After Microsoft reported results on Wednesday, CFO Amy Hood sent an internal memo to employees calling attention to recent developments in AI chips and coding tools, and deals with OpenAI and Anthropic.
Hood sends these emails every quarter when Microsoft discloses its financials. Her missives mostly rehash what the company reports publicly, such as how revenue and profit are growing, or what is discussed on analyst earnings calls.
Still, these memos provide insight into what Microsoft executives deem most important, and what they want employees to know.
The latest memo highlighted how Microsoft is gaining share in markets where the total addressable market is expanding.
Hood specifically mentioned the launch of the GitHub Copilot software development kit in the growing market of AI coding tools, and the release of Microsoft’s new Maia 200 AI chip.
Hood’s email also called out Azure commitments from OpenAI and Anthropic that helped increase commercial bookings, basically the deals Microsoft closed in the quarter, by 230%, year over year.
Capital expenditure on computing and datacenter infrastructure also broke yet another quarterly record, reaching $37.5 billion, she also noted.
Read the memo
Team,
This afternoon, we announced our second-quarter financial results. We exceeded Wall Street expectations, growing revenue 17% and 15% in constant currency and operating income by 21% and 19% in constant currency -a strong finish to the first half of the fiscal year.
In the quarter, Microsoft Cloud revenue surpassed $50 billion for the first time, growing 26% and 24% in constant currency.
There were many highlights this quarter, but a few stand out as reminders of the value our products and services deliver to customers – and as proof points of the progress we are making:
- Commercial bookings, which best represents the amount of business we closed in the quarter, increased 230% and 228% in constant currency driven by previously announced Azure commitments from OpenAI and Anthropic, with healthy growth across our core annuity businesses.
- We invested $37.5 billion in capex on GPUs, CPUs, and datacenter infrastructure to support growing Azure demand, expanding first-party Al usage from products like M365 Copilot and GitHub Copilot, and to increase the capacity available to our R&D teams for product innovation.
- Azure and other cloud services revenue grew 39% and 38% in constant currency, slightly ahead of our expectations. Customers are running larger, more complex workloads with us and increasingly integrating Al into the core of how they operate.
- Microsoft 365 commercial cloud revenue grew 17% and 14% in constant currency reflecting consistent execution in the core business and increasing contribution from strong Copilot results.
- Dynamics 365 revenue grew 19% and 17% in constant currency with growth across all workloads.
- Microsoft 365 consumer cloud revenue increased 29% and 27% in constant currency with subscriber growth of 6%.
- Search and news advertising ex TAC revenue grew 10% and 9% in constant currency driven by higher search volume and continued benefit from third-party partnerships. Bing and Edge again took share.
- Windows OEM revenue grew 5%. And we just crossed one billion Windows 11 users globally.
- And, LinkedIn grew 11% and 10% in constant currency reflecting growth in Marketing Solutions.
Investors tune in to our earnings call for the full details on this quarter and a look ahead to Q3. It’s a helpful way to stay aligned as we deliver on our commitments. Join live today at 2:30 PM Pacific, listen on-demand, or check the transcript on the Investor Relations website.
This quarter’s results reflect meaningful progress on core priorities. We continue to add capacity with pace, drive steady efficiency gains across our fleet, and invest in each layer of the stack
As we enter the second half of the fiscal year, we’re operating in markets with expanding TAM where we continue to gain share and you can see our progress in many places, from last week’s announcement of the GitHub Copilot SDK to Monday’s Maia 200 announcement. We are innovating and delivering together. And we’re doing it with the quality and security our customers expect from us. All of this builds trust from customers and partners as they rely on us for mission critical workloads.
Thanks again for all your work.
With appreciation and gratitude,
Amy
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