And you obviously saw we had a good quarter in bookings, which is far more reflective of future commitment. Excluding this impact, continued improvement in Azure IaaS and PaaS gross margin will be offset by revenue mix shift to Azure and continued investments to support our customers’ success. In the past, obviously, we had a suite of tools, but this is the first product more so than Outlook was, even, in terms of being able to integrate communications, collaboration and business process. In our consumer business, the overall PC market was stronger than expected, benefiting our Windows OEM, Office consumer, and Surface businesses. OPERATOR:  Thank you. Question for Satya in how you’re thinking about the $200 billion enterprise applications market. We are investing to participate in this growth. The pandemic has proven the PC’s central role in keeping people connected, productive, and secure. Microsoft heads into its fiscal Q3 earnings release April 27 with a new acquisition under its belt. We expect COGS of $13.1 to $13.3 billion and operating expense of $11.9 to $12 billion. Samsung has announced two new laptop models - Galaxy Book Pro and Galaxy Book Pro 360 - running Windows 10. This milestone is a testament to the deep trust organizations place in us, and we will continue to invest in new capabilities across all our products and services to protect our customers. https://www.investopedia.com/microsoft-q2-2021-earnings-5096176 Earnings per share was $2.03, increasing 34 percent and 31 percent in constant currency. Unless otherwise specified, we will refer to non-GAAP metrics on the call. We will post our prepared remarks to our website immediately following the call until the complete transcript is available. We expect a sequential increase on a dollar basis to our capital expenditures as we continue to invest to meet growing global demand for our cloud services. And hours spent on LinkedIn Learning were up 2X, compared to a year ago. [Operator instructions] As a reminder, this conference is being recorded. LinkedIn revenue increased 23 percent and 22 percent in constant currency, significantly ahead of expectations. These were the highlights: Meanwhile, the Intelligent Cloud space saw $15.1 billion in revenue, marking an increase of 23%. I’m wondering if you could confirm whether that’s a reasonable assumption. SATYA NADELLA:  Yeah, we’re very, very focused on what we think is modern business process applications, Walter. In closing, we have executed well in the first half of our fiscal year in a challenging and changing environment. And so, that’s I think at least what we are building towards. And more than 500,000 employees at the U.S. Department of Veterans Affairs, including healthcare workers, use Teams to collaborate. Microsoft's Intelligent Cloud segment delivered $15.12 billion in revenue in the fiscal third quarter. Gross margin percentage was 67 percent, up slightly year-over-year, with roughly 2 points from the change in accounting estimate noted earlier. Microsoft managed a 19% increase in revenue in the third quarter of the 2021 fiscal year. So, that’s how we expect it’s actually work to evolve. It is now my pleasure to introduce your host, Brett Iversen, General Manager, Investor Relations. MICHAEL SPENCER:  Thanks, Raimo. January 26, 2021. Microsoft Azure revenue grew 50% year-over-year in fiscal Q2, 2021, contributing to a 26% increase in Server products and cloud services revenue. Thank you. What we are witnessing is the dawn of a second wave of digital transformation sweeping every company and every industry. Microsoft's fiscal third quarter results were well ahead of expectations as the company's commercial cloud revenue checked in at $17.7 billion, up 33% from a year ago. It brings together chat, it brings together meetings, collaboration, that is Office collaboration, as well as business processes workflow all into one scaffolding. A look back on 2020. So, as a tech company with that comprehensive, differentiated portfolio all the way from business applications, industrial solutions to infrastructure, I think we benefit from that. So, I’m not at all assuming that we just remain as is all the time, all the way going forward. KARL KEIRSTEAD, UBS:  Thank you. Two parts to the question:  One, should we feel that the COVID impact is basically behind you; and two, is the tougher comps or are we now seeing the demand is such that allows you to build on those larger numbers? If you ask a question, it will be included in our live transmission, in the transcript, and in any future use of the recording. With that, I’ll hand it over to Amy who will cover our financial results in detail and share our outlook. Sessions increased 30 percent. And leading customers in every industry, including Amgen, AT&T, Daimler, GSK, and IKEA, are increasingly turning to our premium offerings for advanced security, compliance, voice, and analytics capabilities. PromoteIQ continues to scale rapidly, with retailers like DICK’S Sporting Goods, The Home Depot, and Kroger using the platform to power their digital vendor marketing programs. You’ve got Dynamics that’s performing really well and sounds like is accelerating. Amy, do you see a sustainably different post-COVID expense profile for Microsoft as it relates to real estate footprint and T&E levels? Microsoft Q3 2021 Earnings Preview: What To Look For. In Windows, overall OEM revenue growth should be in the low-single digits on the strong comparable mentioned earlier. Satya, I wanted to dig into one of the topics that you mentioned in your introduction, and that’s kind of Teams working as a framework across all of your solutions and sort of connecting more and more people into the Microsoft framework. Azure revenue grew 50 percent and 48 percent in constant currency, driven by strong growth in our consumption-based business that benefited from improvement across industries and customer segments noted earlier. Microsoft brought in $41.7 billion in revenue over the last quarter. Office 365 commercial revenue grew 21 percent and 20 percent in constant currency. SATYA NADELLA:  Yeah. And in Gaming, we expect revenue growth of approximately 40 percent driven by next generation console sales as well as Xbox content and services revenue in the mid-20 percent range. MICHAEL SPENCER:  Great. We once again saw record levels of engagement across the platform, as LinkedIn’s nearly 740 million members use the network to connect, learn, and find new opportunities. KEITH WEISS, Morgan Stanley:  Excellent. Of all the businesses, the larger ones in Microsoft, most of the upside in this recent quarter, except perhaps for Office 365, where despite the migration to E5 and despite the free-to-paid seat conversion, we really didn’t see an acceleration in Office 365. Microsoft FY21 Second Quarter Earnings Conference Call. Now I’ll briefly highlight how we’re innovating across every layer of the modern tech stack, starting with Azure. Vaccine distribution perhaps best exemplifies the critical need for digital capability across the globe, and our Vaccination Registration and Administration Solution, built on Power Platform, enables governments to manage the end-to-end process, from screening and scheduling, to administration, and follow ups. MARK MOERDLER, Bernstein Research:  Thank you for taking my questions, and Satya and Amy, and the whole team, congratulations on the great quarter. And finally, we returned $10 billion to shareholders through share repurchases and dividends, an increase of 18 percent year-over-year. I would like to receive news and offers from other Future brands. Today’s call is being webcast live and recorded. With Game Pass and more than 47 million Microsoft 365 Personal and Family subscribers, we have a large and growing consumer subscription business. I wanted to talk a little bit about gaming. 2020 Annual Report. SATYA NADELLA:  Maybe I’ll just talk about broadly how I think, both at Microsoft as well as what we are seeing as this return to work, I think the key thing, Mark, we need to think about is there will be more flexibility in terms of time, where they work, even the sites people work, because I think the expectations have changed. And even the terms and categorization today that I find that define biz apps, I think, we’ll see or quite large and will be addressed not just with our Dynamics product portfolio, but partially with our LinkedIn portfolio, with our Power Platform portfolio, with Microsoft 365 as well as Azure. In Office consumer, on a strong prior year comparable, revenue growth should be similar to last quarter with continued growth in Microsoft 365 subscription revenue. That wraps up the Q&A portion of today’s earnings call. In our commercial business, consistent execution, focus on customer success, and a compelling solution portfolio in high growth markets should drive another strong quarter. Capital expenditures including finance leases were $5.4 billion, up 20 percent year-over-year to support growing global demand and customer usage of our cloud services. Data governance is top of mind for every business leader and will grow into an important category on its own, as critical as any AI or analytics category today. Investments made over quarters, and often years, coupled with focused execution by our teams are the drivers behind a compelling portfolio that is delivering value today for our customers and creating optimism in our roadmap for tomorrow. KEITH WEISS:  Excellent. That is really one of the bigger drivers of Teams usage as a platform capability, right? We’ll now move over to Q&A. Office consumer revenue grew 7 percent and 6 percent in constant currency on a strong comparable that included roughly 7 points of benefit from transactional strength in Japan. And we’re adding new capabilities to ensure people have verifiable, secure access to their vaccination records. Our final question comes from the line of Brad Reback with Stifel. We saw some improving trends in seat growth in the frontline, improving trends in SMB that won’t yet be reflected, of course, in revenue, seeing good trial conversion, which again speaks to forward revenue more than in quarter revenue, given that all subscription. MICHAEL SPENCER:  Thanks, Amy. That number compares favorably to the peak of $2 billion from the last quarter driven by holiday sales. MICHAEL SPENCER: Good afternoon and thank you for joining us today. Just I think for us, one of the exciting part about Dynamics and for shareholders is the expansiveness of that redefinition by industry. We are empowering domain experts, enabling anyone in an organization to build applications, automate processes, create virtual agents, and analyze data. I mean, just one quick thing I would add is when you look at Microsoft 365, I think one of the best things I’ve seen recently is when a customer talked about all the things that they’re using compared to even just last year to now that is new value from Office 365 and the usage depth and increase. Save big now! From GitHub to Visual Studio, we have the most widely used and loved toolchain to help developers rapidly go from idea to code and code to cloud. As a reminder, revenue mix shift to Azure, increased customer usage of our productivity and collaboration solutions, and continued strategic investments to support customer success in the deployment of our solutions will continue to impact gross margin. In our consumer business, we expect to see healthy demand for PCs and productivity tools continue, though growth rates will again be impacted by the end of support for Windows 7 last year. But when we think about Microsoft Cloud, we think about all the parts coming together to deliver value and differentiation to our customers. It’s how we sell, and it is how solutions are actually implemented for business process change. Dynamics revenue grew 21 percent and 18 percent in constant currency driven by Dynamics 365 revenue growth of 39 percent and 37 percent in constant currency. On the call with me are Satya Nadella, chief executive officer, Amy Hood, chief financial officer, Alice Jolla, chief accounting officer, and Keith Dolliver, deputy general counsel. Excluding the impact of these tax payments, cash flow from operations and free cash flow grew 33 percent and 41 percent, respectively. Thank you. The company on Tuesday reported fiscal third-quarter profit of $14.8 billion, up 38% from the same period last year. Source: Stephen Brashear/Getty Images for Microsoft. Search revenue ex TAC increased 2 percent and 1 percent in constant currency, benefiting from the improved advertising market noted earlier. So, as I look forward, obviously, it’s about what Satya talked about, which is there’s differentiation, there’s usage. Microsoft reported its fiscal year 2021 Q3 earnings today. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. But the one structural change is the digital technology is becoming critical even for core resilience and business continuity, and to deal with what is going to be a structurally changed customer behavior and expectations. SATYA NADELLA:  Maybe again, I’ll start, and Amy, you can add. It’s no longer enough to just adopt technology. The advertising market continued to show improvement, benefiting our Search and LinkedIn businesses. Oh, and you can order them starting today. We expect our Q3 tax rate to be approximately 15 percent, slightly lower than our full year rate of approximately 16 percent. During this call, we will be making forward-looking statements which are predictions, projections, or other statements about future events. Deutsche Telekom will rely on Azure to modernize its IT infrastructure. MICHAEL SPENCER: Good afternoon and thank you for joining us today. Tuesday, January 26, 2021. Azure Stack HCI, now broadly available, helps businesses extend the power of the cloud to sovereign workloads. The recent SolarWinds attacks are a stark reminder of how critical security is to our customers. That’s, I think, really the real power of that franchise, going forward. And that’s what you see when we talked about it, and in my comments, that’s why one of the things I stressed was what was happening with just line of business applications before any SaaS application, ours or others, the reality is the most usage in any enterprise is line of business applications that were built custom by their enterprise and their IT organizations from all the departments, whether it’s HR or finance or operations. The number of customers adopting multiple Dynamics 365 workloads accelerated again this quarter. Webcast PowerPoint Transcript. PlayStation Network . In public sector, the city of Kobe, in Japan, is relying on Power Virtual Agents and Power Automate to keep citizens informed, building intelligent bots to answer frequently asked questions, as well as automated workflows to route inquiries. We’re investing to bring our cloud services to more customers, announcing 7 new datacenter regions in Asia, Europe, and Latin America, and adding support for Top Secret classified workloads in the United States. And so, you see better seat growth, good conversion and good E5 selling. In education, more than 200 million students and educators worldwide rely on Microsoft Education products for remote learning. Segment gross margin dollars increased 29 percent and 27 percent in constant currency, and gross margin percentage increased 3 points year-over-year, with roughly 3 points of favorable impact from the change in accounting estimate. This is something we focused on and I do feel like strong sales, improving margins, particularly in the cloud, have all benefited us on those lines. Printable 2021 Fiscal Year Calendar Template - CalendarLabs MARK MURPHY, JP Morgan:  Yes, thank you very much, and I’ll add my congrats as well. This change in accounting estimate will be effective beginning fiscal year 2021. Commercial cloud revenue was up 33% over last year. AMY HOOD:  Yeah, in general, Brad, it’s a very good question because the things you tend to watch that can move it quarter-to-quarter or things like you mentioned, whether it’s the settlement this quarter, whether it’s for free cash flow, the timing of cash capital expenditures versus on an accrual basis. There’s looking forward to making sure that we continue to have great bookings numbers. That's a 19% increase over … Paid Office 365 commercial seats increased 15 percent year-over-year, with strong conversion of our free trial offers. And, this quarter, Lumen, formerly CenturyLink, rolled out Teams calling globally to 42,000 employees in just four weeks. Segment gross margin dollars increased 11 percent and 9 percent in constant currency, and gross margin percentage decreased 2 points year-over-year, driven by sales mix shift to Gaming. Our Azure Health Bot, for example, is being used by organizations like the CDC, Premera Blue Cross, and Walgreens to build virtual healthcare assistants used by more than 80 million people worldwide at a time when expanding access to healthcare information is more critical than ever. And so, those are the two for Q3 in particular that I would make sure to call out. Webcast Event Website PowerPoint Transcript. So therefore, what I think is key for us is to really maintain flexibility. VIEW BLOG. 390,000 associates at the Home Depot will use Microsoft 365, including Yammer, to foster connection and engagement across the organization. And in Gaming, we saw record engagement and monetization across our platform, as well as console demand that significantly exceeded supply following the Xbox Series X and S launches. Surface revenue is up to $1.5 billion or 12% YoY. Flexible work is here to stay. So, you brought up firstline. Satya discussed our unique, comprehensive, and integrated set of products earlier on the call – products and services that span large growth markets – and we will continue to invest broadly and boldly against those significant opportunities ahead of us. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform. VIEW DETAILS. Your market share in that area is fairly low in aggregate. If it's not quite what you're looking for, there are plenty of alternatives collected here. AMY HOOD:  And maybe just to add a bit to that, Satya. Thank you for taking the question, guys, and very nice quarter. And operating margins expanded 4 points year-over-year to 42 percent, including roughly 2 points of favorable impact from the change in accounting estimate and nearly 1 point of favorable impact from COVID-related savings. We see strong momentum in usage of our products: In identity, Azure AD has more than 425 million monthly active users. Where growth rates are the same in constant currency, we will refer to the growth rate only. We may earn a commission for purchases using our links. In LinkedIn, we expect continued strong engagement on the platform to drive revenue growth in the low-20 percent range. And as a reminder, this conference is being recorded. Operator, we’ll take the next question, please. Businesses like Nestle and Humana chose Power BI this quarter to help employees use data to make smarter decisions. On the call with me are Satya Nadella, chief executive officer, Amy Hood, chief financial officer, Alice Jolla, chief accounting officer, and Keith Dolliver, deputy general counsel. Stay safe. How customers accelerated industry innovation during a year of disruptive change. In Productivity and Business Processes, we expect revenue between $13.35 and $13.6 billion. Amy, you can add to this. We are off to a strong start in fiscal 2021, driven by the continued strength of our commercial cloud, which surpassed $15 billion in revenue, up 31 percent year over year. Inventory levels ended the quarter in the normal range. No spam, we promise. I would like to receive mail from Future partners. And so, as you can imagine, that I think from our research perspective is very exciting to us. New Azure Purview provides an end-to-end view of an organization’s data estate across on-premises, multi-cloud, and SaaS apps that previously was impossible. At CES, our partners showcased new PCs designed for the new ways we work, learn, and play. Office products, LinkedIn revenue, and cloud services all saw big gains. It seems like almost every part of the business beat, there did not seem to be any meaningful impact from COVID or tougher comps. Just wondering how you’re looking at that market more broadly as an opportunity for the company. 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