a14b6db63ece8b357f7ceb8f0

- Total Revenue: $69.632B (**+12%** YoY)  **[0000950170-25-010491_msft-20241231.htm:24]** **[0000950170-24-008814_msft-20231231.htm:23]**   
- Productivity & Business: $29.437B (**+53%** YoY)  **[0000950170-25-010491_msft-20241231.htm:24]** **[0000950170-24-008814_msft-20231231.htm:23]**   
- More Personal Computing: $14.651B (**-13%** YoY)  **[0000950170-25-010491_msft-20241231.htm:24]** **[0000950170-24-008814_msft-20231231.htm:23]**   
- United States Revenue: $35.537B (+10% YoY)  **[0000950170-25-010491_msft-20241231.htm:24]** **[0000950170-24-008814_msft-20231231.htm:23]**   
- Other Countries Revenue: $34.095B (+15% YoY)  **[0000950170-25-010491_msft-20241231.htm:24]** **[0000950170-24-008814_msft-20231231.htm:23]**   

08a10f1380d50a835152417b517565f54ee64b6b19e8453b3306ef5e79eb3a3b

- **Microsoft's commercial bookings increased 75% in constant currency**, significantly ahead of expectations. This surge was driven by strong **Azure commitments from OpenAI** and robust execution across core sales motions, including renewals and upsells like E5 and Microsoft 365 Copilot, indicating **robust demand across the portfolio**.  **[MSFT_3413603_16]**
- **Strong adoption and expansion of Microsoft 365 Copilot**, with customers expanding seats by more than **10x over the past 18 months**, and **usage intensity increasing over 60% quarter-over-quarter**, suggests significant future revenue growth from AI-powered productivity tools. This reflects growing customer engagement and the potential for increased **ARPU growth**.  **[MSFT_3413603_15]** ,  **[MSFT_3413603_11]**
- Microsoft is achieving **significant cost efficiencies in AI scaling**, with **inference optimizations improving by 10x per cycle**. This reduction in AI costs allows the company to **expand AI services to more customers**, driving profitability and market share expansion as AI becomes more **ubiquitous** across their product offerings.  **[MSFT_3413603_10]** ,  **[MSFT_3413603_13]**

bbb69434dfd21847fddba88087f4b8abb027707676270c13f1159359e68fab8f

- **Microsoft is experiencing execution challenges in its non-AI Azure services**, particularly with customers reached through scale motions (indirect sales methods), leading to **lower-than-expected growth** in these areas and potential impact on near-term Azure growth.  **[MSFT_3413603_9]**
- **Microsoft's AI infrastructure is currently capacity constrained**, with shortages in power and space, potentially limiting the ability to meet high demand for AI services until infrastructure investments are realized, which may affect revenue growth in the near term.  **[MSFT_3413603_9]**
- **Free cash flow decreased by 29% year-over-year to $6.5 billion**, reflecting higher capital expenditures on AI infrastructure, which could impact Microsoft's financials if high capital spending continues.  **[MSFT_3413603_6]**

e65c4c5dc682f0df0d80ee562598e08f7f303be5c11d961a42aa6f4e1b7b8e48

1. **Strong Commercial Bookings**  
   **Q:** What drove the surge in commercial bookings?  
   **A:** Microsoft saw a **75% increase in commercial bookings** this quarter, the highest in a decade.  **[MSFT_3413603_16]**  This was driven by significant Azure commitments from OpenAI, ongoing renewals, upsells like Copilot and GitHub Copilot, and strong suite momentum with E5 licenses.  **[MSFT_3413603_16]**  The growth was broad-based, with both existing customers increasing commitments and new customers coming on board.  **[MSFT_3413603_16]** 

2. **OpenAI Partnership and CapEx**  
   **Q:** How is the OpenAI relationship affecting CapEx needs?  
   **A:** Microsoft remains committed to its partnership with OpenAI, which has made significant Azure commitments.  **[MSFT_3413603_12]**  The investments are focused on building a **fungible fleet** that balances training and inference, optimizing costs through Moore's Law and software improvements.  **[MSFT_3413603_12]**  CapEx growth is pivoting towards more CPU and GPU investments directly correlated to revenue, supporting both OpenAI and broader customer contracts.  **[MSFT_3413603_12]** 

3. **Azure Execution Issues**  
   **Q:** What caused the execution challenges in Azure?  
   **A:** Non-AI Azure consumption faced challenges due to adjustments in **scale motions**, particularly with customers reached indirectly through partners.  **[MSFT_3413603_9]**  Changes in sales strategies to balance AI workloads and migrations caused short-term impacts, but adjustments are underway to restore balance.  **[MSFT_3413603_9]**  Azure AI results were better than expected, and confidence in AI growth remains strong despite capacity constraints.  **[MSFT_3413603_9]** 

4. **AI Revenue Drivers**  
   **Q:** What contributed to the AI revenue beat?  
   **A:** AI revenue exceeded expectations due to strong performance in Azure AI services and **Microsoft Copilot**, with significant growth in new and expanded seats.  **[MSFT_3413603_10]**  Increased usage adds value and supports a strong price per seat, even though usage doesn't directly impact revenue.  **[MSFT_3413603_10]** 

5. **Copilot Adoption**  
   **Q:** How is Copilot adoption progressing?  
   **A:** Copilot is gaining traction in departments seeking immediate productivity gains, such as sales, finance, and supply chain.  **[MSFT_3413603_15]**  Collaboration across functions is driving broader enterprise adoption, with network effects leading to wider deployment.  **[MSFT_3413603_15]**  Microsoft is simplifying adoption with **Copilot Chat**, offering flexibility for widespread use across enterprises.  **[MSFT_3413603_15]** 

6. **Copilot Go-to-Market Strategy**  
   **Q:** How will Copilot evolve to reach more customers?  
   **A:** Microsoft is expanding Copilot's reach by introducing **Copilot Chat** in M365, enabling deployment across the entire installed base.  **[MSFT_3413603_13]**  By leveraging inference optimizations that reduce costs, premium features are becoming more accessible.  **[MSFT_3413603_13]**  Similar expansions are happening with GitHub Copilot and Security Copilot, enhancing availability across the portfolio.  **[MSFT_3413603_13]** 

7. **AI Scaling and Cost Reduction**  
   **Q:** Are AI costs decreasing as it scales?  
   **A:** Innovations like **DeepSeek** are driving significant **10x improvements per cycle** through software optimizations in AI inference.  **[MSFT_3413603_11]**  This reduces token and inference computing prices, enabling broader consumption and more application development.  **[MSFT_3413603_11]**  AI models are becoming more efficient, even running on PCs, making AI more ubiquitous and beneficial for Microsoft.  **[MSFT_3413603_11]** 

8. **Proprietary vs. Open Models**  
   **Q:** Does it matter if inference uses open or proprietary models?  
   **A:** Microsoft anticipates a combination of proprietary and open-source models in applications.  **[MSFT_3413603_14]**  It's crucial to start with the best models and continuously optimize for cost and latency, regardless of their origin.  **[MSFT_3413603_14]**  Investments in platforms like **Foundry** help developers manage the complexity of multiple models, ensuring operational efficiency.  **[MSFT_3413603_14]** 

d92142200b3d6090fe0a8a1e580371be72568a51b3c993eceda7f334ce7ce31a

Microsoft’s Q2 saw commercial bookings jump 75%—the highest in a decade—driven by Azure and Copilot expansions. Meanwhile, free cash flow dipped 29% to $6.5B amid heavy AI infrastructure investments. Watch for near-term capacity constraints and rising AI demand.

638e60720b309eed1abcc142049b83eb5f06e0eff810a9ce41178b37d9552f35

c6ef802f0a736c15121781e080b8970d44e41053623f2ed9b501379c259e9d90

**Quarterly guidance for Q3 2025:**

- **Azure Revenue Growth**: 31–32%  **[MSFT_3413603_7]**  (no change from 31–32%  **[MSFT_3404745_8]** )  
- **On-Premises Server Business Revenue**: decline in the mid-single digits  **[MSFT_3413603_7]**  (no prior guidance)  
- **Enterprise and Partner Services Revenue Growth**: low to mid-single digits  **[MSFT_3413603_7]**  (no prior guidance)  
- **More Personal Computing Revenue**: USD 12.4B to USD 12.8B  **[MSFT_3413603_7]**  (lowered from USD 13.85B to USD 14.25B  **[MSFT_3404745_8]** )  
- **Windows OEM and Devices Revenue**: decline in the low to mid-single digits  **[MSFT_3413603_7]**  (no change from prior guidance  **[MSFT_3404745_8]** )  
- **Search and News Advertising ex TAC Revenue Growth**: mid-teens  **[MSFT_3413603_7]**  (lowered from high teens  **[MSFT_3404745_8]** )  
- **Overall Search and News Advertising Revenue Growth**: mid- to high single digits  **[MSFT_3413603_7]**  (no prior guidance)  
- **Gaming Revenue Growth**: low single digits  **[MSFT_3413603_7]**  (raised from decline in the high single digits  **[MSFT_3404745_8]** )  
- **COGS Growth**: 19–20% or USD 21.65B to USD 21.85B  **[MSFT_3413603_7]**  (raised from 11–13% or USD 21.9B to USD 22.1B  **[MSFT_3404745_9]** )  
- **Operating Expense Growth**: 5–6% or USD 16.4B to USD 16.5B  **[MSFT_3413603_7]**  (lowered from 7% or USD 16.4B to USD 16.5B  **[MSFT_3404745_9]** )  
- **Other Income and Expense**: negative USD 1B  **[MSFT_3413603_7]**  (raised from negative USD 1.5B  **[MSFT_3404745_9]** )  
- **Effective Tax Rate**: 18%  **[MSFT_3413603_7]**  (lowered from 19%  **[MSFT_3404745_9]** )  
- **FX Impact**: decrease Q4 revenue and COGS growth by more than 1 point, operating expense growth by roughly 1 point  **[MSFT_3413603_7]**  (no prior guidance)  
- **Capital Expenditures**: remain at similar levels as Q2  **[MSFT_3413603_7]**  (lowered from expected to increase sequentially  **[MSFT_3404745_7]** )  
- **Productivity and Business Processes Revenue Growth**: 11–12% or USD 29.4B to USD 29.7B  **[MSFT_3413603_6]**  (raised from 10–11% or USD 28.7B to USD 29B  **[MSFT_3404745_7]** )  
- **Microsoft 365 Commercial Cloud Revenue Growth**: 14–15%  **[MSFT_3413603_6]**  (raised from 14%  **[MSFT_3404745_7]** )  
- **M365 Consumer Cloud Revenue Growth**: mid- to high single digits  **[MSFT_3413603_6]**  (raised from mid-single digits  **[MSFT_3404745_8]** )  
- **LinkedIn Revenue Growth**: low to mid-single digits  **[MSFT_3413603_6]**  (lowered from 10%  **[MSFT_3404745_8]** )  
- **Dynamics 365 Revenue Growth**: mid-teens  **[MSFT_3413603_6]**  (lowered from mid- to high teens  **[MSFT_3404745_8]** )  
- **Intelligent Cloud Revenue Growth**: 19–20% or USD 25.9B to USD 26.2B  **[MSFT_3413603_6]**  (raised from 18–20% or USD 25.55B to USD 25.85B  **[MSFT_3404745_8]** )  

1b6f08965fe84ec283d78aadb7e4e87256a5767048895e31813aec472bfcc922

1def52b0d1af7883a4a6b9975deeb3df939e4a562510f45aabd8feef6ec2dc2a

a54e20b2aabb0cd96481c206a0f906f2ba18d8fcb3d93fc2afe5bdb098e2ab55

Microsoft 365 Commercial seat growth (percentage)

Microsoft 365 Consumer subscriber growth (percentage)

Number of Microsoft 365 Consumer subscribers (millions)

ce800f91b92e20dc2ec0405971f83a791db5f8e0924f0cb1c86e76366935938d

c60fe86e222cbbda5de01fd001a0a926e76f9fb6fa859020a3495220ca4f1702

| Year | Amount Due (in billions) | Debt Type                     | Interest Rate (%)                  | % of Total Debt                                                                 |
|----------|------------------------------|------------------------------------|----------------------------------------|------------------------------------------------------------------------------------|
| 2025     | 2.25 **[0000950170-25-010491_msft-20241231.htm:17]**                 | Current portion of long-term debt | N/A                                    | 4.4% = (2.25 / 51.138) * 100 **[0000950170-25-010491_msft-20241231.htm:17]**                                              |
| 2026     | 3.00 **[0000950170-25-010491_msft-20241231.htm:17]**                 | 2015, 2016, 2023, 2024 issuances | 2.40 – 4.50 **[0000950170-25-010491_msft-20241231.htm:17]**                    | 5.9% = (3.00 / 51.138) * 100 **[0000950170-25-010491_msft-20241231.htm:17]**                                              |
| 2027     | 9.25 **[0000950170-25-010491_msft-20241231.htm:17]**                 | 2015, 2016, 2017 issuances        | 3.30 – 4.50 **[0000950170-25-010491_msft-20241231.htm:17]**                    | 18.1% = (9.25 / 51.138) * 100 **[0000950170-25-010491_msft-20241231.htm:17]**                                             |
| 2028     | 0.00 **[0000950170-25-010491_msft-20241231.htm:17]**                 | Euro-denominated 2013 issuance    | 2.63 – 3.13 **[0000950170-25-010491_msft-20241231.htm:17]**                    | 0.0% = (0.00 / 51.138) * 100 **[0000950170-25-010491_msft-20241231.htm:17]**                                              |
| 2029     | 1.81 **[0000950170-25-010491_msft-20241231.htm:17]**                 | 2015, 2016 issuances              | 2.70 – 4.75 **[0000950170-25-010491_msft-20241231.htm:17]**                    | 3.5% = (1.81 / 51.138) * 100 **[0000950170-25-010491_msft-20241231.htm:17]**                                              |
| 2030–2062| 34.83 **[0000950170-25-010491_msft-20241231.htm:17]**                | Various issuances (2009–2024)     | 1.35 – 5.49 **[0000950170-25-010491_msft-20241231.htm:17]**                    | 68.1% = (34.83 / 51.138) * 100 **[0000950170-25-010491_msft-20241231.htm:17]**                                            |

80aa87b269ad1389445d36e5f3ef082181d51612f2a323653754b5e8c5f54ca7

1. **Azure Capacity Constraints**  
   **Q:** What's causing Azure growth to be at low end of guidance?  
   **A:** Amy Hood explained that Azure revenue grew by **30%**, hitting the low end of their guidance due to softness in some European geographies on non-AI consumption.  **[MSFT_3395040_14]**  She noted that capacity constraints, particularly on AI and Azure, will remain in Q4 and the first half of the year.  **[MSFT_3395040_14]** 

2. **CapEx Investments & AI Demand**  
   **Q:** How does CapEx relate to AI demand and cloud growth?  
   **A:** Satya Nadella stated that CapEx spend is driven by demand signals, with over **60%** of the spend on equipment purchased only if there is demand.  **[MSFT_3395040_10]**  Amy Hood mentioned that roughly half of FY24's total CapEx is on land, build, and finance leases, which are monetized over **15 years and beyond**.  **[MSFT_3395040_10]**  They manage CapEx to capture opportunities with the right product portfolio.  **[MSFT_3395040_10]** 

3. **Margins Impact from AI Investments**  
   **Q:** How will AI investments affect margins near term and long term?  
   **A:** Amy Hood noted that margins are improving faster with AI than in the last cloud cycle because they're building a consistent platform used both internally and with customers.  **[MSFT_3395040_11]**  This approach makes margins start off better and scale consistently.  **[MSFT_3395040_11]** 

4. **Meeting Demand Amid Capacity Constraints**  
   **Q:** Can you grow revenue without escalating CapEx?  
   **A:** Amy Hood confirmed they can see consistent revenue growth without elevated CapEx numbers, as they can throttle CPU and GPU investments based on demand signals.  **[MSFT_3395040_12]**  Satya Nadella added that it's important to manage CapEx spend across land, network, construction, and equipment, adjusting based on demand.  **[MSFT_3395040_12]** 

5. **AI Partnerships for Capacity**  
   **Q:** What's the strategy around AI partnerships to address capacity?  
   **A:** Amy Hood explained they have signed with third parties like Oracle to extend the Azure platform due to AI capacity constraints.  **[MSFT_3395040_15]**  Satya Nadella added that purchasing capacity from partners like Oracle may be more efficient due to shorter leases.  **[MSFT_3395040_15]** 

6. **Copilot's Broader Productivity Gains**  
   **Q:** Can Copilots replicate developer productivity gains for all workers?  
   **A:** Satya Nadella believes the productivity gains seen with GitHub Copilot for developers will extend to knowledge and frontline workers through M365 Copilot.  **[MSFT_3395040_16]**  Customers are adopting Copilot rapidly, with the number of customers with **10,000-plus seats doubling quarter-over-quarter**.  **[MSFT_3395040_11]** 

7. **Azure Growth Factors**  
   **Q:** Were there unusual factors affecting Azure growth?  
   **A:** Amy Hood mentioned that apart from slight softness in Europe and capacity constraints, there were no unusual factors; commercial bookings were better than expected.  **[MSFT_3395040_13]**  The Azure growth reflects demand signals and constraints.  **[MSFT_3395040_14]** 

8. **Gaming Growth Potential**  
   **Q:** How should investors view long-term growth in gaming?  
   **A:** Satya Nadella said their investment in gaming aims to have content across console, PC, and mobile, expanding their reach to where people play games.  **[MSFT_3395040_17]**  Amy Hood added that they're building a software annuity and subscription business with enhanced transactions and ownership of IP, which is valuable long term.  **[MSFT_3395040_17]** 

e9c2552845aff98e42567c6abb5739d33d76bca5ccdfea9888654f58dd2b3612

- **Microsoft's Generative AI offerings, such as M365 Copilot, are experiencing rapid growth**, with customers purchasing more seats and high adoption rates, making it the fastest-growing suite in M365 history. The number of customers with over **10,000-plus seats doubled quarter-over-quarter**.  **[MSFT_3395040_11]** ,  **[MSFT_3395040_10]**
- **Strong demand for Azure AI services is driving growth**, despite **capacity constraints**. Microsoft is investing in **capital expenditures** and partnering with third parties like Oracle to extend Azure's AI capabilities, indicating confidence in future growth.  **[MSFT_3395040_15]** ,  **[MSFT_3395040_14]** ,  **[MSFT_3395040_12]**
- **Microsoft's Gaming division has significant growth potential**, especially after the **Activision acquisition**, providing a broad content portfolio across console, PC, and mobile platforms. With over **500 million monthly active users**, the company aims to expand its gaming subscription services and monetize owned IP.  **[MSFT_3395040_17]**

5f8b007708d47595b6d3ae9c477b3801f56bd1de5f08a8ccb22d50e1c0da5499

- **Microsoft's capital expenditures are expected to ramp over 50% year-over-year to over $50 billion**, with media speculation of even larger spending ahead, such as a $100 billion data center, which may strain financial resources if returns don't materialize.  **[MSFT_3380792_10]**
- **Capacity constraints in AI infrastructure are limiting Microsoft's ability to meet current AI demand**, potentially impacting both current and future revenue growth.  **[MSFT_3380792_13]**
- **Shift in IT spending towards AI projects may cannibalize other Azure projects**, leading to potential stagnation in overall spending on Microsoft's platforms.  **[MSFT_3380792_12]**

88a4a6e75797ed765f4e7e9b355ed01852bdb65b1679510cc59cb2872ce5dc2d

- **Microsoft's significant investments in AI infrastructure are positioning it as a leader in AI**, capturing demand as customers build AI solutions on Azure, despite capacity constraints.  **[MSFT_3380792_10]**
- **Azure is gaining market share**, with AI adoption helping acquire new customers and drive usage of adjacent Azure services, leading to **balanced growth and stabilization in core cloud consumption**.  **[MSFT_3380792_11]** **[MSFT_3380792_15]**
- **AI is driving new spending across departments**, not just within traditional IT budgets, as organizations adopt AI to optimize processes in areas like customer service and marketing, expanding Microsoft's addressable market.  **[MSFT_3380792_12]**

d995c40b10c9347a1781759c5d9bc6c41a4bcd7ee1851f0682c611c0d3cbcece

- **Microsoft is facing significant external constraints** in scaling up their AI and cloud infrastructure, including **data center capacity and power availability**, which could impact their ability to meet demand and **affect growth**.  **[MSFT_3404745_10]**
- **High capital expenditure requirements** to support AI growth, including investments in data centers, power, and training infrastructure, could **weigh on Microsoft's financials**, especially if **demand doesn't materialize** as expected.  **[MSFT_3404745_10]** ,  **[MSFT_3404745_12]**
- **Significant investment of $13 billion in OpenAI** and recognizing losses under the equity method accounting could **impact Microsoft's earnings**, and there may be concerns about **over-reliance on OpenAI** and potential tensions in the partnership.  **[MSFT_3404745_13]**

e19834cf6dd1756fb149e69903decade0a1efc9f539b3ebf9f5a2a564503c76c

1. **Azure Growth Deceleration**  
   **Q:** What's causing Azure's growth deceleration beyond tougher comps?  
   **A:** Microsoft explained that the Azure growth deceleration from **34% in Q1 to low 30s in Q2** is primarily due to supply constraints, specifically supply pushouts in AI capacity coming online later than expected.  **[MSFT_3404745_11]**  Underlying consumption growth remains stable from Q1 to Q2.  **[MSFT_3404745_11]**  They expect acceleration in the second half as supply improves.  **[MSFT_3404745_11]** 

2. **Capital Expenditure Outlook**  
   **Q:** Will CapEx growth return to align with cloud revenue growth?  
   **A:** Microsoft stated that as demand continues to grow, **CapEx growth will slow**, and revenue growth will increase, bringing them closer over time.  **[MSFT_3404745_12]**  The pace depends on adoption, but over time, CapEx and revenue growth should get closer together like in the last cycle.  **[MSFT_3404745_12]** 

3. **OpenAI Partnership**  
   **Q:** How does Microsoft view its relationship with OpenAI given recent media stories?  
   **A:** Microsoft views its partnership with OpenAI as **mutually beneficial**, leading to great success for both companies.  **[MSFT_3404745_13]**  They continue to invest in infrastructure for OpenAI and innovate on top of their models, resulting in products like GitHub Copilot and M365 Copilot.  **[MSFT_3404745_13]**  Microsoft is committed to growing together and meeting demand from both OpenAI and broader customers.  **[MSFT_3404745_13]**  Their investment in OpenAI is accounted under the equity method, with a total investment of **$13 billion**.  **[MSFT_3404745_13]** 

4. **Supply Constraints Impacting Azure**  
   **Q:** Are supply limitations affecting Azure growth in Q2?  
   **A:** Yes, supply limitations due to **third parties delivering later than expected** are impacting Azure growth in Q2.  **[MSFT_3404745_16]**  The supply pushouts are mainly into the second half of the year.  **[MSFT_3404745_16]**  This constraint, along with revenue recognition benefits in Q1, affects the sequential growth difference.  **[MSFT_3404745_16]** 

5. **Copilot Adoption and Revenue Impact**  
   **Q:** How is Copilot adoption affecting financial results?  
   **A:** Microsoft reports strong momentum with Copilot, noting it's the **fastest-growing new suite in M365** history.  **[MSFT_3404745_18]**  Penetration in the Fortune 500 is significant, and customers are expanding usage.  **[MSFT_3404745_18]**  The impact of Copilot is seen in M365 Commercial revenue, but growth is somewhat masked by the addition of lower ARPU seats from frontline workers and small businesses.  **[MSFT_3404745_18]**  Going forward, the impact will be more visible in ARPU.  **[MSFT_3404745_18]** 

6. **AI Investments: Inference vs. Training**  
   **Q:** How does inference revenue factor into AI investments?  
   **A:** Microsoft's fastest growth to **$10 billion** in any business is driven by AI inference revenue.  **[MSFT_3404745_14]**  They focus on real demand from enterprises and their own products like GitHub Copilot, rather than selling GPUs for others to train models.  **[MSFT_3404745_14]**  The current inference revenue funds the next cycle of training investments.  **[MSFT_3404745_14]** 

7. **Constraints in AI Investments**  
   **Q:** What are Microsoft's internal and external constraints in AI investments?  
   **A:** Internally, capital outlay for training is limited by monetization of inference demand.  **[MSFT_3404745_10]**  Microsoft aligns training investments with Moore's Law advancements.  **[MSFT_3404745_10]**  Externally, rapid demand has led to constraints in data center capacity and power availability.  **[MSFT_3404745_10]**  They expect supply and demand to align better in the second half of the fiscal year.  **[MSFT_3404745_10]** 

8. **Evolution to Agents**  
   **Q:** How is Microsoft evolving from Copilots to agents?  
   **A:** Microsoft has developed a system including Copilot, Copilot Studio, agents, and autonomous agents.  **[MSFT_3404745_17]**  Copilot serves as the AI UI layer, while Copilot Studio allows users to build and extend agents.  **[MSFT_3404745_17]**  Autonomous agents can operate independently but interact with Copilot when needed.  **[MSFT_3404745_17]**  This entire stack is also available as building block services in Azure.  **[MSFT_3404745_17]** 

782df4d7b3bc9b468583a3d4d563541dea0b5c4b9b20c7a6a5452da0aecd65b1

1. **Azure AI Growth**

   **Q:** How will AI impact Azure revenue and optimization trends?

   **A:** Microsoft reports that AI workloads, primarily **inferencing**, are driving Azure growth. The period of extensive optimization without new workload starts has ended, and customers are now engaging in continuous cycles of building and optimizing workloads, including AI models. This shift contributes to Azure's revenue stability and growth.  **[MSFT_3371186_10]** 

2. **Margin Improvement Amid AI Investment**

   **Q:** How are margins improving despite significant AI investments?

   **A:** Microsoft has achieved margin improvements by pivoting its entire investment infrastructure toward **AI-first work** without significantly increasing headcount. Consistency across the tech stack and leveraging existing resources have created operational efficiencies. Additionally, substantial improvements at the **gross margin level** across products like Office 365 and Azure Core have contributed to overall margin growth.  **[MSFT_3371186_11]** 

3. **Generative AI's Impact on Tech Stack**

   **Q:** How will generative AI change the tech stack?

   **A:** Generative AI is expected to have a **foundational impact** on the tech stack. Core compute architecture, including power density, data center design, networking, and memory architecture, will change significantly. For example, Microsoft's **data layer with Fabric** separates storage from compute, enabling various compute models like SQL and Spark to operate on the same data lake. AI is redefining the cloud's infrastructure level and app model, leading to changes in every workload.  **[MSFT_3371186_12]** 

4. **AI Infrastructure and Capacity**

   **Q:** Can Microsoft meet AI demand without GPU constraints?

   **A:** Microsoft feels confident in its ability to meet growing AI demand. The company has **accelerated capital expenditures** to add capacity, investing in servers and new data center footprints. They have also utilized **third-party capacity** when available to help meet customer demand. This ongoing investment is aimed at addressing the pipeline of increasing AI workloads.  **[MSFT_3371186_13]** 

5. **Microsoft 365 Copilot Adoption**

   **Q:** What are the adoption trends for Microsoft 365 Copilot?

   **A:** Microsoft 365 Copilot is being adopted at a **faster rate** than previous suites like E3 and E5. Deployment is quick, and engagement grows over time, with users frequently utilizing features like **summarization**, **drafting**, **chat**, and **actions**. Companies are adopting Copilot both as a standard issue and through smaller group rollouts, leading to productivity gains and expanded usage.  **[MSFT_3371186_14]** 

6. **AI Services Driving Azure Growth**

   **Q:** What contributed to the 6-point AI services tailwind in Azure?

   **A:** The primary drivers of the 6-point AI services growth in Azure are customers adopting AI for **inferencing at the API level**, mainly through **Azure OpenAI** and OpenAI's own APIs running on Azure. There's also growth from **GitHub Copilot** usage and some smaller-scale training by third parties. Inferencing workloads are currently the main contributor to this growth.  **[MSFT_3371186_15]** 

7. **Office 365 ARPU vs. Seat Growth**

   **Q:** Will ARPU outpace seat growth for Office 365?

   **A:** While seat growth, primarily from small and medium-sized businesses and frontline worker scenarios, continues at a modest pace, **ARPU is expected to increase over time**. ARPU growth will be driven by transitions to higher-value offerings like E3 and E5, as well as the addition of **Microsoft 365 Copilot**, which will contribute to ARPU without affecting seat count. Therefore, ARPU may outpace seat growth in the near term.  **[MSFT_3371186_16]** 

8. **GitHub Copilot Pricing and ARPU**

   **Q:** How will GitHub Copilot pricing impact ARPU?

   **A:** **GitHub Copilot** is becoming essential for developers, akin to spellcheck in word processing. Microsoft sees an opportunity to capture value by enhancing developer productivity, which can justify higher software spending. As GitHub Copilot contributes to developer efficiency, it's expected that its pricing will reflect the value it provides, potentially driving **ARPU growth** in the tools segment.  **[MSFT_3371186_17]** 

09300f047347c27ef19cc0088ce8c07d2115c1e816cbdc40c53e234345a93d71

- **Increasing capital expenditures (CAPEX) to meet AI demand may impact future profitability.** Amy Hood stated that they expect "**accelerating capital expense to continue to be able to add capacity in the coming quarters**".  **[MSFT_3371186_13]**
- **Margin improvements may not be sustainable due to one-time items and ongoing investments.** Amy Hood noted that the margin improvement in Q2 was larger because of a charge a year ago, and that "**we still need to be investing**".  **[MSFT_3371186_11]**
- **Heavy investments in AI infrastructure may strain resources and not immediately translate into revenue.** Satya Nadella mentioned that "**most of what you see in the Azure number is broadly inferencing**" and that large model training is "**not in any of our either numbers at all**".  **[MSFT_3371186_10]**

78babf9d0f2e6ff24c9df6cf36acf25ab39696359db95de3cc17f58961dbd98c

- **Azure's AI services contributed an additional 6 points to Azure's growth**, driven primarily by strong adoption of **Azure OpenAI services** and inferencing workloads, indicating significant AI-driven revenue growth.  **[MSFT_3371186_10]** **[MSFT_3371186_15]**
- **Microsoft improved operating margins despite heavy investments in AI**, showcasing operational efficiencies and disciplined cost management, which led to margin improvements across products like **Office 365**, **Azure Core**, and the **devices portfolio**.  **[MSFT_3371186_11]**
- **Rapid adoption of AI products like GitHub Copilot and Microsoft 365 Copilot**, with **faster-than-expected customer uptake and high engagement growth**, points to strong future revenue streams and enhances Microsoft's position in AI-driven productivity tools.  **[MSFT_3371186_17]** **[MSFT_3371186_14]**

a1c8ca7cd5551704cf15a69b9b0d5beab7a82ca7063dd640272947c28d4306dd

1. **Azure AI Growth and Capacity Constraints**  
   **Q:** Why is Azure AI growth leveling off; are capacity issues affecting it?  
   **A:** Amy explained that **demand exceeds supply for Azure AI capacity**, especially on the inferencing side, which may have impacted the **7-point lift** to Azure growth from AI this quarter and will slightly impact next quarter as well.  **[MSFT_3380792_13]** 

2. **Azure Demand Environment and Customer Budgets**  
   **Q:** How is the demand environment for Azure amid customer budget concerns?  
   **A:** Satya stated that they feel very good about Azure's position, as it's becoming a **port of call for anyone doing an AI project**, attracting new customers and seeing traction in adjacent services like data and dev tools. They are also witnessing ongoing migrations to Azure.  **[MSFT_3380792_11]** 

3. **Generative AI Investments and CapEx Spending**  
   **Q:** How does Microsoft quantify opportunities behind large AI investments?  
   **A:** Satya emphasized allocating capital to maintain leadership in AI, both in training large models and managing inference demand. Amy added that the **opportunity is significant**, impacting every business process, and they will continue investing confidently, similar to their approach over the past decade.  **[MSFT_3380792_10]** 

4. **Azure Stabilization and Core Workload Growth**  
   **Q:** Can you expand on Azure's stabilization and core workload growth?  
   **A:** Amy noted a balanced activity between **new workload starts and optimizations**, consistent with what they've seen throughout the cloud transition. Core Azure showed **acceleration between Q2 and Q3**, driven by new projects not just in AI but across other workloads, including migrations from on-prem to cloud.  **[MSFT_3380792_15]** 

5. **Microsoft 365 Copilot and Capacity Constraints**  
   **Q:** How do capacity constraints impact Microsoft 365 Copilot and Azure AI growth?  
   **A:** Amy clarified there are **no capacity constraints on Copilots**, and their priority is to optimize capacity allocation to ensure per-user businesses can grow. Capacity constraints, when they occur, are more on the Azure infrastructure consumption side.  **[MSFT_3380792_17]** 

6. **AI Being Accretive to IT Spending**  
   **Q:** When will AI lead to net increases in IT spending?  
   **A:** Satya believes that as AI tools like Copilot become standard, they shift operational expenses into tool spending, providing operating leverage. This requires cultural and process changes within organizations, and while it may take time, the **rate of adoption is faster than any seen previously**, evidenced by Copilot's rapid uptake.  **[MSFT_3380792_12]** 

7. **Copilots Competition and Partner Strategy**  
   **Q:** How will Microsoft's Copilots strategy adapt to industry competition?  
   **A:** Satya explained that Microsoft's Copilot integrates deeply with business processes and applications like ServiceNow, SAP, and Salesforce. They are building a Copilot that **acts as an orchestrator of other Copilots**, bridging knowledge worker tools with business applications to enhance productivity.  **[MSFT_3380792_14]** 

8. **Data Quality Issues in GenAI Adoption**  
   **Q:** Is data quality a barrier to leveraging new GenAI capabilities?  
   **A:** Satya acknowledged that successful AI deployment requires good data for reasoning and grounding. He noted that tools for addressing data quality and model tuning are maturing, enabling companies to integrate their data with AI projects effectively, especially in enterprise scenarios.  **[MSFT_3380792_16]** 

5435341ef3391032f33bf6e4b633491c5a64a13c6d6a8fe794ce08a2047692be

- **Microsoft's strategic partnership with OpenAI is driving AI leadership and growth**, as both companies have benefited significantly, with Microsoft building differentiated IP and driving revenue momentum.  **[MSFT_3404745_13]**
- **Rapid adoption of Microsoft 365 Copilot is accelerating revenue growth**, with nearly **70% of the Fortune 500** now using it, and customers adopting it faster than any previous Microsoft 365 suite.  **[MSFT_3404745_18]**
- **Microsoft's AI business is on track to reach a $10 billion annual revenue run rate**, making it the fastest-growing business in the company's history, driven by strong demand for AI services.  **[MSFT_3404745_14]**

61583fd5c81451016259c0351bfbef017f2b82e0e8e2fedb53ba907285e7468a

- **Persistent capacity constraints in AI and Azure are expected to continue into Q4 and H1**, which may limit growth opportunities. Amy Hood stated that "capacity constraints, particularly on AI and Azure will remain in Q4 and will remain in H1".  **[MSFT_3395040_13]**
- **Softness in European geographies on non-AI consumption impacted Azure growth**, contributing to revenue being at the lower end of expectations. Amy Hood mentioned "some softness we saw in a few European geos on non-AI consumption really made the difference".  **[MSFT_3395040_13]**
- **High capital expenditures raise concerns about return on investment**, with analysts questioning whether Microsoft needs to keep growing CapEx at elevated rates and whether the monetization will match these investments.  **[MSFT_3395040_10]** **[MSFT_3395040_17]**

7a6ef85bce169e9eb45154d8f6c7a7fcb55afaab19eda8d3b5acc32142d60af3

Microsoft Corp (MSFT)

Financials