Microsoft FY 4Q16 Earnings Call Notes

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Microsoft (MSFT) Satya Nadella on Q4 2016 Results

Why enterprise partners choose Microsoft cloud

” let’s get into the specifics of the Intelligent Cloud, an area of massive opportunity, as we are clearly one of the two enterprise cloud leaders. Companies looking to digitally transform need a trusted cloud partner and turn to Microsoft. As a result, Azure revenue and usage again grew by more than 100% this quarter. We see customers choose Microsoft for three reasons. They want a cloud provider that offers solutions that reflect the realities of today’s world and their enterprise-grade needs. They want higher level services to drive digital transformation, and they want a cloud open to developers of all types.”

350m Windows 10 users

“Now let’s talk about the progress in More Personal Computing. We have increased Windows 10 monthly active devices and are now at more than 350 million. This is the fastest adoption rate of any prior Windows release. While we are proud of these results, given changes to our phone plan, we changed how we will assess progress. ”

Azure customers extending beyond those just in the “classic tech” industry

“pretty much anyone who is a customer of Azure is also in some form an ISV, and that’s no longer just limited to people who are “in the classic tech industry” or the software business. That’s the same case with GE. It’s the same case with Boeing. It’s the same case with Schneider Electric or ABB or any one of the customers we are working with because they all are taking some of their assets and converting them into SaaS applications on Azure. ”

One third of customers are traditional ISVs

“The question you asked is an interesting one, which is if I had to slice it by classic ISVs, it would be one-third or so of our revenue. But the thing that – the first question that Keith asked is probably more indicative of what’s happening, which is every customer is also an ISV. So every customer who starts off consuming Azure is also turning what is their IP in most cases into an ISV solution, which ultimately will even participate in AppSource.”

The cloud is about moving towards services

” I look at what we are doing with Office 365, Dynamics 365, AppSource, LinkedIn as all being part of one strategy. So the move to the cloud for our customers and for us is not just about a new way of delivering the same value just as a SaaS service. It’s really the transformation from having applications that are silos to becoming more services in the cloud where you can reason about the activity and the data underneath these services to benefit the customers who are using these services. So that’s what this notion of a graph represents.”

Amy E. Hood – Chief Financial Officer & Executive Vice President

Expect Commercial Cloud Gross margin will improve materially next FY

“Before discussing our total company gross margin expectations, let me first address Commercial Cloud gross margin. We expect the Commercial Cloud gross margin percentage and dollars to materially improve next fiscal year. We have invested heavily to build share, expand geographically, and ensure world-class support and reliability for our commercial customers. Going forward, we expect those investments to provide benefits of scale. We also anticipate our cloud capital expenditure growth curve will slow. ”

PC market was a little better than we thought

“the PC market was a little bit better than we thought. And particularly in developed markets, the PC growth was better than we thought. And developed markets are where we see the most transactional business with Consumer Office that impacts in quarter. So the strength from that outperformance or better market in consumer PCs in developed markets is a direct correlation to our performance in Office Consumer.”