Greetings. Welcome to Microsoft fiscal year twenty twenty six, quarter earnings call. At this time, I’ll participate in our normal call. A question and answer session will follow the presentation. If anyone requires a press release, please press the audio telephone keypad. After my press is recorded, the call will be closed. During this call, we discuss general business operations, growth, and financials. We discuss the quarterly performance of the call. After the conclusion of this discussion, we will end the call. On the call today, we will call the attendees. Chairman and chief executive officer, Chief financial officer, and chairman, chief counsel and corporate secretary. On the call today, we will discuss the following topics: earnings call, financials, and expectations. More detailed slides will be available on the Microsoft Investor Relations website. We will call the common treasury today. On the call today, we will discuss the following topics: financials, expectations, and any questions. We will not be calling any follow-up questions. You can replay the call and replay on Microsoft Investor Relations website. During this call, we will make forward-looking statements, which are predictions, projections, or estimates about future events. These statements may contain expectations, assumptions, and other forward-looking statements. We do not make any use to state any forward-looking statements. And with that, I’ll call the call to order. Thank you very much, Jonathan. We are record quarter power by continued strength Microsoft with exceeding fifty four billion dollars in revenue, twenty nine percent year over year. Our analysts passed seventy billion dollars ARR up one hundred twenty three percent. We are beginning to move more quickly towards platforms that will change the tax stack as they implement the coming developments. This will drive expansion and change the creation of cross industry economy. To capture opportunities during these two periods, we are building more cloud-native infrastructure and computing. Second, we are building high value genetic systems across domains, such as security, these two layers will force each other and be focused on driving competitive value differences across the cross industry. Today, we are focused on Microsoft starting with infrastructure. We are trying to build the tax stack from these lines to select the systems software and hardware together as well as optimization. This translates to operational gains. We reduced our line for new users by nearly twenty percent in the beginning of year. After what data center consumption came online, the month six years get a large direct revenue. And we delivered forty percent growth in infrastructure for most used models across platforms. We built software and hardware solutions. All we added another gigawatt capacity this quarter and made on track to double overall footprint in just years. We moved aggressively to add capacity line to the month six years and we announced new data center across for continents. We also continue to modernize with our first five innovation lines. The latest from the end of the year, across fleet millions of servers powered by customer network security solutions, including Azure, as well as our smart CPU’s accelerators. A month hundred dollars accelerated off over thirty percent improvement compared to the previous month’s line. We now have one hundred twenty five dollars. We are now one hundred twenty five dollars. We are now one hundred twenty five dollars. We are now one hundred twenty five dollars. We are now one hundred twenty five dollars. We are now one hundred twenty five dollars. We are now one hundred twenty five dollars. We are now one hundred twenty five dollars. We are now one hundred twenty five dollars. 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The main business that’s now continuing investments share are the materially that benefits the tax profile operating income increased four percent and one percent in constant currency, and operating margin increased three year twenty eight percent. Now moving to two four outlook, which last six billion dollars is expected to be less based on current respect tax increase revenue growth roughly one point improvement in this process and more personal computing with no impact to intelligent cloud overall impact revenue is expected to be less than one point, and tax increase gross revenue roughly one with no impact operating gross starting with commercial business, commercial bookings when adjusted for impact open eye respect gross are growing three base with consistent execution and core new deals growth against eight six percent prior year comparable, market cloud growth margin percentage should be roughly sixty four percent. Now, year to year, driving continuing investments and increased cloud capacity usage, just with we now business model transition, given cloud that will rising with usage value takes effect on first of this year. Now, second guidance, positive business process is expected revenue thirty seven to thirty seven point three billion U S dollars or growth of thirteen percent, and increase commercial cloud are adjusted basis with revenue growth to be between fifteen and sixteen percent in constant currency, when underlying prior year comparable that benefits from two points of entry revenue recognition, and our process respect revenue growth to be between thirteen fourteen percent in constant currency, building on the cloud momentum with solid usage, we expect sales to increase sequentially, which will continue our growth, and sixty five commercial products revenue should grow in single digits from prior years that benefits from higher than expected twenty twenty four tax loss percent. As reminder, and sixty five commercial products includes components that can be variable due to growing revenue recognition tax, and sixty five to two hundred cloud revenue should be below twenty percent range, down sequentially as we start to have the benefit from last year’s price increase, growth will be driven by our two and increase subscription volume, growing then respect revenue growth approximately ten percent, and then make sixty five respect revenue growth to be below double digits down sequentially with impact from prior year comparable that benefits from two points of entry revenue, for example, we expect revenue thirty seven point nine five to thirty eight point two five billion U S dollars or growth of twenty seven to twenty eight percent. And as we continue to focus on accelerating the delivery capacity and increasing efficiencies, and therefore we expect two four revenue growth to be between thirty nine and four percent in constant currency, against strong prior year comparable that includes accelerating growth, growing customer demand to exceed supply, and we continue to balance incoming supply and allocate year, against other higher level priorities, first priority application are the end of replacement. As reminder, year year after growth and very quarter based on capacity timing and contract mix, and our performance business respect revenue decline in single digits with ongoing customer just cloud growths, and more personal computing, we’re looking strong prior year comparable, now getting impacted by demand and impacted by memory prices, and focusing on delivering value to consumers, therefore we expect revenue to be eleven point seven five to twelve point two five billion U S dollars, when those revenue should decline the highest roughly six point seven from prior comparable that benefits from Windows ten support, six point from inventory levels that we expect down for quarter, and six point from lower PC market as prices increase due to memory costs, range of the ten dollars remains wider than normal. Therefore, Windows eleven devices revenue should decline the mid high teens, such average higher revenue growth should be in the high single digits driven by revenue growth and volume with continued year driving and and export and services, respect revenue should decline low teens reflecting prior year comparable that benefits from stronger first priority content as well as recent price changes for Xbox games, as we focus on delivering value to gamers, our revenue should decline year year, therefore at the company level, revenue should be between eight six point seven and eight seven point eight billion U S dollars or growth of thirteen to fifteen percent, with accelerating commercial growth, roughly set by consumers, our two four outlook operating expenses include roughly one hundred million dollars in one time cost, particularly in sales and retirement program. Therefore, respect our twenty nine point four to twenty nine point six billion U S dollars or growth of twenty two to twenty three percent, including roughly three hundred fifty million dollars from the retirement program, and operating spend nineteen point three to nineteen point four billion U S dollars or growth of approximately seven percent, including roughly five hundred fifty million dollars from the retirement program, even as we invested through the year in still capacity driven cloud platforms and services demand and includes of these one time costs, we expect our twenty twenty six operating margins to be about one point year year, excluding any impact from investments open eye, other investment expenses expect roughly negative one hundred million dollars, and interestingly more offset by expense, which includes entertainment related disbursements, we expect adjusted two four effective tax rate to be approximately nineteen percent. Next capital expenditures, we expect then to increase over forty billion dollars as we continue to bring more capacity online, the supply increasing includes roughly five billion dollars from higher component pricing, as well as the impact from sales increases with added ability given for value for corporate and period investments, and we expect next year to remain similar to year, for calendar year twenty twenty six, we expect roughly a hundred and ninety billion dollars in capital expenditures, which includes roughly twenty five billion dollars from the impact of higher component pricing, we remain confident in our current investments given higher demand and increasing product usage, as well as efficiencies already driving a profitable form, even with additional investments, and continue to bring GPU CPU and storage capacity online faster, we expect main stream list to twenty twenty six, despite these constraints, and continue to balance incoming supply, we expect our growth to show modest acceleration in second half of the calendar year compared with first half. Now, like the year closing thoughts as of next fiscal year first, we continue to evolve our operations to increase our pace and agility, and therefore we expect our growth year operating expenses to be in mid high single digits reflecting investment R and D, inclusive AI investment and compute and talent to accelerate product innovation. Next, as reminder, we will strong prior year comparable impacted Windows ten support elevated inventory levels, as well as increase office and service tax reporting. And finally, we remain focused on delivering platform that enables customers to build and run solutions, and driving innovation our first priority application and services, and therefore we expect another year of double digit revenue operating growth of twenty seven, including we are committed to delivering innovation, help customers create new business value, as the final quarter of our fiscal year, with that being said. Next, thank you. How do we start with the first half of your question? Please, on question. Operation please questions. Please join us. We will start with question one on your call from today, and our first question will be your question. You may proceed to question two. For this particular question, maybe this is the first answer before person starts. And our first question comes from one of Keith’s with more Stanley, please. Thank you. Thank you for taking the question. And Greg, another new follower, the my first question for number is two for us, and we have most people’s question. One of Roger’s question on demand, we’ve been talking about demand for a while, we’ve been seeing a surge in demand for days, and we’ve been seeing in your business, many short term increases of demand, how that demand translates to commercial and how that might be changing and differentiating cycles between different companies and that, and all that new business, and longer term business, and that, and what, what this man will require, and another way, it’s all this because while we’ve seen from my perspective, there’s a lot more I expect innovation to increase and future to really increase. So, how does he want you to see the increase? Where do dollars are coming from? Thank you. You want to start? Well, why start with the first half of your question? Please, around how does the model impact bookings? I think it’s really important. Why have normal single digit impact bookings this year? They are more maybe more multi year commitments, and that have some volatility. But I think you take that back, which is like Roger question asking about the talk to you, um, you’re thinking through, you think models, and store for um, and proceed business, and suddenly, are you thinking about getting more and and more productive, and seeing value in that, more work, and agent, and when I think about models, I start thinking about um, licensing vs consumption business, and really applying more broadly than seeing um people thought about that, and so it starts to mean that over time bookings will also look a little different. It’ll consist still have that for seat licensing, but also have um the just like you said, and it may not all flows through bookings in the same way. Um, you’ll just build for you, and that you see higher customer satisfaction levels. Then you’ll keep building and keep using agents and direct that you will grow to your business. Um, and I think probably how we just start to think about that transition um, probably may not be as short term bookings. I think we’re starting how we think about um the opportunity I would probably think about more like, yeah, it’s going to be a big, big, big, big change. And also, a big, big, big, big change. Will be a huge, huge, huge, huge change. Will be a huge, huge, huge, huge change. Will be a huge, huge, huge, huge change. Will be a huge, huge, huge, huge change. Will be a huge, huge, huge, huge change. Will be a huge, huge, huge, huge change. Will be a huge, huge, huge, huge change. Will be a huge, huge, huge, huge change. Will be aAnd of course, just the acceleration. We really did an acceleration. Usually, we find it much faster, usually get into production. But when we go through that, you also tend to focus on the acceleration. That’s acceleration from first order to the acceleration from the second order. I do believe that one of the real focuses that we all have is that, and the way that we start to question the data and the data which is the new usage model, we have to make sure you deliver incredible high value customers. So what we need to do is make sure the focus starts with customer usage, the value, if that creates value, positive outcomes. Then the next question here and the overall agreement. Thanks for. All right, next question please. The next question comes from one more more with more questions. Please proceed. Thank you, thank you for the question. And gradually, on the the quarterly and the the quarterly growth, some of the commentary made on guidance. Um, we’d like to drill a little bit into the question of um of the factors and the making obviously the fourth quarter’s growth, the first quarter’s growth, even faster than the overall business, but the business that makes the business very resilient, the first quarter’s growth, the second quarter’s revenue growth, the third quarter’s revenue growth. You some color about how the company’s outlook, you know, how much needs to be spent on replacing equipment or first party, or do that as we look for the the quarters, especially the first that the quarters will continue to be very real, and the more is will be good. Thank you. Thanks for letting me start with our which even aside from first rates, we talk about acceleration from where we are, which is the first ninety-four and twelve number of the second half of the year. We start to see that first rate on the second we have the amount of being done on sort of that which is really the thing that correlates with the positive is the third that number is that’s going into fifteen after four months, kind of from from these contracts, kind of get to the end. Um, yeah, I think in so many ways, this just by the last cycle and when the um is expensive and when sources generally um are growing, seems to be the trend of supplying demand. Um, it just gives you a lot of confidence, um, and overall, um, certainly and starting with the fourth side, then what you’re asking is whether as we see the usage consumption model more at the service layer, um, are we starting to see that that I think if you look at um the last quarter, I think we saw some acceleration, which is good. And we see five quarter number this quarter, um, guiding for that to be better, and then for um that fourth quarter, we see why I think the first quarter’s asking more asking about almost start to see that sort of revenue growth. Um, and I think that’s the first place we need to also point to it. I think you start to see um in how rates, revenue growth rates, usage consumption models, um, acceleration, the top line, and then in general, I think continue to see that rates, and so we think um, extending that amount of all putting into production, seeing some deliver turns and revenue having the focus is, and I think so far, really the most important is still the delivery, that fourth quarter, we see the acceleration, see the revenue growth. Um, I do feel very about um that number and our focus will be how much that we can pull in as fast as we can. I just want to be transparent that we have revenue that sitting there that can be grown faster. Or, efficiency, the focus needs to be on doing that. Um, and then the contracts quickly can and improving the revenue quickly as well. I mean, just that one point here, which is getting comfortable, one of the things that we’ve learned even in the last two years, so now I and the number of more questions comes into this is where is the gap and the quarterly economics gap and this and it’s fascinating to be able to say something most exciting that we’re looking at is the quarterly growth. And so we see that means we have a strong growth in knowledge work, holding sixty which are the gap, and then you couple that with the right business model, which is really interesting, much more interesting users, plus usage, and then you even the focus we have that sort of is true line, and if anything, one more we are getting gaps to get the gaps in time for the increase in usage, which is going to be very key. And you have the more capability, the expansion, so you know we think about even more next out. It sort of finding the world under the water, and that just goes the model short, and so you have to be ready for it. Extremely, it really do great, and again, gradually more. Thanks much. All right, next question please. The next question comes from one more more questions. Please proceed. Hi, thank you. What’s that? I just want to hear some of your questions. Hi, give me the technical question. Thanks for the question. Thank you for the question. So I think, with regard to how to be able to combine, um, the multiple different factors knowledge work and some of the data, the knowledge that you’re combining, but if you sort of focus on and to combine the the four factors and the shape of the product, how is you going to do this? That that now we’re using all the factors that sort of one factor, then there is all the things like research and analysis that you use with that revenue growth means that revenue’s building, building, and now couple that you now have this more factors, things like technology or session and combining these two factors you do, you have questions, you get insights, you ask it, you even generate that you open that that will excel, all going further to find it so another way to continue the conversation. And then of course, you now have even more factors, you’re using different types of tasks, you know, you’re interacting with, but you’re dealing with tasks with people. So these all the factors and one of the most interesting things to keep in mind is the usage is the simplest. So this is not even the previous question. Are people using it? Finding useful, and this is like they have it in and usage. The other thing is important to think about what makes these factors useful is intelligence and intelligence is the function of two things. It’s intelligence having multiple models coupled to that, that the meanings, the documents, the emails, the teams, and all of that. When they all that reach, either constantly updates, and this is not something that they is the most important business company that’s constantly changing and setting. That’s the context. The models brought together with the hardest that’s multi model, this is actually the same thing we do in general. We do in analysis by doing this and see what’s going to do the couple of hardest from the models, and then have the context which is true because customer will use multiple models that to look at the core context that grading up all the data, the W. These are going to be the most valuable to you want to generate using all the checks with folks that the type of things that you want users to access to, and so that’s really the and then couple that with the business model, usage, plus usage, usage, pricing, and see what’s actually happening, and see that all of that. Thanks, thank you, everyone. All right, next question please. The next question comes from one more more questions. With more questions, please proceed. Yes, thanks for the question. Maybe I’ll start with you. Talk a little about the changes open environment. If anything, we should be aware of model perspective, model perspective, which changes where we were maybe a couple weeks ago, and I guess for you, you see like opportunity for the first time from model perspective. You and take away, we should be thinking about where we’re going to land with this new framework. Maybe I’ll start with you all. I feel very about partnership with open AI. I’m always very focused on partnership and sharing that the win-win approach. And that’s how you can maintain partners. This is I start with, I think the most obvious we have the model, what we uh with all our efforts that we will access to all the tools we’ve learned to explore and learn more about and that’s wonderful. And that sort of one part of the second part of course is the that customer value, the large customer value, not just in our accelerated side, but also all the other components. And so we want to do well, and then of course we have our equity and so overall, the construction they grow and we grow, and customers also have this expectation in terms of the more we’re sitting, therefore we’re all the partners, but I feel very very very happy. Yeah, I think the only thing to keep in mind is having our revenue, especially through twenty twenty three, and the fact that is a real positive. And then point out, let’s say point out the I P, the about twenty twenty three, with the most number of shares. Thank you. Thank you. All right, we have one more question. The last question comes from one researcher with more questions. Please proceed. I want to follow up and answer your question. What about the question of how can I see models and functions? I mean, the last question is very important. We see how they’re totally made. Maybe I want to challenge you. You want to challenge with how to dominate these consumption companies? Double down on that. See, I’m seeing increasingly customers want ability of a model that is seeing all the usage is that actually running right? Yeah, I’m going to understand how it’s really different. You。
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