Microsoft Corp at Goldman Sachs Communacopia + Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Got it. And I happen to -- you guys should all check it out. There's this YouTube video. You're the star of the show, and you talked a lot about how you planned to approach fiscal '23 with your partners. It's called Inspire '23 (sic) [Microsoft Inspire 2022]. That's Inspire '23? I got to tell you, I felt fired up after watching that YouTube video and he's the star of the show and you introduced your industry heads and they bring in their customers, whatnot. So the -- despite the looming uncertainty with the macro, et cetera, you guys sound you were bullish and I thought, okay, man, these guys sound bullish. And then Satya comes over after you and he sounds equally bullish. So what's going on at Microsoft? Why -- you put up good numbers from your seat. What have we been seeing with respect to demand trends, the nature of customer conversations that makes you so bullish about the future?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Yes. We'll dig into the specifics of that, but I do -- and we were talking about it when we caught up before the group meeting, something to the effect that there is inflationary forces in the economy, but tech is deflationary. That's something all talks about on the conference call. How -- if you don't mind, level set us on what is the implication of what you guys have been talking about. Tech is deflationary, the economy is going through inflation, what can you do at a super high level for the economy because you're a $200 billion revenue company. You're big, and you have influence in all corners of the economy. If you don't mind digging to that statement a little bit and tell us what it means.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Got it. So in an environment where financing costs are going higher because of higher rates, whatnot, the fact that tech actually makes money from our perspective, should hold us in good stead, right? And that was the point that our chief economist, Jan Hatzius, was making in the morning at 7:30. He calls for a soft landing. And we did ask him about the role of technology in GDP improvement, and he's definitely more optimistic than you could imagine. And Judson, looking out a little bit more big picture, a lot of our clients have been thinking about where we are in cloud adoption, digital transformation. Are you seeing any changes with CIO budgets? Has anything changed with respect to appetite for IT in your conversations?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Cloud window washing, I like that.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : So I'm glad you didn't say the best of Goldman Sachs and that -- so that would have been a concerning thing. But I did want to ask you a little bit about deglobalization. What can Microsoft help customers with respect to onshoring the globalization? Because I thought that was a bit of a negative, but you make it sound like it -- you could do something for these customers. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2022 / 10:00PM, MSFT.OQ - Microsoft Corp at Goldman Sachs Communacopia + Technology Conference

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : That's great. So you've got the most expansive commercial product portfolio at Microsoft. It's dizzying in terms of what it can do, LinkedIn, Microsoft 365, Azure, those are like multi, multibillion-dollar business, multi-tens of billions of dollars of businesses. When it's that big, how do you build synergies across these products? And how do you even cross-sell? Sounds like an insurmountable task of monumental complexity. How do you do this?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Nothing's boring. You're a good speaker.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : And that's how -- and the customers see it that way, the way you're explaining it. More customers are going to see it the way you explain.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Got it. Excellent. What could go wrong here? What could be the roadblocks and problems with digital transformation?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : It's Alison Taylor (sic) [Alysa Taylor], right? I mean she's still doing the... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2022 / 10:00PM, MSFT.OQ - Microsoft Corp at Goldman Sachs Communacopia + Technology Conference

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Got it. Got it. I'm going to do a quick pulse check. I always keep the mic so far away from me. Quick pulse check to see if anybody has any questions. If you do, just raise your hand, we'll try to -- it's not even possible for me to see the raised hands because there's so many of us here. Pardon me if I'm missing any raised hands. Okay, there you go. Unidentified Analyst Could you talk a little bit about the ecosystem and where it is and how you see that evolving over the next 5 to 6 years?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Any other question? Before I -- please go ahead.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Microsoft, 100% [or so]?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Judson, I'm curious, I mean, this is something that just came to mind here, if you have and if you're willing to share your perspectives on the data, database, data analytics, data warehousing segment of the software universe. I know Satya has called out how Cosmos DB is on fire, triple-digit growth rate, that sort of thing. What is happening on the Microsoft data ecosystem? Can you give us your perspective what to read into what's happening with data warehousing, databases, unstructured data, structured data, RDBMS, document databases? So many things that are happening. It's fascinating to me that database market has gotten the slowest growth market in software to the fastest growth market in software. What's happened? What is Microsoft's stake there?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Did they switch from Exadata to Cosmos DB running the cloud?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Yes. Now that's a great perspective because I was curious what's happening to the former, most stodgy piece of the software market now turned the most active, vibrant, and I really gained from that perspective that you had to share with us. Moving on to -- unless there are any -- aren't any raised hands, I want to move on to -- if I can just finish my question, and I'll come to you because I'm thinking right through it here. We'll come to you in a second. Microsoft 365, quite a few of us have been using Teams, maybe all the time or some of the time. What are you doing with the Teams product? Were you investing in the functionality? And what are you telling your customers specifically leverage within Teams and then after that? Would that be...

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Yes. I noticed in your Inspire speech, you had some scenarios where Teams integrates with GitHub capabilities. So all the collaboration extends out to the developer, not just the...

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Got it. Let's go to your question, please. Thank you.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : I have a question on a topic that I'm petrified. I don't know much about it. And I'm not...

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : No, no, no. I'm not -- and many of my clients know that I do not really like security, but it's a hot topic, and it's hugely relevant and things have changed since I gave up my interest in security 12, 13 years back. What are customer conversations in security like these days? Why is it so important?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : I'm less insecure about secure security, actually. Anybody else with a last opportunity to pose a question at Judson? If not, I have one final one for you. We zoom back out a little bit. What are we underappreciating with respect to a product or a market that Microsoft is participating in that you don't get enough questions from us and we all really take into it. Even your customers don't know that, oh, you've got this unbelievable product. What could we be talking about in the next few years that we're not talking about today?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Yes. So commercial cloud is still a $100 billion run rate business, roughly, like commercial cloud?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : It's in the model. It's in the model. I just have not seen it in the last week or so. Now what I wanted to say was it's not too often that you see a $100 billion-ish run rate business growing 25%, 30%. Here's the man that made it happen. So thank you for getting us excited about technology, getting us excited about everything in general. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2022 / 10:00PM, MSFT.OQ - Microsoft Corp at Goldman Sachs Communacopia + Technology Conference