Microsoft executives interpret the financial report: supply chain tension will continue to affect, but the company’s business fundamentals are strong – yqqlm

On the morning of April 27th, Beijing time, Microsoft today released the company’s financial report for the third quarter of fiscal year 2022. The report shows that Microsoft’s third-quarter revenue was $49.360 billion, an increase of 18% compared with $41.706 billion in the same period last year, excluding the impact of exchange rate changes (not in accordance with US GAAP), a year-on-year increase of 21%;Net profit was $16.728 billionan increase of 8% compared with the net profit of US$15.457 billion in the same period last year, a year-on-year increase of 13% not in accordance with US GAAP, and a year-on-year increase of 17% excluding the impact of exchange rate changes (not in accordance with US GAAP).

Microsoft CEO Satya Nadella, Executive Vice President and CFO Amy Hood, and Chief Accounting Officer Alice Jolla were among the company’s executives following the earnings release. He conducted the subsequent earnings conference call, interpreted the key points of the earnings report, and answered questions from analysts.

The following is a transcript of the analyst Q&A session of the conference call:

Morgan Stanley analyst Keith Weiss: The overall market conditions, including the stock market, are very difficult at the moment, coupled with changes in the interest rate market and rising inflation, and the ongoing war in Europe, the company seems to be doing very well given these backgrounds , the business has accelerated growth, and continues to meet potential market demand, including the accelerated growth of Office 365 Business, so I think a question most investors want to ask is, in the current context, the company’s growth confidence and Where does the driving force for sustained growth come from? What about customer demand and pending orders?

Satya Nadella: There are three levels to answer your question. First, the competitiveness of the company’s products, including our architecture products, software services, commercial cloud, and the improvement of the commercial monetization level of existing installed users, especially since the outbreak of the epidemic, we have done well in both aspects. Yes, the market share continues to grow. In these areas, we also have price leadership, that is, when the market is unfavorable, the most cost-effective product will always win. Specifically for commercial cloud products, we have such Advantage. Second, through conversations with customers, we found it interesting that under the current circumstances, and when the market has been adversely affected in the past, neither IT budgets nor digital engineering expenditures are targeted for reduction, but instead they will choose to accelerate Advances in these areas drive increased levels of business automation and improved productivity, because in an age of inflation, the use of software is one of the ways to ease inflationary pressures. Finally, we cannot predict changes in inflation, but we believe that technology spending as a percentage of overall GDP will double by 2030, and companies need to continue to promote the application of technology, continue to gain relevant market share, and maintain a competitive advantage. It is an issue that we need to pay attention to and a source of our confidence.

Amy Hood: We have been emphasizing our focus on long-term development opportunities, including the development of the total potential market you mentioned. We still have a lot of room for growth, because we are still in the early stages of digitalization and automation. The space is still very large, and the company’s sales and customer order execution also have very good continuity. Our confidence comes from the company’s continued investment in long-term growth opportunities.

Jeffrey analyst Brent Thill: Amy, is the company’s outlook for the fiscal fourth quarter as before, considering the impact of supply chain tensions?

Amy Hood: Our outlook for the personal computing business takes into account supply chain constraints, especially the impact of epidemic prevention and control in China. For this outlook, we also follow the previous principles and strive to take reality to the greatest extent possible. Condition. With the supply chain impact likely to extend into May, there will be continued business impact in the future, revenue from the company’s contract manufacturing business will be confirmed at the production stage, and Xbox game consoles and Surface computers will be affected earlier. The impact on the fiscal fourth quarter will be greater, and we will continue to monitor the situation and strive to be more transparent about these impacts in the earnings outlook. Apart from the above, our outlook is the same as the previous forecasting principles.

Bernstein Research analyst Mark Moerdler: The growth of the company’s Office business has exceeded many expectations. What are the growth opportunities during the transition from E3 to E5? How will the future growth from end users be driven?

Amy Hood: In essence, the performance of this quarter is similar to the previous quarters. All business segments have grown, especially the first-line business. The business growth of enterprises and small and medium-sized businesses is more obvious. During the transition to E5 , our revenue per user (ARPU) also improved. The transition from E3 to E5 has created a lot of growth opportunities, and this transition has just begun, and there will be great opportunities for user growth in the future, especially for small and medium-sized businesses. What needs to be added is that E5 products bring more value to customers in terms of security, compliance, analysis capabilities, etc., plus the value that Microsoft 365 and Windows operating system Microsoft products can bring to customers, We believe these are reasons to remain optimistic about future developments.

Satya Nadella: The fundamentals of the company’s business are very strong, whether it is E5, small and medium merchants, first-tier business, and the growth of emerging markets. This quarter is also the first time I feel that we have products suitable for emerging market regions. Teams Essentials, including the smart team collaboration tool Teams, is designed for smaller companies and organizations, helping companies bring products and services into markets they haven’t been to before. In addition, the growth drivers you mentioned also come from products such as the teleconferencing tool Teams Phone, the pre-configured video conference room solution Teams Rooms, the employee experience platform Viva, and Windows 365 and other products, these products can especially provide users with better in the current situation. multi-value. In addition, we are seeing record data usage across all regions, and increasing data usage and driving deployment growth is also a priority for us.

UBS analyst Karl Keirstead: Amy, the company’s growth in the local Office business was weak this quarter, and the outlook for the fourth quarter also indicates that the Surface business will have the same situation, is this situation due to the company Is it exclusive to Microsoft as a result of the end of the Open License program? Or is it a trend that will continue in the future due to the gradual migration of local Office business to the cloud?

Amy Hood: Good question, I don’t think the cloud migration of the on-premises Office business will have such a big impact on the company’s third fiscal quarter, because the cloud migration has been going on and the effect on the company’s various businesses has continued. Customers are also very accepting and supporting the transition of our trading model. The new policy will start from January 1, and it will take some time to complete the transition. The transition period may be longer than we expected, so the habit impact will also appear in the fourth fiscal quarter. Our team is also working hard to help clients adapt to this transition, which is a very important task.

Satya Nadella: I would like to add that this transition is a very good thing for customers, partners and for the long-term development of Microsoft as a company.

Continuous update. . .