Microsoft (NASDAQ: MSFT)
Q2 2024 Earnings Call
Jan 30, 2024, 5:30 p.m. ET

Key Highlights:

• Record-Breaking Quarter Fueled by Strength of Microsoft Cloud
• Azure Dominates with AI Advancements and New Customer Wins
• Integration of Activision Blizzard Results in More Personal Computing Segment

Overview of Earnings Call:

Operator

Greetings, and welcome to the Microsoft fiscal-year 2024 second-quarter earnings conference call [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. Please go ahead.

Brett Iversen — General Manager, 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.

Microsoft completed the acquisition of Activision Blizzard this quarter, and we are reporting its results in our more personal computing segment, beginning on October 13, 2023. Accordingly, our Xbox content and services revenue growth investor metric includes the net impact of Activision. Additionally, our press release and slide deck contain supplemental information regarding the net impact of the Activision acquisition on our financial results. 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 second 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 and 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’ll 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 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 — Chief Executive Officer

Thank you, Brett. It was a record quarter, driven by the continued strength of Microsoft Cloud, which surpassed $33 billion in revenue, up 24%. We move from talking about AI to applying AI at scale. By infusing AI across every layer of our tech stack, we are winning new customers and helping drive new benefits and productivity gains.

Now, I’ll highlight examples of our momentum and progress, starting with Azure. Azure again took share this quarter with our AI Advantage. Azure offers the top performance for AI training and inference in the most diverse selection of AI accelerators, including the latest from AMD and NVIDIA, as well as our own first-party silicon, Azure Maia.

And with Azure AI, we provide access to the best selection of foundation and open-source models, including both LLMs and SLMs, all integrated deeply with infrastructure data and tools on Azure.

We now have 53,000 Azure AI customers. Over one-third are new to Azure over the past 12 months. Our new models-as-a-service offering makes it easy for developers to use LLMs from our partners, like Cohere, Meta, and Mistral, on Azure without having to manage underlying infrastructure. We have also built the world’s most popular SLMs, which offer performance comparable to larger models but are small enough to run on a laptop or mobile device.

Anker, Ashley, AT&T, EY, and Thomson Reuters, for example, are all already exploring how to use our SLM Phi for their applications, and we have great momentum with Azure OpenAI Service. This quarter, we added support for OpenAI’s latest models, including GPT-4 Turbo, GPT-4 with Vision, DALL-E 3, as well as fine-tuning.