On this page of StockholderLetter.com we present the latest annual shareholder letter from MICROSOFT CORP — ticker symbol MSFT. Reading current and past MSFT letters to shareholders can bring important insights into the investment thesis.

 •  10/24/2024 Letter Continued (Full PDF)
 •  10/19/2023 MSFT Stockholder Letter
 •  More "Application Software" Category Stockholder Letters
 •  MSFT Benford's Law Stock Score = 96

MSFT Shareholder/Stockholder Letter Transcript:

Dear shareholders, colleagues, customers, and partners:
Fiscal year 2024 was a pivotal year for Microsoft. We entered our 50th year as a company and the second year of the
AI platform shift. With these milestones, I   ve found myself reflecting on how Microsoft has remained a consequential
company decade after decade in an industry with no franchise value. And I realize that it   s because   time and time
again, when tech paradigms have shifted   we have seized the opportunity to reinvent ourselves to stay relevant to
our customers, our partners, and our employees. And that   s what we are doing again today.
Microsoft has been a platform and tools company from the start. We were founded in 1975 with a belief in creating
technology that would enable others to create their own. And, nearly 50 years later, this belief remains at the heart of
our mission to empower every person and every organization on the planet to achieve more.
This year, we moved from talking about AI to helping our customers translate it into real outcomes   one person,
one organization, one institution, and one country at a time. We have made remarkable progress on this front across
every industry. For example:

Coles is generating 1.6 billion daily AI predictions across 850 Australian stores, ensuring every shopper finds
what they need.

Unilever is performing thousands of simulations with AI in the time it would take to run tens of laboratory
experiments, as it accelerates its product development.

Developers at Ita  , Brazil   s largest private bank, are coding more efficiently using our AI pair programmer,
GitHub Copilot.

Khan Academy is making tutoring more accessible for students and helping teachers plan more creative
lessons, using our small language model Phi.

Aquafarmers in Indonesia are improving their yields, thanks to an app built with the Azure OpenAI Service,
as well as Azure IoT.

In Kenya, street vendors now have access to credit for the first time, thanks to M-Kopa, a social enterprise
using Azure ML to do its forecasting.

And enterprise customers and their employees around the world, from Amgen and Disney, to Finastra and
Vodafone, are using Microsoft 365 Copilot to become more creative and productive.
Financially, the year was also marked by record performance. We delivered over $245 billion in annual revenue, up
16 percent year-over-year, and over $109 billion in operating income, up 24 percent.
Going forward, we are focused on three priorities: First, prioritizing fundamentals, with security above all else. We
launched the Secure Future Initiative (SFI) this year, bringing together every part of our organization to advance
cybersecurity protection. Second, driving trustworthy AI innovation across our entire portfolio while continuing to
scale our cloud business. And, finally, managing our cost structure dynamically to generate durable, long-term
operating leverage. All three priorities are critical to our ability to continue thriving as a company as we raise the bar
on our operational excellence, with a focus on continuous improvement across everything we do.
AGE OF AI
If we go back 70 years to the beginning of modern computing, our industry has had two dreams: First, can
computers understand us instead of us having to understand computers? And second, as we digitize more of the
world   including people, places, and things   can computers help us reason, plan, and act more effectively using all
that information? Over the past year, we have had breakthroughs on both fronts.
The core underlying force behind these breakthroughs is scaling laws. Just like Moore   s Law drove the information
revolution, the scaling laws of deep neural networks (DNN) and transformers are driving today   s AI revolution. Up
until the DNN inflection point, progress in compute was keeping up with Moore   s Law   doubling every two years.
But we have now started to see progress in AI performance double roughly every six months.
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There are three capabilities coming together because of these scaling laws. First, we have a new natural user
interface that is multimodal. It supports speech, images, and videos   both as input and output. We have memory
that retains important context, recalling both our personal knowledge and data across devices, apps, and the web.
And, finally, we have new reasoning and planning capabilities that help us understand complex context, complete
end-to-end tasks on our behalf, and reduce our cognitive load.
This new world is being defined by a rich tapestry of AI agents, which can take action on our behalf, including
personal agents across work and life, business process agents, and cross-organizational ones. These agents will be
able to work in concert as a new input to help make small businesses more productive, make multinationals more
competitive, make the public sector more efficient, and improve health and education outcomes broadly.
Microsoft has built three leading platforms to help our customers maximize their opportunity in this emerging
agentic era: Copilot, which you can think of as the new UI for AI   the human interface for this agentic world; the
Copilot stack, which brings together infrastructure, data, and app services to help customers build their own copilots
and agents for their own business processes; and a new category of Copilot devices that are purpose-built for this
new era, including the Copilot+ PCs we introduced this year.
OUR OPPORTUNITY
The innovation we have driven over the past year matters only if we translate it into enduring value for our
customers. That   s why, across our tech stack, we are focused on helping people and organizations realize the
benefits of AI.
Infrastructure
This year, we expanded our cloud and AI capacity, announcing new investments across five continents. These are
long-term assets to drive new growth for the next decade and beyond, and ensure communities around the world
have access to the compute they need to drive economic growth in this new era.
Our cloud now also offers top performance for AI training and inference and the most diverse selection of AI
accelerators, including the latest from AMD and NVIDIA, as well as our own first-party silicon, Azure Maia, which we
introduced last November.
More broadly, we continued to see sustained revenue growth from migrations as customers turn to Azure. Azure Arc
is helping customers streamline their transition, as they secure, develop, and operate workloads with Azure services
anywhere. We have 36,000 Arc customers, up 90 percent year-over-year. And we remain the hyperscale cloud of
choice for SAP and Oracle workloads.
Data & AI
AI models are now key building blocks for every application. And with Azure AI, we are building out the app server
for the AI age, providing access to the most diverse selection of models to meet customers    unique cost, latency, and
design considerations. We offer leading frontier models, thanks to our strategic partnership with OpenAI. With Phi-3,
which we announced in April, we offer a family of powerful, small language models. And, with Models as a service,
we provide API access to third-party models, including the latest from Cohere, Meta, and Mistral. In total, we have
over 60,000 Azure AI customers, up nearly 60 percent year-over-year. This year, we also announced a partnership
with G42, which will run its AI applications and services on our cloud, as we collaborate to bring our latest AI
technologies to the United Arab Emirates and other countries.
AI does not get created without data. At the data layer, we are fundamentally rethinking what it means to be an
analytics database or an operational data store in the world of AI. Our Microsoft Intelligent Data Platform provides
customers with the broadest capabilities spanning databases, analytics, business intelligence, and governance   
along with seamless integration with all our AI services. And Microsoft Fabric, our AI-powered, next-generation data
platform we made generally available this year, now has over 14,000 paid customers who can go from data, to
insights, to action   all within the same unified SaaS solution.
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Digital & app innovation
From GitHub to Visual Studio, we have the most comprehensive developer tools. GitHub Copilot had a breakout
year, as it became standard issue for developers in every industry. We now have more than 1.8 million paid
subscribers and over 77,000 enterprise customers, up 180 percent year-over-year. They are realizing productivity
gains of up to 55 percent while staying in their flow and bringing the joy back to coding. This year, we also
introduced Copilot Workspace, a Copilot-native developer environment, which helps any developer go from idea, to
code, to software   all in natural language.
We are also integrating generative AI across Power Platform, enabling anyone to use natural language to create
apps, automate workflows, or build a website. In total, we now have 48 million monthly active users of Power
Platform, up 40 percent year-over-year.
Modern work
Microsoft 365 Copilot is becoming a daily habit for knowledge workers, transforming their work, workflow, and work
artifacts. Adoption has been faster than any other new Microsoft 365 suite. And employees at nearly 60 percent of
the Fortune 500 now use Copilot to complete tasks faster, hold more effective meetings, and automate business
workflows and processes. In fact, internal and external studies show as much as a 70 percent improvement in
productivity using generative AI for specific work tasks. And early Microsoft 365 Copilot users were 29 percent faster
in a series of general tasks like searching, writing, and summarizing.
And we   re going further, bringing the Web plus Work plus Pages together as the new AI design system for
knowledge work. With Pages, which we just announced last month, you can take any information from the web or
your work and turn it into a multiplayer, AI-powered canvas. You can ideate with AI and then easily share what you
create for collaboration with other people.
And with Copilot Studio, customers can extend Copilot with agents and build their own agents that proactively
respond to data and events from their own first- and third-party business data. To date, 50,000 organizations have
used it. And, just this week, we announced new capabilities that will make it possible for customers to build
autonomous agents using Copilot Studio.
Microsoft Teams remains essential to how hundreds of millions of people meet, call, chat, collaborate, and do
business. This year, we rolled out to all customers a new version that is up to two times faster while using 50 percent
less memory. And Teams Premium surpassed 3 million seats, up nearly 400 percent year-over-year, as organizations
chose it for advanced features like end-to-end encryption and real-time translation.
Business applications
We   re using this AI moment to redefine our role in business applications, too. Dynamics 365 once again took share,
as organizations use our AI-powered apps to transform their marketing, sales, service, finance, and supply chain
functions.
And we are expanding our total addressable market by integrating Copilot into third-party systems as well. Our new
Dynamics 365 Contact Center infuses generative AI throughout the contact center workflow in a customer   s existing
CRM.
We are also extending Copilot to specific industries, including healthcare. With DAX Copilot, more than 400
healthcare organizations are increasing physician productivity and reducing burnout. On average, clinicians save
more than five minutes per patient encounter. And 77 percent say it also improves documentation quality.
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 10/24/2024 Letter Continued (Full PDF)