Microsoft Corporation

Greetings and welcome to the Microsoft Fiscal Year 2025 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jonathan Nielsen, Vice President of Investor Relations.

Good afternoon, and thank you for joining us today. On the call with me are Sachin Adela, Chairman and Chief Executive Officer, Amy Hood, Chief Financial Officer, Alex Jolla, Chief Accounting Officer, and Keith Dolliver, Corporate Secretary and 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 the reconciliation of differences between GAAP and non-GAAP financial measures. More detailed outlook slides will be available on the Microsoft Investor Relations website when we provide outlook commentary on today's call. On this call, we will discuss certain non-GAAP items, 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 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 will 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 the 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 juicy to update any forward-looking statement. And with that, I'll turn the call over to Satya. Thank you.

Thank you, Jonathan. It was a very strong close to what was a record fiscal year for us. All up, Microsoft Cloud surpassed $168 billion in annual revenue, up 23%. The rate of innovation and the speed of diffusion is unlike anything we have seen. To that end, we are building the most comprehensive suite of AI products and tech stack at massive scale. And to provide more context, I want to walk up the stack starting with Azure. Azure surpassed $75 billion in annual revenue, up 34% driven by growth across all workloads. We continue to lead the AI infrastructure wave and took share every quarter this year. We opened new DCs across six continents and now have over 400 data centers across 70 regions, more than any other cloud provider. There is a lot of talk in the industry about building the first gigawatt and multi-gigawatt data centers. We stood up more than two gigawatts of new capacity over the past 12 months alone, and we continue to scale our own data center capacity faster than any other competitor. Every Azure region is now AI first. All of our regions can now support liquid cooling, increasing the fungibility and the flexibility of our fleet. And we are driving and riding a set of compounding S-curves across silicon systems and models to continuously improve efficiency and performance for our customers. Take, for example, GBD4O family of models, which have the highest volume of inference tokens. Through software optimizations alone, we are delivering 90% more tokens for the same GPU compared to a year ago. Beyond the AI fleet, we continue to build our commercial cloud to address customers' unique data residency and sovereignty requirements. This quarter, we introduced the Microsoft Sovereign Cloud, the industry's most comprehensive solution spanning both public and private cloud deployments. All of this innovation is driving our strong results. We saw accelerating growth from migrations again this quarter. Nestle, for example, migrated more than 200 SAP instances, 10,000 plus servers, 1.2 petabytes of data to Azure with near zero business disruption. That makes it one of the largest and most successful migrations in business history. The next big accelerator in the cloud will be quantum. And I'm excited about our progress. In fact, earlier this month, we announced the world's first operational deployment of a level two quantum computer in partnership with Atom Computing. This is how we will continue to think and make investments with decade-long arcs while making progress every quarter. The next layer is data, which is foundational to every AI application. Microsoft Fabric is becoming the complete data and analytics platform for the AI era, spanning everything from SQL to NoSQL to analytics workloads. It continues to gain momentum with revenue up 55% year-over-year and over 25,000 customers. It's the fastest growing database product in our history. Fabric One Lake spans all databases and clouds, including semantic models from Power BI, and therefore it is the best source of knowledge and grounding for AI applications and context engineering. Azure Databricks and Snowflake on Azure both accelerated as well. Cosmos DB and Azure PostgreSQL are both powering mission-critical workloads at scale. OpenAI, for example, uses Cosmos DB in the hot path of every chat GPT interaction, storing chat history, user profiles, and conversational state. And Azure PostgreSQL stores metadata critical to the operation of chat GPT, as well as OpenAI's developer APIs. This year we launched Azure AI Foundry to help customers design, customize, and manage AI applications and agents at scale. Foundry features best-in-class tooling, management, observability, and built-in controls for trustworthy AI. Customers increasingly want to use multiple AI models to meet their specific performance, cost, and use case requirements. And with Foundry, they can provision inferencing throughput ones and apply it across more models than any other hyperscaler, including models from OpenAI, DeepSeq, Meta, XAI's Grok, and very soon Black Forest Labs and Mistral AI. We sim shipped 15 models from OpenAI alone on Foundry this year, providing a same-day access to state-of-the-art models deeply integrated with our infrastructure and tools. And we are seeing accelerated adoption of our new Foundry agent service, which is now being used by 14,000 customers to build agents that automate complex tasks. For example, NASDAQ is using Foundry to build agents that help customers prepare for board meetings, cutting prep time by up to 25%. All up 80% of Fortune 500 already use Foundry. And when we look narrowly at just the number of tokens served by Foundry APIs, we processed over 500 trillion this year, up over 7x. This is a good indicator of true platform diffusion beyond a few head apps and services. Talking about the app layer, these applications are becoming embedded in our daily work in life. Our family of co-pilot apps has surpassed 100 million monthly active users across commercial and consumer. And when you take a broader look at the engagement of AI features across our products, we have over 800 million monthly active users. Microsoft 365 Copilot is becoming the new way to organize work and workflow and work artifacts. We rolled out our biggest update to Microsoft 365 Copilot to date this quarter, bringing together chat, search, create, notebooks, as well as agents into one intuitive scaffolding. With this innovation and continued product improvements, we are seeing real momentum. Customers continue to adopt Copilot at a faster rate than any other new Microsoft 365 suite with strong usage intensity as shown by our week-over-week retention. And we saw the largest quarter of seat ads since launch with a record number of customers returning to buy more seats. Barclays, for example, will roll out Microsoft 365 Copilot to 100,000 employees globally following a successful initial deployment of 15,000. UBS is expanding its deployment to all of its employees after initially rolling it out to 55,000 of them. And Adobe, KPMG, Pfizer, Wells Fargo all purchased over 25,000 seats this quarter. Tens of thousands of organizations have already used our researcher and analyst deep reasoning agents in the first weeks of availability, and we have introduced group-level agents in teams like Facilitator and Interpreter, which generate real-time translation and notes in meetings. Hundreds of partners like Adobe, SAP, ServiceNow, and Workday have built their own third-party agents that integrate with Copilot and Teams. We are also seeing more customers use Copilot Studio to extend Microsoft 365 Copilot and build their own agents. This year, customers created 3 million agents using SharePoint and Copilot Studio. And with Copilot tuning, they can easily create agents fine-tuned on their company's data, workflow, and style that reflect their unique tone, language, and expertise. We're also seeing great traction among specific roles and functions, starting with developers. GitHub Copilot continues to have great momentum in IDE with agent mode and new form factors like coding agent, which is capable of asynchronously executing developer tasks. We have 20 million GitHub Copilot users. GitHub Copilot Enterprise customers increased 75% quarter over quarter as companies tailor Copilot to their own code bases. And 90% of the Fortune 100 now use GitHub Copilot. More broadly, GitHub usage and repos are seeing explosive growth because of AI. AI projects on GitHub more than doubled over the last year. The surge in wide coding projects and AI coding agents, whether it is Cloud Code, Codex, Cursor, or GitHub Copilot, are generating more pull requests and more repos on GitHub. And our code review agent is being used heavily across the platform, performing millions of code reviews each month. In healthcare, we had a breakout year for Dragon Co-Pilot. Customers used our ambient AI solutions to document over 13 million physician-patient encounters this quarter, up nearly 7x year-over-year. For example, at Mercy Health System, more than 1,000 physicians are already using Copilot to reduce administrative burden so that they can focus on providing better care. They have saved more than 100,000 hours to date and plan to expand to all 5,000 providers. As one physician put it, the best thing to happen to my practice in 10 years. And in security, we were the first in the industry to introduce agents to help defenders autonomously handle high-volume security and IT tasks. More broadly, AI is driving a fundamental change in the biz apps market as customers shift from legacy systems to agentic business applications. Dynamics 365 took share this year, and we're winning customers in every industry, like Verizon with sales, Domino's Pizza Group with ERP, 1-800-Flowers with Contact Center. When it comes to consumer apps, we are innovating across all surfaces. In fact, on Monday, we introduced Copilot Mode in Edge. It's especially exciting to see the innovation coming back to browsers. Copilot Mode brings together Copilot Composer, Chat, Discover, Search, and Actions to build the next generation of browser for the AI age. Our Copilot consumer app also continue to see strong growth in engagement and successful sessions. And we are bringing Copilot to every Windows 11 PC. With Copilot Vision, you can share your screen with Copilot and get real-time insights and assistance on anything. And we are well positioned as we approach Windows 10 end of support in October, thanks to Windows 11 and Copilot Plus PCs, which offer customers compelling security as well as AI value. Talking about security, it underlies our cloud and AI infrastructure as well as our copilots and agents. We have launched over 100 new capabilities over the past year. Just last week, we added a modern data lake to our SIEM, Microsoft Sentinel, bringing together customer data across our first-party tools as well as third-party ecosystem over 350 connectors. We're also extending the systems customers already use for governance, identity, security, and management to protect every AI agent. Entra now extends identity permissions, policies, and access controls to agents. Defender secures nearly 2 million general AI apps. Purview is used by three-quarters of the Microsoft 365 co-pilot customers to protect their data. And all up, we now have nearly 1.5 million security customers and continue to take share across all major categories we serve. Before I wrap, I want to talk about two consumer businesses of ours with massive end-user reach, LinkedIn and Xbox. LinkedIn is home to 1.2 billion members with four consecutive years of double-digit member growth. All-up comments on LinkedIn rose over 30% and video uploads increased over 20% this year. We continue to bring AI to every part of LinkedIn experience, introducing agents across hiring as well as sales. When it comes to gaming, we have 500 million monthly active users across platforms and devices. We are now the top publisher on both Xbox and PlayStation this quarter with successful launches of Forza Horizon 5 and Oblivion Remastered. The Call of Duty franchise has never been stronger. 50 million people have played Black Ops 6. Total hours surpassed 2 billion. Minecraft saw record monthly active usage and revenue this quarter, thanks in large part to the success of the Minecraft movie. and we have nearly 40 games in development, so much, much more to come. We surpassed over 500 million hours of gameplay streamed via the cloud this year, and Game Pass annual revenue was nearly $5 billion for the first time. In closing, we are going through a generational tech shift with AI, and I have never been more confident in Microsoft's opportunity to drive long-term growth and define what the future looks like. With that, let me turn it over to Amy to walk through our financial results as well as the outlook.