Microsoft (MSFT) Q4 2024 Earnings Call Transcript

Image source: The Motley Fool.

Microsoft (MSFT -0.89%)
Q4 2024 Earnings Call
Jul 30, 2024, 5:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Microsoft fiscal year 2024 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. [Operator instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Brett Iversen, vice president of investor relations.

Brett Iversen — Vice President, Investor Relations

Good afternoon, and thank you for joining us today. On the call with me are Satya Nadella, chairman and chief executive officer; Amy Hood, chief financial officer; Alice 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 businesses 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 and the comments made during this conference call and in the risk factors 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.

Satya Nadella — Chair and Chief Executive Officer

Thank you, Brett. We had a solid close to our fiscal year. All-up, annual revenue was more than $245 billion, up 15% year over year and Microsoft Cloud revenue surpassed $135 billion, up 23%. Before I dive in, I want to offer some broader perspective on the AI platform shift.

Similar to the Cloud, this transition involves both knowledge and capital-intensive investments. And as we go through this shift, we are focused on two fundamental things. First, driving innovation across a product portfolio that spans infrastructure and applications, so as to ensure that we are maximizing our opportunity while in parallel, continuing to scale our cloud business and prioritizing fundamentals, starting with security. Second, using customer demand signal and time to value to manage our cost structure dynamically and generate durable long-term operating leverage.

With that, let me highlight examples starting with Azure. Our share gains accelerated this year driven by AI. We expanded our data center footprint announcing investments across four continents. These are long-term assets around the world to drive growth for the next decade and beyond.

We added new AI accelerators from AMD and NVIDIA, as well as our own first-party silicon Azure Maia, and we introduced new Cobalt 100, which provides best-in-class performance for customers like Elastic, MongoDB, Siemens, Snowflake, and Teradata. We continue to see sustained revenue growth from migrations. Azure Arc is helping customers in every industry from ABB and Cathay Pacific to LALIGA to streamline their cloud migrations. We now have 36,000 Arc customers up 90% year over year.

We remain the hyperscale cloud of choice for SAP and Oracle workloads Atos, Coles, Daimler Truck AG, Domino’s, Haleon, for example, all migrated their mission-critical SAP workloads to our Cloud and with our Azure VMware solution, we offer the fastest and most cost-effective way for customers to migrate their VMware workloads, too. With Azure AI, we are building out the app server for the AI wave providing access to the most diverse selection of models to meet customers’ unique cost, latency, and design considerations. All up, we now have over 60,000 Azure AI customers up nearly 60% year over year and average spend per customer continues to grow. Azure OpenAI service provides access to best-in-class frontier models, including as of this quarter GPT-4o and GPT-4o mini.

It’s being used by leading companies in every industry, including H&R Block, Suzuki, Swiss Re, Telstra, as well as digital natives like Freshworks, Meesho, and Zomato. With Phi-3, we offer a family of powerful small language models, which are being used by companies like BlackRock, Emirates, Epic, ITC, Navy Federal Credit Union, and others. And with Models as a Service, we provide API access to third-party models, including as of last week, the latest from Cohere, Meta, and Mistral. The number of paid Models as a Service customers more than doubled quarter over quarter, and we are seeing increased usage by leaders in every industry from Adobe and Bridgestone to Novo Nordisk and Palantir.

Now on to data. Our Microsoft intelligent data platform provides customers with the broadest capabilities spanning databases, analytics, business intelligence, and governance along with seamless integration with all of our AI services. The number of Azure AI customers also using our data and analytics tools grew nearly 50% year over year. Microsoft Fabric, our AI-powered next-generation data platform, now has over 14,000 paid customers, including leaders in every industry.

from Accenture and Kroger to Rockwell Automation and Zeiss, up 20% quarter over quarter. And this quarter, we introduced new first-of-its-kind, real-time intelligence capabilities in Fabric, so customers can unlock insights on high-volume, time-sensitive data. Now on to developer tools. GitHub Copilot is by far the most widely adopted AI-powered developer tool.

Just over two years since its general availability, more than 77,000 organizations from BBVA, FedEx, and H&M to Infosys and Paytm have adopted Copilot up 180% year over year. And we’re going further with Copilot Workspace, we offer Copilot native end-to-end developer productivity across plan, build, test, debug, and deploy cycle. Copilot is driving GitHub growth all up. GitHub’s annual revenue run rate is now $2 billion.

Copilot accounted for over 40% of GitHub’s revenue growth this year and is already a larger business than all of GitHub was when we acquired it. We are also integrating generative AI across Power Platform, enabling anyone to use natural language to create apps, automate workflows or build a website. To date, over 480,000 organizations have used AI-powered capabilities in Power Platform, up 45% quarter over quarter. In total, we now have 48 million monthly active users of Power Platform, up 40% year over year.

Now on to future work. Copilot for Microsoft 365 is becoming a daily habit for knowledge workers as it transforms work, workflow, and work artifacts. The number of people who use Copilot daily at work nearly doubled quarter over quarter as they use it to complete tasks faster, hold more effective meetings and automate business workflows and processes. Copilot customers increased more than 60% quarter over quarter.

Feedback has been positive with majority of enterprise customers coming back to purchase more seats, all up the number of customers with more than 10,000 seats more than doubled quarter over quarter, including Capital Group, Disney, Dow, Kyndryl, Novartis, and EY alone will deploy Copilot to 150,000 of its employees, and we are going further adding agent capabilities to Copilot. New Team Copilot can facilitate meetings and create and assign task. And with Copilot Studio, customers can extend Copilot for Microsoft 365 and build custom Copilots that proactively respond to data and events using their own first and third-party business data. To date, 50,000 organizations from Carnival Corporation, Cognizant, and Eaton to KPMG, Majesco, and McKinsey have used Copilot Studio, up over 70% quarter over quarter.

So, we feel that now we have both the content and the ability to access all the traditional high-scale platforms where people play games, which is the console, PC, and mobile. But we’re also excited about these new sockets, right? I mean the fact that even in this last quarter, we expanded X Cloud to Amazon TV, I forget the name of what it’s called. But that’s the type of new access that really helps us a lot, reach new gamers or the same gamer everywhere they want to play. And that ultimately will show up in that software plus services and transaction revenue for us, which is really our long-term KPI, and that’s what we’re building toward.

And that was the strategy behind Activision as an asset. Amy, if you want to add to it?

Amy E. Hood — Executive Vice President, Chief Financial Officer

No, I do think the real goal here is to be able to take a broad set of content to more users in more places, and really build what looks more like to us, the software annuity and subscription business. with enhanced transactions and the ownership of IP, which is quite valuable long term. As Satya mentioned, things were with the ownership of IP, it can be monetized in multiple ways. And I think we’re really encouraged by some of the progress and how we’re making progress with Game Pass as well with some of the new announcements.

Thank you, Keith.

Brett Iversen — Vice President, Investor Relations

Thanks, Keith. That wraps up the Q&A portion of today’s earnings call. Thank you for joining us today, and we look forward to speaking with all of you soon.

Amy E. Hood — Executive Vice President, Chief Financial Officer

Thank you.

Satya Nadella — Chair and Chief Executive Officer

Thank you, all.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Brett Iversen — Vice President, Investor Relations

Satya Nadella — Chair and Chief Executive Officer

Amy E. Hood — Executive Vice President, Chief Financial Officer

Keith Weiss — Analyst

Amy Hood — Executive Vice President, Chief Financial Officer

Mark Moerdler — Analyst

Kash Rangan — Analyst

Brent Thill — Analyst

Karl Keirstead — Analyst

Brad Zelnick — Analyst

Mark Murphy — JPMorgan Chase and Company — Analyst

Keith Bachman — Analyst

More MSFT analysis

All earnings call transcripts