Microsoft(MSFT) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Annual revenue exceeded $245 billion, up 15% year-over-year [29] - Microsoft Cloud revenue surpassed $135 billion, up 23% year-over-year [29] - Revenue from Productivity and Business Processes was $20.3 billion, growing 11% (12% in constant currency) [25] - LinkedIn revenue increased 10% (9% in constant currency) [26] - Dynamics revenue grew 16%, with Dynamics 365 growing 19% (20% in constant currency) [26] - More Personal Computing revenue was $15.9 billion, increasing 14% (15% in constant currency) [47] - Microsoft Cloud revenue was $36.8 billion, growing 21% (22% in constant currency) [55] - Azure and other cloud services revenue grew 29% (30% in constant currency) [109] - Xbox content and services revenue increased 61%, with 58 points of net impact from the Activision acquisition [84] - Cash flow from operations was $37.2 billion, up 29% [85] - Free cash flow was $23.3 billion, up 18% year-over-year [85] Business Line Data and Key Metrics - Copilot accounted for over 40% of GitHub’s revenue growth this year [18] - GitHub’s annual revenue run rate is now $2 billion [37] - Over 480,000 organizations have used AI-powered capabilities in Power Platform, up 45% quarter-over-quarter [38] - Microsoft Teams Premium surpassed 3 million seats, up nearly 400% year-over-year [21] - Defender for Cloud surpassed $1 billion in revenue over the past 12 months [22] - Azure AI customers now exceed 60,000, up nearly 60% year-over-year [15] - Paid Models as a Service customers more than doubled quarter-over-quarter [16] - Microsoft Fabric now has over 14,000 paid customers, up 20% [35] - Over 1,000 paid customers used Copilot for Security [60] Market Data and Key Metrics - Azure Arc customers grew to 36,000, up 90% year-over-year [31] - Azure AI customers also using data and analytics tools grew nearly 50% year-over-year [34] - Copilot customers increased more than 60% quarter-over-quarter [19] - DAX Copilot was purchased by over 400 healthcare organizations, up over 40% quarter-over-quarter [20] - LinkedIn member growth and engagement accelerated, with 1.5 million pieces of content shared every minute [49] - Gaming now has over 500 million monthly active users across platforms and devices [50] Company Strategy and Industry Competition - The company is investing in AI and cloud infrastructure, with FY2025 capital expenditures expected to be higher than FY2024 [67] - Microsoft is scaling its AI infrastructure to meet growing demand, with Azure growth expected to accelerate in H2 [89] - The company is integrating generative AI across its product portfolio, including Power Platform and Dynamics 365 [18][42] - Microsoft is expanding its datacenter footprint across four continents to support long-term growth [30] - The company is focusing on delivering differentiated value through AI and cloud products, with a commitment to growing its leadership in the AI platform [105] Management Commentary on Operating Environment and Future Outlook - The company expects double-digit revenue and operating income growth in FY2025, driven by AI and cloud demand [67] - Management highlighted the importance of managing cost structure dynamically based on customer demand signals [7] - The company is seeing strong demand for AI services, with Azure AI growth driven by capacity constraints [89] - Microsoft is committed to scaling its infrastructure investments to meet the growing demand for AI and cloud services [67] - The company expects FY2025 operating margins to be down only about one point year-over-year [68] Other Important Information - Activision contributed a net impact of approximately 3 points to revenue growth, a 2-point drag on operating income growth, and a negative $0.06 impact to earnings per share [45] - The company returned $8.4 billion to shareholders through dividends and share repurchases, bringing total cash returned to shareholders to over $34 billion for the full fiscal year [66] - Microsoft’s effective tax rate was approximately 19%, higher than anticipated due to a state tax law signed in June [66] Q&A Session Summary Question: CapEx as a leading indicator for cloud growth [79] - Answer: The company focuses on demand signals and product portfolio shape, with CapEx driven by demand for AI and cloud services [80][94] Question: Efficiency in CapEx and revenue growth [103] - Answer: The company manages CapEx based on demand signals, with flexibility in scaling infrastructure investments [123][167] Question: Azure growth and capacity constraints [137] - Answer: Azure growth was impacted by capacity constraints and softness in European geos, with improvements expected in H2 [146] Question: Gaming growth potential [141] - Answer: The company aims to expand gaming content across platforms, including console, PC, and mobile, with a focus on software annuity and subscription business [171][175] Question: Copilot penetration in Office [153] - Answer: The company expects Copilot to drive productivity gains across knowledge workers, similar to its impact on developers [161] Question: Azure guidance and performance [137] - Answer: Azure growth was at the lower end of guidance due to capacity constraints and softness in Europe, with improvements expected in H2 [146]