Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Good morning.Thanks, everybody, for joining.I'm delighted to be welcoming Microsoft to the conference here on stage.I'm Brad Sills, a Senior Analyst covering Large-c ap software, including Microsoft.We're very fortunate today to have Yusuf Mehdi, who is Consumer Chief Marketing Officer and Corporate Vice President.Thank you so much, Yusuf, for joining us.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Thanks, Brad.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Great to have you here.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.Thank you.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Why don't we just start, Yusuf, with, a little bit of your background and, your role at Microsoft as Chief Marketer for the consumer?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, great.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Please.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It's great to see everybody.Good morning.At Microsoft, the role I play is I run essentially product marketing, product management for most all of the consumer products at the company.This includes Windows, our Surface device portfolio, Microsoft 365 Consumer.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Most notably of late, Bing and Edge and all of our AI, consumer AI efforts.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful.Why don't we just start high level?When we think of Microsoft, we think of the enterprise.Maybe if you could just touch on kind of the state of the Microsoft brand with the consumer and where are the key focus areas?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Sure. you know, as a whole, with Microsoft, we, you know, are fortunate to have a very strong brand on a worldwide basis.We have great strength in the enterprise, as you know.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That translates over into the consumer space because people are people, as we say, so they use our software at work and at home.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You know, we have excellence in certain categories of productivity and creativity.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Where we're well known, and then, and now we're coming in new areas.Obviously, with Windows, we've got strength, and then with Bing and Edge.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.Wonderful.Great.We saw the launch of the new Bing early this year, and I thought the demo was impressive.Wanted to just get your thoughts on, you know, what was the motivation behind that?What are the use cases you're going after with Bing in search?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Sure.Well, you know, the big opportunity that we saw with the launch of the new Bing is that there are roughly about 10 billion search queries that happen every day, and at least a half of those, by our count, go unanswered.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
People aren't getting the answers to the questions they want.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
These are things like, you know, longer travel queries, you know, more sophisticated research.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We saw an opportunity to marryS the power of AI with Bing.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Create a new interface to go after that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
start to solve some of those problems for customers.You know, and we're seeing some good success already early on with that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful, wonderful.Would love to get your comments on the OpenAI partnership, and the integration there.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
With Bing and in general across Microsoft, if you could.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Sure.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Please.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You know, as many of you may know, we have a very tight relationship with OpenAI that dates back now multiple years, to about 2019.We've worked together, with them to start from the foundation.We've helped provide the cloud power behind the phenomenal work that they've done in AI through large language models.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
With Azure, w e've built the supercomputer.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That powers all of that training and the inferencing.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
These are very high-end, sophisticated computers.There was special work done for that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We did that work.Then, you know, more recently now with Bing, we've worked together.We've built a proprietary technology inside of Microsoft that we call, codename Prometheus.This is a proprietary way that we have to access the large language model, to access the AI.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Get the most out of it.Essentially, think about taking the power of the web index, our understanding of the internet.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Of web pages, which there's only, you know, essentially two companies that really have that kind of power.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We can now more intelligently call, access the AI, refine the answers, and get that back.We've worked together with OpenAI in a number of ways on that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
From ChatGPT, we made an announcement at our developer conference last week that we are now going to enable with them, the ability to use search within ChatGPT, just like we have with Bing.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Today, with Bing, we have a very differentiated offering.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Which is you can not only access the AI to answer questions, but we can call the internet.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That means we can reference things.It means we have more timely data.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Those are real strengths, and that we're continuing to partner with ChatGPT on that.The final thing is, we announced with them a common plugin architecture.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
As third parties want to now come in and write on this new emerging platform, when developers write a plugin, it'll run on Bing and on ChatGPT.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
For that matter, on all of our Copilots at the company.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful.At the time of that launch, for the new Bing, you referred to the next-generation LLM from OpenAI that was coming, that's more tailored for search.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Would love to get any more color on that, please, if you could elaborate.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Sure, yeah.At the time, you know, at the time, we were essentially running on an early version of GPT-4.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
If you.Already it's, you know, recent memory, but, at the time GPT-3 was out, we had more advanced results, and people were asking: "Why are your results so great?
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It's because we had been working on an early version, so that's what we were referring to.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
OpenAI confirmed that, you know.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
About a month or so later after they announced it.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Got it.What has the results been so far in terms of the relevance of Bing, since you've had this integration with OpenAI?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Please.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, it's only been about four and a half months, but since the launch, we've had a bunch of great progress and milestones on that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
First off, and just from in terms of usage, Bing has now surpassed 100 million daily active users.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Which, by all accounts of any kind of product on the internet, is a super impressive number.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
In the world of the internet, search, it's not that much.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We're still single-digit player, which means we have a lot of upside.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
100 million daily actives is pretty impressive.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've seen our mobile traffic increase 4x.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've seen a lot of pickup now in usage of it.We've seen new users come.You know, I think back early on, we had millions of new users come and try Bing that hadn't before.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It's really, I think, in our minds, started a new day in search.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
A new round of competition.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful.Thank you.There were some enhancements to the Prometheus model as part of this Bing overhaul, earlier this year.Could you elaborate on what Prometheus is, and what were some of those changes?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.Prometheus is a little bit of some of what we, I was mentioning earlier.It's, it's our proprietary method for accessing.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The Bing search index.We've used it effectively to do a couple things.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
One is to get better answers in Search.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
What will happen is let's say today you call an AI, in, you know, ChatGPT or something else.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You get back an answer that gets created from the AI.We're able to check that against the search index.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
To understand, hey, is that really something from there?We can use search data to help the answer get more relevant.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We can footnote it.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The other thing we've done is we've actually used AI in the converse, and we've applied it to our search ranker.For those of you who follow search, closely, improvements in search ranking is very tough.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It's, you know, 20 years for us and Google.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The largest increase, I think, in at least a decade, if not longer.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Came after we applied the AI, you know, sort of techniques
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
-to the search ranker.Now our results, I would say, rival Google's results in terms of relevancy.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Interesting.Okay, great.You demoed some new use cases, you know, when you rolled out the new Bing.Are there any use cases that have surprised you, that you've seen more of, that perhaps maybe you didn't expect?Just any commentary you can make on, you know, how some of these new use cases for search are coming in with Bing.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Sure.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, a couple different things.Like we said, first off, you know, I said about half of the queries that we see in search today go unanswered, and those were things like travel, like more sophisticated travel planning...
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... deeper shopping research.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... sort of advanced kind of research.Those things we're seeing now in the early data-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
that people are in fact, doing better queries.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It gets kind of nuanced.Like, when you're in search, people might say, "Flights for $500.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
When people are in a chat interface, they might say, "Hey, help me plan a trip to Kenya.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Two-week trip to Kenya.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It's different questions, different answers.We're seeing people do more sophisticated travel-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
analysis and planning as one example.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've seen a lot of people do much more research, historical discovery of information and content that they hadn't done before.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
because it's the ease of use is now there.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've seen some changes in those things.You know, the big takeaway, though, is in the chat, when we see people chat, the vast majority of what they're trying to do is search specific stuff.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
If there was a question before we launched about whether the new AI and the new chat would revolutionize Search.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That has proven out, at least in our data.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.Wonderful.Okay, great.When you think about the advantages Microsoft has here in search, the data set that you're leveraging, if you could provide a little bit of color as to, you know, what that is and from your seat?Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Sure, yeah, we have a, I would say we have a couple of really, you know, clear advantages.One is the OpenAI AI foundation model, it's very clear that is by far the best, most advanced model that's out there.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You know, we've seen that through various testing.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Number one, we're getting to leverage the most advanced AI foundational model.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Second thing is, because of our Bing web index-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Like I said, there's really only two big search web indexes out there, we have a unique opportunity to be able to marry sort of daily crawling-.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
up-to-date information, you know, deep search understanding
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
with the AI.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's a very unique thing that we can do.Thirdly, we, because we're more of a challenger, if you will, we have smaller share-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... we're very focused on the new emerging customer needs, and we can take more, you know, we can take more steps to be innovative.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
the user experience that we've done with
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
what we're doing with Search on the search page itself.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
And then the integration that we're doing with that, like we've announced Windows Copilot.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've put Bing on the Windows taskbar, so half a billion people now can get access to.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
one-click access to Chat.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Those are some unique strengths that we can bring to help people with their searches.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful.Thanks, Yusuf.At the time of the launch, you referenced the convergence of the browser, you know, the chat, and search.If you could elaborate on that and how you see that direction.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.One of the things that we see is most people don't.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
between their browser and their search engine.They think of it as one concept.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Right?Obviously, when you go in, I'm sure as you all use the Internet, you go into the URL address bar, and you type in.What we're doing is we're doing really deep integration of that search and chat capability in Edge.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
that, so that you get what we think of as your Copilot for the web.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Which means that as you go anywhere on the Internet.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
not just on, you know, bing.com or-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
some other
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
-site.com-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Anywhere on the web, if all of a sudden you want to apply AI to the page you're looking at...
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
...For example, you go to a page, and you say, "Hey, tell me what this page is.Summarize a long PDF.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Tell me the ingredients for this recipe.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
With one click on Bing, we can now read that page with the power of AI, and if you want, you can then go outside the Internet and access additional information.For example, you can say, "Hey, read this, you know, third-quarter report.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
of financial earnings from company X.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Give me the key takeaways.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Compare their earnings in the last quarter against another.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
put it in a table for me.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You can literally do that all, anywhere on the web, on any type of content.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's an incredible merger and we're very unique in doing that right now.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful.Thank you.What kind of impact have you seen from the new Bing and Edge on search volumes and engagement?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yep.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Please.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You know, a couple things.Like I said, our daily active users now have surpassed $100 million.We were on a path of growth.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... but that has certainly picked up since we launched the new Bing.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm, mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
likewise, our Edge browser has been growing share-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
for the last eight quarters in a row.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's continued.If anything, we see when people use the new Edge with Chat, they spend more minutes on it, and they use it even more.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
All of the early signals, and this is still early data, but all of the early signals are very positive.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
In particular, when we see people use chat, we see them search more, we see them come back more frequently.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The early signals are good, and now as we're starting to scale more broadly.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... we'll see how that, you know, expands out.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Great.Thank you.Thank you.When you think about Microsoft's advantage, I mean, we're all a lot of focus this week on AI and LLMs.What is Microsoft's advantage in training LLMs, you know, your own internal LLMs?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.Again, we use OpenAI a lot for the LLM.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Sure.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
They do a lot of the training.We work with them a bit, as we said.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Sure
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... um, on the-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
...Azure infrastructure, the supercomputers.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We do a lot with our responsible AI.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
There's a lot of techniques we've done.We have an incredible, responsible AI, at the group, at the company.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... across many dimensions, from-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... ethicists, to researchers, to scientists, to user experience designers.We collaborate with OpenAI.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
on some of that as well.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Sure.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Of course, we have the web index and the search index, and so a lot of the learnings we have there, we're able to work with OpenAI on the training of the LLMs.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Great.If you could comment on some of the challenges when, you know, faced when training LLMs, you know, data quality, bias, user privacy, you know, how do you see those challenges, and how is Microsoft and your partnership with OpenAI, how are you addressing that?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah. both us and OpenAI are really committed to having a super quality offering.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... in the content, in the AI, in all of that training-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
there's a lot of thought and care that has been put into making sure that, you know, quality content is, essentially, you know, clearly in there.Content that is, you know, of suspicious thing gets ranked appropriately.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Fair.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Then again, we do a lot of training to protect against, you know, sort of bad actors.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We don't want people to use the AI to cause harm.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... self-harm and harm in otherwise, sort of, bias against, you know, people.There's a lot of work that has been put in between ourselves and OpenAI to make sure we have really a, an inclusive and equitable solution.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.Mm-hmm.Wonderful, great.How does Bing, how do you approach the balance between personalization and privacy with search through Bing, yeah?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Well, we think privacy is a very personal thing.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
For us, privacy is built in by design in all of our products.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've put that work.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
the way we design the service
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
how we gather data, how we store data.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
All of that is in there.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
I think first and foremost, privacy is of the utmost thing for us.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We protect against that.Within that constraint, we can start to build a real personal experience for people.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful.Great, thank you. 10 years ago, you had the launch of Cortana.Curious to get your perspective on how Cortana fits in here, with ChatGPT and the Microsoft AI portfolio.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, you know, I think, Cortana and other sort of like agents were early forerunners of, you know, different interfaces to try and access content.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Where we are today with the new Bing...
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... in partnership with ChatGPT, is we have really now a much more advanced, powerful system that can, in fact, answer questions.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... in the case of some of the work we're doing now with even Windows-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
With Microsoft Edge, can take action on your behalf.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
you know, the tech there is really much, much more advanced, and I think it is sort of the future where we see things going.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Great.Maybe we could talk about the Bing Image Creator, which is powered by OpenAI.What are some of the possible monetization opportunities there?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Please.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, I think two different things probably we could take in turn.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
There is Bing Image Creator.For those of you who don't know, Bing Image Creator is a service where you can essentially create images just by typing in words.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You can say, like, for example, I've used this, I'm doing a home remodel design.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
I've said, you know, "Help me design a mid-century, modern-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... living room that has, you know, brass and wood and whatever," and it'll come back with a picture.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
I can say: "Oh, hey, make that rounded-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... and let's change the color from black to white.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It can do that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It's an incredible thing.Since we've launched that, we've had hundreds of millions of people, images now created.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It's probably one of the most exciting features that we've seen.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've put that in chat, the ability to iterate.If you guys haven't all tried it, bing.com, go up there now and go into chat in creative mode, although we've just launched it in all the modes, and try it and say, "Create an image of XYZ.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You can see the power of it.That's a great feature.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Separately, I think, question you're probably at after, right, is like a broader thing.What's going on with monetization?
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
What are the opportunities there?
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It's obviously super early days.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Two, I think, of monetization, sort of innovation happening in two sort of segments.There is what happens on the classic search page.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... where in there, we're seeing, as we get more relevant answers, we're able to kind of use traditional search advertising.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's doing really well.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
There's the chat interface, where obviously it's a different user experience.It's cleaner.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You know, there's more chat, and so, you know, does it make sense to have a lot of answers there with a lot of, you know, advertisements?
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Obviously, one of the things people are liking about chat is that you don't have all the blue links, that you can get right to the answer you want.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... and then go find.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We are, right now experimenting a lot with our content publisher partners.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
With advertisers on what is the ad opportunity within the chat window.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We're finding good things.We're finding the ability to, for example, have links to more content.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's one thing that's been very unique with what we've done with Bing.Unlike any other services, we put citations and footnotes.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We're also having richer, answers in some cases we're testing.We're testing the ability to potentially have right ads on the page.We're flighting all that now.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
As you can imagine, advertiser demand is very high.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
-for this because they know this is where there's a lot of action.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It's still very early to say how it'll play out, but my guess is that, you know, my sense is a couple of things: One, you'll see fewer ads.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
they'll be much more relevant.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
They'll have much higher click-through rate.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
I think it'll be a very disruptive experience to traditional search-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
which for us is all goodness, because, again.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
early and we're happy to engage with.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
with a new and improved search experience.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We're in the beginnings of that process.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful.Thank you.Thank you, Yusuf.Why don't we shift gears to Windows and the PC business?What are some of the key focus areas for consumer in the roadmap for Windows?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, Windows broadly?
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah, please.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.A couple different things.Let me just start and just kind of give an update on Windows.We are now at an all-time high in terms of Windows usage and engagement.You know, I think we're over 1.4 billion people-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... use it monthly.A huge majority of that, uses it daily.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've seen usage of Windows go up.We've seen use cases since the pandemic go up.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The pandemic had many bad things, but one small silver lining is we saw people return to use the PC.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
-and they rediscovered-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
the value of the PC.You know, previously, you know, all of us live a lot on our phones.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
People saw they could use the PC for things like, you know, video conferencing.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
not just for work, but for home use, right?
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
For staying in touch with family.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
online shopping.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
went up, telemedicine-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
went up, you know, grocery delivery.People, since the pandemic has sort of subsided, people have continued to do those use cases.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
because of that, and so that, the value of the PC probably has never been higher.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That has been one of the great things that we've seen.More recently, with Windows 11...
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've made great strides to make that much more cloud powered.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
As we're starting to talk about it, AI-powered.A couple of things.On the cloud-powered side, it's hard to believe, but Windows 10 did not require a login sign-in.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Imagine using your iPhone and not signing in.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
with an ID.You couldn't imagine it, right?
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The phone wouldn't make any sense.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Maybe you would make a phone call, but that'd be about it.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Windows, until Windows 11...
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
About a year and a half ago, we didn't require that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Now that we do, we're seeing the use of Windows change dramatically.People are now...We have a very high login sign-in rate.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Now, we can give you a personalized news feed.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We have widgets now, which is a new platform for people to do development.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's much more personalized.People are able to back up their content.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
They can roam their files.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
All these things that you take for granted on your phone, we've brought to the PC, and so the value of the PC has gone up quite a bit.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's been one thing we've done.Much more cloud powered, much more service enabled with Windows.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We're also then most recently announced that we're now enabling you to be able to send messages from your phone...
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
-via either an Android or an iPhone.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
If you've always wanted to have your text messages come into, your PC.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
you can now do that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's a huge thing that I've always wanted.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We still have more work to do.You can't necessarily do group messages, but you can do the individual messaging.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
That's great.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Most recently, the AI has now come in.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We announced at Build, two weeks ago-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
...Windows Copilot.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Windows Copilot is essentially powered by Bing.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You get all of the power of the internet, all of the power of the intelligent agent.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
now within Windows.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Just like I referenced with the Edge example.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
you can use your PC experience and ask it questions to about what's going on on the things on your desktop to take advantage.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You can take what we call actions, like you can do in Edge.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Now with your Windows, if you've, you know, if you've ever sort of said, "Hey, how do I put this thing in dark mode?
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You can just pull up Windows Copilot and say, "Put my PC in dark mode.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Put me into focus mode because I have to work now.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It will arrange your Windows-.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... dial in your playlist.Everyone who didn't know how to use Windows is now gonna be a power user of Windows.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
because you now have the Windows Copilot
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
that you can just talk to, and it'll take action on your behalf.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful.That's exciting.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Great.Yeah.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Thank you for that.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
I can't wait for that myself.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.Why don't we, if we could, talk about the interplay with Xbox Game Pass and Windows, and what's on the roadmap there for the convergence of those two?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Sure.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
One of the things that's been great as we look at our Xbox business is we've seen a lot of, obviously, great success on the console.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Gaming and online gaming.We're seeing a lot of success now with gaming on the PC.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
PC has always been a home to obviously gaming.It's the
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... platform for games.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Now with Xbox, we're starting to really see.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... progress there.We've brought our Game Pass subscription service that lets you play games across console and PC.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
In fact, we almost doubled the total number of countries now that have Game Pass.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
on the PC.We've seen that tick up quite a bit.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've got some great experiences there with an Xbox app on Windows.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You can keep track of your friends, your gamer profile, all of your gamer stats, and so that has all come together.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We're seeing really good progress there on the PC.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Great.Great, why don't we shift to devices?You know, Surface tablet, laptop.Where's the focus on the product line?Anything on the roadmap there as well?Yeah, please.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.We're really focused on the core of our Surface portfolio, which is primarily the Surface Laptop-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The Surface Pro.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
our two-in-one.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You know, the Surface Pro continues to be really an unrivaled and unique product on the marketplace.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It's the only two-in-one, as we like to talk about it.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
It is the tablet that can replace your laptop.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You have a full tablet.You have an incredible screen with pen.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You have access to all of Windows on that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That is a big focus for us.We're continuing to improve on that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Performance has gotten better.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We've had 5G capabilities on it now.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You can move around, and now with Windows 11, you can take advantage of it.It is by far the best devices for mobile professionals and for creatives.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
On the laptop, we've continued to do a lot of work to build more and more powerful laptops.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
that again, give you that real incredible computing experience with Windows.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's really been the big focus.Yeah, the innovation trend continues.I can't talk about things that are coming in the future but.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Right
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... you know, suffice it to say that if you're a Surface fan, there's a few Surfaces out there, you're gonna want to continue to use it.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
That's great.Thank you.On the Q3 earnings call, you called out some elevated inventory levels there, if you could elaborate on that, please?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Sure.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You know, what happened because of the pandemic, there's been sort of ebbs and flows on, PC purchasing.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
how the PC market's gone.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
One of the things that happened is people bought a lot of PCs.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
...I think in advance of they were thinking of return.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We saw elevated inventory channel levels.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Sell-through has continued, so sell-through has continued sort of steady.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Obviously, what's happening is we're seeing retailers wanna work down the inventory levels.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The way that, you know, impacts us.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
short term, there's less sell-in.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The sell-through continues.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
And it's working its way through.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Great.Great.I think you're also, you have responsibility for Skype?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yes.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.Okay, great.There's clearly an investment being made there.Any commentary on where those key investment areas are for Skype, and how does that fit into the broader consumer portfolio?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, I think the way I think about it, and, I mean, take a step back from that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Like, on, in terms of communications, consumer communications-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
we really have a couple different assets.We have Teams.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... that you use a lot for work, but we now have Teams for Consumer.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That has been growing nicely in terms of monthly active users.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Still early.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We have Skype, as you referenced, which is something we've had for traditional-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... that still has a very loyal fan base.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We have this product called GroupMe.Don't know if you have GroupMe, but if you have kids, they all use GroupMe 'cause it's a huge hit in college.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Those three products, what we're looking at doing is increasingly bringing them together on a common platform and architecture.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... while still respecting the user experience that people love on each of these-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... things, right?With GroupMe, people, college kids love the simplicity of it.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
With Skype, people love the ability.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... friends and family from across international lines.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Teams Consumer now is really becoming a great place for communities.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... for people to come together with communities.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We have brought, a lot of the new Bing and AI into those products.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
getting to Skype specifically, which you asked about...
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
we've, one of the things we've done with Bing and AI is we've put, essentially a chatbot-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... in Skype.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
If you are talking with your family, for example, and you're planning a night out or a trip.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
you can call the Bing chatbot and say, "Hey, Bing, tell me great places to travel.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Bing will put that together and drop it in the chat window.While you're chatting with your family, you can actually call the chatbot to help you.It's like having a intelligent assistant or a concierge or a butler.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... help you while you're conversing, you know?
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We see that expanding as we add the capabilities.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Okay, wonderful.How does Microsoft think about some of the overlap between, you know, Skype and Teams, or is it truly complementary as you're describing there?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, I think we see it as complementary on-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... the core infrastructure, right?
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The communications, the idea of having one contact list.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We think of the user experience as being unique.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Distinct for those.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
like I said, Teams is focused on increasingly more on some communities.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... getting groups of people to do that.Skype is more sort of point-to-point, family-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... much more for international expansion.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful. maybe just a higher level question, you know, when you think about, you know, the Microsoft brands, you know, again, a lot of enterprise association, how does that benefit Microsoft and the consumer with, you know, with Windows PCs and, you know, some of the other offerings you talked about?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.Well, the, our strength in enterprise and at work-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... is that we are the tools and the devices, the software, the devices that people use every day for-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Sure
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... for their work.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That, you know, that becomes a real reason that people then wanna come and use it in their home life.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That provides a nice virtuous cycle.Conversely, when we sell-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... our Surface devices in particular that people love
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
they come and then wanna bring those into work.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Right.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
I see that with my kids who are now working.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
They'll have a laptop that they got from work, I won't say from where, and then, of course, I'll buy them a Surface for their birthday.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
They're like: "Dad, that's awesome!" I'm like: "Well, take that into work.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Right.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
They're like: "Well, we're not allowed to," in some cases.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
I'm not allowed to.You know, we have a...
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Sure.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... kind of thing." They're like: "Gosh, I wish I could use my Surface.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Then vice versa, I've had people who have a computer at home, and then they love the Surface they got at work.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That flywheel for us of consumer to commercial is a very unique thing.Again, like all of us, we have jobs, and we have personal lives.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Being able to use a single device, being able to use a single productivity suite, an email-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... a browser-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... that virtuous cycle of, you know, work to consumer and back.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... really benefits us in terms of, being able to better meet customer needs.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Got it.Got it. maybe shifting to Xbox a little bit, you know, the strategy has always been, you can play games from anywhere on any device.It's less console-centric, you know, strategy.If you could just comment on, you know, how you see the convergence of the, you know, Game Pass with the PC and how that fits in with that overall strategy.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, I mean, I think you said it well.We believe that, you know, the future of gaming.Right now, there's three different gaming silos.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
There's games on your phone.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... games on your PC, and games on the console.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Historically, those have been three different worlds.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Frankly, three different audiences.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You know, we, our vision for Xbox is that you should be able to play the games you want, with the people you want, on the devices you want.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
what we've done is we've built much more of a cloud gaming solution.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
that can now work across all those devices.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We're taking all of the steps.Like I mentioned earlier.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... having Game Pass, give you the ability to play games on the PC and the console.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You buy them once, and you can run them across both those platforms.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We're building that capability.We're bringing the Xbox app out to all those platforms.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful.Great.When you think about, you know, Microsoft Studios, you know, what are some of the things you're excited about that, you know, you can talk about here that might be coming?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.I mean, there's a lot of great games coming.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yeah.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
There's a big one that's coming up.I don't know how much we've talked about it, so I probably won't mention it, but it's coming up shortly.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The team has been playing that game a lot, and, we're pretty excited about it.I think it's, it'll be a sort of a great look forward in terms of what gaming can do.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Great.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You know, as a whole, the studios team does a really fantastic job.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
building next-generation content.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... the fastest, you know, form of growing entertainment, and we think that the ability to expand upon that with AI will improve quite a bit.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Great.How do you see the convergence of, you know, gaming with the metaverse in the enterprise potentially?You know, I think the talent base that you have there, engineering talent, you could apply a lot of that.You could, you could deploy some of those resources towards the metaverse.Curious to get your perspective on how you see that playing out, and where is the talent base for the metaverse within Microsoft, and is there overlap between, you know, the gaming franchises in those applications?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, I mean, I think from a technology perspective, you know, a lot of games, not all games, but a lot of games are about world development.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... character development.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The techniques in terms of how you do the programming, how you do the design of that software.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... to build, that is applicable in the metaverse
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... you know.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Of course, we have all of our own work that we've done in the enterprise space.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
to build sort of digital twins, if you will.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah, I think there's a lot of you know, relevance there.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Wonderful.We're running short on time here.Any other comments, Yusuf, that you'd wanna make?Any kind of closing comments on kind of the state of the Microsoft consumer brand across multiple franchises?
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
I think what I would say is that, you know, one of the things we've probably been at the best place we've been in our consumer business in a while because we see the opportunity of AI to really transform everything we've done.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We talked about Windows...
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
how Windows Copilot-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... it will be the operating system that I think will lead the way.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... with AI and assistance in a way that you haven't seen before.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's because, you know, some of our competition either doesn't have that capability in-house.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... or it's not in their interest to disrupt their own current search model.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
The second thing is with Microsoft 365, we didn't talk a lot about that.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
That's our productivity suite.That's not just, you know, Microsoft Word and PowerPoint, and we're gonna bring Microsoft 365 Copilot-
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Yep
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
to that, so that you can talk to Excel and have it
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
you know, do things on your behalf.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We're also now using things like Designer.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... which is, I think of it as sort of equivalent to a Canva.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... but with more powerful capabilities for design and creatives.We're, you know, early in the testing of that, but that's we've already crossed a lot of users on that as well.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We see that coming.With the new Bing and Microsoft Edge, that is really the big thing.That's the big opportunity.It's a huge market.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
... a huge TAM.We have first mover.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
You know, we don't have any of the innovator's dilemma.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
We're excited to meet customer needs and to go out and get some of those things.I would say broadly across Windows, our devices, and what we're seeing with Microsoft 365...
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Mm-hmm
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
it is super early days in the internet, super early days of with the development of AI, we're quite excited about what we're gonna be able to do with it.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
It's very exciting.Yusuf, thank you so much for joining us at the conference.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Thanks very much.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
Great to have you here.
Yusuf Mehdi
Consumer CMO and Corporate VP, Microsoft
Yeah.Thank you.Thanks.
Brad Sills
Senior Analyst of Large Cap Software, including Microsoft, Bank of America
