Microsoft Corp Q1 2025 Earnings Call Transcript

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

Question: Keith Weiss - Morgan Stanley - Analyst : Congratulations on a really solid quarter. So Satya, the expansion of capabilities, the speed of innovation, the magnitude of the opportunities ahead for generative AI makes this the most exciting period for software I've seen in my 25 years of covering this space. And based upon this call, it seems like you share that excitement. But in my investor conversation, that excitement also feeds two related questions, and they both have to do with constraints. And the first is like what are the internal constraints or guardrails that Microsoft has when it comes to investing behind these innovations, particularly in relation to the funding of future generations of foundational models, where people are talking about price tags, you only said tens of billions or even $100-plus billion? And then on the other side of the spectrum, what are the external constraints that Microsoft sees in building out this capacity to meet the demand and capture the opportunity, particularly constraints in your ability to power all these new data centers being built out and power it in an environmentally sustainable fashion? I'd love to get the Microsoft perspective on both those questions.

Question: Brent Thill - Jefferies - Analyst : Amy, good to hear the reacceleration in the back half for Azure. I guess many are asking, 34% growth in Q1 falling to low-30s. I know the comp is a couple of points harder. But is there anything else you're contemplating in that guide for Q2 to see that deceleration other than a tougher comp? Thank you.

Question: Mark Moerdler - Bernstein - Analyst : Congratulations on the quarter. The question every investor obviously asks is a question on the CapEx growth and the CapEx spend. Obviously, half of that facility is an equivalent that have a longer life, but the other half is the rest of the components. Can you give any color on how you think of that growth? Does it return to the traditional approach, where basically CapEx is going to grow in line or slightly slower than cloud revenue? And if so, any sense of the timing? Do we have enough facilities online by sometime next year, et cetera? Any color would be appreciated.

Question: Karl Keirstead - UBS - Analyst : I'm actually not going to ask a question about the numbers, but Satya and Amy, I'd love to ask a question about OpenAI. Since the print three months ago, we, investors have been hit with a torrent of media stories about OpenAI and Microsoft. And I'd love to give Microsoft an opportunity to frame the relationship. It seems to me it's critically important. But we have been, I think, everyone on the line, picking up signals that perhaps Microsoft wants to diversify somewhat at the model layer and offer customers choice. So Satya, I'd love to get your framing of the relationship. And then in terms of the numbers, maybe this is a little bit more for you, Amy. But how does Microsoft manage the demands on CapEx from helping OpenAI with its scaling ambitions? And how do you manage the impact on other income that you just gave us some color on?

Question: Kash Rangan - Goldman Sachs - Analyst : Satya, when you talked about the investment cycle, these models are getting bigger, more expensive, but you also pointed out to how in the inference phase, we're likely to get paid. How does that cycle look like in inference for Microsoft? Where are the products and the applications that will show up on the Microsoft P&L as a result of the inference phase of AI kicking 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. OCTOBER 30, 2024 / 9:30PM, MSFT.OQ - Q1 2025 Microsoft Corp Earnings Call

Question: Kash Rangan - Goldman Sachs - Analyst : That's, to your point, that you invest now and you can get the growth later even if you slow down the CapEx, right? That's what you're trying to tell us.

Question: Mark Murphy - JPMorgan - Analyst : I'm wondering if you can shed any more light just on the nature of the supply limitations that you're mentioning that are impacting Azure in Q2, where that impact might be incrementally just a touch more than we expected. Is it more the GPU supply? Is there some element of power cooling or the ability to wire up the networks? And Amy, should we infer that the supply is constraining Azure growth by roughly a couple of few points in Q2? Or am I overestimating that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 9:30PM, MSFT.OQ - Q1 2025 Microsoft Corp Earnings Call

Question: Raimo Lenschow - Barclays - Analyst : If you talk about the market at the moment -- because you were first with Copilot, you had identified a lot with copilots and now we're talking agents. Can you kind of -- Satya, how do you think about that? And to me, it looks like an evolution that we're discovering how to kind of productize AI better, et cetera. So how do you think about that journey between copilots, agents and maybe what's coming next?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : Appreciate the question. I want to go and think a little bit about Copilot, how we should be thinking about kind of numbers here with the recategorization. It seems like that was maybe softer in the past than expected or maybe with the numbers this quarter starting to pick up. Can you maybe walk us through what you're seeing on that and maybe more importantly, how we should be thinking about your overall AI strategy on consumer versus enterprise, especially now with [the stuff] on the fold? Thanks so much.