MSFT

Microsoft Corporation (NASDAQ:NASDAQ:MSFT) Q1 2023 Earnings Conference Call October 25, 2022 05:30 PM ET Company Participants Brett Iversen - Vice President ...

And in this particular period, I think we are going to optimize for long-term customer loyalty, but proactively helping them optimize their spend, which I think is the right thing for us to be doing as a company for – on behalf our shareholders long term. And I want to focus mostly on what, and how we see the number, which is that it is still a very large growth rate with growth across all segments and with growth across all geos. But if you step back and say, this is how you drive ultimate share gains and build customer loyalty and help customers grow, I think that needs to be the focus of our teams inside the company and also the partners that we rely on to help customers do that as well. This is still the way to build growth and leverage in your business, and yet you still want to optimize your workloads, you still want to run them the most efficiently so that you can then make room for new workload growth. On a constant currency basis, excluding the incremental impact of the lower Windows OEM revenue and the favorable impact of the latest accounting change, we continue to expect FY 2023 operating margins to be roughly flat year-over-year. And in gaming, we expect revenue to decline in the low to mid-teens against a strong prior year comparable. At the total company level, we continue to expect double-digit revenue and operating income growth on a constant currency basis. And finally, as a reminder, for Q2 cash flow, we expect to make a $2.4 billion cash tax payment related to the capitalization of R&D provision enacted in 2017 TCJA and effective as of July 1, 2022. In our on-premises business, we expect revenue to decline in the low to mid-30s. With the stronger US dollar and based on current rates, we now expect FX to decrease total revenue growth by approximately five points and to decrease total COGS and operating expense growth by approximately three points. Excluding the FX impact, growth was driven by strong renewal execution, and we continue to see growth in the number of large long-term Azure and Microsoft 365 contracts across all deal sizes. And as we look towards the holidays, we offer the best value in gaming with Game Pass and Xbox Series S, nearly half of the Series S buyers are new to our ecosystem.