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Deutsche Bank Technology Conference
Who: Dave O’Hara, EVP, Commercial CFO
Event: Deutsche Bank Technology Conference
Date: Wednesday, August 31, 2022
Brad Zelnick: I think we're live. Welcome back, everybody. I'm Brad Zelnick with the Deutsche Bank Software Team. Really delighted to be here hosting this session with Microsoft where we have the company's Executive Vice President, Chief Financial Officer of its Commercial Business, Dave O'Hara. Dave, welcome.
Dave O'Hara: Thank you, Brad.
Brad Zelnick: Thanks for being here. The format of this will be a 35-minute or so fireside chat, or as long as we last. I've got a bunch of prepared questions to ask Dave and if there's time, maybe we'll -- I'll keep my eyes on my phone, on my inbox. If you have any questions, I'll try to weave them into the conversation. Again, if we have time. But with that, Dave, let's jump right into it.
If you don't mind, maybe for those that are less familiar with you, your title, can you explain your role and what it is that you do at Microsoft?
Dave O'Hara: Sure. I am the Commercial CFO for Microsoft which is just what it means which is the CFO for all of our Commercial business. People ask me, tell me what's in the Commercial business, and I say anything that’s not consumer. Which is true and it's fairly accurate framing, so it's all of it. It's Azure, it's Office, it's Windows Commercial, it's SQL, it's all of the commercial stuff. And then I also have Corp Dev.
Brad Zelnick: Excellent. Thank you for that. Maybe if we could talk -- the macroenvironment is on everybody's mind. Maybe if we could just reflect on last quarter, the company sounded very confident in the strong momentum in the Commercial business, but did call out some softening, specifically in the small to medium business segment. We're now 2 months into Q1. Has anything changed in terms of the trends that you're seeing there? And also, several other software companies have come out and spoken about larger deal cycle delays in large enterprise type deals. Is this something that Microsoft is beginning to see as well?
Dave O'Hara: I would say at a macro level, I think everybody is still trying to figure it out and understand where the world is going. For us, we were, as you noted, we had a good Q4, we had a really good bookings number, a record bookings number for us. And we've had a few quarters of that in a row and so we like to see that. We see that as a sign of future strength, so we feel good about where we're at and we feel like long term, the cloud is just going to continue to expand.
On the SMB side, we saw a little bit of a pullback, but even with that, we still saw good growth, it was just probably a tick less than we might have otherwise expected. We still have the same outlook. Like you said, I think everybody is still trying to figure it out, but I also think that people are looking at this as an opportunity to really transform and they're investing accordingly.
Brad Zelnick: That makes sense. And to your point on commercial bookings, you've now had 3 quarters in a row with greater than -- or 35% or greater commercial bookings growth in constant currency, and led by large long term Azure commitments. I can imagine this does give you some degree of visibility and confidence in the business trajectory for the year. But what do you think is driving customers' confidence in making these large types of commitments, especially in these times?
Dave O'Hara: I think one, first and foremost is, we can show them how they can save money by investing in cloud technology and investing in the future. They look at it as an opportunity to take your OpEx down. When we look at a company, we really think the opportunity for us is basically anything they spend on OpEx. Like everything ultimately can be automated and everything ultimately can be run better in the cloud. We just make that pitch to them.
I think the other thing is, we just have a good lineup of products. Cloud started out as infra, but it's much more than that now. We have solutions that fit all up and down the stack. I think the reason that they're willing to make commitments is, one is, if they make a long-term commitment and a big commitment, they're going to get a better deal from us, and they know that. And two is, they're just kind of at the point where I think they just feel like it's past the question of does this make sense? They know it makes sense. The question is, how fast can they move and how efficiently can they move? We're seeing lots of people make big investments and lots of people come in with big ideas.
Brad Zelnick: I am always I guess surprised/not surprised when I hear of these massive 9-figure multiyear strategic commitments with the world's most known brands. But when we think about Azure, obviously there's demand that falls into that category all the way down to smaller innovative type companies looking to do more with less and some of what you talked about. But how reliant is Azure growth on larger, long-term deals? Is it fair to think about Azure as driving customer spend on other Microsoft products as well, like Power Platform, Dynamics, Office? Like how have these customer conversations evolved in terms of pulling through more and more of the portfolio?
Dave O'Hara: We started out talking about the Microsoft Cloud. When we go in and make a pitch to a customer, we talk about all the offerings that we have and Azure, as you noted, is a good entrée because it's infrastructure and at some level the companies are better off starting there. But there are so many offerings beyond that Power Apps, Dynamics, any of the database offerings. We really look at it -- I think that's the reason they want to sign a long-term relationship. One is, not only do they get a better deal, two is, they get more of a roadmap and they can understand where they're going long term as opposed to just doing a transaction. It's really about a deep partnership. We have the conversation with lots and lots of customers and I get involved in lots of deals as well. Many of the CEOs start out by saying, I don't want a transaction, I want a partnership. And that's what we're looking for too is a long-term partnership. And throughout that partnership, they end up using a lot of our technology, not just Azure. Azure is often just the starting point.
Brad Zelnick: Got it. Makes perfect sense. Overall, Azure growth rates remain very impressive, but there's still healthy debate around the trajectory from here over the next couple of years as just the revenue base just gets larger and larger. I appreciate you're not going to give us long term guidance, but can you walk us through the inputs and process of how Microsoft itself thinks about capacity planning and the visibility you feel you have for overall commercial demand?
Dave O'Hara: It's a very different world, obviously, than we had even 5 years ago. Because our CapEx number is much more meaningful, much larger. But we also feel like we have way better signaling to how much we should be spending on CapEx. Because we have these long-term contracts. We have deep conversations with customers. We have the biggest global footprint from a cloud perspective. That's all signal and that all tells us where we think the world is going. To build a datacenter takes a long time and so you have to be fairly accurate. But not only that, you have to continue to drive efficiency. How we think about the long-term growth of Azure, it's a unique market in the sense that you have 3 super deep pocketed players who are willing to do what it takes to win a customer. I feel like from a pricing perspective, it's always very competitive and we'll do whatever it takes to be competitive and continue to grow share. Pricing is always, for lack of a better description, under pressure. But we feel like we're charging a fair price and customers believe we're charging a fair price. Pricing, there's probably pressure on that side.
On the hardware and software side, there are definitely efficiencies of scale. Where we've seen some of that through some of the margin expansion that we've been able to achieve over the years is just efficiency. You might have price pressure on the top end, you might have bigger contracts which result in more predictable revenue, you have all the efficiencies in the hardware and software side, and then you get the benefits of scale across all the OpEx that we're spending. All of that, we sort of -- every quarter we pull all of that together and say, here's where we're at in our cloud business. But it really starts with the Microsoft Cloud. Not just any one product, it's Microsoft Cloud and making that work across all of those inputs and takes.
Brad Zelnick: You mentioned the CapEx cycle. Does the capital that you're deploying in Microsoft Cloud today -- how do we think about that like just in terms of -- and I don't want to get into the accounting and the changes in depreciation and things like that, but just more from a capacity planning standpoint, how far ahead are you thinking and is the company looking at?
Dave O'Hara: Well, we have a rolling 3-year plan on how we think about CapEx. But really, it's about the next 18 months in terms of what you can control. It's best to have a directional thinking on how we think about 3 years out. 18 months out, we do a lot of planning and then we adjust as we go. What we've seen over the last 5 years is, each year we have to adjust that a little bit. On the other hand, you get way more VMs out of a machine these days. You can store way more servers in a datacenter. The chips are much better. You can process -- there's a lot more consumption that can be run through a datacenter today than 2, 3, 4, 5 years ago. We get all those efficiencies as well. You have to factor all of that into the planning process to say where do we think we're going to be? And then you have to get smarter about how you provision land. I feel like we are so much more sophisticated in that process than we were when we started. It's been really fun to see.
Brad Zelnick: Awesome. Maybe to pivot to Industry Clouds, I feel like the message we've heard coming out of Microsoft, it has signaled really strong adoption around what you're doing in vertical market specific offerings. How important is that to the longer-term Azure strategy? And is this an area where we should expect to see more investment, maybe similar to what we've seen in healthcare with Nuance?
Dave O'Hara: Sure. On the Industry Clouds, really, for those that are familiar, the Industry Clouds are really onboarding to Azure is how we should think, about it. Because they're industry specific, but it's not super deep functionality. It's not like we're creating a vertical product that goes and competes with the ecosystem. It's really just industry, some industry functionality runs on Azure and gets people onboarded under our Cloud. Those are all being well received. But even as an example, when we announced our sustainability cloud, Judson and I jumped on with some CEOs from Europe and then we jumped on a call with some CEOs from the U.S., and just said, hey, here's what we're doing, all good news. And they're like, hey, where's the reporting for X, Y and Z? People just want stuff that's very specific to their company and to their industry and we'll continue to work with the ecosystem to deliver that.
Now on Nuance, I spent a ton of time on Nuance both pre- and post-acquisition, and still spend a ton of time there. Nuance was unique to us in the sense that we do have a very strong ecosystem play, always have, always will. And Nuance was both an app and a platform. It's a platform in the sense the EPIC embeds it and Cerner embeds it and other healthcare providers embed it. It provides very specific functionality that the ISVs can use to make their solution better. The thing we liked about that is, it's not a vertical app. It's really a platform app that is very industry specific. And I think we will take the opportunity to build all of those that we can. Because I think as long as we're enabling the ecosystem and we're providing specific functionality that maybe they can't get or choose not to build on their own, then that is all good news. I think we're seeing that chill up. Would we do more stuff like Nuance? I think to the degree that we can have something platformy that works with the ISV community and provides differentiation that they want, yeah, absolutely.
Brad Zelnick: Any industries that stand out as rich opportunities?
Dave O'Hara: I think the 6 that we have for Industry Clouds are all seen as an area of focus for us. Think about any of them -- retail, financial services, manufacturing, whatever, healthcare, sustainability. I think the other one is nonprofit as I look at my IR friends. I think all of those are big and broad opportunities for us to have partnered closely with the ecosystem.
Brad Zelnick: Cool. Dave, maybe to pivot to a different topic, today's Microsoft really embraces interoperability and open standards and ultimately to drive customer benefit. I'm surprised when I think Microsoft's multi-cloud value prop is very clear with capabilities such as Azure Arc as an example. Can you talk philosophically about the balance between interoperability versus proactively partnering with great companies, like a Databricks for example, to ultimately drive customer success?
Dave O'Hara: Sure. When you look back on it, it's been a bit of an evolution. I think when we first got into the cloud game and it was us and AWS and some other vendors that had been around a while too, it was seen as you go win a customer, then the customer runs in your cloud. And it quickly became apparent that that probably wasn't going to be the way that it all played out. The customers wanted choice. They wanted the opportunity to run the business they wanted on whichever cloud they wanted. And candidly, if you start 6 years behind your competitor, then it benefits us to have a multi-cloud environment. Because that way, if people are running some workloads on AWS and some on us and some on GCP, then our job is to make that run as efficiently as possible. And Azure Arc really does that. What it then allows people to do is run Azure services across a variety of clouds including all the public clouds. I think multi-cloud is definitely here to stay. I think the onus is on the public cloud providers to make that work as seamlessly as they can and we'll continue to invest in that. In early days, it was like hey, here's our cloud, here's their cloud, which one do you want? And now it's like, hey, here's how to best run your business. And I think it's a much better story for customers.
Brad Zelnick: No doubt it's playing out to customers' benefit and we pick that up all the time. Maybe along similar lines, it was surprising to see, at least for me to see for sure, your announcement of an Oracle Cloud managed database service for Azure. Can you talk about the size and scope of this specific opportunity and just more generally how Microsoft thinks about coopetition?
Dave O'Hara: Yeah. Satya in particular is very, very committed to an ecosystem play and that we should be able to partner with almost any company in almost any industry and in the best interest of the customer. We've done business with Oracle for decades actually. Judson, who runs our sales force, he came from Oracle, so he's got longstanding relationships there. I think Oracle has great offerings and great database offerings. I think having those database offerings run in Azure Cloud is a good thing and we just got together and we said, hey, we have a common set of customers that would like to see this happen. Let's make it happen. And it really wasn't a difficult conversation to have. We just felt like if you do this and we do that, it all works out for the customer, then that's a good thing.
The Databricks partnership is a pretty deep partnership for us. Our partnerships can run from sort of marketing partnerships to API partnerships, as something that's more deeply integrated or even something like Databricks that actually sells on our paper. We just, depending on the company and depending on the opportunity, I think we're open to having partnership conversations with basically anybody.
Brad Zelnick: No doubt. Maybe while we're on the data topic, Cosmos DB data volumes have been growing at over 100% for 4 quarters now. Synapse data volumes growing very nicely as well. How does Microsoft think about data services creating affinity and stickiness in the cloud? And as well, how should we think about the cost of delivering data intensive services over time?
Dave O'Hara: Sure. Well, data is a big play for us. Always has been. Way back in the day when Microsoft got into the business with SQL, that was sort of our -- that was the big leap into data and I think everything that we do now sort of builds on that history. For a cloud offering, infra is great, storage is great, but if you can't do something with the data, it's not really going to make a difference. We spend a bunch of time and money on making our data products and offerings better and more targeted toward customers. And I think we see that in the growth.
I think for us, the stickiness comes from the collection of services, not any one service. Data is probably more sticky than average, but in the end, what they really want is all of their products to work together across the whole cloud. From a consumption perspective, some companies use data a lot more than others, so it just depends.
In terms of cost, I think we have a fair value prop for our data services. But again, we look -- when someone signs a multi-billion-dollar contract with us, and a multiyear, multibillion dollar contract, there's a piece of that that's data. As I noted earlier, we look at it across the whole Microsoft Cloud and we just need to make sure that we're competitive in the market. And I think we are and I think we'll continue to drive costs down. I think the most surprising thing to me in the last years has been how quickly with the combination of software and hardware we've been able to take costs out of the model and which allows us to pass better pricing onto customers. And I think they're seeing that and benefiting from that.
Brad Zelnick: No doubt. Can we talk about Office? Switching to Office 365 Commercial in specific, the company has noted moderation in SMB new deal volume recently. How much of recent seat growth is being driven by SMBs versus larger enterprise customers? And how much runway is left for each of these customer segments to maintain seat growth over the medium term?
Dave O'Hara: Sure. Well, there's as few things at work with Office. Office obviously has deep penetration into the enterprise. On the other hand, we're continuing to add functionality to Office that benefits customers. And so even though it might be deeply penetrated, we have other offerings, whether it's Teams or Security or any other of the new offerings that we've come out with lately. I think from an enterprise perspective, we have room to grow. Our E5 penetration still has room to grow. From an SMB perspective, it's that that accounts for a large chunk of our new users, but I think it will continue to account for a large chunk of our new users. It's the combo -- as we look at building the Office business, it's a combination of both new offerings and new suites for the enterprises, but also sort of simpler, more straightforward offerings for SMBs and frontline workers. And I think both of them are growth opportunities. Our job is to just add as many customers as we can and get them the most value that we can in some combination that PxQ is the Office business.
Brad Zelnick: We've talked a little bit about the Q, maybe a little more on the P. There's healthy debate around ARPU as a driver of Office 365 growth. E5 seats were up I think 60% year-over-year this past quarter, now account for 12% of the installed base. How should we think about penetration from here? To what extent will SMB and frontline SKUs offset this uplift? And is ARPU likely to be a meaningful growth driver going forward?
Dave O'Hara: I think the combination of ARPU and seat growth will be our growth driver. You might say ARPU might be up a tick, down a tick, seat growth might be up a tick, down a tick. But when you figure the two out, then that's where we're going to be. And then you throw in the new offerings that we have, some of which just come with the Office product, like Teams and others which we might charge for separately, I think that adds to the growth as well.
Even with Teams, as you think about Phone and as you think about Room and Events, there's lots of opportunity for even growing within Teams. It's a combination of all of those things that I think ultimately results in the revenue number. It's not like we're sort of pulling switches to hit a specific target. We're just trying to add the most value that we can and add as many seats as we can. And like I said, some combination of that along with the new offerings is our number.
Brad Zelnick: Maybe on that basis, if we look out way on the horizon in terms of the things that you can sell into that base and the problems you can solve, what might you be able to point to that perhaps suggests that investors are just completely underestimating how much Microsoft can deliver into that Office space and to new customers and solve more and more beyond Teams and some of the things that we already know that are feeding into that?
Dave O'Hara: I think if you just look at Teams and Security as two examples of markets that were either nascent or basically didn't exist 5, 10 years ago, both of those are really good examples. There was an exec once who told me the story a long time ago about how that exec was running Office and how he felt like it had kind of been tapped out. And that was when it was like I think a $5 billion business. Jack Welch of all people said, you're just thinking about it wrong. Like you just need to redefine your market. I think with Office and Windows and Modern Work, we're constantly redefining our market and redefining what we can deliver to customers. I think we have good signal and I think we have a good idea what customers want. And I think we can meet that and I think we've seen that over the last few years.
Brad Zelnick: Makes sense. Could we maybe double click on Teams? I mean it's just become so prevalent in just the way the world has evolved over the last few years, hybrid work becoming the standard. I can tell you from my own team, our regular updates from around the world, I've got folks in London, on the West Coast, New York, and we use Together Mode, by the way, which is pretty cool. If you haven't seen it, you probably should check it out. It gives a nice feel to it. But just double clicking a little bit more into Teams, as we've settled into this new normal, how do you think about Teams from here and where the greatest opportunities lie ahead?
Dave O'Hara: Yeah, I think -- Brad and I were just having a quick conversation before this and he said, hey, one thing I don't like about Teams -- and so that is the most common thing that any of us hear, is hey, let me give you one piece of advice on Teams. It's ubiquitous. Lots of people use it, lots of people love it, but everybody has always got that one little thing and why do you do this? I think there's always opportunity to improve the product. And Jeff Teper who runs Teams, I had dinner with Jeff I think Saturday night, and talk about real time feedback, for any of us who do our jobs, like every time we have an SLT meeting with Satya, we start to run Teams. And the minute there's a glitch, it's like boom. If any of us think that we're on all day every day, you're not compared to Jeff. But Jeff just takes it all with a smile and says that's great feedback, we'll go work on it. I think we get lots of feedback on Teams and lots of feedback on how to improve it both at a macro level and at a micro level. And I noted your feedback, Brad, thanks
Brad Zelnick: I think when I told that to you, I said it was more of a limitation of how we at Deutsche implemented Teams.
Dave O'Hara: I think your exact words were, it's more about how bankers think than how Teams works. But I do think Phone is a great opportunity. People have PBXs that are 30 years old. I think we can go in and offer a much more affordable and effective solution. As an example, in the hybrid world, events are much more online than they are in person, and so I think all of those are opportunities for us to continue to build out Teams.
Brad Zelnick: It seems like it's definitely the future. I want to touch on Security which you mentioned is tremendous opportunity. I think Microsoft today is technically the largest security company out there in the industry by measures in growth and the scale that you've shared with us. But the integrated nature of Security and what you offer is I think a key differentiator. How do you leverage this during the sales process? And what are Microsoft and Charlie Bell's aspirations in Security? What's at stake here? And how big of a monetizable opportunity do you see in Security?
Dave O'Hara: Sure. There's a few things about the security market. And we came out with -- I think we announced we had $15 million in revenue and I think we also announced that we're investing $20 billion in security in the next 5 years, which I actually -- that might be low. But we're going to spend a lot. We think it's a great opportunity. The thing about the security market is it's just constantly evolving. When you think you've solved one thing, there's 5 more right behind it. It's not static in way, shape or form. And I don't think you're ever done building security offerings. I think that opportunity will literally just continue to evolve for many, many years. The thing with us is that we have I think the best signal of any company on the planet just by virtue of all the products. And so we can see some of this coming before other people see it coming and I think that puts us in a great position. Even if you look at some of the stuff like the war in Ukraine and some of the stuff that Brad Smith and his team have talked about, I mean we have signal on virtually any security threat around the globe. I think that's a good opportunity.
I also think that we're just, because of our history in the enterprise, and because of our global reach, we're very trusted by customers. When we talk to them about security and we talk to them about security as part of our integrated offering, they listen and they want to learn more about it. I just think that literally it's an untapped market. Because it's always changing, there's always new threats, and we have great signal. I think we'll just continue to build out big, very helpful offerings for our customers in the security space. It's going to be -- I wouldn't even try to estimate what the TAM will be 5 years from now.
Brad Zelnick: Is M&A a priority in Security?
Dave O'Hara: I think we're always looking at M&A. I've told people like I'm not really a CFO. It's true. It's factually correct. I'm more of a deal person. But I do think that M&A is hard. Everybody loves the deal and loves getting a deal done, but then comes the hard work of integrating it and how do you think about integrating the technology and how do you think about integrating the teams? I think we've gotten really selective, appropriately selective on the deals that we do. If you look at Nuance, we spent a lot of time on that. We took a very thoughtful approach in terms of how do we think about platform versus apps? How do we think about industry? How do we think about Teams? If you look at Activision, that's another big deal. I think what you see with us is us being more thoughtful and more selective and in doing deals that are more strategic because we just know there's such an investment to make them work. All that said, we'll build Security offerings. We might buy some, we might partner with some companies. I think the market is -- I think there's lots of room to float a lot of boats in Security.
Brad Zelnick: Helpful. And by the way, when I prepared for today, I didn't fully appreciate the extent to which you spend time on deals and how much of a responsibility that is. Just maybe a general question, I know you're not going to give us your shopping list and I know that you've got your hands full right now with acquisitions pending. But is there anything else that you can share maybe even in terms of the things that we shouldn't expect Microsoft to do? Areas that whether characteristically or functionally that are philosophically antithetical to where Microsoft's future is?
Dave O'Hara: Sure. I would describe it this way. Satya always starts out, whenever we're talking about whether it's building a product or acquiring a company or whatever, he's like, tell me what the TAM is. Is it growing? Is it growing faster than our TAM? Because we have fought hard to get the growth rates with Microsoft to where they are today. And you don't want to buy a bunch of deals that are going to slow you down. That's a key question, like what's the TAM? Is it growing or not growing? Is this acquisition going to accelerate us or is it going to slow us down? How do we think about the culture of the team? Is the team going to be a cultural fit? Do we have permission to play there? Is somebody going to look at it and say, hey, all of that makes sense. I think we've just gotten more thoughtful about what filters through. I think before, historically we might have done a lot of product acquisitions, a lot of tuck-ins, and we still do some of those, but now I think we'll probably be just looking for stuff that's differentiated, strategic and impactful. We're buying fewer companies, maybe slightly larger, but they need to fit culturally and they need to fit strategically. And they probably are going to be adjacent to something we're already doing, because I just don't think we're going to run that far off field.
Brad Zelnick: Sounds sensible and it's helpful to hear you articulate that. Maybe just as I kind of step through some of the parts of the portfolio, as we think about Power Platform, Dave, you now have over 25 million monthly active users which is obviously very impressive. How does Microsoft make Power Platform as relevant to customers as Office is?
Dave O'Hara: I think by making it easier to use and making it as helpful as we can. In the end, everybody who wants to be a coder should be a coder. And the simpler we can make it to go build your own apps, however big that app or however small that app might be, then we'll get more users. For us, it's about continuing to make it easy to use, effective for them to use, but also to sort of do it in a standardized way that you're not going to end up with a bunch of one-off apps. I think that's our challenge is continuing to give people the tools they need to go build out the apps that they need, but do it in a way that all hangs together. That's the job of Power Platform and we'll continue to work on that. I think that's, in a baseball parlance, that's early innings in terms of where that's going to go.
Brad Zelnick: It's a massive opportunity for sure and can't see why it's not Microsoft's right to really continue.
Dave O'Hara: I think that's one area where we have permission to play.
Brad Zelnick: For sure. Play on the field, to the baseball analogy. I wouldn't be doing my job as a CFO of the business if I didn't ask you about margins. With all this growth, ambition and innovation comes the need for investment. Within the commercial business, how do you prioritize spend as you manage down to operating margins? Are there still Microsoft Cloud gross margin improvements that we'll see and adjusting through accounting changes and things like that? And how do you think about Commercial margins longer term?
Dave O'Hara: Yeah. When people think about margins, a lot of times they're thinking about costs. But really, the biggest impact on margins is pricing. And the biggest impact on pricing is being able to provide differentiated value. To the degree that we can continue to build up stack and provide differentiated value, I think customers will be willing to pay for that. And I think that will help us with margins. I think margin also depends on mix. As we've seen with some of our SaaS apps that have better margins, as Azure grows in proportion to that, maybe the margins get squeezed a little bit, but on the other hand, maybe we get better pricing out of some of the other apps. Or maybe we just drive costs out of the model through efficiencies on software or hardware. All of those things come into the mix. But we're focused on not margin itself, but all the components of margin that drive margin. And we just work those as much as we possibly can to make them as good as we can. And then the margin is really an outcome. The short version is, we feel good about where we're at on margin. We think there's still opportunities to improve that and we'll keep working on that.
Brad Zelnick: And because you brought up pricing, can you just remind us philosophically if anything has changed especially as you think about the other main cloud competitors out there from a platform perspective, what the philosophy is? And if at any point in time, like what would trigger any change in that strategy or philosophy as it relates to pricing for cloud infrastructure?
Dave O'Hara: Our pricing strategy is that we're going to provide value and we're going to take share. We're going to continue to be competitive in the market from a price perspective and we're going to continue to take share. I think, because I've been asked by analysts before, like geez, it feels like you have room on price. And we're like, we feel good about where we're at on price. Customers feel good about where we're at on price. And as long as we're growing share, and as long as we're continuing to expand revenue and margins, then I think we're doing the job.
Brad Zelnick: Makes perfect sense. We're almost about out of time. I'm going to ask you one last question which is the sort of magic open-ended question of, what haven't we talked about? What do you feel is misunderstood? What would you like to tell us about Microsoft's Commercial business that maybe we haven't touched on?
Dave O'Hara: Well, I think our Commercial business is pretty well understood. I think what's maybe -- maybe it's harder for folks who have thought about it as a variety of offerings and less about a Microsoft Cloud. And for us, it really is about the Microsoft Cloud. And when we talk to customers about it, they get that story, especially the C-Suite. They get that story that it all needs to be integrated. But I still think that there's a little bit of legacy out there where people think about Microsoft as products as opposed to cloud offering. But we're getting that story told. We also get customers that come in where they just say, hey, my business needs to be completely transformed, let's start over. In that case, we'll start with ideation of that. What do you really need to rebuild your business and what do you need to be ready for the next 20 years? I don't know that that's been appreciated maybe as it could be, but that's fine too, because I think it shows up when the customers succeed and do well, so we'll get there.
Brad Zelnick: Awesome. Well with that, I think we're about out of time. Dave, thank you so much. It's really great to see you and thanks for participating in this year's conference.
Dave O'Hara: Thanks for having us, Brad.
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