Microsoft Corporation

Greetings and welcome to the Microsoft Fiscal Year 2020 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Mike Spencer, General Manager of Investor Relations for Microsoft. Thank you. You may begin.

Good afternoon and 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 reconciliation of differences between GAAP and non-GAAP financial measures. Unless otherwise specified, we will refer to non-GAAP metrics on the call. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's third quarter performance in addition to the impact these items and events have on the financial results. All growth comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted. We also provide growth rates in 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 transition, 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, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and in the risk factor section of Form 10-K, Forms 10-Q, and other reports and filings with the Security 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. We delivered double digit top line and bottom line growth once again this quarter, driven by the strength of our commercial cloud. As COVID-19 impacts every aspect of our work in life, we have seen two years worth of digital transformation in two months. From remote teamwork and learning to sales and customer service to critical cloud infrastructure and security, we are working alongside customers every day to help them stay open for business in a world of remote everything. There is both immediate surge demand and systemic structural changes across all of our solution areas that will define the way we live and work going forward. Our diverse portfolio, durable business models, and differentiated technology stack across the cloud and the edge position us well for what's ahead. And now I'll highlight our innovation and momentum, starting with modern work. We are empowering people and organizations for a world of secure remote work and learning with Microsoft 365 and teams. As work norms evolve, organizations are realizing they need a comprehensive solution that brings together communications, collaboration and business process built on a foundation of security and privacy. Microsoft Teams supports multiple communications modalities in a shared workspace. It's the only solution with meetings, calls, chat, collaboration, and with the power of office and business process workflows in a single integrated user experience with the highest security as well as compliance. Teams keeps all your work in communication, conversations, documents, whiteboards, and meeting notes in context. It helps people collaborate inside and outside meetings, making them more efficient, effective, while reducing fatigue. We're accelerating Teams innovation, adding new capabilities each week, and now support meetings of all sizes, meetings that scale from 250 active participants to live events for up to 100,000 attendees to streaming broadcasts. We saw more than 200 million meeting participants in a single day this month, generating more than 4.1 billion meeting minutes. Teams now has more than 75 million daily active users engaging in rich forms of communication and collaboration. And two-thirds of them shared, collaborated, or interacted with files on Teams. And number of organizations integrating their third-party and line-of-business apps with Teams has tripled in the past two months. In healthcare alone, there were more than 34 million Teams meetings in the past month. New capabilities enable providers like Northwell Health, New York State's largest health provider, to deliver first-class telehealth. And the NHS in the United Kingdom is using Teams to ensure staff have the tools they need to do their vital work. Now that home offices are doubling as home schools, educational outcomes are at a premium. The combination of Teams and curriculum in OneNote and social learning with Flipgrid give teachers a complete remote learning solution so that they can improve student outcomes. More than 183,000 educational institutions now rely on Teams. In the United Arab Emirates, more than 350,000 students are using Teams. In Italy, the University of Bologna chose teams to move 90% of their courses for 80,000 students online in just three days. 20 organizations with more than 100,000 employees are now using Teams, including Continental AG, Ernest & Young, Pfizer, and SAP. Just last week, Accenture became the first organization to surpass half a million users, and we expanded our partnership with NFL to include Teams, which powered their first-ever virtual draft. More broadly, we continue to see momentum with organizations across Microsoft 365. Office 365 now has 258 million paid seats. Usage of Windows Virtual Desktop tripled this quarter as organizations deploy virtual desktops and apps on Azure to enable secure remote work. From Interpublic Group and Kohler to Vodafone, the world's leading companies are choosing Microsoft 365 as their productivity cloud. And we continue to see strong demand for our premium offerings from customers like MasterCard, Autodesk, AARP, and Coca-Cola. We chose not only Microsoft 365, but Dynamics 365 and Azure in a five-year multi-cloud agreement. We're also expanding our opportunity with consumers with Microsoft 365 Personal and Family, which now has more than 39 million subscribers. And we're bringing teams to consumers for the first time so that they can stay connected with family and friends. Windows 10 now has more than 1 billion monthly active devices, up 30% year over year, and we are seeing demand for Windows 10 PCs from small screens to large screens to dual screens. Now on to security. Security remains a strategic priority for every organization, and the shift to remote only increases the need for integrated end-to-end zero-trust security architecture that reduces both cost and complexity. Third-party analysts affirm our leadership as the only company that offers comprehensive identity, security, and compliance solutions. This quarter, we introduced new capabilities to protect customer data no matter where it resides. Microsoft Defender ATP now supports Linux in addition to Windows and Mac OS, with iOS and Androids to come soon. And new insider risk management in Microsoft 365 helps organizations detect and mitigate malicious activity. The world's largest hedge fund, Bridgewater Associates, is using security services built into Microsoft 365 to protect employees and core services in a zero trust environment. Retailer Asos is using Azure Sentinel to detect and mitigate threats. And the need to secure remote identity and access management is increasing demand for Azure Active Directory, now at 300 million active users. Now on to developer tools. We have the most complete developer tool chain independent of language, framework, or cloud from GitHub to the world's most popular code editing tool, Visual Studio Code. And our developer relevance is increasing. For over a decade, developers have come together remotely on GitHub to build the world's software. As of today, we have 50 million developers on GitHub. From Twilio to the US Department of Veterans Affairs to more than 10,000 engineers at Daimler, GitHub is where developers go from idea to code and code to cloud. Developers are also collaborating on mission-critical projects from tracking the spread of COVID-19 to implementing contact tracing to helping expand access to personal protective equipment. We are bringing GitHub to even more developers, making core features free for the first time for teams of any size. And our acquisition of NPM makes GitHub the largest software repository for JavaScript. Now onto Power Platform. COVID-19 has accelerated the urgent need for every business to create no-code, low-code apps and workflows in hours or days, not weeks or months. Power Platform is already used by more than 3.4 million citizen developers and business decision makers. If you can create an Excel spreadsheet, you can create an app, build a virtual agent, automate a workflow, analyze data, and share insights in real time. In just two weeks, Swedish Health Services, the largest non-profit health provider in the Seattle area, used Power Apps to track critical supplies. Thousands of organizations are relying on new integration between Microsoft Teams and Power Apps to share timely information. And governments around the world are using Power BI to share the latest COVID-19 data with their citizens. Leaders in every industry from global healthcare company GSK to Coca-Cola to Toyota are all using Power Platform to accelerate their automation. Now onto Dynamics 365. Dynamics 365 is helping thousands of organizations accelerate digital transformation as they remote every part of their operations from manufacturing to supply chain management to sales and customer service, inclusive of new scenarios like curbside pickup, contactless shopping, remote customer assistance and operations. Patagonia is using Dynamics 365 Commerce to rapidly move to new, more intelligent distribution and fulfillment models, including contactless shopping. And we are working with card issuers like American Express, so merchants who use Dynamics 365 fraud protection can reduce fraudulent activity as they process more transactions online. In field service, the world's largest commercial real estate services firm, CBRE, is using Dynamics 365 Remote Assist to help keep its life sciences tenants' labs fully operational from afar. An enterprise software company, C3.ai, founded by Tom Siebel, shifted its entire sales force to Dynamics 365 sales in less than two weeks. Now to LinkedIn. Amidst the changing jobs market, LinkedIn's role in creating economic opportunity for every member of the global workforce has never been more acute. LinkedIn is where more than 690 million professionals go to connect, learn new skills and find new opportunities, contributing to record levels of engagement across the platform in Q3. We're helping organizations attract, retain, and develop talent with our portfolio of talent solutions, talent insights, Glint, and LinkedIn Learning. Professionals watch nearly 4 million hours of content on LinkedIn Learning in March, a nearly 50% increase month over month. With LinkedIn Live, people and organizations can broadcast video content to their networks in real time. Streams are up 158% since February. And the combination of LinkedIn Sales Navigator and Dynamics 365 gives sales professional tools for more effective remote selling. Now on to gaming. People everywhere are turning to gaming to sustain human connection while practicing social distancing. And we continue to deliver new exclusive first and third party content to attract and retain gamers. We saw all time record engagement this quarter. with nearly 90 million active users of Xbox Live, led by the strength on and off console. Xbox Game Pass has more than 10 million subscribers, and we are seeing increased monetization of in-game content and services. And our Project xCloud gaming service now has hundreds of thousands of users in preview across seven countries, with eight more launching in the coming weeks. Now onto Azure. Now more than ever, organizations are relying on Azure to stay up and running, driving increased usage. We have more data center regions than any other cloud provider, and this quarter we announced new regions in Mexico as well as in Spain. We are the only cloud that extends to the edge with consistency across operating models, development environments, and infrastructure stack. Now, Azure Edge Zones extends Azure to the network edge, connecting directly with the carrier's 5G network to enable immersive real-time experiences that require ultra-low latency. And our acquisition of Affirm Networks will help operators deploy and maintain 5G networks and services cost-effectively and securely. From BlackRock to Coca-Cola to Genesis, leading companies in every industry are choosing Azure. The NBA is using Azure and our AI capabilities to build their own direct-to-consumer experiences, and the world's largest companies like AB InBev and Mars continue to migrate their SAP workloads to our cloud. In AI, customers are applying a comprehensive portfolio of tools and services and infrastructure to address unique challenges, including those created by COVID-19. In healthcare, we are seeing compute data and AI come together to help speed up response from testing to therapeutics and vaccine development. Healthcare providers have created more than 1,400 bots using our healthcare bot service, helping more than 27 million people access critical healthcare information. The Centers for Disease Control is using the healthcare bot to help people self-assess for coronavirus symptoms. Adaptive Biotechnologies is using our tools to decode the immune system's response to the virus. And Immunity Bio is using more than 24 petaflops of computing power on our cloud to help researchers build models in days instead of months. Enterprises are using our speech services to manage a record influx of customer service inquiries, including Post Italian, which is using it to automatically respond to nearly 170,000 calls per day. All up, six million hours of speech were transcribed in March alone. In closing, we will continue to work and innovate alongside our customers as their digital first responders today and as their trusted digital transformation partners going forward. With that, I'll hand it over to Amy, who will cover our financial results in detail and share our outlook, and I look forward to rejoining for your questions.