Microsoft Corp at Goldman Sachs Communacopia & Technology Conference Transcript

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

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Got it. So although you're a technical person by education, your title is Chief Marketing Officer. Is the bar so high at myself to be in market? 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 10, 2025 / 10:05PM, MSFT.OQ - Microsoft Corp at Goldman Sachs Communacopia & Technology Conference

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Correct. On that topic, how do you envision AI evolving over time? So Microsoft has got a unique vantage point being super, super early. So explain to us how you envision the AI tech stack evolving over time, your vantage point and Microsoft's role in this evolution?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Got it. We all watched the launch of GPT-5. I'm sure you did. What is your reaction to the GPT-5 launch? What do you make of the technological enhancements? And I have a follow-up question as it brings to Microsoft.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : So you just got me thinking, so the beginning of a system that's going to prove to be very influential, where do you go forward with this? How do you make this more useful in terms of Microsoft's approach to this technology?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Yes. So the bleed over to M365 Copilot, how does this manifest going forward, the GPT-5 improvements in M365 Copilot?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Got it. Any examples of that? So you talked about the financial analyst. Any other examples besides putting me out of a job?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : I'm going to throw out a bunch of seemingly unrelated terms and ask you to see if you can explain where this concept kind of fits in this. RAG context -- broader context windows, reinforcement learning, test time compute. In that ramp of seemingly unconnected things that I just blabbered out, where would this enhancement to GPT-5 fit in? Is it a broader context window? None of the above? It's like that's mad rambling, Kash, and it does not make any sense.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : RAG, broader context window, reinforcement learning. So those are all things that are supposed to enhance the core model in some way, add context to it, provide information to it, hold it more in memory. What you're talking about is getting deeper into domains. Does that happen because of any of these things? Or does the model itself come with the deeper domain and you just have to call upon that, okay, I want to pull upon the financial analyst demand, and boom, it goes in? 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 10, 2025 / 10:05PM, MSFT.OQ - Microsoft Corp at Goldman Sachs Communacopia & Technology Conference

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Got it. Not step function, but (inaudible) of magnitude better.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : That was what was echoed by our previous panelists from Sequoia Capital that he said that people misinterpreted the GPT-5 as an incremental advance over GPT-4.5, and he made it look like it's a lot more than that, which seems to be very consistent with how you characterized it. I've watched Build and I was fascinated. I was not prepared to be riveted to every second of what happened at Build, and I was riveted. In particular, the MCP support for MCP protocol, the agent-to-agent protocol and would seem like you were building a middleware layer. Just my mind flashback to BEA Systems. That may not mean anything to you, but maybe some of us here in the audience might actually link like BEA systems. They produced middleware for SaaS, web-based applications. Of course, the company went nowhere, but they were at the beginning, you could see the future, if you envision, right? It felt like you're building middleware for agentic applications. So talk to us, if you don't mind, the implications of these frameworks A2A, MCP as it pertains to AI apps ecosystem development? How important is this?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : That inertia talks about foundry. The foundry layer has all these protocols being supported. And then if these protocols are supported, then you would need to pull into a data layer that would have all the semantics, the context, et cetera, to make the agents actually do the work, right?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Got it. How dependent is the Microsoft Copilot stack on OpenAI's IP? And are you diversifying your tech stack beyond OpenAI?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Is something about this MAI model that Microsoft is doing?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : So the role of MAI is just one other model. It's a Microsoft first-party model. Where is that, I mean, going? What are the plans for MAI in the context of the foundry layer?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : We've heard so much about the AI, the potential threat of AI disrupting seat count or put pressure on seats due to layoffs or maybe intentions to hire at a slower rate because of AI's ability to write code, do design and who knows what else it's going to do. Where do you stand on this debate?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : What are the productivity benefits that you're seeing with your customers on account of adopting Copilot at this stage? It's been out for a couple of years now.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Well, I use Copilot to draft e-mails and make little corrections to it. And I also ask it to summarize my calendar for the day and what are the priorities. I even asked it to prioritize the e-mails that I need to respond to. And sometimes it looks at an e-mail and say, oh, number one important e-mail would be like some client asking me to comment on a wildly speculative thing that's happening that it thinks it's very important because it's a word and such you have to please get back to me on this, right? So but on that, I think it's been just generally a tool that has been growing. And I start to use Word, not that I use PowerPoint, but I get into it, Copilot starts to show up. And can I summarize this for you? It's turned -- started to show proactivity, just like ChatGPT. Would you like me to do more research on this? It's starting to show up a little bit more and more and more.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : I think some people would say that Wall Street uses too much jargon in cRPO, RPO, KPI, I mean, translate all that stuff. Lay it for me in English, right? We actually have a jargon dictionary in the Goldman Sachs research. You had to headline -- it's like a massive one, very long one because every industry analyst has their own like jargon list. One day, that goes away. As of the Q4 earnings, which were phenomenal, Copilots are now more than 100 million MAUs across commercial and consumer. Where are we in this adoption cycle, the first inning, second inning, third?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Got it. How is Copilot usage tracked relative to your expectations? How are those usage patterns changing?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Should I say another Copilot usage, which really was absolutely productive for me was -- there was a point in time, March or April, I forget. The was just think, oh, Microsoft is going to cut CapEx, their whole hyperscalers or blah, blah, blah. I had the benefit of your most amazing IR team on the road. And I had conviction, and we wrote up a report. And I wrote up in my e-mails, my thoughts on CapEx and one client, and there are multiple e-mails sent to multiple clients on this topic, covering multiple aspects and one client called me like two minutes before a company was reporting -- is going to be reporting earnings. And he said, I want your thoughts on Microsoft CapEx. I said I'll call you right back. I just went to Copilot and said summarize everything that I've said about Microsoft CapEx in five bullet points. Boom, I sent it to him, and he was ecstatic. He was like I really appreciate you getting back to me so quick. Thank you, Copilot. I'll not mention the client's name. I don't think he's here. He may be here.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : I checked the e-mail, though, before I sent it.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : What is Copilot's competition? When you try to sell this, who do you run into? Is it like ChatGPT modified by the customer to like Copilot or --?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : I mean, there's this tendency, the beginning point of any new tech cycle that when you have the building blocks, you're excited to build your own thing and you feel like you're a genius developer and everybody is a genius developer creative, et cetera. When things kind of settle down, you don't -- that's not the core competence and you want to rely on a provider like Microsoft that has watched hundreds of customers and has dissimulated the province and makes the product better. And what the person that developed this just leads your stock? Who do you call? That's so simple.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : The decision on part of Microsoft, the price M365 Copilot at $30 a month, how do you expect this to change over time?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Got it. Okay. E5 upgrades have been a big driver of ARPU increases. Could you quantify for us or maybe give us a range, what percentage of the base is on E5 today? And how large is the opportunity that's left ahead of you?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : It's the denominator. Yes. That's right. And Copilot has to be a catalyst for the --

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Got it. We've got about two minutes left. Are we okay to get a question from the client? Or should I just go on? Anybody? We generally don't get any questions because it's such a large room and by the time the mics get to decline. Is that the case? Or who's going to be the bold one? Yes. All right. Unidentified Participant Okay. So I'm going to make the question that people would like to hear. Your partner, OpenAI, just signed a gigantic multiyear contract with another cloud provider. Why not Azure?

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Yes. That's --

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : You're not the right person for that. It's a good question, yes. Should contact Microsoft IR for that. Anybody else? Yes. This is a question that has to be addressed to Jared given the scope of his work. So yes. 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 10, 2025 / 10:05PM, MSFT.OQ - Microsoft Corp at Goldman Sachs Communacopia & Technology Conference Unidentified Participant (inaudible - microphone inaccessible)

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : With that, let's give a round of applause for Jared. Thank you so much. Great discussion.