Microsoft Corporation

Greetings, and welcome to the Microsoft Fiscal Year 2020 Fourth 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. It is now my pleasure to introduce your host, Mike Spencer, General Manager and Investor Relations for Microsoft. Thank you, sir. 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 Dolliver, Deputy General Counsel. On the Microsoft Investor Relations website, you can find our earnings press release and our 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. 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 fourth quarter performance in addition to the impact these items and events had 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 will also provide growth rates in constant currency when available and 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, 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 our 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. Good afternoon, everyone. We delivered record results this fiscal year, powered by our commercial cloud, which surpassed $50 billion in revenue for the first time, up 36% year over year. The last five months have made it very clear that digital tech intensity is key to business resilience. Organizations that build their own digital capability will recover faster and emerge from this crisis stronger. We are seeing businesses accelerate the digitization of every part of their operations from manufacturing to sales and customer service to reimagine how they meet customer needs from curbside pickup and contactless shopping in retail to telemedicine and healthcare. That's why we are building the full modern technology stack powered by cloud and AI and underpinned by security and compliance to help every organization digitally transform. Now I'll highlight our innovation and momentum starting with Azure. Every organization today needs a distributed computing fabric to run essential workloads. We are building Azure as the world's computer to support them with data center regions, more data center regions than any other provider, including new regions as of this quarter in Italy, New Zealand, and Poland. We have always led in hybrid, and we are accelerating our innovation to meet customers' needs wherever they are. Azure Arc is the first control plane built for a multi-cloud, multi-edge world, and we are taking it further with Azure Arc-enabled Kubernetes. New capabilities in Azure Stack HCI help organizations bring the cloud to their very own data centers. And our acquisitions of Affirmed and Metaswitch, along with Azure Edge Zones, extend Azure to the network edge, expanding our offering to telecom operators as they move to 5G. Our differentiated approach across cloud and edge is winning new customers in every industry, from Land O'Lakes, the National Australia Bank, to Johns Hopkins Medicine, as well as leading ISVs, including Citrix, Finestra, SAS, and Workday. At the data layer, Azure is the only cloud with limitless data and analytics capabilities that can deliver a cloud-native data estate for every organization. The combination of SQL Hyperscale, Cosmos DB, Synapse Analytics, and the new Synapse Link, which enables live analytics on real-time transactions, differentiate Azure. In AI, we have the most comprehensive portfolio of tools, frameworks, and infrastructure. We're thrilled with the progress our partner OpenAI is making. Their new GPT-3 model constitutes a new breakthrough in AI and was trained on our Azure AI supercomputer. New capabilities in Azure Cognitive Services make it easier to build applications that speak naturally in 49 languages and its variants, and to generate insights from unstructured data, including paper-based forms and medical records. Microsoft Bot Framework now includes powerful authoring tools to build sophisticated conversational bots with low code, and with Azure Machine Learning, organizations can deploy AI more responsibly and safely. All this innovation is driving usage. In June alone, 13.5 billion transactions were processed in Azure Cognitive Services, 2.5 billion messages sent, 9 million hours of speech transcribed. From Bridgestone to United Health Group to EY, companies are relying on Azure AI to innovate and better meet customer needs. Now to developer tools. The role of developers is more important than ever, from emergency response to recovery to reimagining the world. We have the most used and loved developer tools to build any application for any platform. We have seen increased activity across multiple measures, and we are going further with new tools to power secure remote development. With Codespaces, we are bringing together the best of GitHub, Visual Studio, and Azure to help developers go from code to cloud in seconds. New advanced security features in GitHub use semantic analysis to scan code for vulnerabilities. And GitHub discussions help software communities collaborate outside of the code base. More than 3 million organizations, including the majority of the Fortune 50, now use GitHub. The state of California is using GitHub and Azure DevOps to power 90% of its digital COVID-19 response infrastructure. All the 5,000 engineers at Autodesk rely on GitHub to break down silos across the organization. And at Etsy, developers are using GitHub to deploy production to production more than 50 times per day. Now to Power Platform. With Power Platform, anyone in an organization can rapidly create an application, build a virtual agent, automate a workflow, or analyze data. Citizen developers and business decision makers at companies like Schlumberger and T-Mobile are using Power Platform to address challenges created by COVID-19. Power BI is the clear leader in business intelligence in the cloud and is growing significantly faster than competition. 96% of the Fortune 500 now use Power BI to find insights in their data. More broadly across the Power Platform, we are seeing accelerating usage. Power Apps, monthly active users increased 170% year-over-year. Power Automate is up 75%. And in just six months, Power Virtual Agents are already surpassed 6.7 million sessions. Just yesterday, we launched an end-to-end return to workplace solution in Power Platform that will help organizations like CBRE keep employees safe and healthy when they go back to their office. And we continue to invest in robotic process automation. Our acquisition of SoftMotor when coupled with Power Automate enables customers, including KPMG, to automate manual business processes across both legacy as well as modern applications. Now to Dynamics 365. Dynamics 365 is helping organizations in every industry digitize their end-to-end business operations, from sales and customer service to supply chain management, so that they can rapidly adapt to changing market conditions. Customer Insights is the fastest growing Dynamics 365 application ever, helping organizations like Walgreens, Boots Alliance, and Chipotle offer more personalized customer experiences. BNY Mellon chose Dynamics 365 this quarter to help investment managers build stronger relations with their customers. More than 4,500 organizations now use Dynamics 365 Commerce, Finance, and Supply Chain Management, making it one of the fastest growing SaaS solutions in its category. FedEx, for example, uses Dynamics 365 to drive more precise logistics and inventory management. In retail, Dynamics 365 Connected Store now offers in-store traffic analytics and curbside pickup, prioritizing safety as stores reopen. And we continue to invest in solutions to protect merchants as they process more online transactions. New account protection and loss prevention features in Dynamics 365 fraud protection help protect online revenue, and we are working with financial services firms like Capital One to improve fraud detection and keeps customers secure. Now to LinkedIn. In spite of revenue headwinds due to lower hiring needs, we are seeing record engagement as LinkedIn's more than 706 million professionals turn to the network to connect, learn, and plan for the future. Content shared was up nearly 50% year over year, and LinkedIn Live streams were up 89% since March. people will increasingly need to move beyond current domain expertise to learn new skills, and they're turning to LinkedIn. Professionals watched nearly four times the amount of LinkedIn Learning content in June than they did a year ago, and we're making it easier for them to access LinkedIn Learning's more than 16,000 online courses directly in the flow of their work. A new learning app in Teams will allow organizations to integrate LinkedIn Learning as well as their own content to create a continuous feedback loop between work, skills, and the learning needed for upskilling and reskilling employees. Now to Microsoft 365 and Teams. When, where, and how the world works is fundamentally changing. Microsoft 365 is empowering people and organizations to be productive and secure as they adapt to more fluid ways of working as well as learning. Microsoft Teams is helping people be together even when they're apart. It's the only solution with meetings, call, chat, content, collaboration with Office as well as business process workflows in a secure, integrated user experience. We are reimagining every aspect of the meetings experience with new capabilities like together mode and the dynamic stage to help people feel more connected and reduce cognitive load. We expanded the gallery view and team so that people can see and interact with up to 49 participants at a time and breakout rooms and live reactions will help people build social capital in a virtual world. Deeper integration between Teams and Power Platform brings an integrated data platform, Microsoft Dataflex, for easier, faster application creation and deployment, enabling a new category of enterprise-grade apps and chatbots in Teams. Teams is rapidly becoming the communications backbone as customers accelerate moving voice to the cloud. And we are expanding Teams beyond the workplace, making it easy to add personal Teams account on mobile so you can stay connected with friends and family across work as well as your life. Teams users generated more than 5 billion meeting minutes in a single day this quarter, and we are seeing increased usage intensity across the platform as people communicate, collaborate, and co-author content in Teams. 69 organizations now have more than 100,000 users of Teams, and over 1,800 organizations have more than 10,000 users of Teams. We are working alongside educators as they prepare for remote, hybrid, and in-person scenarios this fall. More than 150 million students and teachers around the world now rely on our tools, including Teams, Stream, OneNote, as well as Flipgrid, to prioritize student engagement and learning outcomes. Our new Microsoft Cloud for Healthcare is helping providers schedule, manage, and conduct viral visits using Teams and engage with patients using Dynamics 365. In healthcare, there were more than 46 million Teams meetings this past month. The NHS in the UK chose Microsoft 365 to empower its 1.2 million employees with the latest productivity and collaboration tools to deliver better patient outcomes. More broadly, we are seeing increased usage of Microsoft 365 and larger strategic agreements. Alcoa and Telstra are empowering their entire workforce, including first-line employees with Microsoft 365 and Teams. Across industries, customers like 3M, CenturyLink, GE, and Providence are increasingly choosing Microsoft 365 premium offerings for differentiated security, compliance, voice, and analytics value. Our Microsoft 365 E5 user base more than doubled year over year. People are turning to Windows PCs more than ever, with minutes spent in Windows 10 up more than 55% year over year. And we expanded our family of Surface devices and accessories to help people work, learn, and connect from anywhere as we create new categories that benefit the entire OEM ecosystem. Now to security and compliance. Remote everything continues to accelerate the need for a zero trust security architecture that protects people, devices, applications, and data holistically. And we are the only company with an integrated end-to-end capability informed by more than 8 trillion signals each day. Azure Active Directory now has more than 345 million monthly active users across more than 200,000 organizations. And we are not only securing employee identities, but customer and partner identities as well. General Motors, for example, is using Azure Active Directory to secure interactions between its employees, dealers, and customers. Azure Sentinel now has more than 6,500 customers. The accelerating adoption of IoT across industries is creating new security challenges, and our acquisition of CyberX this quarter will help secure customers' IoT deployments. Finally, we are helping customers protect their more sensitive information. Microsoft Information Protection is enabling companies such as Siemens AG to protect sensitive data wherever it exists. And new Microsoft 365 Records Management helps customers govern data and reduce risk. Now on to gaming. It is simply a breakthrough quarter for gaming. We saw record engagement and monetization led by strength on and off console as people everywhere turned to gaming to connect, socialize, and play with others. Stepping back, we are expanding our opportunity to empower the world's 2 billion gamers to play wherever and whenever they want on any device. Xbox Game Pass is seeing record subscriber growth across both console and PC. and now includes content from more than 100 studios. Our xCloud gaming service is already live in 15 countries. And just last week, we announced that we will bring xCloud to Xbox Game Pass so subscribers can stream games to a phone or a tablet and play along with nearly 100 million Xbox Live players around the world. In content, we are delivering differentiated first and third party content to attract and retain gamers. Xbox Series X will launch this fall with the largest launch lineup for any console ever, and Minecraft reached a new high of nearly 132 million monthly active users during the quarter. In closing, we are expanding our opportunity and investing across the full modern technology stack. Over the next decade, technology spending as a percentage of GDP is projected to double, And we are well positioned to participate in that growth by innovating and defining the key technologies that empower every person and every organization on the planet to build more of their own tech intensity. 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.