Microsoft Corporation

Welcome to the Microsoft Fiscal Year 2020 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset prior to pressing the star keys. If anyone should require operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. I would like to turn the call over to Mike Spencer, General Manager of Investor Relations. Thank you. Please proceed.

Good afternoon. Thank you for joining us today. On the call with me are Satya Nadella, Chief Executive Officer, Amy Hood, Chief Financial Officer, Frank Broad, Chief Accounting Officer, and Keith Oliver, Deputy General Counsel. On the Microsoft Investor Relations website, you can find our earnings press release and financial summary slide deck, which is intended to supplement our prepared remarks during today's call and provides a reconciliation of differences between GAAP and non-GAAP financial measures. All growth comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted. We will also provide growth rates and constant currency when available as a framework for assessing how our underlying business is performed, excluding the effect of foreign currency rate fluctuations. Where growth rates are the same in constant currency, we will refer to growth rate only. We will post our prepared remarks to our website immediately following the call until the complete transcript is available. Today's call is being webcast live and recorded. If you ask a question, it will be included in our live transmission, in the transcript, and in any future use of the recording. You can replay the call and view the transcript on the Microsoft Investor Relations website. During this call, we will be making forward-looking statements, which are predictions, projections, and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the risk factor sections over Form 10-K, Forms 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. And with that, I'll turn the call over to Satya.

Thank you, Mike, and thanks to everyone on the phone for joining. We're off to a strong start in fiscal 2020, delivering $33 billion in revenue this quarter. Our commercial cloud business continues to grow at scale as we work alongside the world's leading companies to help them build their own digital capability. Microsoft provides a differentiated technology stack spanning application infrastructure, data and AI, developer tools and services, security and compliance, business process, productivity, and collaboration. For each of these areas, first, each of these areas represents secular long-term growth opportunity. Second, we are delivering best-in-class innovation and openness in each layer. And third, we offer unparalleled integration and architectural coherence across the entire stack to meet the real-world needs of our customers. Now I'll briefly highlight how we're accelerating our progress in innovation starting with Azure. Organizations today need a distributed computing fabric to meet their real world operational sovereignty and regulatory needs. This quarter we opened a new data center region in Germany and Switzerland. And in India we're bringing the power of Microsoft Cloud to millions of small businesses through our partnership with Jio, one of the largest mobile carriers in the country. Every Fortune 500 customer today is on a cloud migration journey, and we are making it faster and easier. Just this week, we announced an extensive go-to-market partnership with SAP, making Azure the preferred destination for every SAP customer. And our partnerships with VMware and Oracle also bring these ecosystems to our clouds. We're extending beyond the cloud to the edge, enabling customers to get real-time insights where data is generated while ensuring security and privacy. And we are seeing traction in every industry, from Azure Sphere securely connecting Starbucks coffee machines to Azure Stack enabling scenarios from smart factories and modern compliant banking to mobile healthcare in remote areas. We're reimagining customers' data estates for the cloud era with new, limitless capabilities. Azure SQL Database brings hyperscale capabilities to relational databases, and Azure Cosmos DB is a low latency, high availability database for globally distributed applications of any data type. The quintessential characteristic of every application going forward will be AI, and we have the most comprehensive portfolio of AI tools, infrastructure, and services. Azure AI now has more than 20,000 customers, and more than 85% of the Fortune 100 companies are using Azure AI in the last 12 months. In healthcare, Novartis chose Azure AI to transform how medicines are discovered, developed, and commercialized. Nuance will rely on our cloud to power the patient exam room of the future where clinical documentation writes itself. And Humana is using Azure AI to build personalized healthcare solutions for its more than 10 million members. We're also pushing the bounds of how computers and AI can generalize learning beyond narrow domains, collaborating with OpenAI on a supercomputing platform to train and run AI models. I'm excited about our partnership and our collective pursuit to democratize AI and its benefits for everyone. Now to developer tools. The rise of digital IP creation in every organization means developers will increasingly drive and influence every business process and function, and GitHub is where they go to learn, share, and collaborate. GitHub has grown to more than 40 million developers, up more than 30% since our acquisition a year ago, and more than 2 million organizations use GitHub, including the majority of the Fortune 50. At Ford Motor Company alone, 8,000 employees use GitHub to innovate and collaborate with a vast ecosystem of third-party software developers. Our acquisition of semantic code analysis engine Semele this quarter strengthens our security capabilities, enabling developers to more easily find vulnerabilities in large open source code bases. Now let's turn to our workflow cloud power platform. Automating workflows across every function will be key to productivity gains for every organization. We are building power platform as the extensibility framework for both Microsoft 365 inclusive of Microsoft Teams, as well as Dynamics 365. It brings together low-code, no-code app development, robotic process automation, and self-service analytics, enabling everyone in an organization to build an intelligent app or workflow where none exists. Power Platform already has more than 2.5 million monthly active citizen developers. Power Apps helps domain experts, those closest to the business problem, to design, build, and publish custom apps fast. And 84% of the Fortune 500 have already created power applications. Now let's talk about security. Rising cyber threats and increasing regulation means security and compliance are a strategic priority for every organization. We have a comprehensive offering across identity, security and compliance, spanning people, devices, apps, developer tools, data, and infrastructure to protect customers in today's zero trust environment. It starts with Azure Active Directory Premium used by more than 100,000 organizations for identity, access management, and SaaS application security across heterogeneous environments. It builds with information protection and cloud security with Microsoft Defender Advanced Threat Protection, and now with risk-based vulnerability management. And it extends to Azure Sentinel, now broadly available. Sentinel is a cloud-first service that analyzes security signal at massive scale across the entire organization, using AI to detect, investigate, and automatically remediate threats. We'll share more about our expanding opportunity in security at our Ignite conference in the next few weeks. Now on to business applications. Dynamics 365 is the only AI-powered business cloud that gives customers a 360-degree view of their business. From marketing and sales to finance and operations to unified data and unlock insights, it enables every level of organization to move from reactive siloed transactional processes to proactive, repeatable, and predictable business outcomes. This quarter, we introduced Dynamics 365 Commerce, a new omnichannel solution to unify back-office, in-store, and digital experiences and deliver personalized content wherever shoppers are. Dynamics 365 AI Insights app ingests data from any first-party or third-party source, freeing data from systems of record to power modern systems of engagement and intelligence. New Dynamics 365 Product Insights provides organizations like Ecolabs real-time view of how customers are using their products to maximize customer lifetime value. And Dynamics 365 Connected Store helps retailers like Marks and Spencer's analyze observational data to optimize in-store shopping experience. We're enabling our customers to bridge the physical and digital business processes with our mixed reality cloud spanning HoloLens 2, Azure Mixed Reality Services, and Dynamics 365 applications. Pharmaceutical company Patheon, for example, is using Dynamics 365 guides along with HoloLens 2 to reimagine training for its employees. Now to LinkedIn. We saw record levels of engagement again this quarter across the platform. Marketing Solutions remains our fastest-growing segment, up 44% year-over-year, as marketeers leverage our community-based tools to connect with LinkedIn's nearly 660 million members. We continue to innovate across our talent portfolio, including Talent Solutions, Talent Insights, Glint, LinkedIn Learning to help every organization attract, retain, and develop best talent. LinkedIn Skills Assessment is a new way for members to showcase their proficiencies and become more discoverable to recruiters. Now turning to Microsoft 365 and Surface. Earlier this month, we unveiled our broader Surface lineup to date, including two new dual screen devices coming next year. We are reimagining every layer with how we infuse AI from silicon up to device form factors and the role of operating systems to help people be more productive and creative in a multi-sense, multi-device world. We will continue to invest across form and function to new create categories that benefit our entire OEM ecosystem. And our expanded partnership with Samsung builds on our promise to help people be more productive on any device anywhere, bringing OneDrive outlook in your phone and more to new Samsung devices. Microsoft 365 is the world's productivity cloud and the only comprehensive solution that empowers everyone from the C-suite to first line workers with an integrated secure experience on any device. We're infusing AI across Microsoft 365 to help make work more intuitive and natural. New presenter coach in PowerPoint makes anyone a better public speaker. New capabilities in Word enable professionals to transcribe or record audio files while staying in the flow. Video is more searchable, shareable, and first class within Microsoft 365 with Stream. And new inking capabilities let users create and reply to comments from anywhere using pen or voice. Microsoft Teams. continues to gain traction, bringing together everything a team needs, chat, voice, meetings, collaboration with the power of office and business process workflow into a single integrated user experience, all with the highest security and compliance. Teams keeps all of your work, conversations, and meetings in context, eliminating the need to bounce back and forth between different apps with features like integrated calendaring, one touch to join meetings from your phone, and we are broadening our opportunity with 2 billion first-line workers worldwide, adding priority notifications, role-specific targeted messages, and the ability to clock in and clock out of a shift. Our differentiated offering is driving usage, making Teams the category leader. More than 350 organizations now have more than 10,000 users of Teams. More broadly, all this innovation is fueling growth, Office 365 commercial monthly active users surpassed 200 million this quarter. The leading organizations like Cerner, Chevron, and the Lego Group are choosing our premium Microsoft 365 E5 offerings for their advanced security and productivity experiences. Finally, gaming. In gaming, we're investing in content, community, and cloud services to expand our opportunity with two billion gamers worldwide. We saw record Xbox Live monthly active users with strength both on and off console in mobile and PC, and continued growth for Game Pass subscriptions. Gears 5 saw more than 3 million players in its first weekend alone. Ten years in, Minecraft is stronger than ever with record revenue and usage, and we are bringing the franchise to new audiences with Minecraft Earth. Finally, just last week, we started trials of Project xCloud so gamers can play games wherever and whenever they want on any device. In closing, we are accelerating our innovation across the entire technology stack to deliver new value for customers. We're investing aggressively in large markets with significant growth potential, and it's still early days. With that, I'll hand over to Amy, who will cover our financial results in detail and share our outlook, and I look forward to rejoining for your questions.