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+[["I mean, sometimes it's not that you came up with some brilliant strategy, it's just like really good work consistently over a long period of time.", 0], ["Even while in International, we're continuing to invest in a lot of areas, we continue to frontload Prime benefits for the newer geographies, we continue to launch new countries as we launch Prime in Australia recently.", 1], ["So for example, we never participated as much in I'd call it non-developed markets, medium and small businesses with all of the sophisticated workloads.", 0], ["See, first of all, I'd say the opportunity for our shareholders when they think about Microsoft has never been better.", 1], ["But essentially, the focus is going to be on monetizing through feed ads for video.", 1], ["So this is an architectural design point that we have built from the ground up from day one and it's good to see people validating it now and elsewhere and we will take that as a validation of something that we thought of a long time ago.", 1], ["Japan happens to be one of those geos.", 0], ["First of all, to your point around foreign exchange, it continues to be a challenging environment given the strengthening of the US dollar.", 0], ["On the GDPR changes, so we just started rolling out the GDPR controls in Europe and we're going to make all the same controls and settings available every way, which gives people the same opportunities to make the same choices.", 1], ["So, first on head count.", 1], ["APAC benefited from some of the product optimizations we did in the quarter.", 1], ["But I tend to think I like to focus on where the company is going, which is cloud mix shift, annuity growth, and overall worldview of bringing Windows and the ecosystem growth through MPC.", 1], ["The FX-neutral growth was 48% in Q1, up from 44% on the same basis in Q4 and 42% in Q3.", 0], ["We've already talked about India but domestically we are, globally, we are investing very heavily in our Prime platform, both in North America and International and that includes video content and original content, Prime Music.", 0], ["But I would expect that to be a longer term evolution as opposed to in Q2.", 0], ["And one of the reasons we were able to scale into Instagram ads more quickly is because we were building off of the Facebook advertiser base.", 0], ["The mix even, that information protection, I mean that's just another very important point which is amongst the customers who are using Office 365, already 20 million are using some of these premium services like information protection", 0], ["I do think that the sort of the macro things that I spoke about earlier, the upgrade programs, the Android Switcher rate, the iPhone momentum in the emerging markets and the LTE penetration in these markets these trends are not one quarter things.", 0], ["We're very focused on helping advertisers meet their ultimate goals, looking at their ROI, looking at the return they get on ringing the cash register, whether that cash register rings online or offline.", 0], ["One is just the format.", 1], ["So over 1 million SMBs have posted a video on Facebook, which is pretty amazing, because I doubt 1 million SMBs have ever run what is a video or TV ad.", 0], ["Early on, there is this issue, which is that if you're a AAA game developer, until there's a certain volume of units in the field, you're not going to be able to make enough money to fund your game development just based off of people buying your content.", 0], ["And when you see platform shifts, as you are in the ad market, from more traditional forms of media to display, to now mobile, we're seeing those metrics change, and there's obviously a lot of conversation and a lot of concern out there about what we're measuring.", 0], ["I don't view it that narrowly quarter to quarter or even year to year.", 1], ["Because we're working with our carrier partners on those and retail partners.", 0], ["So, now that with a SaaS approach, you can reach a much broader base of business customers all over the world, is one opportunity.", 1], ["But another area that's growing incredibly quickly is private messaging, right, where between Messenger and WhatsApp, I think we're around 60 billion messages a day, which I think is something like three times more than the peak of global SMS traffic.", 0], ["And so we see that we\u2019re appealing to new customers, both new to smartphone and new to iPhone and people switching.", 1], ["In fact, across our entire histories in many of the areas, but increasingly across of the creative cloud and their Document Cloud as well as their Experience Cloud, we have plenty going on.", 0], ["And then the lift-shift turns into lift-shift and modernize and that's where these premium services get activated.", 0], ["Even there we now have premium offerings and then we have higher level services.", 0], ["So it's the totality of that.", 1], ["We had talked about last year about an initial step up in cost of close to $800 million in the second quarter.", 0], ["One of the great things that's also part of that, I think, you alluded to it is just Alexa, and one of the most popular features we see as you probably imagine for using those devices are just interacting with Alexa, wherever you may be is being able to listen to music.", 0], ["It's growing very well.", 0], ["So, yes, I think scale is helping.", 1], ["Phil just said the Prime Now has been expanded to 14 metro areas.", 0], ["It's the real challenge is to grow the market, because if you add everyone up that's providing subscription music today or streaming music, it's, outside of China, it's less than 200 million probably around the world.", 0], ["So, on the promotion side, we don't consider it a huge factor either way.", 1], ["I mean I have to start with the fact that we did recently introduce 20 new Fire TV products, so that includes the new \u2013 and the first Fire TV Edition Sound Bar, Fire TV Cube.", 0], ["So I hear you on a year-over-year basis, but Q3 was a little funny a year ago on that front.", 0], ["This is going to increase the amortization.", 1], ["Strong unearned in particular was actually better than expected Azure billings in the quarter that drove unearned above the high end of our guide, and I think we were quite pleased by that performance.", 1], ["Also, if you'll remember, a year ago we had a very big base of expirations in Q4 and had very strong performance a year ago.", 0], ["I think India is a very important market in the long-term.", 1], ["So it's sort of all three of those.", 1], ["We build fulfillment centers so that we can add selection and we can add FBA partners.", 0], ["But we think that this is a real human need and a sociological need and it's an important thing that people need to do.", 1], ["Yes, we are seeing headwinds in terms of targeting and measurement.", 1], ["We're not just on Facebook.", 1], ["There a few of us who are at scale in public cloud who are very competitive, and anybody who decides to be multi-cloud, public cloud, those are the winners.", 0], ["So even as we continue to see Azure gross margin improvement at the IaaS and PaaS layer, just given the TAM and our opportunities, it will create long-term pressure on that gross margin number.", 1], ["One is just building a dedicated product space for high quality news.", 1], ["Our installed base continues to grow.", 1], ["The vast majority of the weakness in the Greater China region sits in Hong Kong.", 1], ["And that follows a lot of feedback directly from our community that people want Facebook to be more about friends and family and less about just content consumption.", 0], ["We have Xbox LIVE; we have Office 365; we have Dynamics and Bing and that diversity is what allows us to build in fact for our own needs a cloud architecture that then can meet many more workloads and that\u2019s working pretty well for us.", 0], ["I do think we are making progress on working through the issues and addressing them.", 1], ["As I said, we have over 350 new features and services \u2013 also significant features and services that have launched this year.", 0], ["I mentioned Music.", 0], ["Stories on Instagram are a very promising one, and we're seeing some nice experimentation there.", 0], ["We\u2019re seeing a bunch of that candidates for president get on Facebook themselves and interact taking questions from their potential voters directly.", 0], ["Second thing, I mean, making the Alexa service smarter.", 0], ["I think it's profound and I think Apple is in a really unique position to lead in this area.", 1], ["The online store will also be expanding from around 319 cities to where they can hit two day delivery to 365 cities.", 0], ["The WhatsApp Business app has launched, and we now have more than 3 million people actively using it to test business solutions.", 0], ["There are new areas like machine learning, artificial intelligence, Internet of Things, serverless computing and database and analytics are really big.", 1], ["But there's certainly great content that people are finding using post search, but it's really \u2013 the focus is really to try and allow people to discover content that's been shared on Facebook that's relevant to them, and that's going to be the focus in the near term.", 1], ["Oh, and mobile, we said for a long time continues to be a tailwind for the business.", 1], ["We are experiencing a ramp-up, if you will, in the second half of this year particularly tied again to AWS, or excuse me, the fulfillment center spend and also the video content spend.", 0], ["We're not quantifying the Prime video spend today, but we do \u2013 it has been increasing.", 1], ["That combined with the step-up in fulfillment centers that I mentioned, the 26 new ones, left us in a really good position.", 0], ["But some of the things we\u2019re also going to intentionally take a longer period of time than we might have previously in order to get safety right.", 1], ["I would just add one thing, is that we've actually announced a number of important partners to help us take the Surface portfolio into commercial customers.", 0], ["First of all, I want to remind you that Q3 is typically a lower operating income quarter as we're preparing for the Q4 holiday peak.", 1], ["Our iPhone ASP was $691 during the December quarter.", 0], ["And so, you look at all of these and all the things that I talked about earlier and I couldn't be happier with the reception that we're getting and the work that is going on behind the scenes right now for the developers readying their apps for the fall.", 0], ["So we are confident that we will have the ability to handle seasonal demand.", 1], ["And the used cases that we see in the cloud in many cases happen to be net new workloads, IOT was not driving our server growth traditionally, mobile backend was not driving our servers traditionally.", 0], ["The similar dynamic this year, we are going to have about 80% of our increase in square footage for fulfillment and shipping coming online in the back end of the year, so that's a major increase.", 0], ["because we're making a strategic investment in ad tech, helping advertisers and publishers grow, so it's on and off Facebook.", 0], ["Since we launched over in India in 2013, we've created over 700,000 direct and indirect jobs.", 0], ["Well, I think in terms of engagement the product is having, the biggest impact is News Feed continuing to do very well.", 1], ["The number of developers that either have done something, or even more the case, that are working on things that I've seen are growing tremendously.", 1], ["So one of the big opportunities that I'm really excited about right now is I think that there's a pretty big opening between very private messaging, the one-on-one messaging products like Messenger and WhatsApp, and products like Facebook where you share with all your friends at once or Instagram.", 1], ["I also think that the deployment of AI technology is something that we will excel at", 1], ["And a big piece of what is driving that is iPhone.", 1], ["So it continues to be a really good story for us.", 1], ["And so I actually am confident you'll start to see that transition land.", 0], ["This is the quarter where that will reverse.", 1], ["The replacement cycle is likely longer.", 0], ["And ultimately for our business that will drive up the amount that businesses are willing to pay to advertise to send people into those interactions because they perform well.", 0], ["We have started manufacturing there which is very important to be able to serve the market in a reasonable way.", 1], ["That's not our primary issue right now.", 1], ["So on Facebook Stories, we have 0.5 billion people using it daily, and we think that's pretty impressive growth; we're seeing real engagement.", 1], ["And those are Internet.org efforts, Android product improvements that we've continued to make a big area like Android \u2013 Facebook Lite platform on Android has been a great grower for us.", 0], ["And to the video questions, the biggest thing that we need to do is make sure that the video experience is people-centric and that we're helping creators build community and we're helping people interact with each other.", 1], ["And so we\u2019re trying to do our part to help advocate for a good regulatory framework in each area and they will come in different forms.", 1], ["Take SQL, what we are seeing in terms of SQL growth, in terms of Azure DB, as well as SQL server and SQL server on Linux, that's again addressing the customer needs.", 0], ["So, I think, we're excited about the electronics getting out there.", 1], ["Some significant portion of those are manufacturing-related, and so we've asked ourselves what can we do to increase this.", 1], ["And so even with some of that benefit of the durable trends, plus I think a more temporal one of end of support, I do expect to see a deceleration in that number in Q4.", 1], ["Obviously there's a very direct impact, which we've talked the most about in terms of Windows Pro and its mix would attach to business PCs.", 0], ["We had the first Prime Day there this year, Prime Music, Amazon Business is also expanding in India.", 0], ["You're right, the Office Consumer growth still has quite a bit of transactional business to it, even though we have moved, and you saw that growth, the subscriber base, materially.", 1], ["So earlier this year, they rolled out a car at CES on Facebook video rather than at a car show.", 0], ["I think a lot of this comes down to the graphs in the community that you have in the different places.", 0], ["Perhaps it's a bigger issue for stores and foot traffic, but we don't notice it in our business.", 1], ["So, overall, people are spending more and more time on mobile, and that means that there are always more services that people use whether it's YouTube or there's some really interesting ones with younger folks, especially like musical.ly and live.ly that I think are pretty interesting as well, the Snapchat, which you mentioned.", 1], ["The fact that we put some salespeople and then there's increased productivity is something that we obviously celebrate and we track very closely.", 0], ["There's lots of reasons, but the largest one in our view is that when you look at what happened in 2015 in China, we had a surge of upgraders that came into the market for the iPhone 6 or iPhone 6 Plus, and the upgrade rate increased relatively more in Greater China than elsewhere around the world.", 0], ["And we continue to add digital benefits like Prime Video.", 0], ["And thirdly, the transition cost that you've mentioned as we prepare for a busy fall.", 0], ["So that increment, that acceleration in desktop revenue growth is largely due to our efforts on reducing the impact of ad blocking.", 1], ["On the shipping side, I would say it's a difficult equation.", 1], ["We are making progress, and I feel good about the progress that we're making.", 1], ["The second phase is help people not only interact with the people they care about, but also the businesses and other public entities that they care about as well.", 0], ["because we want the formats to match.", 0], ["I will tell you at the end of the quarter kind of what we're seeing on cost and how it looks for Q4 as well.", 1], ["In Q4 Amazon India was the top e-commerce site in India throughout the very busy diwali shopping season, including the shopping season, according to comScore.", 0], ["And so, therefore, we\u2019re becoming much more competitive with very large customers deploying whether it's sales or operations.", 1], ["As Tim said, we are very supply constrained on iPhone 7 Plus this year.", 0], ["When we think about Instagram Shopping, it's very early tests, but it really follows the kinds of things we do in other areas of our products and services, like Messenger.", 1], ["And that\u2019s what\u2019s really driving some of the economics.", 0], ["On the next day or same day, here in the U.S., we continue to expand that as well, but we think that those fast options add us to the consideration set of a customer's purchase on some purchases that we might not otherwise be included in.", 0], ["Ad Breaks are really a relatively small \u2013 a very small factor today.", 0], ["We\u2019ve made progress over the last week or so, and we were able to deliver more customers an Apple Watch over the weekend than we had initially anticipated.", 0], ["And the supply growth really getting driven by Stories is coming through at lower prices, so that\u2019s one of the factors that factors into the lower growth outlook for the second half.", 1], ["And really E5's only been in market for the last month of the quarter.", 0], ["So that continues to grow with the growth of the Prime program.", 0], ["And so the installed base is clearly a piece of it getting the trade-in program going, and the secondary market moving has been helpful in that as well.", 1], ["as you continue to see customers ask for us and our help in managing their digital estate, consistently, securely through one interface, you'll actually see growth across all components of that cloud.", 0], ["And more importantly than the total number, we are in many more cities than we were before.", 0], ["And so you have a very, very young population.", 1], ["So even though we\u2019re seeing good impression growth that\u2019s impression growth it\u2019s flowing through at a lower price point.", 0], ["The cycles -- the average cycle has extended.", 1], ["And so making these new formats of ads is actually hard for people and expensive.", 0], ["And so that's how to think about that big delta.", 0], ["The minus side is that the bifurcation of the smartphone from the service itself has a plus and a minus into it.", 0], ["It is because of the higher level services that we have.", 0], ["If you exclude ops-related employees, our head count's growing actually slower than our FX neutral growth rate of 30%.", 0], ["We think we can continue to grow very well into the December quarter.", 1], ["New users, Satya referenced on the small business and mid-market side.", 0], ["The other exciting thing is we\u2019ve this entire new class of applications and I talked about this even into this week's conference, which is these AI-first modules, whether it's for sales, for marketing, for customer service or this Customer 360.", 1], ["We're taking a customer centric approach as we build that to make sure we're providing engaging business, engaging adds to customers and making sure we keep the customer front of mind.", 1], ["It wasn't necessarily the Prime flywheel that was the issue, it was more the FBA demand that we had from FBA sellers for space in our warehouses.", 1], ["We're very happy to have a multi-year supply agreement, and we're happy that we have a direct license arrangement with Qualcomm, which was I know important for both companies, and so we feel good about the resolution.", 1], ["On the international, on an FX neutral basis, the growth was 15% in Q3 and 19% in Q4.", 0], ["One of the things we're trying to do is continually evolve our tools and the products to help that customer set agencies, advertisers, make sure they've got a variety of ways to meet their goals.", 1], ["With Messenger, we're really at the beginning of phase two.", 1], ["But what I can tell you is that iPhone 6 was the most popular iPhone last quarter, but I just believe to sell 74.5 million they were really all popular.", 1], ["And then the team of flagship store for international brands which you've heard about giving thousands of direct imported products access to \u2013 customer\u2019s access to these products and those happen to be stocked and ready to ship from our fulfillment centers in China.", 0], ["One of the comments I had made in my remarks was some momentum we're seeing in our consumer cloud services.", 0], ["There are now over 100 million items in the U.S.", 0], ["Another big driver is we've focused on trying to make sure that we understand the effects of using our services on people's well-being.", 0], ["And we have teams of people doing what people are good for which is making nuanced human judgments.", 0], ["We do believe that this, too, shall pass and that these countries will be great places and we want to serve customers in there and so we're not retrenching.", 1], ["So given that structural position, we are going to make sure that we keep increasing the strength of the community.", 1], ["So the fun example is the Furbo Dog Camera.", 0], ["So the 300 million is certainly part of that decelerate -- the sequential deceleration in the growth rate in that line item.", 1], ["But we are optimistic on the timeframe of years, right not driving next quarter's business.", 1], ["So, we like what we see on the third party side.", 1], ["At the revenue level, we started from the fact that we are very, very excited about the lineup of products and services that we have getting into the holiday season.", 1], ["We continue to use feedback from customers to develop new services and features.", 1], ["That will get better over time.", 1], ["It's coming in sales.", 0], ["And this is where the huge distinction is.", 0], ["So, yeah, we do see expansion of the one-day program as we move through the year.", 1], ["We had guided 38% to 38.5%, and we came in at 38.5% exactly.", 0], ["Our unit growth has been strong and that's primarily attributable to our Prime program and the customers and members that enjoy that program.", 0], ["Whole Foods will be issuing a final 10-K early next month.", 0], ["What's interesting is that what you see is SMBs are able to use the pull of some of the biggest brands in the world.", 1], ["Right now, what we're seeing is an accelerated growth rate in software engineers and also sales teams to support primarily AWS and advertising.", 0], ["And so I remain very optimistic.", 0], ["Because of some of these results about where the PCs were upgraded and the pace at which they were upgraded.", 0], ["And so when that upgrade rate in fiscal year 2016 returned to a more normal upgrade rate, which would be akin to what we saw with the iPhone 5S as a point, it had further to fall.", 0], ["And you're right in that our strong operating expense focus,", 1], ["So, very pleased with Q4 and the pace of the business.", 1], ["And so again, we're continuing to invest.", 1], ["We're getting more efficient every time we put new capacity into the network, whether that's through automation or just through the experience we've gained over the years.", 0], ["So yes, the operating income guidance is $300 million to $1 billion.", 0], ["So click-to-messaging ads, which the ads run in Facebook and Instagram but then link you to WhatsApp or Messenger, is a product that's growing well.", 0], ["When you look at our Services revenue, the growth of the Services revenue has been accelerating during the course of the year during a period when, as you know, our revenue came down slightly", 0], ["And we\u2019re happy with the initial results.", 1], ["And actually it's been going up as we began to get scale through these services over time actually.", 0], ["But it could also be that you see something on Facebook and have a conversation about that in the world with someone who's meaningful to you and the next to me that we need to understand that.", 0], ["We don't think that, that's necessarily the long-term trend, but it certainly created a lot of operating efficiencies, and now we'll reset and evaluate where we need to still add people.", 1], ["And so we're looking at getting the right message the right time.", 1], ["because of the macro environment, IT budgets, and also the secular shift to the cloud.", 0], ["And we're also happy with the success we've had with developers.", 1], ["But in a time when there is a real fundamental shift in the category when it comes to both business models and technology, we feel we're well positioned to ride that.", 1], ["As I said on the call, this was a big expiration quarter for us.", 0], ["But really the vast majority of searches on Facebook are for people, not topics related to retailer e-commerce.", 0], ["And if you look at the switcher number, it's the highest that we've seen in any quarter.", 0], ["So in a lot of ways, 2018 was about banking the efficiencies of investments in people, warehouses, infrastructure that we had put in place in 2016 and \u201917.", 0], ["Brazil was down somewhat compared to the previous year.", 0], ["So in some places, we\u2019ll \u2013 there will be laws passed and others might be working with regulators and having some structural rules imposed on us like with the FTC settlement; in other areas, it might be self-regulation like around, content and speech in the United States.", 0], ["And I just want to add one more time, Sue really did an amazing job on our Board and I'm sad to see her go and she has really helped shape a lot of what we do and I'm just incredibly grateful, perfect to mentioned it here.", 1], ["There are other investments certainly that are increasing sequentially.", 1], ["The second thing I'll also mention is that, to me the opportunity to win, I would say, new class of developers, we are making progress.", 1], ["You're getting people bidding for other actions and optimizing against other actions like a click to a website or a downstream e-commerce transaction, an app install.", 0], ["This is the largest increase that we've done since we've reintroduced the dividend back in August of 2012.", 0], ["I think on any kind of, on a 90-day clock, lots of different things can happen.", 1], ["So we think that this is going in the direction of building a stronger community and a stronger business over the long term, and we're optimistic about what we're seeing here.", 1], ["It's helped by additional selection that's available for fast track shipment, including FBA.", 0], ["Right now for links that are not Instant Articles, it can be one of the slowest parts of the Facebook app.", 1], ["And it's the fact that we had a channel inventory reduction at the top end of the range, and we've got the introduction of the iPhone SE at the entry level of the range.", 0], ["Certainly, this quarter we saw that ad load had a much less significant impact on impression growth.", 0], ["Satya mentioned the layers of Azure.", 0], ["And they targeted millennials and early tech adopters.", 0], ["So, while a lot of the content is still provided by people in a way that we\u2019re not covering costs, we do have a strategy of investing in great content that really starts the flywheel growing \u2013 going and we\u2019ve been pretty pleased, I mean it\u2019s not the biggest effort anyone has, but we\u2019ve had some hits from Tom and Time to Tom and Time to Red Table Talk ,sorry for your loss, and we\u2019re seeing some really nice engagement numbers on these shows.", 1], ["So this quarter, we only gave the active customers with a paid purchase in the trailing 12 months, and so that number was more than $285 million.", 0], ["So you're already seeing some of that getting picked up in the quarter and you'll see that carry through in the year.", 1], ["So that's the base.", 1], ["We\u2019re not releasing a user number,", 1], ["I would note we've been benefiting from continued growth across Instagram.", 1], ["As you know, we hired two highly respected television executives last year and they have been here now for several months and have been working on a project that we're not really ready to share all the details of it yet, but I couldn't be more excited about what's going on there and we've got great talent in the area that we've sourced from different places and feel really good about what we will eventually offer.", 1], ["But that, I think, is the primary focus for the foreseeable future.", 0], ["And we keep track of that across cohorts of customers, that as people come into the ecosystem and start paying on the ecosystem, we see a spending profile that is very similar around the world.", 0], ["I realize that's very different than what some of the, is being written, but the June sales were the highest.", 0], ["But generally, again, we're happy with the ability to service customers, the reaction of customers in Q4, and the bottom line results that we had.", 1], ["They're a Utah-based SMB.", 0], ["We started Amazon Flex in India, which helps our local partners to deliver packages, gives them jobs, grows our delivery capacity for sellers and increases our speed of delivery.", 0], ["So we are comfortable with price decreases.", 1], ["Whether that's trying to get a reservation for a restaurant or getting customer support or calling to buy something.", 0], ["So they invested in carousel ads and only show them when their stores were closed and they turned a $35,000 investment in carousel ads into $2 million in sales which happened precisely when they want it to happen.", 0], ["McDonalds used mobile app video ads in Facebook and Instagram News Feed and Stories to launch a limited edition called the Big Mac range in the UK.", 0], ["They're doing even better in China.", 1], ["But on the IaaS and PaaS layer, that's about our execution each quarter and especially making an impact.", 1], ["To the question around the channel inventory for iPhone, we grew channel inventory by 3.3 million units during the course of the December quarter.", 1], ["Video is exploding on Facebook, as Mark talked about, and that gives us an opportunity to do a lot of work with marketers on video.", 0], ["So we already rolled out the first test of the new camera in Ireland.", 0], ["And the way we participate just on the Azure side, we obviously participate even with our Windows Embedded, but on the cloud side, we are seeing the attach to our emerging machine learning services as well as advanced analytics that\u2019s been one of the place where we are well suited for some of the emerging use cases.", 0], ["So we'll have 11 games in 2018 and 2019, be able to deliver that to over 100 million Prime members globally, which is a great continuation of the partnership we've had with the NFL.", 1], ["And while we don't expect these changes will significantly impact advertising revenue, there's certainly potential for some impact.", 1], ["And in any situation, whether it\u2019s the watch or in the past on iPad or on iPhone, when demand is much greater than supply, it\u2019s difficult to gauge exactly what it is.", 1], ["Perhaps if someone sees some content that's problematic, they used to tell us about it and then we'd go look at it to now, increasingly, we're building AI systems and we have tens of thousands of people who are doing more proactive review of content that could be potentially problematic.", 0], ["iPhone in particular was very strong, very strong double-digit growth there.", 0], ["So we're very happy.", 1], ["With the major currency changes we saw in Q2, we've also done some price adjustments between certain geos for us.", 0], ["And, Paul, there's no doubt that mobile has a beneficial effect on our engagement in the U.S.", 1], ["The mix amongst the services will always result in a pacing change", 0], ["The question you asked is an interesting one, which is if I had to slice it by classic ISVs, it would be one-third or so of our revenue.", 1], ["So we're really glad to join up with them.", 1], ["It becomes part of the International segment results.", 0], ["And so you can see the iPhone, the Mac, and the App Store adding, and with the iPad in PRC, not in Greater China, but in the PRC, iPad had its best quarter ever, higher than all the others, and also grew in a market that contracted for the overall market.", 1], ["And we have a very strong and trusted venue for Chinese customers to access international brands there as we continue to focus on great offerings through the AmazonGlobal Store, which offers great brands from outside of China to customers.", 0], ["We're not concentrated in any one layer of the stack, which is something we do by design because our vision has always been that we want to of course offer all of these layers, and customers will choose depending on their needs and their scenarios.", 0], ["We believe that this is the range where we're going to fall within.", 1], ["We're really excited today to announce that we have 60 million small business pages that are using Facebook on a monthly basis.", 0], ["We're happy to see the recent clarifications and we're happy to operate in any regime.", 1], ["So early days, but I think a lot of potential here.", 1], ["But I think one of the successes you are seeing we\u2019re having right now is that we are helping people move to Stories more quickly because of the lessons we learned.", 1], ["It's growing in every geography and it's growing across all our major product categories, and that is very, very important for the services business.", 1], ["And so, you've seen that already in terms of the ramp that we have in capital expenditures.", 0], ["Others have an 18-month clock.", 0], ["In many cases, it starts with advanced set protection of Windows 10 estate.", 0], ["Now people don't really move between operating systems.", 0], ["So it's always with the customer experience in mind that we make acquisitions.", 0], ["On a year-over-year basis, the number of accounts that are actually transacting and paying on the App Store is growing very, very well.", 1], ["Well, in Echo, again, we continue to build out the list of devices, launching the Dot and Tab and Fire TV skills this past year.", 1], ["The other two items that are not insignificant in China that I don't want to lose here is that the stimulus programs, I believe, are having an effect on the consumer.", 1], ["And the majority of the iPhone SEs that we sold in the domestic market last quarter were manufactured there.", 0], ["And that is exactly what happened in our actual results.", 0], ["They\u2019re a kids clothing retailer.", 0], ["And so, we've been able to grow without the market growing.", 1], ["When we look at it geographically, I think we see different developments.", 1], ["I believe our participation in the phone segment by itself with Windows phones and Lumia phones being there is important, and that's why we picked the three areas where we have differentiation and we want to focus on it.", 1], ["But we're looking at the stuff with increasing rigor now where we organized the company into these product groups, and each product group leader will not just look at the product as one thing, but what are the key three or four or five use cases which often can really be their own product lines on their own, and we go through and we build those out to be world-class.", 0], ["And then there is a new load hybrid as well which is people are building in fact they're doing AI training job in the cloud but want to deploy the model close to the edge.", 0], ["And again, as I said earlier, we're in the long haul.", 1], ["It has a price advantage and the value advantage for customers.", 0], ["I doubt very many people knew that we had $25 billion enterprise business that we quietly built in not too many years", 0], ["Everything is in Europe.", 0], ["For now, the thing that I would leave you with is that people think that Facebook isn't in China at all and that's actually not true.", 1], ["I think it's very important that there is federal privacy legislation.", 1], ["I think now more than 100 million people follow different hashtags, which is a way that people can form ad hoc communities, and that \u2013 it all goes towards the overall mission that we have as a company of helping to build community and bring people closer together.", 0], ["And between the upgraders and the switchers that we see, and the first-time buyer category is still out there too in several countries, including some that you may not think there is, there's still a sizable base in some.", 0], ["And just to clarify, to give a little more information, we have been offering, obviously, faster than Two-Day Shipping for Prime members for years, one day, same day, even down to one to two hour delivery for Prime Now.", 0], ["Whereas now, we actually have specific value, which is in fact very valuable to those first line workers.", 1], ["When you look at the Amazon Music Unlimited subscription, it continues to grow very quickly.", 1], ["We typically reduced channel inventory for our newest iPhones in Q2,", 1], ["So on a comp basis you'd expect to see subscription revenue be about $300 million lower due to that accounting change.", 0], ["We\u2019re now at 21 in Greater China and we\u2019re on track still to achieve 40 stores by the middle of next year.", 0], ["We're focused on all of these metrics and working hard with third parties and with our advertiser to get those metrics right.", 1], ["And because messaging really started from the place of people communicating one to one with each other and is now adding all these other uses, it's just a lot of investment and a lot of different functionality that needs to get added.", 0], ["For WhatsApp, it's the biggest countries on WhatsApp.", 1], ["Both have over 1.2 million monthly actives.", 0], ["That's what the Amazon team, with them, is committed to, and also across any delivery channel that we have, AmazonFresh, Prime Now or Whole Foods.", 0], ["And one of the ways that we're talking about decentralization is through end-to-end encryption in messaging.", 0], ["This is a small closed beta with 23 brands and for us that's obviously a very small number.", 0], ["It\u2019s still early in this space, but we\u2019ve done a few things with IMDb TV, Live Sports, things like adding more inventory through Fire TV apps, and as I said IMDb TV, adding more OTT video supply through Amazon Publisher Services or APS integrations and streamlining access for third party apps and really just making it easier for advertisers to manage their campaigns and provide better results.", 0], ["Similarly, to some of the things we've done in Messenger, some of the things we've done in Marketplace, we're watching for what is the organic activity between businesses and consumers, and then we're building products to enhance and enable that organic activity.", 0], ["We continue to invest very heavily in our systems both for retail vendors and also for third-party merchants invest billions of dollars a year on behalf of then making Amazon a better place for customers to buy and increasingly not only vendor sales, but also third-party merchant sales.", 1], ["As I said earlier, it's worth 40 basis points.", 0], ["In the U.S. and Canada on Facebook, we're seeing strength in sort of nonvideo feed engagement.", 0], ["That means it shows up in bookings and again not in the unearned balance in the same way, and so you will see as we go forward and you are already starting to see it more volatility in this number, not just based on the way we\u2019ve traditionally talked about it which is the movement of the expiration base but also in some of these larger and longer term commitments by what we now think of not just as customers but these are really now partnership relationships that we have where to your point we're co-collaborating to help customers be successful as they build their digital future.", 1], ["We're not opposed to collecting sales tax within a constitution and permissible system that is both simple and applied evenhandedly.", 1], ["And I think it takes real composure as a leader to scale something to many x where it was just a few years ago and build up the organization and be able to continue pushing the products forward every day to be able to do that.", 0], ["And I think sometimes it's harder for us to measure exactly what a revenue synergy means.", 1], ["There are a lot of people who are just sharing content socially, right,", 1], ["And Keith, the thing I would add in addition to Satya's comment about investing and investing materially to make these improvements in performance and utilization, we've always had and seen, as you all have gotten a bit used to, it can be a little bit lumpy quarter-to-quarter, and so we expect a sequential growth into Q3, which is really just a movement that happens from time to time.", 1], ["But overall, when I look at what is it that we need to get done is innovate on what is a fundamental architectural advantage to where the world is going.", 1], ["It was a reasonably consistent Kash, there was not a geo in particular that I would say was a massive outlier although in two of our largest geos, the U.S. and Germany they did have very good years in particular in Q4.", 0], ["And that\u2019s how we want to make sure we make progress,", 1], ["And what we would like to transition that more to over time and what an increasing amount of the content is, is revenue shares for ads shown in the videos.", 1], ["Innovation is accelerating, not decelerating.", 1], ["But when we look at our survey data on iPhone SE, as Tim was saying, we believe that the iPhone SE is doing exactly what it was intended, which is we are seeing a higher rate of new to iPhone customers, which is obviously very important to us because we bring new people into the iOS ecosystem.", 1], ["We're in a very fortunate position that we generate cash beyond the needs that we have.", 0], ["And so I do think it was premium driven as opposed to sort of a price driven in particular.", 1], ["It's the highest growth rate that we've had for services during fiscal 2017.", 0], ["And so we've had 48 price decreases since we launched.", 0], ["So there's a lot of different fronts that we're working on.", 1], ["Ben Carson ran 240 different ads targeted at different audiences, and so we're starting to see candidates use our platform to communicate, to advertise and to share.", 0], ["I don't see that from a market point of view or \u2013 and certainly not from an iPhone point of view.", 1], ["And there's always lumpiness as well as increased deployment that happens once the users migrate, and we'll continue to track that and we'll continue to disclose those numbers as they come along.", 0], ["And it is ultimately I think going to change the way that we communicate and live and work in addition to how we play games.", 1], ["Now, if you think about some of the dynamics that we've been going through in the intelligent cloud segment, in particular the way I tend to think about that, as you've seen, we're now 20% growth this quarter in that server and product services KPI, 17% on a constant currency basis, and are sort of confident that you should continue to see that, as I said, into Q4 and then into FY 2019 as well.", 1], ["We\u2019re seeing broad sales across all categories.", 1], ["And I mentioned this before that 99% of the ISIS and Al Qaeda related content that we take down, we're removing before any person flags it to us.", 0], ["And then the most important thing is that the customers' success is what will breed revenue for the next quarter, the next year.", 0], ["But we do have opportunities we think to increase effective ad load on Stories, where Instagram Feed and Facebook Feed are \u2013 we think the opportunities are much more limited to increase ad load going forward", 1], ["But I do think at this point, we're pretty much ahead in terms of the technology that we're building, and making it an open platform I think is a big is a big step forward.", 1], ["We were able to reach supply/demand balance in December, which placed the entirety of our channel fill for iPhone X in Q1 and this will have an effect on both units and ASP in Q2.", 1], ["Private sharing, both with Stories and direct messaging, are growing incredibly quickly on Instagram, and I think that those are both very exciting areas for development of products as well.", 0], ["We were really small company at that point.", 0], ["As I mentioned earlier, creation \u2013 or excuse me, monthly plans, student plans, et cetera.", 0], ["They did a Slideshow ad that included a Shop Now button, which enables you to take action on their site.", 0], ["We launched some of them at F8.", 0], ["And as far as the guidance we have given at close in terms of what to expect, for example around EPS impact, those are things that we'll stay committed to.", 1], ["But what we found in general is that if you look at some of the markets that are strongest for both of them, they can each grow in those markets, and as messaging has become more affordable and more reliable for people, the volumes of messaging have just gone through the roof in terms of what people want to do.", 0], ["In terms of what is driving the deceleration, it's a combination of factors, and I think I outlined those in my commentary.", 1], ["During the Prime Day, we had some unique deals for Prime customers at Whole Foods.", 0], ["How - and quarter to quarter will there be volatility, shifts, changes, that's all going to be the case.", 0], ["We gained share during the quarter.", 0], ["And I think we will continue investing more.", 1], ["It's the strongest lineup that we've ever had.", 0], ["It's happening, as I said, in digital offices within each one of the customers.", 0], ["On the side of the products that we built, Rift and Touch were both a little delayed,", 0], ["We set a target of surpassing 0.5 billion paid subscriptions on the ecosystem during 2020.", 0], ["And so you've got \u2013 the risk there is of course the headwinds that we talked about on the ad targeting front and how that will play into U.S. growth as well.", 0], ["With Dynamics 365 for example, what you even to see in this last fiscal year which has been the first full fiscal year where we have this modern, modular approach to business application.", 0], ["And Ad Breaks is going to allow us to have a monetization strategy with that longer-form content.", 0], ["And I talked about how the mobile end points has been growing and the mobile usage has been growing.", 0], ["And obviously that all translates into the revenue growth as well across all of the marketing solutions, talent solutions, and sales solutions.", 0], ["And in Marketplace, we definitely are going to focus on some of the areas that you talked about including jobs is already a pretty meaningful focus where a lot of people do find jobs and business is less jobs through Facebook.", 1], ["But I don't want to diminish the signal because the signal is demand is very good for Windows 10 and upgrades in modern hardware when they realize the benefits.", 1], ["You think - think about the quality of content that you get for 499, and it's amazing.", 1], ["iPhone X was the most popular smartphone in all of China last quarter.", 0], ["Phil [Schiller] was just over there opening a developer center last quarter, and so there are a ton of things going on there.", 0], ["We\u2019re starting to see some benefits from that.", 1], ["So for me, while I appreciate the spirit behind the question, for us we have felt a necessity to do that for years, as a part of total shareholder return and our commitment to do that.", 0], ["I think that the major catalyst for that was probably the subsidy plans becoming a much smaller percentage of total sales around the world than they were at one time and so I think that some are lengthening.", 1], ["We design a great product and we make it priced at a great value.", 1], ["They get replace by new contracts at current levels and therefore the protection that is provided to us by our hedging program diminishes over time.", 0], ["And so I think that is another factor that presents risk in our ability to continue to grow ARPU.", 1], ["So what we were encouraged by in Q4 was that globally we doubled the number of \u2013 our Prime members doubled the number of viewing hours of the Prime Video year-over-year.", 0], ["So we're taking what is a great mobile ad product on Facebook and Instagram and making it even better.", 0], ["We have great momentum in wearables.", 1], ["And we have stated that we will be in India soon.", 0], ["We had features and new technology and these products when we launch and tend to have higher cost structures than the products what they replaced.", 0], ["Overall, we are very excited about the growth we are seeing in Office 365.", 1], ["The very first thing and I think Satya even mentioned it in its most direct in SMB is moving from buying a copy of Office, which was a very static concept to the idea where you could buy Office and frankly get all the benefits that those who used to deploy servers used to get only with IT departments of their own.", 0], ["But I think all marketers have the opportunity to do video, and that's pretty exciting, including SMBs who would never be able to hire a film crew and buy a TV ad.", 0], ["So -- we also recently announced plans to create additional one million jobs in India by 2025.", 0], ["The other three services, the card is launching in August, the gaming service and the video service are starting in the fall.", 1], ["So, on Instagram, there are a number of really exciting opportunities.", 1], ["So the impact of this change was an increase of $560 million to other revenue in Q1, which is \u2013 the other revenue is, of course, part of our supplemental sales disclosure.", 0], ["Yes, as you noted in the press release or the 8-K, we had an absolute step-up from Q1 of $792 million to Q2 of $1.2 billion.", 0], ["A lot of people that buy Apple products buy for the whole ecosystem, even though they might not currently use all the different products.", 0], ["We're continuing to invest in a number of key areas, hiring engineers to drive the three, five, and 10-year priorities.", 0], ["As I said in my remarks, I am very optimistic about what Windows 10 means for our customers, partners and Microsoft.", 1], ["We saw some acceleration of growth from a revenue perspective.", 0], ["And especially in this market, a generational move here really means, especially for many of the workloads being moved, these pay off every year for the next 10.", 0], ["We launch Prime Now in the U.K.", 0], ["And what I would say is I think there we feel good about the supply in the Commercial segment and the Premium Consumer segment, which is where the vast majority of our revenue is in OEM.", 1], ["Obviously, it's probably, everybody realizes this, but the big disparity between the U.S.-Canada growth rates versus the other regions like Europe and the rest of world are the currency headwinds, which had a very significant impact to the year-over-year advertising growth rates in those regions.", 1], ["If you start with the user, what the App Store provides people is the best and safest place for users to get apps.", 1], ["A good example of this is in fact even the rewrite of complete revamp I would say of Dynamics.", 0], ["You can also see that on the other services we're not doing that.", 0], ["In terms of Cortana and home, I think it's probably important.", 1], ["And then finally, the third bucket was about accelerating our commercial cloud lead.", 0], ["But 23% of that was in the second half of last year.", 0], ["We've had I think a lot of success moving advertisers to where people already are.", 1], ["It is a return to the attach level we saw before.", 0], ["So when somebody moves to Office 365, their graph, their people, their relationships with other people inside the organization, their work artifacts all move to the cloud.", 0], ["From a small business perspective, being able to close the loop on ads and transactions, we think, is just going to make it so that it's more valuable to have a presence on our services, and buying ads is going to be more valuable.", 1], ["And that diversity of workloads long term is what lead to margin improvement.", 0], ["We've got customers that are very engaged with our products.", 0], ["They had a goal of promoting their new flight routes, including one from Mumbai to Beijing, and their new aircraft.", 0], ["What's I think interesting and strong about our potential business growth is that we're able to do this across these services.", 0], ["And so we are still insignificantly in the build mode there, and so don't think of the penetration as anywhere near sort of a mature penetration.", 1], ["So we are investing a lot in privacy related to building the products and also working on complying with the FTC settlement.", 0], ["It's longer than an iPhone, probably between an iPhone and a PC.", 1], ["When you look at our revenue guidance, we are guiding to a sequential decline between 26% and 30%.", 0], ["They had a 16.5% lift in ad recall and then Nielsen\u2019s study showed a nearly 20% incremental reach on Facebook versus TV.", 0], ["And this impedance is something that I've always dreamt of how do we go forward.", 0], ["There were a few days of downtime for some of our selection.", 0], ["However, I think you can tell from the numbers that Luca is talking about just on the currency side and that's before thinking through the affect that price increases can sometimes have on the business over a period of time, it's clear that the economic piece is large.", 1], ["What I would say is that we feel like we're in great shape for the holiday.", 1], ["I would say the margins \u2013 our margins expectations are that we will price competitively and continue to pass along pricing reductions to customers both in the form of absolute price reductions and also in the form of new products that will in effect cannibalize the old ones.", 1], ["It's not only dependent on us, it's also dependent on the companies that are adopting Amazon, so there's a - or excuse me, AWS.", 0], ["And we have 12 bookstores now.", 0], ["And similarly, based on the feedback that we're getting, I would expect that we'll be rolling that out pretty widely across the world soon as well.", 1], ["This is the offer that allows Chinese customers to shop from the U.S. website, Amazon.com, with prices in RMB and with Chinese-language pages.", 0], ["Overall, the approach we have taken for multiple years now is to transform everything that we do inside the company, whether it\u2019s the product creation, how we\u2019re organized in the R&D, how we think about breaking down any silos and category definitions we may have had in the past, how we think about even marketing and the marketing approach, and then of course even with the go to market, and this transformation is ongoing.", 1], ["I think we have been and continue to be a great place for people to browse and discover.", 1], ["because we always wanted that halo effect of the premium console driving even the lower-end console, because that creates the sockets for gaming for us.", 0], ["And we've tried hard to have an iPhone that is as affordable as possible for people that really want an iPhone but may have a more limited budget.", 1], ["On your question on video advertising, yes, there may be opportunities over time to have more advertising in our Video, but we choose not to do that right now.", 1], ["We think we have \u2013 we're attractive both to customers and to sellers and we like our position.", 1], ["And we got a lot of feedback from people saying that's not what they wanted.", 0], ["It's driven the purchase of airplanes to move product between points within our delivery network.", 0], ["Our emerging market performance during the quarter was very strong.", 1], ["And so as we work on rolling out more Ad Breaks, and we are rolling out slowly, we're really focused on finding ways to help marketers measure the right things, and that's a very important focus for the company going forward.", 1], ["There\u2019s a couple of things, but in general it is almost always mix shift.", 1], ["and so we feel very good about that.", 1], ["What we're hearing from publishers is that this is a good opportunity and they're pleased with the extensions we're making", 1], ["So we're continuing to see good growth in the Facebook ecosystem with 11% DAU growth.", 1], ["And so the net is we\u2019re investing a lot across the board in our infrastructure, in our products, on partnering with different companies.", 1], ["We believe we have position that doesn\u2019t exist on any other platforms.", 1], ["And so we're very bullish about what can happen in the higher-level services and we'll continue to build on that piece.", 0], ["We\u2019ve committed, we did sales overlays.", 0], ["We haven't seen enough upgrade cycles to really establish a pattern as yet.", 0], ["So we're very happy with the initial results out of the team in Whole Foods down in Austin.", 1], ["The line item online stores revenue increased about 13%, ex-FX.", 0], ["And so we are lapping that, which sequentially makes up half of the 800 basis points sequential gain.", 0], ["We're really pleased with that and if you look at the sort of the cycle, which I'll define as Q1, Q2, Q3 for ease, you'll see that we've grown like mid single digits and on an average weekly sales point of view, and of course double digit on the ASP and so I think it's really healthy.", 1], ["And keep in mind that this $99 was partially offset by $24 of unfavorable foreign exchange.", 0], ["FBA becomes very important as well and we've talked about some of the tailwinds we see there, and sort of the linkage between marketplace and Prime that FBA provides.", 1], ["Obviously, if people learn about things through our ads and then close the loop all the way to purchase, it's very strong for proving ROI, it also helps as a measure that return as well.", 0], ["So we are very excited about that.", 1], ["So I think excited about that, other opportunities we've been working with in ads, video for a bit longer period of time have been things like our sports offering, some of the live sports that we've done, things like Thursday Night Football, really like the success that we've seen on those and been learning from that and looking forward to pursuing more opportunities to engage and serve with customers with those types of video offers, but also take some opportunity to monetize with the advertising.", 1], ["Over the longer term, I think as that works, people will experiment with longer forms of video as well and all kinds of different things.", 1], ["And so we're really happy that we were able to increase week by week what we're outputting and we're going to get as many of them as possible to the customers as soon as possible.", 1], ["And we did have some large Azure contracts which tend to be longer dated and tend to have low billings upfront.", 0], ["And so that's our plan going into 2017.", 1], ["And right now, we're using the Lift tool to continue to measure their sales for the 30 and 60 days beyond the campaign to see what happens.", 0], ["And importantly, we're also creating better experiences for people", 1], ["That's why I tried to stress up front that time spent is not a goal by itself here.", 1], ["And traffic \u2013 which for us is incredibly important in the retail stores because we do a lot more than sell \u2013 traffic was up 27% year on year.", 0], ["It's a really good way to drive engagement.", 0], ["Those, we believe, are attractive long-term investments.", 1], ["Clearly, what we've learned here and it's not a surprise really is that the -- many, many people do want to trade-in their current phone.", 1], ["I think in terms of impression growth, you're going to have more opportunities in Stories, probably more opportunity on Instagram, but good revenue growth opportunities in both places.", 1], ["On the advertising business, or rather I should say other revenue that line item grew about 41% year-over-year.", 0], ["And in the mid-term, we're building out those next-generation of services to be great businesses that reach their full potential, so that's Instagram, WhatsApp, Messenger.", 0], ["And more of these augmented reality tools I think are going to be an important part of delivering that experience to making that fun to use and expressive as it can be.", 0], ["And so the underlying growth rate for service in the quarter was fantastic.", 1], ["If you look at what percentage of our ads are truly relevant to the people who are seeing them, I think we've done a lot better over the last couple of years, but we have a long way to go.", 0], ["So if you recall, it's very consistent with what we've been talking about the last couple of quarters which is the acceleration of expense growth is really driven by three factors.", 1], ["In terms of overall reach of Office 365, we continue to see significant opportunity going forward on multiple dimensions.", 1], ["But rather than just run one ad, they were able to run five based on the interest base and personality targeting that really only we can do.", 0], ["Now, that being said, I am pleased obviously, to be able to access the cash more easily and not has to go through the debt market to be able to make these choices", 0], ["Home is important.", 1], ["We've gotten with iOS 9, there's some incredible productivity enhancements coming in with split view and slide over and picture-in-picture.", 0], ["All of this said, we're optimistic, as I've been the whole time, that this will get sorted out", 1], ["So what we're seeing is the results we're able to deliver on Facebook and Instagram, a lot of our marketing partners want more.", 0], ["That has obviously helped a lot with the growth in the number of paid accounts.", 0], ["I'd say Whole Foods is not less in their commitment to providing the best selection of high-quality products and having them in stock for customers.", 0], ["The bigger one is more mechanical that leap day comp I would say.", 0], ["However, if you look at it from an upgrade rate point of view instead of the absolute number, the rate is similar to what we saw with the previous iPhones, except for iPhone 6, which as we called out in the past had an abnormally high upgrade rate.", 0], ["I\u2019m not sure precisely when, but I\u2019m pretty confident that it will.", 0], ["Europe, we saw the declines that we anticipated from GDPR.", 0], ["Yes, we haven't updated that number, but suffice to say the innovation pace continues to accelerate.", 1], ["Some people hold onto those for the life of the product and some people trade them in.", 0], ["The architectural design we have for example when we do X we are buying the four everything that Microsoft does which is everything from Azure to Office 3652 Dynamics 365 as well as our consumer services like Xbox live.", 0], ["It's about the selling motion of E3 and E5 that we talk about.", 0], ["Facebook is really the new town hall.", 1], ["At the same time, we don't want to underinvest in the business.", 0], ["And we have a lot of data where that's the advantage we have is that we see the viewing patterns, and we also see the sales patterns, so we can tie the two together and understand which video resonates with Prime members, which video doesn't, and make mid course corrections.", 0], ["I think it's clear that the population of India will exceed China sometime in probably the next decade or so, maybe less than that.", 1], ["Overall, I think some of the trends that you've referenced, whether it's Tier 1 workloads or serverless or even complete data center migrations, all of that is happening.", 1], ["In terms of direct ads in messaging, we're taking that very slowly.", 1], ["And because it allows the mobile carriers to not have to have the whole supply chain and sales and retail that they have otherwise, they're able to sell the data plans for on average about 10% less than they would be able to otherwise, which actually is allowing more people to get on the internet in the first place because they can now afford data plans.", 0], ["Similarly, aside from the conversational and linguistic understanding, there's a whole thread of the work that we're doing on visual understanding.", 1], ["And so therefore, we look at that as an expansion opportunity, so we take that.", 0], ["All of these have been multiple years of hard work, and clearly there is momentum across the board, and that I think is what you are seeing and we are excited about this quarter's execution and performance, and I think it bodes well for what we do in the future, but the key is for us to recognize that this is about the sort of long-term commitment to a big opportunity in making sure that you line up your execution against that.", 0], ["When that study was shared with people internally, and we have that culture where people do studies and share things, and we're really glad because that helps surface issues, we immediately conducted our own research using the full data.", 0], ["So there's an increasing focus on objectionable content, right, and a lot of unfortunate things, right, that people share on Facebook.", 0], ["With Surface Pro 4, Surface Book, Band 2 and the Lumia 950 and 950 XL.", 0], ["As you think about commercial intent in Facebook versus Instagram, there's so much activity on both.", 0], ["And a lot of this happens within the current News Feed product.", 1], ["I think broadly, when we look at our strategy, it's focused on, number one, providing a broad selection for customers across a number of categories, so that they can find and buy exactly what they're looking for.", 1], ["And the reason we think people are so active is it's just really expensive and hard to have your own mobile site or your own even webpage.", 0], ["When you look at what we're trying to get done between Azure, we don't really see these themes across Azure or 365, Dynamics 365, and also the things that we're doing with Xbox Live, for example, all billed as one cloud infrastructure and a set of rich services in the cloud.", 0], ["In the first quarter with any new kind of product, you would always have learning and these sorts of things.", 1], ["We put a lot of energy on AR removing very fast.", 1], ["So we're investing on that front.", 0], ["Just on the OpEx question, I think the key is that we're investing in our near, mid-term, and long-term priorities,", 1], ["iCloud is a service that continues to grow very strong double digits, and that's also helping.", 1], ["Just on the second question on the subscription services, we\u2019d said on the last call, you probably remember, related to the adoption of the accounting standards update and revenue recognition policies that was impacting our results in a number of areas in 2018.", 1], ["There's tons of innovation left at the phone.", 1], ["That being said, I don't view any OpEx number as a constraint.", 1], ["I also think the government is much more focused on the infrastructure and on creating jobs, which is fantastic,", 1], ["So there's some things like that, that maybe obfuscate the numbers a bit, but we're really pleased with the retail growth.", 1], ["I would say from a Gaming perspective, one of the bigger changes that has happened in the last, I would say, couple of years is one, of course the vibrancy of the Xbox Live network across the PC and the console and now increasingly even on the phone because of titles like Minecraft.", 1], ["Q4 was a little depressed is how as we think about it due to some of the restructuring; Q1 is a little bit higher.", 0], ["You know very well the launch timing is different.", 0], ["But I think broadly, I don't see any difference than say, what we used to see or what we still see on our server or any other technology adoption curves.", 1], ["and we think that's very promising for our ability for people to use this platform to make those connections that will ultimately drive business opportunities.", 1], ["We will definitely see higher investments as we move through the year.", 1], ["We've already started down this path.", 1], ["And as I mentioned, it\u2019s one of the factors driving an increasing inventory.", 0], ["Direct response, SMBs who have uploaded 1.5 million videos and have both organic and paid in the last month, and developers.", 0], ["Pages are engaging in this, and some of the trends that Dave just talked about for just a lot of video behavior across the platform.", 0], ["And so lots of positives there.", 1], ["We're only working with one operator currently in part of the country.", 0], ["We\u2019ve got a great new device lineup you may have seen announced in September and on the AWS side, we\u2019re looking forward to our re:Invent Conference in Las Vegas, where we welcome over 65,000 conference attendees.", 1], ["There is a second experience called Video Home, which we started talking about earlier in the year.", 1], ["And finally, the enterprise business is not to be underestimated", 1], ["But they became much more pervasive and much communicated, I think much wider with the September announcements.", 0], ["Hundreds of millions of people already tell us that the groups that they're a part of on Facebook or at least a few meaningful ones are the most important part of their social experience.", 0], ["Certainly one of the things that we've talked about its most, that\u2019s notable is fulfillment by Amazon.", 0], ["I had mentioned Japan, but also even in this country even though the subsidy has gone away for a period of time.", 0], ["And so overall while it did have an RPL impact, which does explain along with mix shift, the minus 13% in non-Pro OEM versus the PC license growth that we saw, I think really Satya covered the actual logic to that in terms of overall ecosystem health as we feel quite good about.", 1], ["But at this point in time, we see that Q2 is the toughest compare.", 1], ["And we think it's a combination of all these offerings that really are the strength of our business and explains why we can continue to grow.", 0], ["But in general, my view is very positive in terms of how things are going, and that positive view is obviously factored in our guidance as well.", 1], ["They basically assume that you are one person on one of device, and we know that's not true.", 0], ["It\u2019s a bit about the law of large numbers and the differential between growth and holiday season, that\u2019s very tight few weeks of the holiday season versus the rest of the year.", 0], ["And in each of these \u2013 going back to 2016, we were \u2013 we have a very big security team that was focused on security around even the 2016 election and we found hacking and phishing attacks that the Russian government was trying to do, and we notified the right people about those.", 0], ["But as you say they're separately run and they can meet at different points and sometimes at certain vendors perhaps that may get out of hand are get out of sync.", 0], ["And then the next stage after that which is really the enterprise deployment, which as Satya mentioned, we expect in the second half of the year.", 1], ["Those are markets where our growth rates are particularly strong and the 6 Plus, because of the screen size, is doing extremely well.", 1], ["You see an ad and you drive a car off a lot.", 0], ["And even take something like EMS, which is a service you could say in the past we participated with Active Directory, but we, and some amount of system center.", 0], ["It's not that we're going to crack every market at once, but in sum I think we're definitely getting there.", 0], ["and so we were very happy about that", 1], ["But we think that's working and look forward to bringing a lot of new content to our Prime subscriber base, both through our normal Prime subscription and also the monthly plan that you alluded to.", 1], ["So that shows real growth people understanding they need to do it differently, but we\u2019ve still got a pretty long way to go, and we are seeing good results.", 1], ["It's growing faster outside the U.S. than it is in the U.S.", 0], ["And then in terms of infrastructure itself, as again I said, there's people who are tiering, even applications people who build hybrid applications where the storage could be even on premise in some cases, but the mid-tier and the web and the mobile back ends are in the cloud.", 0], ["Over 1 million SMBs have posted videos and done really small ad buys around them.", 0], ["I mean, I think as I talked before, we're working on the improving usability of tools.", 1], ["I tend to think about that as we'll have significant revenue growth in that segment.", 0], ["And compared to the industry peers, we're obviously gaining share with Windows Server, on SQL Server, and pretty much all of our management and security products as well.", 0], ["But as consumer engagement with video has continued to grow, that creates more and more of an opportunity for video ads.", 0], ["And so it's iPhone X was number one, but we had several in the top.", 0], ["And so I would continue to expect to see us do it.", 1], ["And so the sum of all that, I feel great about the results.", 1], ["We did announce a region in India.", 0], ["And we don't really have a specific target there.", 1], ["We are investing in India.", 1], ["I think, as you saw in the release, there are some new devices that take advantage of the underlying service that we think will be really convenient for sellers and interesting for device makers.", 1], ["And so that is going to make it smaller in how it's going to appear in the revenue numbers.", 1], ["So we're glad to have that problem.", 1], ["So we are very encouraged, as I said last quarter in India, and continue to invest there very heavily.", 1], ["As we are having this momentum build, in fact we talked about some of the new customers we're adding, and the way we see that is the install base growing.", 0], ["So that's the nature of that comment.", 1], ["So there is actually expense related to AI that's on the human side in the near-and medium-term as well.", 1], ["And even with all the pricing action we took, we, from a total cost of ownership or just raw pricing perspective are very competitive versus what\u2019s available in the market.", 0], ["I do generally - I mean, I believe very strongly in trying to decentralize and put power in individual's hands.", 1], ["But they are moving fast.", 0], ["It continued to be a strong contributor to profitability in Q1.", 1], ["And so in some respects we are giving benefits earlier in the lifecycle to international Prime customers than we did in North America just because it launched later.", 0], ["Of course, it will manifest for us with Cortana as an agent from Microsoft that has some special skills, especially around that crossover between work and life.", 0], ["That's where we will make sure we do our best, building blocks and AI work.", 0], ["Yeah, and in terms of Instagram, I just think Kevin and the team are doing amazing work.", 1], ["You'd see that in that line item, which is about $2.2 billion here in the second quarter.", 0], ["So, we are essentially reflecting the fact that we have gotten better at extending the useful life here and now building that into our financials moving forward.", 1], ["The same \u2013 my same response applies and I think we'll do quite good in iPhone. I", 1], ["They collect the data, they store the data, the analyze and do predictions on it but then after you do predictions you got to do something about the predictions.", 0], ["It will also be the targeting that we have and the targeting capabilities that we're doing with things like Custom Audiences and getting better and better at that.", 0], ["So just taking that to be 3D and immersive.", 1], ["And in terms of ad load growth, I pointed to the fact that we continue to expect that ad load will be a less significant factor in the remainder of 2017, and that's certainly the case.", 1], ["But you need to keep in mind that we contemplate a number of factors including the fact that we have family sharing as part of the service, the fact that there are multiple device purchases, the geographic availability around the world, the availability of local content at the beginning of the service, how many people do we have with payment methods on file.", 0], ["I can't quantify it, or break it out specifically, but I will say it's a large factor as well as a couple other things in the international segment.", 1], ["We use those technologies a lot in our internal businesses and we're also developing services for AWS customers.", 0], ["So, we've launched a number of changes that are focused towards trying to encourage more interaction at the expense of some passive consumption on the network.", 0], ["We think it's driven by again Prime, the Prime program, the engagement of Prime customers as well as increased selection, and particularly third-party selection.", 0], ["But now it loads instantly.", 0], ["I do want to add one point though because when we talk about operating income in both in Q2 and Q3 and we talk about the cost and penalty of one-day, I would like to highlight there's some other investment areas that are certainly going on here.", 1], ["And so I think what you're starting to see is a process whereby there's a great product, there's a good macro environment.", 1], ["So I think we are seeing that \u2013 including on Facebook, including in ads even though it's earlier \u2013 the additional opportunity is big.", 1], ["But I would say this was an extraordinary step up, as I mentioned, in Q3 that is tied to very rapid growth in not only paid units but Amazon fulfilled units.", 1], ["In terms of resellers, we think it's a big opportunity.", 1], ["So we think it'll help make the community stronger over the long-term.", 0], ["We haven't announced any specific plans as it relates to shipment volumes for the consumer for Rift.", 0], ["But we are very grounded in the fact that it has to be earned and not something that we will inherit because of being owners of GitHub.", 1], ["And then separately on Windows 10 and the strength we've seen in OEM Pro, and I would also say it mirrors in some ways you're also going to see some of that growth and strength in Windows commercial, so let me answer them a bit together.", 1], ["On the engagement front, we're seeing time spent growth per DAU across the Facebook family of apps, and that includes Facebook itself.", 1], ["And you can bet that we're brushing up our models, and we'll apply everything we learn to the next time.", 1], ["So we\u2019re in a very early innings of it, but we are pretty excited.", 1], ["I see a switcher rate that is the highest ever.", 0], ["We\u2019re doing well in virtually every corner of the world.", 0], ["We see China as a \u2013 and the way we're approaching China as a way to \u2013 a trusted avenue for our Chinese customers to access authentic international brands and we'll focus on those global brands and bringing those to Chinese customers.", 0], ["So that's our focus on gaming.", 1], ["We've got a 2 point headwind on that range of 16% to 18%, so if you think about that and move your midpoint up to 19%.", 0], ["And it's true that we are at this point at scale on Azure and with very, very high growth rates.", 1], ["There will be variability quarter to quarter.", 0], ["Database is also a multibillion-dollar business propelled by Aurora.", 0], ["because we went through this period where our mobile experience was not as good as we wanted it to be and we had no ads on mobile.", 0], ["We continue to see really strong usage growth across the board, and it's coming from customers of all sizes.", 0], ["The offering in China that we have for consumers is also a great, trusted customer engagement.", 0], ["We are just working very hard to get capacity in place and in productive use for Q4 and beyond.", 0], ["On the - this is Phil.", 1], ["Research and development is the core of the company.", 1], ["Overall, what you're going to see from us on video is not just try to optimize for overall watch time, but to optimize for building products that help bring people together and help facilitate real interactions between people.", 1], ["We are very optimistic.", 1], ["India, although Diwali moved into Q4, so far that's going really well.", 1], ["We have a ton of energy going into the country on a number of fronts, and it is the third largest smartphone market in the world today behind China and the United States.", 0], ["So $640 million more is in other revenue this second quarter.", 0], ["So we're only up 13% on head count through nine months year-over-year.", 0], ["And we started some early small tests around f8 last year where with some ecommerce services made it so that people who were buying things could follow up with the business and get customer support and buy more things.", 0], ["And so we're not changing anything.", 1], ["In retrospect, when you look at the periods, they clearly were.", 1], ["It's also the one that is the most accurate for us to measure.", 0], ["So in addition, we've expanded grocery delivery to 20 cities so that's picking up steam.", 0], ["Groups and communities, we think, is increasingly ubiquitous, but the tab there isn't going to be used by everyone.", 0], ["And so to me, that represents a qualitative change, and so the type of dialogue we have, whether it's with an auto company or a financial services company or a retail company, is much deeper, much broader.", 1], ["Annual is still going to be a better deal but we know that customers may try it more frequently if it's a monthly plan, and that's what we're looking for.", 0], ["And so I see lots of positive things, and so that's how I look at it.", 1], ["I will take the opportunity and asked about Windows 10 in the enterprise market that we are encouraged by the pace of deployment, the number of proof of concepts, and actually some of the stability we've seen in the commercial PC market in terms of starting to see some so I think overall I think we will continue to watch, but our security and management value prop I think really is paying off.", 0], ["And if we can make it so that you can have some of those interactions in an automated way where you fire off a text and then just get a response back quickly, but asynchronously so it doesn't take up your full attention, then", 0], ["We are going to continue to make quality changes now going forward around meaningful social interaction.", 1], ["We're seeing ads in inbox, which are now available to all advertisers.", 0], ["We're seeing those put videos in.", 0], ["And we've seen significant adoption of SQL, so this is Azure DB, machine learning-as-a-service.", 0], ["You'll hear us talk about Dynamics 365, Office 365, as well as our Azure core and premium services.", 0], ["And so what you'll continue to see is that would normalize.", 0], ["There has been a noticeable drop in run rate, between Q3 and Q4 generally on the lines of about 300 basis points.", 0], ["I think, I guess, if you're talking about DAU and MAU, Europe is stable on that front in terms of Facebook overall.", 1], ["If you look at our installed base of iPhone today versus two years ago, it's increased by 80%.", 0], ["So, great first wave of the, what we call the Amazon's Great Indian Festival, which lead into Diwali.", 0], ["Every server product of ours has cloud enrollment right, whether it be SQL, whether it be Windows Server, and you'll see that increasingly, even in this next wave of servers.", 0], ["Another example is there are tens of millions of people, maybe more, but I'll go with that, who, on Android, use Messenger as not only their app for Facebook messaging but also for SMS, as their SMS client.", 0], ["When we look at the year-over-year growth in paid Prime members on a global basis, it's been consistent in Q4 year-over-year, similar growth rates year-over-year to what we've seen in some of the earlier quarters of this year.", 0], ["We had that even prior to tax reform.", 0], ["You see an ad and you order a service.", 0], ["I think part of it is that, the FX piece.", 1], ["It's worth noting though that because of our ads targeting our ability to reach people multiple times.", 0], ["Overall, the shift to the higher layer services is the real driver here, which is obviously Office 365 and its various levels is one factor.", 0], ["And we've certainly found on the Internet and YouTube and in other places that there are whole industries around creators with different cost structures than traditional Hollywood folks who can produce very informative and engaging content that a lot of people like and enjoy and that builds communities and that helps people connect together in a way that definitely can be supported by this ad model.", 0], ["So we need to balance all these different elements.", 1], ["We are very excited by the level of customer response that we\u2019ve got for our current portfolio.", 1], ["So it's still early, but we're encouraged and we think we're creating some value, a lot of value for our business customers.", 1], ["So, great customer adoption.", 0], ["We are more certifications than anyone in terms of adhering to both regulated industry as well as digital sovereignty.", 0], ["And so you probably have a little bit of that that is shaking out.", 1], ["We think that's at the core of being able to in fact then have all of the revenue \u2013 have revenue growth in their business solutions with across higher market sell.", 1], ["Our revenue exceeded in terms of growth, our growth in operating expenses.", 0], ["In fact, we are very excited about what we are doing with our devices and Adobe and with Windows because I think Windows and Windows 10 Creators Update is the ideal platform for all of the creators in the world because of the innovation in Windows and the innovation in devices, both Surface Book as well as our OEM devices.", 1], ["On the 3T piece, we do collect on behalf of our sellers in two states, Washington State as of the first of this year, and then Pennsylvania turned on here on April 1.", 1], ["And predictably, people want to do more of that activity.", 0], ["And so what we have done in January and in some locations and some products is essentially absorbed part or all of the foreign currency move as compared to last year and therefore get close or perhaps right on the local price from a year ago.", 0], ["And so with the customer set that Luca referenced as well, the 99%, the iPhone X is a beloved product.", 0], ["From the perspective of hiring growth, I'd really point to the fact that we've been consistently accelerating hiring so far in 2017, and I pointed to the fact that we expect to accelerate hiring in the back half of the year as well.", 1], ["So a lot of this of course is just around the great power of Alexa and being able to offer even greater convenience and touch points where customers can interact with that and we're seeing a lot of good momentum with usage and how customers are interacting with Alexa.", 0], ["It shouldn't be designed around apps.", 0], ["So I think, from that perspective, it is broadly stable for Facebook there.", 1], ["The other reason why the number of paying accounts is growing is the fact that the quality and the quantity of content continues to improve.", 0], ["So for example, the store monetization, Bing monetization, Xbox Live monetization as Xbox Live monetization as Xbox Live now in fact is going to span devices are all things that drive monetization for below 9 inches.", 0], ["This quarter, we had a bit of a mix shift to a higher-end SKU.", 0], ["So I feel that, as I said, we have a cloud strategy that is not just about infrastructure.", 0], ["You're absolutely right that one of the phenomena now is that pretty much anyone who is a customer of Azure is also in some form an ISV, and that's no longer just limited to people who are \"in the classic tech industry\" or the software business.", 1], ["We\u2019re also growing the channel there.", 0], ["So this is important overall, we\u2019re very focused on it.", 1], ["The second phase is really working on buildings organic interactions between businesses and consumers; and then finally, the third phases is about building those commercial opportunities.", 0], ["The reason why we give disproportionate attention to it is because we're trying to help push forward new formats that are not just about consuming content but are really about interacting, so Live, 360 video, and there will be others in the future.", 1], ["They're very loyal, and so you see this upward trajectory of our Services business.", 0], ["We're also now, very recently, made some changes, as you probably have seen, to the design of the App Store.", 0], ["And our view is that the less friction, the better the user experience, the more people can easily interact with businesses that they care about.", 1], ["Of course we don\u2019t count that in our run rates or when we talk about our $6 billion plus run rate, that\u2019s just pure public Cloud number and that\u2019s fantastic to see and we want to measure it that way.", 0], ["And from a pricing perspective, there's - we've got to improve our ability to grow the number of advertisers using Stories and improve price there, but it's going to be more reliant on that in terms of revenue growth.", 1], ["So more than 50% of accounts on Instagram are using Explore every month.", 0], ["What we said for FY20 and certainly in Q1 as we expected to be up sequentially in Q1 and we will continue to get some headwind because of the strong Azure IaaS and PaaS growth we expect through the year, but we certainly think that Azure fundamental gross margin improvement will help offset that next year.", 1], ["I believe that our set up for that is the investments we've been making for the past couple years, as well as the investments we're going to make for the next couple.", 1], ["Let me, first, I wouldn't say penetration is the word for this.", 1], ["From a gross margin perspective, it is slightly dilutive to company margins, but the impact is not particularly large.", 1], ["So I'm very excited about it.", 1], ["And so I think it depends on people's reference points.", 1], ["And we think that it will accelerate as the year goes by to sort of the breakdown of the cable bundle that's been talked about for years.", 1], ["I will say we are very happy in our consumables and hard lines categories, as well.", 1], ["Certainly, the \u2013 part of that increase in deferred balances is related to Reserved Instances.", 0], ["On the bundle question, Toni, we look at each service, and decide what's best to do for it and with TV+, we concluded that a great way to get more people to see the content would be to do this, and it would be a good gift for our users, and so that's what we're doing.", 0], ["She was selling clothes in her living room and selling them.", 0], ["So where I come to summarize where I think we are, coming into 2019 is, 2017 and 2018 were really - we had a lot of hard work to do, but we also needed to figure out what the road map was going to be going forward.", 1], ["Echo Spot was launched in India and Japan in the last quarter.", 0], ["The format is so visually appealing and people are telling stories with pictures, so we see both anecdotally and in the data that this is a great place for people to become aware of a product in the first place.", 0], ["And so we go through different cycles.", 1], ["But you're right, we're also getting a very big base.", 0], ["So to share one example, IKEA wanted to boost their online sales when their stores were closed.", 0], ["And so that is something that we need to work through every time we launch a new product and we have a pretty good track record and history of taking those cost structures down over time.", 1], ["Obviously, we're investing on the research and development side on Oculus in 2015 and that's factored into our expense guidance for this year.", 0], ["I would continue to expect to see ARPU growth as we see E5 have its impact through the year and so think about these same dynamics still for us where we focus on new users and ARPU increases as we shift to Office 365.", 0], ["I am sticking with it being about a point.", 1], ["And then we tend to defer some revenue on some other categories, like for example gift cards or some AppleCare, but in general by far the largest element is the change in ESPs.", 0], ["Revenue growth was the same as Q2, and now we're at an $18 billion run rate, whereas last quarter when I had this call, we were at $16 billion, so very pleased with the customer response in the AWS business as well.", 0], ["It's well over 50% in some countries, particularly the UK.", 0], ["Our installed base is growing at double digit, and that's probably a much more significant metric for us from an ecosystem point of view and the customer loyalty, et cetera.", 1], ["We now have the ability to have one control plane for IT for all the devices, identity management, device management, data protection.", 0], ["Some of these IoT services now even have SaaS components to it.", 0], ["Secondly, Mark talked about the internet.org efforts that we have.", 0], ["And so that comparable will be tough for this year, but that's a transitory thing.", 0], ["And we have been and continue to invest a lot in this.", 1], ["It's building the developer ecosystem.", 0], ["So we have more work to do, but we're making progress on all dimensions.", 1], ["We also feel good about the volume we got for Xbox One S,", 1], ["I realize zero to 40% is not as helpful.", 0], ["And I think we've done a very good job of pointing out its competitive advantages, and we're seeing that also benefit margins.", 1], ["And then we priced the XR right in the middle of where the entry iPhone 8 and entry iPhone 8 Plus have been priced.", 0], ["But I also point out that we launched Turkey in the quarter and now we have 17 Amazon websites globally.", 0], ["So, the road to monetization takes some time.", 1], ["It's based more on shipping units.", 0], ["And then, we're working very hard to get everyone to give Apple News+ a look.", 1], ["So we felt we could guide to a slightly narrower range, which we've done occasionally in the past.", 1], ["So it was a rare aggregation of startups in Q3 and into Q4 that's helping us position better for Q4 volumes.", 1], ["I do want to point out it's not just an accounting-related change.", 1], ["Unless we are able to, over time, settle between us on some amount, but right now we're depending upon the courts to do that.", 1], ["So there's lots that we are working on on engagement that continue to drive time spent.", 1], ["The issue is that enterprises, generally speaking are only deploying iPads to a small percentage of their workforce.", 0], ["When you look at our overall growth, our growth is very broad-based.", 1], ["And obviously that will impact both, I think, the quality of the experience in terms of the ads they get and also the monetization for us.", 1], ["You can share it on the platform.", 0], ["We see adding five more this year.", 0], ["Since -- in 2016, I think it's very fair to say that we were behind where we needed to be as with a lot of -- the rest of the industry and governments as well and expecting the kind of information operations that we now have seen.", 1], ["And we\u2019re very pleased with the strong performance that we had with Facebook itself in the quarter.", 1], ["We have some really, really impressive gains and efficiencies in both the warehouses and also the data centers.", 1], ["So that's how we look at it, but you got to remember that before Quantum, there are many byproducts of a quantum effort that have significant implications on how we get more competitive, efficient in terms of providing computing to the world.", 0], ["And our focus will always be making sure we have a clear roadmap for customers to make long-term commitments through annuity and so we are really trying to get away from some of that launch impact that you may normally expect to see.", 1], ["We have a very large and diversified business.", 0], ["So that's really what's driving it, not a shift to a different format like video.", 1], ["Constant currency growth was 48%.", 0], ["iPhone was relatively flat year-on-year, similar as the market was.", 0], ["So I think that's what you're seeing.", 1], ["We launched additional savings for Prime members at Whole Foods.", 0], ["It also, obviously, you can also do things with HomePod like use it as a speaker phone.", 0], ["So I think what that does is, again it strengthens your purchase decision, it strengthens the need to not have to go elsewhere to buy a product because you need it quickly.", 1], ["VR is still very early.", 0], ["And so I think what you're seeing is that across all of the objectives people have from brand marketers to direct response to SMBs to developers, as our ad products get more sophisticated, our targeting and measurements get better.", 1], ["It's a huge market and it's clear that many people will be moving into the middle class over time, as we've seen in other countries.", 0], ["Our reported results are on a normalized basis, removing the one-time item from last year, was 15%.", 0], ["So, we believe that there needs to be a regulatory framework in place for each of the major issues that I just talked about.", 1], ["That for us was a bit of a surprise, and a positive surprise, obviously.", 1], ["For production, I think that means that you need to get the camera experience, and the experience for capturing and uploading videos that you've captured to be much better in a more central part the of the experience.", 0], ["In terms of our marketer segments from brands to direct response to SMBs to developers, the growth is really strong there as well.", 1], ["This year, we took Prime subscription revenue and amortized it over the quarters on a straight line method.", 0], ["And maybe the two most important messages are that we believe iPhone revenue will grow double digits as compared to last year, during the March quarter.", 1], ["That value gets deferred and gets amortized over the estimated period of time that we deliver the free services.", 0], ["So they will have that same profile, which is lower-margin services first, higher-margin services over time.", 0], ["It's a business that is growing nicely, so we get good support from our scale.", 1], ["It is actually impacted by the same thing that impacted free cash flow this quarter, which is about a $1.3 billion on settled cash settlement impact.", 1], ["Of course remember that both Apple and Google has built cameras and private photo sharing and photo management directly into their operating system.", 0], ["There's a lot of - it's having a lot of pickup by both vendors, sellers and also authors.", 0], ["You'll also notice that the Fire TV Stick was \u2013 a new version of it was launched in India with some important features there such as the ability to search in Hindi and in English, free data usage for three months and also data monitoring, which is important there.", 0], ["And I just go back to the three factors that I cited in the past that the regulatory landscape is continuing to evolve.", 0], ["And so it's a very rapidly expanding country.", 1], ["In the medium to long run, we believe we compare very favorably with any other spend we can do", 1], ["And the installed base is up 80% over the last two years.", 0], ["We learn from every Q4, this one was no exception.", 1], ["And the fact that our Services mix increases as we go through the year, that is of course also helping, given the profile of our gross margin for Services.", 0], ["We're excited about Q2 when the devices hit the shelves.", 1], ["We want to make it easier for our customers to actually use our services", 0], ["We began to see more gaming approvals in the quarter, or I should say some key gaming approvals.", 1], ["We let them do registration, imaging, catalog, uploads and basic seller training.", 0], ["So, I mean, that's what we're seeing in terms of driving engagement.", 0], ["In terms of the way we price, we price to sort of the value that we're providing.", 1], ["And so we turned the corner in Music.", 1], ["And also on the memory front, we feel that for NAND, we're going to be turning the corner very soon.", 1], ["And so, we're seeing consumers adopting that and we're building products for them.", 1], ["We have transportation companies that we partnered with and other technology companies.", 0], ["And it continues to be a large increase both Q3 and Q4.", 0], ["I would tell you that the way we look at this is in a quarter where you have a supply constraint, it's difficult to draw too many conclusions from it.", 1], ["Could we sell significantly more and significantly faster from an upgrade cycle standpoint in places outside the United States, where we've been forced to increase prices by up to 20%, 30%, 40% in certain countries?", 0], ["There's still a small business at 100 people, but they are a growing business and showing the power of how our work with SMBs is growing jobs.", 0], ["So we don't think it would be a good experience in News Feed, right,", 1], ["Then we've got data centers and data centers is a growing expenditure for us,", 1], ["Because there are a lot of really big and important Chinese companies who sell a lot of products to people outside of China, and they use Facebook as one of their primary tools in a lot of cases to spread information about what they're doing and grow their customer base.", 0], ["While we saw improvement in the gross margin percentage in Office 365 and continue to make progress on that it is also the balance, right.", 0], ["I wouldn't say yes at this point,", 1], ["So \u2013 and then as you know, Q3 is generally a lower quarter due to all the work to get ready for holiday and the hiring of people and building teams.", 0], ["Our content systems are getting more mature, there\u2019s a lot of more work to do in each of those.", 1], ["I think, AR has the ability to amplify human performance instead of isolating humans.", 0], ["And when they have an ad and they can get a direct contact one to one with a customer, that's been something that people are really excited about.", 0], ["We've been a longtime advocate of structural tax reform, and so we'll just wait and see how things play out.", 1], ["And so again, that's a new muscle for advertisers.", 0], ["So that's the TAM expansion.", 1], ["But that said, we see plenty of opportunity for total gross margin growth in terms of dollars just because of the number of markets that we participate, in which we by the way, never participated in the old server world.", 1], ["But so is speed and agility for customers and the ability to deliver services and features that were beneficial to them.", 0], ["Similarly on headcount, we grew headcount by 48% in 2016, 38% in 2017, if you exclude the acquisitions of Whole Foods and Souq, which drove the number up to closer to 68% I believe.", 0], ["We feel this really strong quarter.", 1], ["And so therefore, from a secular perspective, we are all in on making sure that we invest in our commercial cloud as well as our investments in things like gaming and going after the opportunity that is there in front of us.", 1], ["And you're definitely right that a lot of the AI research that we do is applicable to multiple areas, but we still need to build those tools.", 0], ["So we saw the largest quarter-over-quarter and year-over-year increase in revenue in that business as well.", 0], ["I think we're in the early innings of it, not in the late innings, and I think the market rate of growth over the long haul will also be impressive.", 1], ["That roadmap, we know that those devices drive customer engagement and sales.", 0], ["Take for example foreign exchange, which has been a significant headwind for the company for the last three years now.", 0], ["And there's international expansion in some other areas.", 1], ["When you look at our current product portfolio, it is much broader than it used to be.", 1], ["And what they did in that test is tag each article of clothing.", 0], ["And we have - again trying to take advantage of the fulfillment capacity and transportation capacity especially with third-party partners that we have.", 1], ["And the other thing that we need to keep in mind as we step back for a second and now we've gone through a couple of cycles where the U.S. dollar has strengthened.", 0], ["In terms of the expense guide in 2020, I would say that obviously we plan to -- a large factor of our expense growth is driven off of headcount.", 1], ["So that's what led to the acceleration of desktop revenue growth.", 1], ["So it\u2019s really a great benefit for sellers, its good for sellers, its good for customers and we believe good for share owners too.", 1], ["So it's going to take time.", 1], ["But I\u2019m really confident that this is something we really understand how to do and will do.", 1], ["So again, we had margin expansion year-over-year that was quite significant, from 12.4% to 23.5%.", 0], ["And so we're putting a lot of energy in, just like we have in other geos that eventually wound up producing more and more.", 1], ["You are seeing us take other steps like a buy button, like the Marketplace launch, which are really aimed at improving some of the experiences we think people are trying to have and already having in organic ways on Facebook.", 0], ["And so it's not a revenue-related issue.", 1], ["And it's number one in China, which is another powerful point.", 1], ["So, yeah, we think this is an important part of our Prime offering.", 1], ["So for the iPad and Mac categories, you need to keep in mind that our launch timing is different on a year-over-year basis.", 1], ["The services grew 31%.", 0], ["So we will continue to invest in the businesses we think fit that profile and we're always looking for a fourth or fifth business that fits that profile.", 1], ["We think there's more of these that we can do.", 1], ["So there's many puts and takes.", 1], ["So customization, customization and composition, especially with Office 365, is very important, and this is where we have some very differentiated offer with Power BI, PowerApps and Flow.", 0], ["And so iPhone X has done well there.", 1], ["So I don't think of it as reflecting a bigger shift than we've seen in particular this quarter.", 1], ["We've seen lots of consecutive quarters of growth in our higher-level services but we're now seeing some good scale.", 0], ["So it's not all FC capacity, that's square footage.", 0], ["And we have a formula for how we build these businesses.", 1], ["And sales by sellers in Q4 were greater than all of 2014 combined in Q4.", 0], ["The primary benefit was the two things I just talked about.", 1], ["And we're really proud of the growth of the business.", 1], ["I could not be prouder of the product.", 1], ["So our goal is to have lots of different things we can do for our marketers and measure them really deeply all the way through to business results.", 1], ["One part of the business that I think has been really strong and is worth noting is we're working with marketers in China to help with their export business.", 1], ["That ad was so successful on Facebook and Instagram that they then ran the 60-second ad on TV instead of their 30-second ad.", 0], ["We do have some cash in the U.S.", 0], ["In general today Mark almost all of that benefit shows up in what I would say as the on-premise KPI, and so over time though how you should think about that it will eventually show up in Azure consumed revenue growth, this is a benefit that\u2019s fundamentally about high value and flexibility and meeting customers where they are so that they can make a determination of when to make that choice.", 1], ["And we've continued to do that this quarter as well.", 1], ["We look at \u2013 there are more than 1 billion people every month who use our Groups product.", 0], ["Keep in mind; we started in acquisition where we were below our targeted range.", 1], ["If you want to get to total bookings, you just add back in all the consumer revenue, is technically is how you would do it", 0], ["In terms of AWS, we've had 48 price decreases since inception.", 0], ["But at this point I would say, we have emerging ISVs, some of the global ISVs building SaaS applications on top of Azure driving a significant amount of growth of new businesses, the new business models emerging on Azure, as well as hybrid, which I would say are driving.", 0], ["So of course, Shannon, as you've seen, our guidance for margin is 50 basis points higher than the guidance that we had given for June.", 0], ["And just to clarify, what we had been saying was early 2015, and we sort of look at the year and think of early as the first four months, mid is the next four months and late is the final four months.", 0], ["Justin on time spent, there is no question that video is helping us on time spent and engagement.", 1], ["Overall I would say there\u2019s a secular movement that\u2019s happening in particular with Office 365, quite frankly, it\u2019s happening across the entire product portfolio of Microsoft which is more to what I would described as annuity relationship as well as subscription relationships.", 1], ["The number of developers that are writing apps more for it are impressive and we\u2019re seeing some incredible innovation coming out there.", 0], ["It was the highest ever by far.", 0], ["We\u2019re looking of course at our cost structure, and we try to remain as competitive as possible.", 0], ["So it's always a very difficult period for us to estimate.", 1], ["We're growing the number of advertisers and publishers, and we're continuing to see growth and we'll continue to invest.", 0], ["So as it gets smaller, it has less of a depressive effect on the overall impression growth number, because if you recall, desktop has quite a number of impressions per DAU, just given it's the right-hand column that has multiple impressions on each screen.", 0], ["Even at decreasing growth rates, we are still growing and predicting growth at very healthy rates, and that's based on returning for advertisers.", 1], ["We have been working and continuing to reinvest and save through the year as we look to get everything here more efficient.", 1], ["And so I do think we saw some impact, particularly in SQL and I do expect to see some of that in Q4.", 1], ["So there are a couple factors there.", 1], ["I think that's pretty similar to the trends that we've seen in that metric.", 1], ["But for the near-term, the way that we\u2019re thinking about it is offering as many of these things at cost and for free as possible to deliver as much value to small businesses and businesses around the world.", 1], ["For example, the work that we're doing on full end-to-end encryption, that's just -- that's a long-term project.", 0], ["Some are much further along than others, but overall we're very happy.", 1], ["We have a number of other things that we're working on across Messenger and WhatsApp.", 0], ["Interesting enough, we have a lot of requirements around edge devices even, so that you can have databases with compute so that you can really have what is needed at the edge, that\u2019s sort of one conversation.", 1], ["So that will also minimize the impact that will have on the top line.", 1], ["And in fact, on a constant currency basis, we actually grew slightly in emerging markets.", 0], ["That's to us to the best way for us to keep having that recurring value.", 0], ["I think there is and you'll see that dynamic, so if the expiry base is a little bigger, you'd expect obviously a number bigger than that on the booking side and when the expiry rates' growth - it's really about the delta between the two as you know.", 1], ["It\u2019s not always the choice of TV or Facebook, but often we can be a complement.", 0], ["The other point about Teams is just not limited to knowledge workers, which has been really the only place traditionally we play.", 0], ["And where it is not perfect, we wind up reviewing over 100,000 apps per week between new apps and updates for existing apps, and then work with developers quickly to fix the issues.", 0], ["Of course, as you look further out, you know we do not provide guidance past the March quarter, but it goes without saying that at current levels, again those headwinds will continue to become stronger for the reason I explained earlier, that our hedges continue to expire, they get replaced by new hedging contracts at current levels and", 0], ["And so there's an enormous upgrade cycle there for people that are still running on 3G handsets.", 1], ["And that means there's, in many ways, almost limitless opportunity for consumers to do more.", 1], ["because the line between them, both strategically and literally, is more important to be blurred and going in that direction.", 0], ["And we also differentiate between payment systems that are built on top of the existing financial infrastructure like what we're trying to do with WhatsApp payments or when we make payments in Instagram Shopping, and our work with something like Libra that is trying to build some new technological infrastructure for financial services.", 0], ["I would say Stories is today from an impression growth perspective really about Instagram Stories.", 1], ["And that really means mobile.", 0], ["So I\u2019m generally happy that we\u2019re moving on with the ramp.", 1], ["I would also point out, AWS had a strong quarter, accelerating growth versus Q3 and also expanding operating margins by 100 basis points.", 0], ["The 86% also seems low to me but I was quoting a third-party source and not our own data.", 1], ["Our other segments are growing as well.", 1], ["So one of the things that we are in fact very focused on is enabling others to build their own clouds.", 0], ["So the strength from that outperformance or better market in consumer PCs in developed markets is a direct correlation to our performance in Office Consumer.", 0], ["Certainly, weaker dollar in the long term, if it holds, will be a positive but it's not something that you're going to be seeing translating to gross margin tailwind quickly.", 1], ["So very, very pleased with the critical acclaim to the Amazon Studios content and we've got a lot of new content coming out this year.", 1], ["And we're seeing a lot of great examples of people using ads in the feed across Instagram and News Feed.", 1], ["That means more time in video, and that does come at the expense of some impression growth in News Feed.", 0], ["When I look at what's happening with say some of the most innovative work we've done around distributed computing which is service fabric and how people are in fact going straight to building out using our past services some of the new HyperScale cloud services using microservices and not only are they doing that but we're also seeing great growth in our serverless infrastructure which is Azure functions.", 0], ["And so a lot of the underlying things we do to build our ad systems don't just feed into revenue, they feed into quality.", 0], ["So we're still very pleased again with the international business, continue to invest in Prime benefits, international expansion as I just mentioned, and we're still seeing very good pickup.", 1], ["because we think that is a pretty old concept to have suites like that, which is we have now really made the entire Dynamics 365 much more modular, modern, and much more efficient for customers.", 0], ["What really matters is that when we get that migration and we are seeing it, we are able to show them the value", 1], ["We're very fortunate and work very hard to have loyal customers and to continue attracting an impressive number of switchers.", 1], ["We have the best deployment tools and development tools in Azure.", 0], ["Our focus is on this worldwide, and so it's not only a U.S. focus, but we want to deliver a great experience around the world and deliver it globally, and so we've put a lot of the energy into doing that.", 0], ["If you remember back to Q4 and the capacity constraints we had in Q4, primarily due to really strong FBA growth, we talked a lot in the Q4 call about the operational cost of that in Q4.", 0], ["We feel that 37.5% to 38% given the new FX environment I think says a lot about all the work that we've done on the cost side to get there.", 1], ["So the example of that is the new camera that we're working on and all the creative tools around that.", 0], ["On ad blocking, in terms of the impact, I would just point out that this quarter we had 18% year-over-year desktop revenue growth.", 0], ["And you look at even some of our games like Halo, a significant usage of our cloud.", 0], ["We continue to invest.", 0], ["If you do a car ad for us, how many vehicles were driven off the lot?", 0], ["And we've improved the quality of the ads in News Feed, and that's another driver from the supply side.", 0], ["The third major category is going to be completely new products and platforms.", 0], ["We got the foreign exchange, we got as you said, a lower iPhone mix.", 0], ["And so the Apple Arcade will serve some of that market.", 1], ["We are very focused there on the user experience, but we're also focused even earlier stages on growing our business ecosystem.", 0], ["Of course, we've been talking about the importance of tax reform over the years, because we believe it's really beneficial to the U.S. economy.", 1], ["We got going in a larger way during that quarter, we were pretty much just ramping in the previous quarter.", 0], ["It was always about doing something great for the user and I think if you treat the users and the customers well, then you have a good business over time and so that's how we'd look at that.", 0], ["We remain very bullish on China and don't subscribe to the doom and gloom kind of predictions frankly.", 1], ["When I look at all the acquisitions that we have made over the course of last year and our OpEx guidance for next year shows how disciplined we are in bringing new talent in, be it in R&D, be it in sales and marketing.", 0], ["We also want to make this as automated as possible.", 1], ["It's just expansive.", 1], ["We also have a mid-price point, with the iPhone 6 and the iPhone 6 Plus.", 0], ["I build and application that\u2019s fundamentally distributed that also happens to ransom and compute on Azure Sphere.", 0], ["When it comes to our Commercial Licensing and our servers, it\u2019s the same trend, Heather, which is the big shift that\u2019s happening is our enterprise and datacenter products, being Windows Server, Systems Centers , SQL Server, are more competitive.", 1], ["Overall, I'd say that these changes are doing what we expected that they would do and helping people to connect more and have more meaningful interactions.", 1], ["And things that you didn't mention, the Mac continues to perform very well.", 1], ["And I mentioned during the call in January that we were expecting FX to have a negative impact on a sequential basis of about 100 basis points after the effect of the hedges.", 0], ["And in More Personal Computing, the largest change in that segment is frankly the phone.", 0], ["That's something that we want to make sure we follow more our opportunity in a customer across the board versus trying to micromanage to certain margins in very specific opportunities, because we think that it's the integrated ability for us to deliver value is which I think long term is what the customers expect of Microsoft.", 1], ["And we're seeing a growing engagement with the broader Apple ecosystem during the quarter.", 0], ["We're also focused on job growth, job creation over there.", 1], ["And then finally -- and this is not to be under weighted either -- I think the improved trade dialogue between the countries affects consumer confidence in a positive way.", 0], ["And what they created was a really visual journey using the format that is Instagram, the format that is Facebook and combining the two platforms that they're targeting.", 0], ["So that's a place where we want to continue to focus.", 1], ["Measurement is really key there.", 1], ["And that we rolled out in a few countries as well.", 0], ["But overall, when you look at the outcome during the December quarter, it was very, very strong.", 0], ["But we feel pretty good about the Q1 growth there, even despite some downtime in India.", 1], ["We expect to offset partially these impacts with other cost efficiencies, and again, with a mix shift towards Services.", 1], ["Our online store revenue was up over three times year over year.", 0], ["As I mentioned in the prepared remarks, there was a $640 million adjustment and there was a one-off change.", 0], ["And that enables people to use Facebook in a very direct to response way,", 0], ["So I would really focus on that in that segment", 1], ["And I don\u2019t have anything too specific to add today, we\u2019re trying to take a very consultative approach to how we develop anything around news or any of the things that touch the big social issues and certainly, supporting journalism is up there as one of the really important things that we care about.", 0], ["It was up over 70% year on year.", 0], ["And I mentioned the increase in number of paying accounts that we value in this last 90 days is the largest that we've ever had.", 0], ["That's primarily around technology, technical recruiting, software engineering, and we have a lot of opportunities that we see to invest in the long-term growth of the business.", 0], ["Some of that is in Q2, you'll see that more in the next few quarters.", 0], ["Messaging is really strategically important for the company and the long-term engagement with our users, and the organic feel of the engagement with businesses and consumers is where we will be focused.", 0], ["Amazon vendors, sellers, authors as well as third-party advertisers who want to reach Amazon customers.", 0], ["When I look at the usage, the usage is six times our nearest competitor.", 0], ["And so any of the engagement with ad metrics, whether it's remembering an ad going back to \u2013 people have been measuring that for a long time too, how long a video ad is viewed, are only proxy metrics.", 0], ["Just to give you a sense, on a year-over-year basis, when I look at foreign exchange, that has an impact of almost 300 basis points on our margins.", 0], ["The second component, and the one you'd asked about, is a little bit about that premium services revenue mix.", 1], ["You can connect them with all the business process data that's in Dynamics 365, but not just in Dynamics 365 but all the applications in AppSource because business process will always be a much more fragmented market as opposed to just one market share leader by industry, by vertical, by country.", 0], ["They are very different, you'll see the growth rate in India is very rapid.", 1], ["One is that the format of an ad really has to match the format of the consumer experience.", 0], ["On the negative side, the headwind on gross margins on a year-over-year basis from foreign exchange is about 100 basis points.", 0], ["And so really and truly, it\u2019s sort of everything you look at in China was extremely good.", 1], ["IaaS growth comes because people already have existing code that they want to move over, and then they start extending by writing more PaaS because it's sort of more efficient for them to write new code and new apps in PaaS.", 0], ["Yes, on Board members, there are a lot of great leaders who serve on our Board, who have served on our Board.", 0], ["To share one of my favorite new examples, Subway working with their agency 360i developed video ads and images for Facebook and Instagram to promote the limited time offer Reuben sandwich.", 0], ["It's now used by hundreds of millions of people every month.", 0], ["It makes the jobs in our warehouse that much better.", 0], ["So I think that customers are going to see it in a variety of ways.", 1], ["We\u2019ve also said the manufacturing ramp that we\u2019ve had this year in the December quarter has been the fastest that we\u2019ve ever had.", 0], ["But having said that, if to your specific question of where our differentiation lies, the first one is hybrid.", 1], ["because we're able to continue to move people up the stack, including all the way up to the business process layer, I think you'll continue to see us be confident in our ability to move and create margin and growth.", 0], ["But before I get to streaming, the thing that I'll say is most critical when you think about gaming is having a platform where the gamers are already there.", 0], ["But overall, we are seeing prices increase on mobile in region, so I think that's consistent with the reported trend.", 0], ["So we have some high hopes for what we can achieve with engagement around Xbox Live across the console plus PC.", 0], ["But overall, I do feel confident about where we are.", 1], ["We're guiding slightly higher for the December quarter because on the positive, we're going to have of course better leverage and the mix in the December quarter tends to be better.", 0], ["So beyond the awards that the content is winning and the success we're having with Amazon, particularly our Amazon Originals, we feel that program is working.", 1], ["I mean, on the first question Ross as far as our premium services, just even on the application infrastructure side, for example, in compute, there is increasing need for things like IoT services.", 1], ["And so it\u2019s hard to imagine it being better.", 1], ["We think it's a great opportunity to reach customers who are already in a discovery mindset.", 1], ["On the price reduction question, we've got a long track record of driving costs out of the business and you can certainly see where we've even done that over the last several quarters if you look at the margins in AWS.", 1], ["So we're working on both investing heavily in the business, we're working on fixed and variable productivity in other areas, putting a lot more energy into it.", 1], ["We also announced a Operations Center of Excellence to be opened up in Nashville, which is about -- estimated to be about 5000 jobs.", 0], ["This is a capability that's been multiple decades in the work, but here we are with very competitive total cost of ownership price competitiveness, but with a technology that is in many cases, as Gartner talks about, at the top of the charts when it comes to all of these workloads.", 0], ["So as we look at our metrics and what information we provide each year, we often make some changes.", 1], ["So we are starting to see as I mentioned in earlier calls that the investment will be stepping up in 2019, so started to see that in Q2.", 1], ["We have now the flexibility to deploy this capital.", 1], ["And we're developing it across a wide variety of ad products,", 1], ["It\u2019s an increasingly important use case for us.", 1], ["We have Prime Now", 0], ["And that means that there needs to be a whole range of new production tools and consumption experiences for enabling that.", 1], ["And in that modernizing phase, it's not just being modernized to live only in what is called a cloud, but it will also be modernized to live in the edge of the cloud.", 0], ["But this is intended to be a global improvement in speed tied to our Prime program.", 0], ["Largely, I think that will carry the day in the future as well.", 1], ["And the results have actually been better than we anticipated when we first made the investment.", 0], ["But certainly there's a reasonable amount of behavior in there which is looking for things that, over time, could be monetizable or commercial intent.", 0], ["The initial market that we look at are all the people who have Xboxes, PlayStations, and Wiis, the people who are excited to have an immersive media experience sitting in their living room for a long period of time, and that's a pretty big market.", 0], ["And that number is in the low 30 percentages.", 0], ["From our point of view, autonomy is the mother of all AI projects.", 1], ["Yes, we have had very strong growth the last two years and earlier, obviously on Prime growth of members.", 1], ["In some of the products, I would urge people to look at the Outlook Mobile experience and how really meaningful the experience is for the user and the member.", 0], ["So we're really excited about the creative team we've assembled and the products that they've been able to bring to Prime customers.", 0], ["Most of our capacity and capital and capital leases in AWS is to service existing regions and existing customers demand growth.", 0], ["So we want to continue to do that.", 0], ["So if you look at some of the tools and products I\u2019ve talked about in the last couple of quarters, now you can \u2013 rather than us saying to you, go make a Stories ad you can just send us some pictures, some text, some very easy posts and we will create some Stories ads for you.", 0], ["We rolled out a lot of additional Prime features internationally as well this year, from FREE Same-Day to Prime Now to Prime Music and Prime Video in Japan, to name a few.", 0], ["We've tried to run the company in a way where we have -- we set up the infrastructure, and we set up the business models.", 0], ["And so that's what we're doing from a job growth point of view, and we're very, very proud of that.", 1], ["The first is regulatory as you think about things like GDPR and other impacts and how those will be rolling out globally.", 0], ["We have real openness to all of the frameworks that you can call out to, and that something that we stay very attuned to come out which is we are not trying to fight some old battles.", 0], ["Last year we increased square footage by just under 20%.", 0], ["This was actually a database we just launched last year.", 0], ["Again, Keith, when we look at either the capital expense or the technical architecture, and the general approach we take is about all of our cloud.", 1], ["And that's what we're trying to do with the video tab, to make it so that all the different folks, whether they're pages that you follow or creators that you like, who you want to subscribe to and get the updates to what they're doing, that you have a place that you can go to with more intent to consume that content.", 1], ["The phone itself followed what I would call a normal seasonal kind of pattern.", 1], ["And so there's lots of pluses and minuses on this.", 1], ["So, yeah, we are investing ahead of user growth, given the long lead time in deploying data centers and network capacity.", 1], ["but I'm convinced that making a great product that is high quality, that is the best thing for the customer and we work for the user.", 1], ["When you look at the Instagram Shopping experience, we're seeing some really nice growth.", 1], ["And I'd say the character of the engagement growth is a little bit different by region.", 1], ["And then when it comes to how we\u2019re thinking about expense growth as we look beyond 2019, we\u2019re not providing specific guidance but I\u2019d note that we continue to invest aggressively across the business and there\u2019s no change in our long-term outlook on the need to invest heavily in areas like safety and security, innovation in our core product and infrastructure and the ultimate impact that those will have on our operating margin.", 1], ["We have 400 million people sharing with Instagram Stories, 450 million with WhatsApp Status.", 0], ["And just the addition of Facebook Stories drove 26% more additions to their checkout cart.", 0], ["So, our private cloud, premium cue mix is also growing you see that in our results.", 0], ["That's where we spend most of our cycles in.", 0], ["I do believe that every conversation that we're having with customers is cloud-led.", 1], ["And so I do think that can have an impact in H2.", 1], ["I mean, specifically we've made a lot of initiatives to help improve and invest in the Facebook experience in emerging markets and that has helped drive some of the acceleration in growth.", 1], ["And I would imagine that that will come and contribute to our business through advertising in the way that it has historically.", 1], ["And in fact, they came right where we expected in terms of unearned balances.", 0], ["Last year we changed some of our incentives and worked with FBA merchants to try and have better throughput through our FCs, particularly in Q4.", 0], ["So we're very bullish on our International business.", 1], ["More than 200 million people use Explore in order to see content that's interesting to them and interact with people beyond their friends and the people who are \u2013 who they follow directly.", 0], ["The reality is the way we've done this for years is we've had a panel, a survey of thousands of people who basically we asked what the most meaningful content is that they had seen on the platform or that they've seen off the platform and we design our systems in order to be able to get to that ground truth of what people \u2013 real people are telling us is that high quality experience.", 0], ["The other piece that we hadn't talked about is the reclass that we gave in the past few quarters, specifically around the advertising services that have moved from Contra COGS into other revenue beginning in 2018.", 0], ["And so, that's going to have an impact on impression rate growth.", 0], ["So I think, that's a lot of \u2013 the focus now is really having a good and exciting roadmap of recent revises and more to come ahead, and getting those into customers' hands.", 1], ["The objective of this is really twofold.", 1], ["So a number of things have come out recently.", 1], ["We have deals going with Ford on powering the cars of the future, Lyft, Gogo, a lot of really good customer wins in the quarter.", 0], ["On the specific report on this study, the study was conducted by a former employee with very incomplete data.", 0], ["We\u2019re not hanging numbers out there to be measured on at this point, but we don\u2019t do a lot of big partnerships as you probably know.", 0], ["So beyond that, we don\u2019t do geographic cost breakouts and allocations; it\u2019s not how we run the business.", 1], ["And we've done a lot of interesting things to help sellers and that\u2019s why you see the results that we're seeing today 44% of our units today, as of this quarter, our third party units, that\u2019s up about 400 basis points from last year.", 0], ["And so it\u2019s tough to find something in the numbers not to like.", 1], ["One thing that I would cite there, it's just how we manage ad load and balance some of our internal promotion units and sort of use it as internal house spend and the nature of the changes that we made in that had a more pronounced impact in some of the lower ARPU countries and unlocked more impression growth in those markets.", 0], ["The way the auction system works is going to just be whatever is the ad that is going to necessarily have the best return is going to win in the auction.", 0], ["And quite frankly, primarily I'm excited because for us, as I've always said, GitHub is not a means to some other end.", 0], ["The \u2013 we'll point out in Q2 that we added London and Boston as two new sites in London for AmazonFresh, and that was the first international location.", 0], ["on pricing growth, I think there we feel like we're making good progress in our goal of driving better outcomes in ROI for our advertisers through things like better targeting, better ad units, driving better conversion,", 1], ["As I said, the vast majority or the majority of the growth that we're seeing in sharing is coming from private messaging and story sharing.", 0], ["because they want to get a message out.", 0], ["We're always going be in a back-and-forth with ad blockers on the desktop side.", 0], ["So on the first one, the 10,000 number, that encompasses both employees at Facebook and also employees at partners, so it's not all Facebook employees.", 0], ["Our primary consideration is always around maximizing gross margin dollars, and that is the approach that we take around for example pricing decisions.", 1], ["Clearly, how they've used our service has evolved over the years.", 0], ["So the dividend is a very large component of capital return because we're going to be returning more than $13 billion a year to investors through dividends but we believe that given where we are with the valuation of the stock, we think that we continue to do the buyback primarily.", 1], ["In this line item, is certainly the fees associated with Amazon Prime and also it's where a lot of our subscription services for digital music, digital video, audiobooks, e-books, so there's some moving parts in there.", 0], ["We are now up to 49 since launch in 2006,", 0], ["Things like Prime Music, Prime Now, Amazon Fresh, all expanding globally.", 0], ["We do think that the -- for that accounting impact effectively, we expect that that amount will decrease as we go through the year.", 1], ["It really depends what that would be.", 0], ["The concept of adding a lot of value by having and giving comfort to the customers that as they make a commitment to the Microsoft platform that they can move between a commitment to on-prem to the cloud in a high value way, I do believe is a unique thing that we offer at this time.", 0], ["But we're going to invest as much in just making sure that we build out the community features around that.", 1], ["The customer response from people that have gotten theirs over the weekend have been overwhelmingly positive, and we\u2019re far ahead of where we expected to be from an application point of view.", 0], ["So we're very excited about what we're seeing there.", 1], ["And that is a purely \u2013 it's more transactional than even our rest-of-world business.", 0], ["On video, yeah, right now the strength in our system is definitely through helping people discover content that they hadn't really asked for through News Feed.", 0], ["We have almost 2 million application developers in China that are writing apps for iOS and the App Store, and they're doing unbelievably creative work and innovative work.", 0], ["And customer service spend is something that people generally try to minimize.", 0], ["On the AirPods we're anxious to see the customers for the new AirPods Pro.", 1], ["And we think the combination of the creative working for mobile but also the measurement and targeting we can do is a very powerful offer.", 1], ["Obviously, if you look at what we had launched in the last few quarters and few years, we launched a lot of new products, and now we are launching a lot of new services.", 1], ["We believe that because we can do marketing to people and then measure results across what people do in privacy-protective ways, we have an ability to improve the relevance of marketing which will make it better for consumers and increase returns for marketers.", 0], ["But as I said before, we're approaching a $10 billion run rate in this business.", 0], ["So, for example, when we talk about data and AI close to data, because computation will always go wherever data is.", 0], ["So, things that we're really excited about stores, so a brand can customize and curate a multipage store.", 1], ["So the impression growth acceleration, you've got a couple factors going on there.", 1], ["And so we see that as a huge opportunity.", 1], ["Even on that -- our own demand for it, we don't see any change.", 1], ["And I would say the rapid pace of innovation continues to stretch our lead in that dimension.", 1], ["The other one is that there is no such thing as a canonical business.", 1], ["On a year-over-year basis, it's less relevant for our business.", 0], ["We are concerned at this point about capital efficiency, returning price to customers periodically with price reductions and adding feature sets for them to make the business more valuable.", 1], ["Their video is making a big contribution to time spent growth, but we are not providing a specific stat on time spent growth on an ongoing basis.", 0], ["So that is factored \u2013 I'm not quantifying that today, but it's factored into our Q4 guidance and it will be obviously factored into guidance into 2019.", 1], ["That's gone one example of it.", 0], ["So I do believe that's a continued pace you will see us on, and we feel good about the ROI of the investments we have made especially in those commercial segments.", 1], ["And so that's the proposition for the user.", 1], ["Our growth is really broad-based, and I think it really shows how important the targeting can be.", 1], ["As Tim said, we're starting the rollout of Apple Card in August, and there's two more very important services that we\u2019re going to be adding to our portfolio during the fall.", 0], ["And I think you do see that in general through the year as we continue to keep that formula.", 1], ["And the things that have huge growth rates there are the other products category, which is our wearables business in China and the services business, which you and I just spoke about.", 0], ["This is all the things that are coming in SQL 2016 and we're excited about that.", 1], ["On desktop, people would have more commonly uploaded an album of photos that they took from their digital camera and downloaded onto their computer; whereas on mobile, the more common behavior is to take a single photo or a couple and just post those.", 0], ["So the move to the cloud for our customers and for us is not just about a new way of delivering the same value just as a SaaS service.", 1], ["So while I'm confident in our ability to continue to grow the core margin, I do think for us in particular, it really is a portfolio that we believe that we need to manage appropriately.", 1], ["But ultimately, if you want to get those high-quality judgments today on sensitive content and you want to do it quickly when the stakes are pretty high in terms of taking down content or leaving things up, and we take that extremely seriously, you want people to be looking at that.", 0], ["So to share another example from a holiday, Shutterfly did a Facebook and Instagram, both the brand and direct response holiday campaign on mobile", 0], ["So I have long believed that on 90 day clock on unit sales is a very surface way to view Apple.", 1], ["But as I said, one of the key things is, architecturally, the way we build Azure, the way we build Office 365, the way we build our gaming cloud and the way we build even Dynamics are all pretty much one architecture.", 0], ["Our goal when we work with marketers is to drive their business, and that means their products off the shelves, their services into the hands of people, and so in order to do that well, we need to work on targeting and we need to work on measurement.", 1], ["On the cost side, we talked last time about $800 million estimate of transportation cost to supply one day, the additional one day in Q2.", 0], ["Part of that is on HomePod but part of it is with the Apple Watch and the iPhone and the iPad, and so I think home is important.", 1], ["If you go back a few years and you tried to load a video in News Feed, it might have to buffer for 30 seconds before you watched it, which wasn't a good enough experience for that to be the primary way that people shared.", 0], ["And that's where Azure Stack shows up.", 0], ["Paid subscriptions is another target, is important to us.", 1], ["So you'll see that, we reported subscription services revenue increased 26% when you exclude FX.", 0], ["So look, I mean I think for all the concern about whether there is enough competition, the space today continues to be incredibly competitive.", 1], ["We actually launched a very broad portfolio of devices into the quarter.", 0], ["Advertising remained strong and was consistent growth with Q4.", 1], ["So on the FX adjusted ARPU growth, I would just really point to the overall revenue growth rate, that's what's driving it.", 1], ["One of them is the fact that last year in January we launched China Mobile and we had the subsequent channel sale for China Mobile.", 0], ["So that also helped and probably differential versus the guidance estimate.", 1], ["And they're experiencing frankly the latest innovations that the company has built.", 0], ["When we start to get to this point and the percentage we already have in the cloud, it is really an offset.", 0], ["We're also seeing a lot of strength in brand.", 1], ["So the right ad in News Feed is different than the right ad in an Instagram or a Facebook story is different than the right ad in Watch, which would be video-only.", 0], ["As I said earlier, we will be discussing capital allocation plans when we review our March quarter results.", 1], ["It's growing on all major products and it's growing of course in total.", 1], ["And that's really different from where we were a couple years ago.", 0], ["I mean, one, we're bringing a lot of cool hardware options to customers.", 0], ["You don't have to write any code.", 0], ["It's the fact that we are having the iPhone SE entering the mix, and that obviously is going to have a downward pressure on ASP.", 0], ["We - the basic - the principles behind GDPR in Europe, I think we're very important, and I think having that codified around the world would be a very positive step.", 1], ["But I think I look at this and say, at a 37% growth rate, plus some of the integrations we've seen and the growth in uses and users of things like Outlook Mobile, I believe that we're probably a little bit on the front end of the revenue synergies you'll see in product over time.", 0], ["So again, we feel like if we work on the inputs on this business and continue to grow traffic to the site, we will have a good outcome in the advertising space.", 1], ["So, yeah, so, Justin, over time ad load has been one of the factors driving year-over-year growth.", 1], ["And I think using and trying to continue to earn the customer trust to deliver these world-class workloads.", 1], ["But clearly the iPhone SE has a downward impact on iPhone ASP, of course,", 1], ["And of course, Cortana Analytics; this is the big data side of it.", 0], ["We think about the relevance of our applications across all device sockets.", 1], ["We want to build a service that can help connect everyone around the world, so we want to offer that service for free and have it be affordable, and that's completely aligned with what we're trying to do.", 1], ["And so that's how we priced it.", 1], ["And at the end of the day, there's also policy and you're in a community and we have community standards for how we think people should communicate in order to be safe.", 1], ["So, it was really important to me, and I think to making \u2013 to the long term of what our product stands for it to make sure that News Feed is always about meaningful interaction.", 1], ["Third party units continue to grow, advertising dollars continue to grow very well.", 1], ["As we connect more advertisers with those and bring more data into the system and we can get more of the impressions that are very highly targeted and very relevant, then we'll be rewarded with better pricing as we can expand that out into things like Lookalikes.", 0], ["We did a little better in the quarter than I expected, but inventory levels are a little higher.", 1], ["But in terms of for the market overall, I just think it would be a lot better if we had a very clear set of rules at the federal level on privacy.", 1], ["So we were competing there with things like Facebook camera, but we ultimately thought that we were going to do better work if we were building with Instagram.", 1], ["We are also continuing to invest in areas like community operations and other areas.", 0], ["And then on the brand side itself, we have new reporting - excuse me, where we're again looking to measure the new to the brand shoppers and what lift they're seeing.", 1], ["So we still feel quite good about the opportunity, especially in some of the customers that have already moved to E3.", 1], ["And rather than just relying on our own intuition, although we do rely on that a lot, we will try to put it out in the market and get feedback and then roll it out from there.", 0], ["The reactive model of waiting for people in the community to flag them guarantees that by the time that we get to look at an issue someone has already seen that content, which is not the state that we want to be in.", 0], ["On the political spending, our business is broad-based,", 1], ["On the other part of your question, we continue to work on the network around the world, but I can't respond to any of the rumors and speculation.", 1], ["The guidance is $2.5 billion to $3 billion, and that's up from $1.8 billion last year.", 0], ["You can tell by that we\u2019re a big believer in China.", 1], ["In the US, I think it was less video and more core feed engagement.", 0], ["It's really as we talked about transactional weakness in Productivity and Business Process.", 1], ["And now the third class of content, which I think is going to be important and increasingly important over time is the one that you basically want to essentially trade the content for money, and that is one where you need the rev share to unlock that.", 1], ["So we're happy with the engagement that customers have.", 1], ["It did pull forward a bit of revenue into Q2.", 0], ["Yes, I think you're seeing the expansion of our bookstores.", 1], ["We've also added Lockers, and much more to come.", 0], ["because when they're more targeted, they have higher returns for marketers and they're more enjoyable or relevant for people.", 0], ["And so I'm not sure there's anything quote-unquote new, Karl, I would say, other than that bit of mix between OEM Pro, a little bit pulled into Q2 versus Q3.", 1], ["At the end of 2014, we had 15,000 bots, so we've doubled that amount and they were in 10 warehouses.", 0], ["The infrastructure team has done an outstanding job in driving good efficiencies through things like the Open Compute Project, which allows us to leverage an open-source strategy to lower our costs on server and other expensive hardware.", 0], ["That's a part of what we announced with the Apple Card earlier in the call and so we are cognizant that there are lots of users out there that want sort of a recurring payment like that and the receipt of new products on some sort of standard kind of basis and we are committed to make that easier to do than perhaps it is today.", 0], ["Well, Souq's pioneered e-commerce in the Middle East, and they're creating great shipping experience for their customers and they're multiple countries, and they're doing a great job.", 0], ["I mean there are a couple of different things here.", 1], ["And so all of those are important", 1], ["I'm not -- we haven\u2019t even completed the first inning yet.", 1], ["And then, not stopping there, but going to other devices, for example mobile.", 0], ["So when you see some of the KPIs and some of the strength you saw in quarter, that's the foundation of Xbox.", 0], ["It's like 100% year-over-year.", 0], ["Next, I think across every service the momentum we\u2019ve seen in Q4 and in particular, I would say, I think not many people focus on it, but even things like Windows E5, advanced threat protection services, those types of deployments really will add to momentum in our offerings.", 1], ["While pricing is certainly a factor we don't believe it's always the primary factor;", 1], ["Nothing that's happened has changed our fundamental view that China will be Apple's largest market at some point in the future.", 0], ["There are big elections, not just the U.S. midterms, but the major elections upcoming in Mexico, in Brazil, in India, and Pakistan, and a number of other countries around the world.", 0], ["Yeah, what I can tell you is that yes, the unit growth has been reaccelerated in the last two quarters and actually Amazon Fulfilled unit growth is growing at a higher clip.", 1], ["so it is a fundamental part of our business model.", 1], ["But we continue to make changes to improve and to optimize around driving meaningful social interactions as Mark talked about.", 0], ["On a macro basis, I think the trade tension is less and that clearly looks positive right now with the comments that we've been reading in the press.", 1], ["And we'd look at it and take things down that didn't belong.", 0], ["So that\u2019s a little bit more on our guidance, but again we are really looking forward to Q4.", 1], ["That is really showing a lot of good traction for us, but we're also seeing traction in analytics and voice.", 0], ["So you know there has been some reduction in the threshold for some lower ASP items that we\u2019ve been doing separately over the last six months that have spurred some sales in lower ASP items, but we think that is again the right decision for customers, especially over the long term.", 1], ["In terms of what drove the improvement in the pricing, it's strong demand, so that's playing through in the face of a little bit slower supply growth.", 1], ["And we think with the cash flow that we're generating, we have a strong financial position with which to fund that.", 1], ["So it's -- that increase in one-day shipping and all the associated cost of additional transportation and getting capacity in place.", 1], ["There are also carriers that have similar kind of plans, where they also replace or change out the iPhone every year.", 0], ["Today, on the first-party sales, we collect on our own products in all 45 states that have a state-imposed sales tax.", 1], ["And the third is Facebook \u2013 our own product changes.", 1], ["But obviously, if you have rising prices, it's going to make that work against an upstream trend, so we need to continue to work hard to deliver more value for advertisers in the face of that.", 0], ["It allows us and locks for a same day and next-day deliveries.", 0], ["Just a reminder, there is a little bit of impact from the revenue recognition.", 1], ["And again, so we're going to continue feed the Prime platform as we talked about, continue to add selection in a lot of categories.", 1], ["We do much more in-house technology development than we used to do a few years ago, which we think is a great investment for us to make.", 0], ["Then they extended those ads on Audience Network to maximize reach, and they used the Facebook Pixels to measure the incremental sales, and got to a 9.7 times return on ad sales.", 0], ["We like the response that we've seen so far.", 1], ["And in other words, we tried to stay as close as we could to a local price point that we knew was effective for that particular market.", 1], ["I would also say, it's not all about iPhone in China, the services area grew double digit.", 1], ["Prime Now is a little bit easier to build up from scratch, I would say.", 1], ["And volume -- one-day volume was accelerating throughout the quarter.", 0], ["But what our goals there are to be helpful to customers and enhance their shopping and viewing experiences, mostly with targeted recommendations.", 1], ["In fact, you can think of it as a price cut for anybody who cares about being very, very smart about cloud consumption", 0], ["But I would tell you that we\u2019re thrilled with the reception of iPhone X.", 1], ["So what you're seeing in our results right now are very strong growth for Facebook and very strong growth for Instagram.", 1], ["It is a new product for us, and with any kind of new product, you wind up taking some time to fully ramp.", 1], ["So we just see that there is a lot of upside there.", 1], ["So they are very different situations.", 1], ["But its $800 -- excuse me $800 million lower depreciation expense in the quarter and it will be consistent.", 0], ["Now over any short-term period, the majority of what we have seen is really either a budget constraint, a macroeconomic change, or people, to the question you've laid out, maybe in the midst of making their cloud transition plan, and maybe that has elongated the sales cycle to an extent.", 0], ["We are not rolling out any monetization products on WhatsApp right now, but we did start that process at F8 on Messenger.", 0], ["yes, obviously this is a one-off item that affected the December quarter.", 1], ["But on the cost side, yes it\u2019s going to be the route density and other things will improve over time and get our cost structure down, but for now, there is certainly some start-up paying in adding new capacity.", 1], ["And I think that that's just going to continue growing and I'm really looking forward to getting the first stats on WhatsApp VoIP as well soon.", 1], ["If I zoom out of the 90-day clock and look at it, we've got some exciting things coming on iPad.", 1], ["And so what's really most important in winning budgets is our relative performance versus other opportunities presented to marketers.", 0], ["And I think about the combination of both Dynamics 365 as well as what we're doing on the LinkedIn side.", 1], ["So that's countries like India and Mexico and Brazil and Indonesia, which will make up a large part of the community on WhatsApp.", 0], ["And I wouldn't expect anything here to launch soon, but this is definitely something that we're thinking about and that I think will improve the user experience.", 1], ["It is a lower RPL than our traditional non-Pro OEM licenses, but I do believe it drove meaningful ecosystem health and as well drove good competitive dynamics in the channel.", 0], ["I would say that we're very - it's widespread and more Prime members have adopted the Whole Foods benefit than almost any other benefit we've offered them, and they're saving, as a result, hundreds of millions of dollars.", 1], ["And that shows how you can use our ad products to go all the way from awareness, measuring through to a sale and show how important our ads can be to commerce on our platform.", 0], ["So for Watch, the big thing that we're trying to do is help create new ways that people can connect, right?", 1], ["The reason for the acceleration also here is multiple factors.", 1], ["So we definitely see that path of -- where they're adopting the layers of Azure.", 1], ["People like it.", 0], ["So that's where we're most excited about there.", 1], ["So interactions were down.", 0], ["We think our growth has been very broad-based,", 1], ["And so it's difficult sometimes to get a read over exactly what's happening in the market, but given the industry numbers that we've seen, it's clear that we picked up global market share and picked up market share in several countries, not only iPhone, but iPad as well.", 1], ["So we continue to believe consumables, groceries are a key part of the offer to customers and we are playing with very different models to see which works and for what needs.", 1], ["We were up 71% year over year.", 0], ["We have in fact good traction in the business segment.", 0], ["so -- and there is the impact that we would see during the course of the year.", 1], ["so there is an opportunity for us to continue to grow ad load on Instagram probably beyond \u2013 in a longer timeframe than there is on Facebook because of that disparity in terms of where they are today.", 1], ["The other dynamics that you've mentioned are still there.", 1], ["Are we doing them in the right way?", 0], ["On a year-over-year basis, we are also about flat.", 0], ["And so when I look at all of these things, usage going up, app developers still innovating, we've got some exciting things in the pipeline, I feel really, really good about it.", 1], ["So we're thrilled with the results as to what's driving it it's the totality that's driving it.", 1], ["When I think about hybrid computing at least in the fullness of time, it's more the future of distributed computing, where there is a cloud, there is an edge.", 0], ["And certainly AI is going to be a big part of that both on the vision side and the voice side.", 0], ["But there's no reason that we shouldn't be able to match you up with any of the millions of pieces of content that you might be interested in that gets shared on Facebook every day, except for the fact that we don't have the AI technology to know what those are about and if they match your interest today.", 0], ["Then of course, I would say by far the largest impact on margins for the quarter is the loss of leverage,", 1], ["In terms of the actual content, first, we think gaming is going to be the most obvious market.", 1], ["I've seen consumer solutions.", 0], ["And so you're left with less than 100 basis points deterioration on a year-over-year basis where again, we have the reality of new cost structures into our products.", 1], ["On India, I think it's important to look not only at per capita income, which may be what you're looking at, but sort of look at the number of people that are or will move into the middle class sort of over the next decade.", 1], ["So to me that\u2019s what we\u2019re building to.", 1], ["And as far as the used cases, right now it\u2019s actually pretty diversified.", 1], ["And although we have a strong partner network here, we will always be able to leverage our strength and our knowledge about where shipments are going, both within our network and to final customers that will create opportunities for us there as we increase or better the customer experience as well.", 0], ["We want to make sure that we buy back the stock at the right time.", 0], ["And then, I guess, we're very focused on serving brands as well.", 1], ["That was particularly strong in Q4, and I think you'll see that more as we move into 2020.", 1], ["And so we will continue to push that differentiation because I think that view architecturally and the delivery of it is what makes us pretty unique.", 0], ["Where there's significant room left \u2013 and we're not just standing still in terms of adding value for new segments, so those are all in play.", 1], ["An importantly for our business, is connect the dots between online marketing and business outcomes.", 0], ["Starting with fulfillment costs, so in the prior two years, 2016, and 2017, we had grown our square footage tied to fulfilment and shipping by greater than 30%.", 0], ["And so we believe, particularly now that the 4G infrastructure is going in the country and is continuing to be expanded, that there is a huge opportunity for Apple there.", 1], ["Instagram has been strong, especially with Feed Ranking and Stories.", 0], ["But most people who come to News Feed and who come to Facebook today in general are trying figure out \u2013 they're trying to see what's going on with their friends, see what's happening in the world.", 1], ["And iPhone X has a lot of great new technologies in there that are leading the industry, and it is a fabulous product and we can't wait for people to start getting it in their hands.", 1], ["So clearly on that front, we've got a lot of projects that are going to need ongoing funding going into 2017, so that we've got good visibility on.", 0], ["We have everything from sort of the lifecycle management of how these models get created and deployed, and so on.", 0], ["I think 360 videos in another way are another example of this kind of interactive video experience, and my guess will be that we will see more different kinds of video media as time goes on.", 1], ["because that's what is super important for us as we compete in this marketplace and more importantly double down on areas of differentiation we have.", 0], ["In general it hasn\u2019t changed a ton in terms of that final component about fixed versus I think variable base, it's still been in the I think low [40%] [ph] as a range for us in terms of what depreciation versus what's more variable.", 1], ["Even though we saw some high-end SKUs this quarter do well, I would expect in Q4 to have the normal breadth of those SKUs and revert back to looking much more like the commercial PC market itself.", 0], ["So there are these events that are obviously big like the U.S. elections, the World Cup, Super Bowl, but there are enough of these all around the world that no one event is that big for our business.", 0], ["And we expect we've got a lot of great opportunities to continue to innovate on that front.", 0], ["And so we would not \u2013 in fact, we will be very aggressive in taking margin in one place, which is different as we see a path to margin in a different spot.", 1], ["So they were creating a direct response campaign to get people to take specific actions like requesting a quote and finding a specific dealer.", 0], ["And so when I think about the material gross margin improvement we saw in Azure, it continues the path we've actually been on where we've been discussing,", 1], ["I do not view \u2013 just for avoidance of doubt here, I don't view that that issue has anything to do with the trade-related discussions between the countries.", 1], ["So that I think will continue,", 1], ["I'm very excited about what we're seeing and very optimistic about the future.", 1], ["I talked about in some detail the security value proposition.", 0], ["It\u2019s also the case that Facebook had remarkably strong growth as well.", 0], ["I think my conclusion is that the guidance that we're providing for the first quarter that 39% to 40% it actually an incredible level of guidance given the foreign exchange headwinds that we're dealing with.", 1], ["And so, we think the opportunities are big.", 1], ["We think something like gaming, hundreds of millions of people are going to want to use it, and that's great.", 1], ["Just on Instagram versus Facebook and ad load, clearly the biggest driver of our business is core Facebook just in terms of sheer size and even sheer contribution to growth.", 1], ["So we plan on continuing to build the benefits of the Prime program from music to video, to two-day shipping, to same-day shipping, to Prime Now.", 0], ["So in terms of experimenting with different content, I think we'll try a number of different things here.", 1], ["So that helps them manage our inventory better and also respond to customer inquires.", 0], ["Some of our clients approached us where they have a social budget or Facebook budget and some of that moves to Instagram and some people, it\u2019s incremental spend.", 0], ["And when we hit the higher end of our range or just above our range on \u2013 with FX included, we generally see really good drop through on the incremental sales, given the fixed costs we have in fulfillment centers and data centers and quite frankly, people.", 0], ["We've built a very strong partner and customer ecosystem.", 0], ["I think if you think about where the growth remains, it really is in increasing the relevance of the ads, because the ads I think are getting better in terms of reaching the right people at the right time.", 1], ["That\u2019s going to be a big area of investment for us.", 1], ["We'll continue doing that in more places, but the U.S. was certainly one of the biggest places that we were focused on launching it.", 1], ["Again, we feel we're very encouraged by the customer response to our offerings in Q4.", 1], ["And so it's sort of the sum of all of that.", 1], ["But I would reiterate the biggest driver of the transactional performance this quarter was really the value prop people saw.", 1], ["So overall, we will build a differentiated Windows because our application experiences for our cloud end points will be native in windows and at the same time, we will make sure that our services are available on all end points driving more usage, more subscription growth.", 1], ["It was - for Q1, the impact of a change was a decrease of about $130 million to cost of sales due to the capitalization change.", 0], ["You know that in general, we decrease our inventory during the March quarter and the June quarter.", 1], ["And part of it is that there's of course a bigger opportunity when people have their phones with them all the time, but I think that there are plenty of other worlds that we could be living in where we wouldn't have necessarily executed on that opportunity.", 0], ["So when you think about a sequential increase of 15 million subscriptions from the December quarter to the March quarter, it really gives you a sense for the momentum that we have on our content stores.", 0], ["It was our 51st price reduction since we launched AWS years ago.", 0], ["We look at it on two fronts: just offsetting the dilution from the share issuances that we have and then secondarily, to be opportunistic.", 0], ["So that piece of depreciation doesn't change per se.", 0], ["If you use our targeting tools well, you can actually start out with demand fulfillment.", 1], ["So with targeting, a more relevant ad is just better, it's better experience for consumers because they see something they like in their News Feed and it has a higher return for marketers.", 0], ["That\u2019s not unusual prior to a launch cycle and that will clearly impact our revenue in the quarter.", 0], ["We did see headcount growth come down modestly in Q4 from Q3 to 42%.", 0], ["As I said, the $560 million, if you were to back that out and look at the sort of pre-existing advertised \u2013 or other revenue rather that was included in that line item, we'd be growing about 72%.", 1], ["We're excited to have so many first party devices in Q2.", 1], ["It feels \u2013 when you're using a messaging service, that everything there is very intimate and private so it feels like a more natural space to be interacting with a business in a private way for doing transactions.", 0], ["And finally, focused investment and operating expense and that obviously creates leverage.", 1], ["I'm very proud of how we\u2019re doing.", 1], ["So we don't think of hybrid as some stopgap as a move to the cloud.", 1], ["And I think we're seeing impressive growth in all of those areas.", 1], ["And then we are showing that on that portion of installed base driven services business, there is a part that is related to -- where we recognize revenue in terms of the full transaction value.", 0], ["and so we continue to focus significantly in China.", 1], ["The lower prices and services that we offer, and as I said, we'll work on things that will make it easier and easier for customers to work with us with their hybrid data centers or transfer their volume to us.", 0], ["In the quarter, in Q3 we added 18 fulfillment centers and we've added five more in October.", 0], ["But we started building things like Marketplace, that is a tab that and even if the majority of people on Facebook don't use it, it's still hundreds of millions of people are using it.", 0], ["So on elections, we run a very large and diversified business.", 1], ["But I think in terms of it converging on feed from any pricing perspective, that's a journey that's going to take years, not quarters.", 1], ["So it's not like I just build and Azure Sphere application.", 0], ["First, on EGM, I'll just say the growth is across a lot of different products, none to exactly call out here, and we think that a lot of it is, of course, driven by the growth of Prime itself.", 1], ["But, more broadly, to answer your question about growth as we go forward, the way I see it is, we have the strongest hardware portfolio ever, we've got new products on the way, the pipeline is full of great new stuff both on the product and the services side.", 1], ["Partners are adding new routes.", 0], ["One is around visual content and the other is about language.", 0], ["The foreign exchange headwinds as I was explaining to Shannon, they will be on a sequential basis a headwind of more than 100 basis points.", 0], ["Now, the mix to Stories is a big opportunity for us.", 1], ["As I go through different countries as I've been traveling lately, and looking at some things in the market, other things that are coming, the very cool thing is they're all over the place.", 1], ["So while we remain focused on efficiency and the utilization of the hardware and software is also important to continue to see premium upsell, premium workload usage, so the customers are getting the most out of their deployments and usage of the Azure platform.", 1], ["The Azure benefits are things both for Windows Server as well as for SQL which I think are very, very unique to us and you see that.", 1], ["The Prime program attracts more people to Amazon, and they buy more including FBA products and conversely more FBA products in our warehouses helps our in-stock of things that people want to buy, Prime eligible in-stock, and that helps reinforce the Prime program.", 0], ["As you can tell from the numbers, we've significantly improved since the beginning of the year.", 1], ["Now, there are some who spend a large portion of their budget on Facebook, but that's actually very unusual.", 0], ["In the medium to long-run however, we believe that we\u2019re really well-positioned to take share from other platforms out there.", 1], ["But in terms of our investments in that core product value, it is actually happening on all those three.", 1], ["And this takes us to over 200 more countries.", 0], ["So we're very pleased with those results and happy with the fundamentals of the business from that perspective.", 1], ["In terms of learnings, one of the most important learnings we have is that video formats are different on Facebook", 1], ["Overall, we did see Europe had a reacceleration of growth in Q2 versus Q1.", 0], ["And now couple that with the call we've made to provide an upgrade offer.", 0], ["So impacts in Japan more directly come to the P&L as opposed to on our under C&B balances and that's why this quarter, you saw some weakness in commercial licensing, but when adjusted for FX, our unearned balance and bookings actually felt quite good from our commercial perspective.", 1], ["I happened to meet this woman, Angel [Moore], who's running their marketing this year.", 0], ["And I think in many ways Keith what we have done is a really a natural extension of some of the investments we\u2019ve made over the past 18 months to add technical resources to be more present in customer accounts, to really drive their transformation towards success outcomes.", 1], ["It has Office 365, it has EMS, and it has its Windows 10 commercial component.", 0], ["So over the long-term, that is a situation that we will need to try to figure out a way forward on.", 1], ["We continue to see a middle class that is booming there.", 0], ["And it won't be very transparent to you, and that's how it is.", 0], ["But those impressions are coming in at lower prices than we see in feed.", 0], ["It has some additional capital intensity, but it has good return on invested capital from our standpoint.", 0], ["We now, in fact, one of the big areas of investment this year was the core sell capacity in our field so that ISVs can be successful on our platform.", 1], ["We'll continue to invest in fulfillment space to handle higher and higher paid unit volumes and shipped unit volumes.", 0], ["How do we find those ads that are going to be more engaging, they're going to get more clicks, that they're going to get more views, that are going to get more installs.", 0], ["The usage is defined as measured in web browsing is like 71% of total tablets, as I think Luca covered earlier.", 0], ["We think as engagement \u2013 as we pick up engagement with the devices, it helps the engagement with Amazon as a whole.", 0], ["We're seeing good progress on both of them, and interestingly, insurance companies have been pretty active both on Facebook and Instagram, so we're optimistic about that.", 0], ["And one other point I think I made in my remarks earlier is gaming also is a growth area for Azure.", 0], ["And we like having more abilities, more products, more apps to work with so that we can drive those business results.", 1], ["as people spend more time with video, and more time is going to video, that is going to have a limiting factor to how much time they spend in News Feed.", 0], ["So overall I think the most strategic objective for us is to get developer momentum with Windows 10 and that's where we're focusing on with a lot of different actions.", 1], ["We are testing a buy button in the new shop section on pages, but again, that buy button is letting people buy directly from their advertisers, not from us.", 0], ["We think when we expand geographically, existing customers will run more of their workloads on AWS.", 1], ["While the 30-second ad does perform well in News Feed, we also see people understanding that some of the formats are different.", 0], ["They've cared deeply about it since the first conversations I've had with Kevin.", 0], ["When you think about all the -- particularly all the commodity-driven economies, Brazil and Russia and emerging markets, but also Canada, Australia in developed markets, clearly the economy is significantly weaker than a year ago.", 0], ["So I think you're going to see it impacting across the spectrum of our lines,", 1], ["I'm always a little vary to put too much into the unit growth number.", 1], ["My expectations are very high on it.", 1], ["And I would use the word we are deeply partnering with them.", 1], ["We have other businesses like the Apple Music streaming service, which is growing very fast because we just started it a couple of years ago, so we are getting a lot of new subscribers there.", 1], ["Lot of the sensors today are in fact rendezvousing some of that data straight to the cloud.", 0], ["So what you've seen is a push of revenue and income from Q4 into Q1, 2 and 3 that we've mentioned on each call.", 0], ["That's what we've done with the program until now, and the expansion of the program that we've announced today goes in the same direction.", 0], ["The OEM Pro number as I talked about was impacted by a number of factors, but what we\u2019ve seen is over the past three or four quarters, a pretty consistent sort of high single-digit performance once you take out various impacts and chip supply and inventory levels on the tariffs.", 1], ["And I would say, I start with renewals, not just that we renew the contract but how many new products, new services did we add to that contract?", 0], ["So now we're going to shift that that methodology a little bit to instead of just being focused on the content, now to be more focused on trying to measure and have people tell us what is creating the most meaningful interaction in their lives.", 1], ["It was up 60% on a worldwide basis over the prior year, and it was also a record day for our Amazon devices, as well as sellers and customers alike.", 0], ["I've seen enterprise solutions.", 0], ["And for video search \u2013 search is a big priority and a thing that we're working on across all of the different verticals, not just video but also all the posts on Facebook, all of the content that people are selling in Marketplace, the groups that people are joining and sharing and all the news content.", 1], ["And then rest-of-world, we saw a rebound in Latin America, especially Brazil, so we're seeing some particular strength there.", 0], ["We're obviously expecting faster growth in the back half \u2013 back three quarters of the year, so that's \u2013 video's going to be a component in driving that.", 1], ["As part of the holiday offering, we sold a number of record breaking number of Alexa devices as well and I think just in that shipping vein, really pleased with the continued engagement from Prime members, we had the most ever number of Prime members sign up this quarter than any quarter we've had.", 0], ["So rather than go to every advertiser both through our sales force and through our online tools where we sell and say we have a new format, you need to create the new format, you need to figure out the placement being able to just take what they are already doing like Feed ads, converted into Stories and place at anywhere helps us move people into these formats.", 0], ["It's a database that's on-premise that can be tiered with the cloud.", 0], ["I think it will take longer for the GDP to rival it, but that's not critical for us to have a great success there.", 1], ["Generically, each of the examples was quite different.", 1], ["It's -- given the 30% plus growth in square footage last year that we've built, that's 1 major headwind from Q4 to Q1.", 0], ["The enterprise business is clearly picking up and more and more companies are either contracting for or writing apps themselves.", 1], ["We've got a lot of infrastructure investment that we're making across data centers, servers, network.", 0], ["I think we put out a release, I think, earlier this quarter talking about 120,000 operations folks to bring into our fulfillment centers this year.", 0], ["We will continue to and we value all our partner relationships as we develop our own capability particularly in intra-network.", 0], ["I think we've made some strong changes on Facebook in terms of meaningful social interactions, and I think the history of our ability to develop and iterate on consumer products shows that we can help people as they evolve, share the things they want to share, and have a very meaningful and important experience in feed as they're sharing.", 1], ["We are pleased with our Q4 results.", 1], ["There are around, I think, more than 200 million, almost 250 million people who have either an Xbox, a PlayStation or a Wii, and we think that that audience is going to the type of people who are going to be very excited about the type of experiences initially that you can have with virtual reality.", 0], ["We will of course continue to do that where it makes sense and where opportunity presents itself.", 1], ["So I think you should think about it that way that certainly think its big opportunity and again, one of the reasons I want to give you an update, last quarter on Prime growth and you can see that that\u2019s going very well.", 1], ["And so, again, we're juggling the investment in the places where we feel like we have long-term opportunities where we need to invest with making sure we're getting continuously better in all our other processes at the same time.", 1], ["We also make a lot of things that they couldn't do in other platforms available on us.", 1], ["We're also very focused on helping SMBs have a presence, especially a mobile presence.", 1], ["So we have a vested interest in the success of our sellers.", 1], ["As you know, foreign exchange has been a very significant headwind over the last three-plus years, but we've been able to manage that.", 0], ["But it was hard to do in the previous generation because of the server infrastructure and what I would say sophistication of IT required.", 0], ["Sure well, I mean we do a lot of stuff around commerce.", 1], ["So I don't really think it\u2019s about a percentage, but it\u2019s about each of them continuing to make progress.", 1], ["We're looking at a wide range of content, and we're really working towards a revenue share model with creators.", 1], ["But a real key factor in all of this generally is management bandwidth as well.", 0], ["The other things I mentioned, price reductions early on, selling their products on Amazon.com and also installing Amazon Lockers.", 0], ["We're also trying to incentivize getting inventory into the warehouse quicker.", 1], ["And so we're very confident that this quarter is going to be great.", 1], ["We're uniquely positioned to do this given our retail business.", 1], ["We\u2019re continuing to invest heavily in the business.", 1], ["And, launching the Hong Kong region gets us to a footprint of 19 cities in China.", 0], ["If you're a customer that your last purchase was a 6s or 6 or in some cases even a 7, you may have paid $199 for \u2013 and now in an unbundled world it's obviously much more than that.", 0], ["And we now have a business model with Game Pass as well as all the supporting mechanisms for Game Pass like game streaming, we\u2019ve a social network in Xbox Live that is the best in the business.", 0], ["I think what we think is that depending on how people react to the controls and the ad settings, there could be some limitations to data usage.", 0], ["In certain geographies, the way that we win is to get switchers.", 0], ["A few years ago, we probably would\u2019ve rolled this out and tried to deal with issues as they came up with, but now part of our new approach of trying to be more proactive about social issues is trying to build in from the ground up, getting this right upfront.", 0], ["Mozart in the Jungle just won two Golden Globe Awards.", 0], ["We like the convenience factor.", 1], ["And so we've made a number of product and performance investments there with Facebook like being a good example of that.", 0], ["It's not the mission of the company.", 0], ["but I would just say that this is primarily driven by News Feed pricing, and then you have right-hand-column pricing as well, so you have impressions on Facebook News Feed, Instagram feed, as well as Facebook right-hand column.", 1], ["We also have built now into windows server backup and disaster recovery, same thing with SQL server.", 0], ["There are going to be things that our systems miss, no matter how well-tuned we are.", 0], ["So on safety, I think given the volume of content that people share, if you want to have any hope of doing it in real time, the only hope is building AI systems that can either identify things and handle them proactively or at the very least, flag them for a lot of people who work for us who can then look at them rather than waiting for people in our community to flag those after they've already seen them.", 1], ["But at this point, we're still working on that and kind of getting it up to speed.", 0], ["When that happens, it does create demand for new devices and modern devices that improved security.", 0], ["I would confirm that television has intense interest with me and many other people here.", 0], ["But what we've actually also found is that through some of our AI research, we can look at the responses that businesses give to common questions and can confidently provide the right reply a lot of the time.", 0], ["So that compensation expense base that we're bringing into 2019 is really factoring into the overall growth guidance for the total expense guide, so that's a big factor there.", 0], ["And if you think about when we say Windows-as-a-service it\u2019s actually a pretty profound construct which involves us being able to not only think about what ships with OEMs, but how do we on a continuous basis, if it\u2019s a consumer we have things now in the store, we have subscriptions, we have gaming and then when it comes to the enterprise there\u2019s management, security, servicing which is all unique value.", 0], ["Even if you were to set aside the $5 billion FTC accrual.", 0], ["And there\u2019s definitely some pricing action we were able to take", 1], ["The early trends are good, but I think this is really going to be an area that is proportional to the amount of quality content that is in the system, and the business model is really going to be the thing that enables that.", 0], ["I would just say that, our growth is coming from customers that span from start-ups to enterprise customers to government agencies, and they start small and then they continue to build and shift their businesses to us, and many of them have gone \u2013 a large number have gone all-in on AWS, and have had a chance to lower their cost structures as a result.", 1], ["And that was a big moment for us, I think, in the auto vertical.", 0], ["We did pledge to invest $1 billion to help digitize traders and those micro and small businesses across India.", 0], ["The third one is operational efficiency.", 0], ["So we will continue to build out our DSP and flex and chip with Amazon programs.", 1], ["So I think what you're seeing in terms of year over year and what does it mean for next year, this next quarter, it will be a sequential increase, but again, it is a bit lumpy.", 1], ["So I remain optimistic that we'll be able to do work there, but we're just working across a lot of different fronts here because this is a huge space.", 1], ["In addition, growth in infrastructure spend is our large increase in CapEx over the last several years, flows through the income statement as another driver of our expense growth as well.", 0], ["And if you want to accelerate development, obviously, we need to get our products in the market at a good pace.", 0], ["They're inextricably linked.", 1], ["We like the adoption of Prime internationally.", 0], ["We see that being more balanced over time and being more global as we move forward.", 1], ["And the big thing that unlocked a lot of growth in Watch is we basically were able to move a bunch of the video-watching behavior to a different tab, where people intentionally go to the tab", 1], ["And we're very optimistic that this too shall pass and that the market and particularly us will grow again.", 1], ["And we've got some iPhones that are really great for that market.", 0], ["And our response has been that we're going to focus on improving the quality and relevance and that's both going to perform better for the people using our services and businesses who are buying ads.", 1], ["Story is different country-by-country obviously.", 1], ["The sort of the economic question which I know there's a bit lot of attention on, frankly, if I were to shut off my web and shut off the TV and just look how many customers are coming in our stores regardless to whether they're buying, how many people are coming online, and in addition looking at our sales trend, I wouldn't know if there was any economic issue at all in China.", 0], ["And I will also say that we are \u2013 not all of our investments are on the consumer side.", 0], ["That's a real competitive advantage.", 0], ["We saw some additional transition costs in our warehouses.", 0], ["We think we have a lot to learn.", 0], ["And setting up a mobile app, getting people to find and download a mobile app, can be even more expensive.", 0], ["Our Amazon Fulfilled units, the amount going through our fulfillment centers and which essentially includes our first-party retail and our FBA sales and it grew nearly 40% over 2016.", 0], ["So there are a few types of systems here that we're working on around understanding content.", 0], ["We're very happy with the results.", 1], ["And the stock ownership is very concentrated in a few people who put what appears to be a smaller portion of their wealth in the market than we might.", 0], ["To share one example, an online store in Brazil called Loja Nama, they sell decorative items and accessories.", 0], ["And we're prioritizing the different types of content that we think could create the most harm.", 0], ["I think it's a good experience inside Facebook, but we also have had examples over time, like Messenger for example, where we started it in Facebook and decided that in order to fulfill their potential, it needed to be its own experience over time.", 0], ["Same thing with AI, not an old workload.", 0], ["It's not due to any change in our aspiration or belief in the growth curve of revenue, and I wanted to be clear on that.", 1], ["Which is one, our search performance continues to be very good.", 1], ["It is happening for a variety of reasons.", 1], ["I see the smartphone itself, led by iPhone, becoming even more instrumental and important to people's lives.", 0], ["We remain committed to complying with all laws and regulations, we will, but we're evaluating the situation.", 1], ["We've got other areas that we're experimenting with like suggested videos, which are going to be very much like those ads in a feed of suggested videos, which are also an opportunity for us.", 0], ["You see content from that page.", 0], ["That's the commitment we are seeing", 1], ["I don't like litigation and view it as a last resort.", 0], ["In fact if you look at our innovation, we're perhaps unique in the large screen innovation that we're doing with Surface Hub, Hollow Lands as well as some of the two-in-one form factors.", 0], ["I think we're able to do that with Prime Now and get to the UK faster.", 1], ["That will in fact continue.", 1], ["We have seen the watch as a really key product category for us since before we launched it.", 1], ["But I think the answer is that both of those things are happening and it's key that we do both, not just one.", 1], ["First of all on the -- there were two items we discussed last quarter with the Japan consumption tax raising from 8% to 10% effective October 1.", 1], ["And we\u2019re doing all we can to make it very easy to adopt the format.", 1], ["And then there are differences in the feature sets where WhatsApp is extremely utilitarian and focused on texting and now voice calling, whereas Messenger is very focused on expression and the whole set of things that fit into the tools around the Messenger platform that we rolled out at F8, communicating with businesses now, richer tools to communicate in different ways.", 0], ["And I think it's rare that you get someone who's as talented as the folks who are leading this.", 0], ["On the first part of your question about original content, we have done some original content.", 1], ["It's showing the success we're having with customers.", 1], ["And that is where in macro pressure on occasion shows itself first, and then some of that non-annuity lumpiness.", 0], ["And if you have good people leading those teams, then I think you can deliver that over time.", 1], ["We'll also provide \u2013 and giving them targeted recommendations, so making it helpful for customers rather than intrusive.", 0], ["And we have to work really closely with regulators to make sure they understand our business practices, understand how we contribute to economic growth in their countries, and understand the steps we take and continue to take to protect privacy.", 1], ["And it also plays into the fact that we're seeing good growth in places like India, Mexico, Brazil, and others.", 0], ["So machine learning is \u2013 the improvement there are by far the largest technological trends that we're seeing in the industry and across the business.", 1], ["But at the same time, we still will focus on those deals moving to the cloud over time.", 1], ["because if you think about the $1 billion plus beat we had for the unearned, it was due to the fact that we had very good mix shift Office 365 in terms of billings in the quarter, almost very little of that gets recognized in quarter.", 0], ["In this quarter, we reduced channel inventory by 1.2 million units.", 0], ["Also the Japan consumption tax was raised from 8% to 10% on October 1, and what we saw was a pre-buy a bit in Q3 at the end of the quarter, and based on our history with the last time the consumption tax went up many years ago, we\u2019ve expected a slight negative impact from that tax in Q4 in Japan.", 0], ["And where the actual mix occurs among those lines, I think we will just have to wait and see, but that\u2019s why I tend to not focus at that layer it\u2019s like can you get every service better, can you make material improvement, and then of course can you get usage and consumption going that leads to premium service usage, and of course over time you\u2019d expect a higher mix of premium versus core.", 0], ["But the philosophy behind it is that when you only have a like button, if you share a sad piece of content or something that makes you angry, people may not have the tool to react to it.", 0], ["And frankly, inherent in the conversation around moving to the cloud with the aggressive targets we've given, that is implied, to your point.", 1], ["We're making substantial product and engineering investments.", 0], ["As you probably heard us say before, we\u2019ve opened several stores in China recently.", 0], ["The fact that our Services business is growing, it should be a positive because our Services margins tend to be accretive to company margins.", 0], ["One of the things that I feel very good about is the risk we took to introduce the two-in-one category and I feel now that we see that in fact inspire even a lot of activity in our own OEM ecosystem and we see many good designs coming", 1], ["The video ad spend is not all incremental of course", 1], ["We're competing with other forms of media.", 0], ["And Stories on Facebook, clearly, Stories is a big success on Instagram.", 1], ["We've been expanding FREE Same-Day Shipping and One-Day options.", 0], ["This year, we reduced channel inventory for iPhone slightly more than last year and that is true in total and it's true for Greater China as well.", 1], ["So for example, that means being able to read and understand news articles or posts that people make or messages that a person might send to a business so we can help that business auto-reply to them and get information back to the person really quickly, or understand the content so we can better understand what might be interesting to a person and show it in News Feed.", 0], ["because the entire idea was to be able to have a full conversation around the data as stated with customers.", 0], ["So we didn't get any benefit in our P&L, in our margins, during the March quarter, and we're not getting any benefit during the June quarter either.", 1], ["It's very ROI-focused, and we continue to invest and roll out products that help people.", 1], ["And increasingly, that's why we've been talking a bit about the form of these contracts changing, larger commitments being made that are -- that land in bookings but not in unearned, right?", 0], ["So, I think video has been pretty important.", 1], ["We had \u2013 what I attribute it to is continued strength in our \u2013 some of our most profitable areas.", 1], ["So video is effectively winning in the auction if it's higher priced.", 0], ["And if you remember, we quoted the same number a quarter ago and we talked about 150 million.", 0], ["And if you look at China, they\u2019re almost 70%.", 0], ["So, I think we\u2019re seeing good growth on Instagram.", 1], ["because we can understand how actively engaged they are on the platform.", 0], ["It also takes into account the ongoing investments we're making in the longer-term innovation work, which I don't think will necessarily have any meaningful revenue relative to the size of the business in those time frames.", 0], ["Eighty-three percent of the overall inventory on the platform is native, and over 50% of our publishers are only using native ads.", 0], ["Then come the fall, you will see the devices from all the OEMs going into the holiday quarter.", 0], ["because of the year ago quarter also had catch up in it from Q1.", 0], ["Again, the theme here is going to be banking some of the investments from prior years and looking to gain greater control.", 1], ["But we now have management data protection and identity systems that cross all devices in the enterprise, including the Internet of Things, and that makes it pretty exciting.", 0], ["In order to do that, you obviously need apps that are written to specific jobs, not just apps that are general productivity apps like work processors and spreadsheets and presentation tools et cetera.", 0], ["But on a sequential basis, we're probably at the trough of that, which is nice.", 1], ["It's worth noting this isn't a feed product, so there are some more unknowns here.", 0], ["And that's where, if you will, our fair share will come from by competing hard where we have to but also mostly thinking about differentiation.", 0], ["So there actually is some Azure Benefit revenue ultimately that shows \"is on-prem.\"", 1], ["There were people that were upgrading from X to Y.", 0], ["It's really early, but nice pick up and nice buzz there.", 1], ["The local competition was obviously there this quarter and has been there for many quarters before.", 0], ["That's actually a pretty \u2013 a very cool set of features that allow both regulators and businesses to have, for example, audit ability and control over their movement in the cloud.", 0], ["On the AWS side, I think the 2016 to 2015 comparison probably stands on its own and 2014 falls by the wayside, so I would encourage you to look at recent trends.", 0], ["Teams really expand multiple categories, so I wouldn't think of adjusted productivity or even just collab or meetings but as an interface.", 1], ["The other big influence is the same trends are happening in international with respect to FBA growth and the fact that our Amazon fulfill network, or the units we shipped, are growing at a much faster clip than our paid unit growth.", 1], ["And so it's huge, and we felt it was important to spell that out.", 1], ["Last week there was this case where someone was using Facebook Live to broadcast \u2013 or was thinking about suicide.", 0], ["So we're including that in our guidance on operating income and have not separately guided to stock-based comp and other income expense this quarter.", 1], ["And those three factors are the ones that I outlined in my commentary: number one, the substantial investment that Mark highlighted that we're making to just improve the security on our platform; two, the video content investments we're making for Watch tab; and then three, additional investments we're making in the long term initiatives like AR/VR, AI, and connectivity.", 0], ["There are some elements that we understand quite well and we tend to manage well over the course of the cycle.", 1], ["Now over a $20 billion run rate", 0], ["There is still a need for those on-premise products.", 0], ["First, building a consumer use case; then, second, making it so that people can organically interact with businesses; and then third, on top of that, once there's a large volume of people interacting with businesses.", 0], ["So India is a unique country where there are 1.25 billion people, more than 1 billion of them are not on the Internet.", 0], ["That's direct response, brands, SMBs, and developers.", 0], ["Again, this can fluctuate quarter-to-quarter, but we're happy with the current trend and you see it in the AWS margins.", 1], ["because, as we mentioned in our prepared remarks, our installed base of customers and devices is growing, and is growing very significantly", 0], ["They reached people over 25 years old in the U.S., UK, France and Germany, and targeted people who are interested in LEGO toys and shopping, and they found a 3.4 times higher return on ad spend for click-to-Messenger ads versus those that just linked to the LEGO website.", 0], ["And I think the way people largely think about this is this is another way of using the Facebook ad system, including our targeting and measurement capabilities, to create ads that are great creative that can reach people.", 0], ["That shows up in our online stores classification.", 0], ["I think that we have some confidence in that timeframe, which takes us through the end of about 2019, to get our systems to the level that we generally think that they should be at, where we're building AI systems that can flag content that might be problematic to a much larger security and review team that can manage the larger volume of stuff that our tools are flagging to them.", 1], ["And of course a key part of that was iPhone.", 0], ["Some of them get clear value by being separate, like Messenger, for example, where we can make sure that everyone has their push notifications turned on, which is extremely important for a messaging app.", 1], ["So when you take those factors into account, I think that explains the sequential decline that we see this year.", 1], ["We've in the past months significantly expanded our one-day eligible selection and also expanded the number of zip codes eligible for one-day shipping.", 0], ["People consume News Feed stories.", 0], ["The guidance we gave at the time of the announcement in terms of EPS dilution on \u2013 excluding the impact of purchase accounting, being minimally dilutive, 1% plus or minus, stands, including the goal to achieve synergies where they make sense as we continue to focus on growing the core business and keeping it incredibly healthy and realizing the revenue synergies that we know exist across the businesses.", 0], ["They\u2019ve had great success on our site, the -- more than half of our units sold are from third party sellers.", 0], ["When you think about closing the loop, you then have to add in the measurement piece", 1], ["There is a wide variety of products included in that category: smartphones, tablets, cameras, TVs, what have you.", 0], ["For the most part, when we build products, we build them to work for all verticals, and you see us do that.", 0], ["We announced last year that we have over 50 million small business pages active on a monthly basis.", 0], ["They're consistent, the dynamic mix in terms of emerging markets and developed as well as enterprise sizing is not an ASP problem in Pro.", 0], ["There's a lot of interest out there and the number of categories that I'm seeing from gaming to shopping, to I was in China a few weeks ago and saw AR in an art sense, in an art exhibit.", 0], ["We do think there's opportunities to improve the value of the Stories format that will translate into better price for Stories.", 1], ["In terms of transactions, one of the big things that we see happening in messaging long term is that it's a great channel for people to interact with a business one on one and either do transactions in a private space or get support, or for businesses to reach out with very personally tailored messages and have an ongoing engagement with a person.", 0], ["And we purchase that glass and essentially export it to the world with iPhones and iPads.", 0], ["What's nice is that the same targeting, the same measurement systems really work.", 1], ["We think that the performance will continue to improve.", 1], ["And in this context I think we see a mix.", 1], ["In terms of why we're withholding royalties, you can't pay something when there's a dispute about the amount.", 0], ["So it doesn't necessarily mean you're paying a premium for a given product and so if we've got a good DPA ad that might win in the auction for a given user.", 1], ["Your first question on international, yes, all three segments had very strong growth in the quarter.", 1], ["I think we launched a couple more Prime Now cities just today, so that brings us up to about 17 across the globe.", 0], ["If you step back for a second and you look at our implied guidance for the December quarter, we got an expense to revenue ratio of 9%.", 0], ["There is no obvious impact from the last quarter in the Greater China numbers", 0], ["And frankly over time and watching, I think both the creativity and the pace of innovation we\u2019ve seen coming out of our engineering teams particularly in Azure and Office 365 and our CRM team online, I actually even have more confidence in our ability to attach and grow that gross profit over time.", 1], ["We launched Echo and Alexa in France.", 0], ["In terms of ROI on the platform, the ROI is really determined by the ability of advertisers to put the right ad in front of the right person in the right format.", 1], ["Once we've built this installed base up to 18 million users on the consumer side, that recurring rate does in fact offset the deferral from new, and so it is an important inflection point for us this quarter.", 1], ["but we have significant actions going on to really deepen that.", 0], ["And that will be a constant battle between, again, growth, geographic expansion in AWS and also efficiencies to limit how much we actually need.", 1], ["I think it tends to not be as big a factor, sequentially quarter-over-quarter is the gradual growth in it.", 1], ["One is that we just started getting a lot of feedback from people in the community that they wanted Facebook to be more about connecting with people, which is really the core of what it's always been, less so about viral videos or news content and just passive consumption.", 0], ["They are only about 65% accurate in demographic targeting, they don't work on mobile because they are cookie based, they don't work on multiple devices, they don't go off-line to on-line and they overemphasize the last click and reach.", 0], ["And we feel very, very good about the engagement increases in a pretty unique value proposition we have in Mixer.", 1], ["And clearly that's increasing engagement as well and that obviously then translates into revenue growth of those business solutions we mentioned.", 0], ["So instead of focusing on ads first, what we did was we built pages, and we made that free, that way as many businesses as possible could get into the network.", 0], ["And given our starting point, even though we've been growing a lot, there is a lot of headroom there in our mind, and so we are working very hard to realize that opportunity.", 1], ["But the combination of building AI and hiring what is going to be tens of thousands of people to work on these problems, I think will see us make very meaningful progress going forward.", 1], ["And so the inherent volatility that you are talking about really is about changes in-quarter that we see and the impact of that.", 1], ["So that was pretty much in line with what we were anticipating", 0], ["However, one of the key reasons for that is the infrastructure hasn't been there.", 0], ["We rolled out Prime last summer if you'll remember, and we recently launched Prime Video there.", 0], ["We\u2019ve now developed two new iPhones over the year.", 0], ["We can move people down that marketing funnel from demand generation to demand fulfillment.", 1], ["So, to me staying with that and staying focused on our unique contribution is perhaps are both on opportunity and our challenge and we will obviously index on the opportunity side.", 1], ["This quarter in Q1 we were up 60 basis points year-over-year in total at the upper end of that forecast implied would be up 80 basis points, so again, that\u2019s the range and we think its appropriate range for Q2.", 0], ["The analogy that I always use is the first smartphones came out in 2003, right, the BlackBerry and Palm Treo, and it took 10 years to get to 1 billion units.", 0], ["where if you go back to 2006 and 2007, there were a lot of people who were kind of encouraging us to just put banner ads and kind of inorganic content into the experience, and what we decided was that over the long term, the ads and monetization would perform better if there was an organic interaction between people using the product and businesses.", 0], ["That\u2019s happening not just because of frontline workers, but also continued expansion and continued movement in every segment where we see the opportunity to increase the installed base.", 0], ["So we're happy with the launch in the UK and the team did a great job to get that launch in a timely manner.", 1], ["So we think it's a core competency that we have and we need to have, and we'll continue to invest in that.", 1], ["And we see nice attach as far as EAs to the cloud as well and that's definitely a big driver of our growth.", 1], ["And even when we make it super easy for people to get their ads into the right format, from the smallest mom-and-pop to the largest brands, people want to understand the creative of their ad and it needs to be in a format they feel comfortable.", 0], ["And I mean really looking at that, the goal is to make customers' lives easier and make it more convenient and a lot of that is you're seeing that in the homes and to some extent on the Go.", 1], ["So there's a lot of moving parts, usually our headwinds to our unit growth number, but again happy with the 800 basis point quarter-over-quarter jump in that.", 1], ["And I could not be more excited about AR and what we're seeing with ARKit in the early going.", 1], ["We expect those two factors to be offset by positive leverage, because you've seen the revenue guidance that we provided and the mix to services that you've actually mentioned during your question.", 1], ["So where there's issues, they'll be corrected.", 0], ["And so we have a lot of value that is across the board cloud services, whether it's Xbox Live, Windows Update, Office 365, Dynamics 365, and of course all of the Azure services.", 0], ["So, yes, revenue synergies are showing up", 1], ["I think when you think about what bucket of spend that is in, which is a question we get, it really is both marketing spend and any other spend companies have where they're reaching their customers, of which if you think about marketing spend and customer service spend, marketing spend is way bigger,", 1], ["And I think we'll start to see some applications there as well.", 1], ["Also, the Mac business did extremely well.", 0], ["So as you can tell, we've been pretty transparent with our AWS revenue and income numbers we've been breaking it out for 2015 and we're very happy with the growth in absolute dollar terms and we're seeing a pick up from customers and their usage, their increased pace of enterprise migrations, increased adoption of our services especially our machine learning services.", 1], ["Across the whole family, I would say it's very positive.", 1], ["So the Watch behaviors that we're building is one where people come intentionally to watch specific videos and to interact with the community around that.", 0], ["Emerging markets ex-China were up 18% year on year.", 0], ["But we've also had great cost performance this year in three specific areas I'll call out.", 1], ["Instagram remains small relative to Facebook and it's going to really take time to have significant impact on our growth.", 0], ["We will continue to build our business there and continue to do a great job for both customers and sellers.", 1], ["That's kind of the criteria we're using, making sure we're building things that customers love that can have attractive financial returns over time, and can persist for a long time.", 0], ["But as we do arrangements to get the ecosystem going, some of that could get picked up in sales and marketing, and then we have content as well that's getting picked up in R&D for the efforts we're making with Oculus.", 0], ["And you can imagine that as the tools for any of this content get better, people taking photos, newspapers, writing news articles, advertisers, putting out ads for content that they want to sell, the better that content gets, the more people are excited to see it and then that informs the ranking in what the community qualitatively tells us that they want to see from us over time as well.", 0], ["You're going to invest more of your engineering resources in building out the content and experience on the Messenger thread.", 0], ["And I think you see a lot of that in this quarter's P&L and in our capital efficiency, both in the warehouse world and also in infrastructure.", 0], ["Yes, we came in well above our range that we had given of $300 million to $1 billion.", 1], ["But sitting here today, for Q2, I wouldn't expect the year-over-year performance to be dramatically different than the year-over-year performance in Q1.", 1], ["Well, I think AI is going to be great for the experience that people have in our community.", 1], ["We continue to look for smart, innovative people who want to build on behalf of customers and \u2013 but this particular quarter is colored a bit by the operations growth.", 0], ["I think when you think about the long-term monetization opportunities, it's really going to depend upon the time people spend.", 0], ["Switching outside of China was up year-on-year, and so we're happy with that.", 1], ["The things that I would point to are things like AI as well as our investments in AR and VR.", 0], ["So when you think about Instagram, we're seeing great growth there with the community.", 1], ["What we basically ask people we don't want to assess by ourselves which sources are trustworthy.", 0], ["That's actually pretty specific targeting that lets them hit exactly the right audience and amplify what they were doing on TV, and I think that's the kind of thing that only we can do at scale, and it shows how important targeting is.", 1], ["So that\u2019s promising, but we continue to see Europe growing just a bit slower than the rest of the regions.", 1], ["So, we feel confident there.", 1], ["28% growth in Q3, FX neutral, was helped quite a bit by Prime Day and kind of the strengthening of Prime Day in a number of locales.", 0], ["And just kind of having something that's appealing universally to people wanting to stay connected with their friends, that's an important piece of it.", 0], ["We have a sponsored product, it's off to a great start, and it's a very effective way for advertisers to reach those especially interested customers.", 0], ["And before working with us, they really only invested in traditional media.", 0], ["Just recently we became in supply demand balance on the 6 and 6 Plus in January.", 0], ["I mean, many, many, many years.", 1], ["We would expect it to occur more gradually over time than sort of all at once type of thing.", 1], ["On the capital leases, which is a good proxy for the spend to support the AWS business, that's up 49% year-over-year on the trailing 12 months.", 0], ["So, I would expect that we\u2019ll see different countries make progress on different timeframes.", 1], ["On the DAU impact any Advertiser response our business is strong.", 1], ["Three times or more, more than that across WhatsApp and Messenger.", 0], ["Both the traditional business process applications themselves have become much more modular and a much more modern and we\u2019ve a very disruptive business model as well that goes with it.", 0], ["The deceleration you're seeing of 700 basis points is more a function of the Prime Day that we had in Q3, if you remember.", 1], ["We've already reached sellers in 25 cities and we're really helping them expand their business not only within their home region, but throughout the whole country.", 0], ["And in developing countries, where a lot of people are still getting on the Internet, it continues to grow at a fast rate.", 0], ["Over the long-term, if Payments becomes a really important part of what we do, we can \u2013 we\u2019ll have some options and choices about how we choose to \u2013 how to have the revenue flow to us in the future.", 1], ["We\u2019ve got a very open dialog with the rating agencies.", 0], ["Even though the store layout was delayed, we've learned a lot about the buying experience.", 0], ["We expect to see continued ramp of the one-day selection availability for the next few quarters both in North America and international.", 1], ["These are tools that our developers and system integrators and solution partners will use in order to be able to customize applications around Azure.", 0], ["It's automatically built in.", 0], ["But we are very focused on making sure that we have the right product that's competitive in the marketplace and then our business model that's long-term aligned with the interest of our customers, and we'll stay focused on it.", 1], ["We see that the number of paying accounts is growing a lot.", 1], ["So, it was mix shift as well as I think strikes in the hybrid benefits as a value across the customers, those two would have otherwise I\u2019d actually call out as drivers for the quarter.", 1], ["And that's a pretty healthy growth rate, and that's something that by design both in terms of the technical architecture as well as the traction we have in the marketplace and our sales efforts and so on are playing out well, and we are very bullish about that going forward.", 0], ["So these are all things that make it so the video-watching experience isn't just about passive consumption but about interaction, and that's going to, I think, help really drive engagement as well.", 1], ["You are right, in terms of Office commercial 365 the primary driver is still installed base, both the transition as well as new.", 0], ["They're not as pervasive as they are in the U.S. but it seems like we\u2019re on the front end of fairly major trends in the industry.", 0], ["So our model over the long-term really has been to innovate and to use our scale and position to be able to pass savings along to customers.", 1], ["It's a challenging market in the short-term.", 1], ["I think the company has a really highly differentiated customer experience, and they've done a great job getting to the size and scale that they're at today.", 0], ["Actually, this is really all the gaming Xbox One console launch.", 1], ["In terms of the supply side, obviously News Feed is incredibly valuable", 1], ["The typical use case is running a lag between a fulfillment center and a sort center.", 1], ["Some of the numbers that Amy talked about is growth in the seats.", 0], ["I would say in the short run, it's also expanding and increasing our speed on all of our orders quite frankly.", 1], ["They can X out the ads.", 1], ["Even a limited test the feedback was very positive.", 0], ["We do continue to see these ad targeting related headwinds, which have been playing out slowly, but we think are still in front of us.", 0], ["We think the answer to all of this is to remember that what really matters is going all the way through from the ad itself to the sale, whether that sale is online or offline.", 1], ["We\u2019ve had this with every product we\u2019ve ever done.", 0], ["We're working with a small set of partners to start, and we'll roll it out beyond that as that keeps on going.", 1], ["These are all different pieces of the ad tech but what they're all working on is taking the relevance and the ability to do people-based marketing and make that available to work on Facebook but also off Facebook.", 0], ["We have a lot of hard work to do to get to all of our ad campaigns having that kind of measurement.", 0], ["So there is significant I would say combination of culture change as well as how we work change that drives more innovation for the same dollar.", 1], ["Over the long term, there surely will be in -- a connection between the work that we're doing in the Facebook app and Oculus, or there will be opportunities for that.", 1], ["The guiding principle for us on this is that we want to give the most voice to the most people.", 1], ["And so we're very pleased with the kind of continued adoption and usage growth we've seen and obviously the benefits of AWS around their ability \u2013 customers ability to be nimble as a primary factor there.", 1], ["I would say in general where we're going to be, rev sharing with creators, that's going to be picked up in cost of revenue.", 1], ["We do expect to see some additional inventory draw down in front of a launch.", 1], ["So on the year-over-year basis, I think it pops a little bit, Mark, when on really a sequential basis I actually don't think, to me, it looks out of sorts, especially with the type of demand we're seeing, not just for Azure, but across all of the cloud components.", 0], ["So the bigger element of that really is around us creating new products and services that are cheaper and less expensive than the old ones.", 1], ["But at the same time, you've got to remember, at Microsoft, we do have a lot of different business that we do with the customers, which may include some things like refreshes of their on-premise infrastructure all the way to some very high-ambition digital transformation projects.", 0], ["On subscription revenue, yes, we -- you remember we raised the price of Prime in the U.S. last June from $99 to $119.", 0], ["And the other thing is that our systems for measuring the effectiveness of ads, which help advertisers get all the way through to their ROI, which help them bid in our system, also work.", 0], ["Those are the killer transformation opportunities that we are seeing.", 1], ["We do have the WhatsApp Business app, which is helping businesses connect with consumers, and that's growing well but that monetization opportunity is not available.", 0], ["And that's important because over the long run our quality today is our revenue tomorrow.", 0], ["And we just mentioned on the cost side, it's been a very good year from gaining greater efficiencies in our infrastructure costs.", 1], ["In terms of upgraders, we saw the largest absolute number of upgraders ever in any six-month period in the first half of this year, first half of this fiscal year to be precise.", 0], ["We'll see growth in different parts at different times.", 1], ["The way that this is improving the work that we're doing around security and integrity is also very fundamental.", 1], ["But really remarkable to see how resilient iPhone sales have been, because we have increased, in spite of these price increases, we've increased sales and we've increased market share in all our geographies around the world, without exception.", 1], ["And so we want to continue to have this balance, make the right investments and remain efficient.", 1], ["What product you use really depends upon what you're trying to do.", 1], ["I think that there's a big opportunity to build out that platform and a lot more functionality around that.", 1], ["The number of things that you can do are growing significantly.", 1], ["And we've got the Wearables area that is doing extremely well.", 1], ["I think when you have that happen over time, it builds confidence in the product and it builds confidence in end-user confidence in itself.", 1], ["You saw other things like our business B2B business just opened up in the UK.", 0], ["In the bottom line, you'll need to remember that Q3 is a typically a lower operating income quarter as we prepare for Q4, the holiday peak.", 0], ["That might still be a conservative estimate, and we're continuing to work on that.", 1], ["So stepping back, I would say, what is driving the growth, we believe, again, it's the value that we create for AWS customers.", 1], ["And so the growth is pretty broad-based to support.", 0], ["As consumer video has grown in News Feed, it's given us that opportunity for video ads because the format of the ads fits the format of what consumers are doing.", 1], ["Our goal really is to kick-start an ecosystem of partner content in the video tab, for example, and our model is really oriented towards revenue share with creators.", 1], ["They're very valuable for sellers to make it easy for the seller to get their goods to the customer.", 0], ["We don't have enough senior female engineers.", 0], ["Another dynamic of Q4 was that it was a huge FBA quarter, nearly 50% of our third party units were FBA and our third party units were also up to 47% of our paid units, up 400 basis points year-over-year.", 0], ["We \u2013 at the time of guidance, we were concerned a bit about the high \u2013 relatively high inventory we had at year-end in space utilization.", 0], ["So we're taking a significant step.", 1], ["It's growing steadily and doing well, and we hope to have more updates on that soon.", 1], ["What it does for us is it gives us a base for future growth.", 0], ["So think about there having -- because your -- we do expect chip supply to remain constrained.", 1], ["What I think about even just my own day-to-day usage of Office, even in the last year, it\u2019s gone through a drastic amount of change.", 1], ["They then opened a factory in Romania and moved back to Romania, where they're now employing 100 people and they're shipping across Sweden, Romania, Germany, and Austria.", 0], ["For some people it's about fitness; for some people, it's about health; for some other people, it's about communication; and for some people, it's all of the above.", 0], ["And so I don't think of it as margin shifts across the segments, and that's why we think of all of this as one digital estate at least from a customer-end perspective.", 1], ["And that we think if we do a great job with the product that people will be willing to spend more because they get so much more out of it.", 1], ["Literally, the customer sat for the iPad Pro is 99%.", 0], ["They've done a great job building a highly differentiated customer experience, just customer-centric like we are.", 0], ["We also \u2013 more broadly on the iPhone, the iPhone was the top three selling phones in China.", 0], ["The great news about it is, it's not a single geo or a single service.", 0], ["That's another use case that's high growth for us.", 0], ["So for purposes of 2016 modeling, I would use the Q1 rate.", 1], ["We want to continue to invest in the business in all the areas where we think is critical for us to invest.", 1], ["And while we're very pleased with the vast majority of people opting into the third-party data use, some did not.", 1], ["So I see that stretching on both sides, which is to small business on one end and then these premium SKUs on the other end.", 1], ["That has again been caught up for in prior quarters, but again not a huge factor on the growth rate for revenue, but just another item to consider.", 1], ["And we couldn't be more excited to get underway.", 1], ["It appears to us or in what we've been told is that we took the leadership position in North America during the quarter and we have the leadership position in Japan, and so in some of the markets that we've been in for a long period of time.", 0], ["On your second question of Azure GM we have continued to see strong improvement in the core gross margin as Azure team has done a nice job on a number of fronts, continue to make progress on both software innovation but also importantly hardware innovation and working with our supply-chain to continue to have and see benefits on that side, and also is increasing use of premium services also contributed to Azure gross margin improvement.", 1], ["And even the edge is not just one single edge.", 0], ["It's an area where we're very excited about.", 1], ["There's promotional content that businesses and celebrities and folks will produce.", 0], ["We believe that's working.", 1], ["We've been working on our network for about 20 years to be able to enable some of the really fast delivery with things like Prime Now.", 1], ["We are a trusted partner.", 1], ["But in a lot of the most important countries for this like that \u2013 like I mentioned in the United States and Japan, we are not the leading private communication service today.", 0], ["So I think we're seeing this in a number of places, whether it's location through Pok\u00e9mon or some of the face filter activity.", 0], ["And so, I tend to probably as you might imagine be more confident than I was in coming out of Q4 with a strong Q1 in that overall hybrid demand and Azure signal plus good Azure bookings when I talked about my confidence in high teens growth in that KPI for the rest of the year.", 1], ["We've also worked on brand awareness optimization, mobile polling to measure campaign effectiveness, and we're working client by client.", 0], ["So if anything, the mix shift on growth towards Stories is certainly in the near term a headwind on revenue growth.", 1], ["I think a lot of it is that we're getting better and better at ranking and showing people the content they want.", 1], ["We are adding a few more in the near future in California, Washington DC, and Austin.", 0], ["That's our strategy for growing the business.", 0], ["And basically what \u2013 the way to think about this is that, even if a lot of your friends come from the same kind of background or have the same political or religious beliefs, if you know a couple of hundred people, there's a good chance that even maybe a small percent, maybe 5% or 10% or 15% of them will have different viewpoints, which means that their perspectives are now going to be shown in your News Feed.", 0], ["But we're learning a lot.", 1], ["The customer feedback to date has really been incredible and we're very excited for the future of the service.", 1], ["because some regions have obviously lower prices.", 0], ["The second thing, as you pointed out in your question, is we have a business model advantage.", 1], ["because they enjoy very large demand in the initial weeks of sales, which are compounded by the holiday season in Q1.", 0], ["We've also launched video benefits most recently in Japan, but we have them in the U.K. and Germany.", 0], ["In terms of the balance between privacy and AI, this is a long conversation, but at a high level, I think it's a false trade-off that people would like you to believe that you have to give up privacy in order to have AI do something for you.", 1], ["But you can see that China rebounded.", 1], ["This year \u2013 we're not going to release this number every quarter, but we've obviously grown again.", 0], ["Prime Now is a huge benefit that didn't even exist two years ago.", 0], ["We're still focused on continuing to have that sequential improvement, and especially as some of the things Satya talked about, which is the addition of premium services, the pace of innovation especially on the premium end.", 1], ["And second is we don't think of Azure in isolation.", 0], ["And so I think the demographics are great.", 1], ["So not a large impact on Q3 guidance, but certainly an exciting investment for our customer base.", 1], ["We are much more focused on free cash flow dollars and operating profit dollars.", 0], ["In terms of replacement cycles, as I'd mentioned I think on a previous call, some replacement cycles are lengthening.", 1], ["It's much more modular, it's modern, it's extensible with this power platform that gives us the ability to do things for customers and serve them in ways that is very differentiated.", 0], ["And so there is a lot of investment and a lot of efforts going on that front.", 0], ["We don't think that that's what we're uniquely here to do.", 0], ["I think the entire Senior Leadership Team views it as an opportunity to think about where we can best innovate and drive the highest value of every dollar that we invest and I think we've made great progress as a team and I think you're seeing that both in the long-term guidance and in frankly our day-to-day execution through the quarter.", 1], ["And the autonomous systems can be used in a variety of ways and a vehicle is only one.", 0], ["We continue to say that, but we are very encouraged with what we've created with customers and sellers alike in India over the last few years.", 1], ["We are selling them as fast as we can make them, the demand has been strong and the content is starting to pick up both on the AAA, really high quality side and some of the stuff that I think is quite good.", 0], ["Because it tends to be project-based as well and many of the investments we've made in sales capacity, and the reason we did some of the sales transformation, was to invest a lot more in that project-led motion, which is a bit disconnected actually from the EA renewal cycle, and you've really seen that.", 0], ["But 2015 is a big investment year for us across the board.", 1], ["And so there's actually several vectors there that are working well for us.", 1], ["So it increased 51% year-over-year in Q2 versus a head count increase of 42%.", 0], ["It's still in early days.", 1], ["So you're definitely right that there's a certain class of content which is only going to come on to Facebook if there's a good way to compensate the content owners for that.", 0], ["We're very excited about GitHub closing.", 1], ["We're investing in India obviously, and have seen good traction there.", 1], ["And there, we're relying on continuing to improve targeting.", 1], ["And so it took us a little while to adjust all the way back through the supply chain and to bring iPhone 7 Plus into balance, which occurred early this past quarter.", 0], ["I think seat growth will come more from material increases internationally as well as with some of the regulated segments of the market finally moving to the cloud.", 0], ["We now have 42 availability zones in 16 geographic regions and we will continue to grow that business globally.", 0], ["The core of our business is really connecting people with what they care about.", 0], ["And I think it'll be interesting to see how that plays out over the next horizon.", 1], ["On one side, we expect -- on the positive side, we expect leverage from higher revenue.", 1], ["So the long run view should be that you can give us maybe simple pictures, maybe simple videos, maybe an ad you\u2019ve produced, and we can do the placement for you,", 1], ["What used to be large accounts for us, for example, are not by PC count anymore, and that's a pretty fundamental change.", 0], ["And so we are optimistic over time.", 1], ["I couldn't be happier with the rate and face of the developer community, how faster developing these things.", 1], ["So, again, that will have a modest impact on growth.", 1], ["We expect to close it in the second half of the year, so I'll limit my comments right now.", 1], ["We participated only in a portion of it, whereas with Azure, we can participate as the total open platform.", 0], ["India bounced back.", 0], ["We\u2019re just very excited about all the \u2013 everything in this area and it\u2019s one of the biggest areas that we\u2019re focused on for the next several years.", 1], ["They used reach and frequency and Carousel and video ad targeting.", 0], ["I would encourage you just to move it into Q4 as you think about what to expect.", 0], ["We believe it's the toughest compare", 1], ["And then you're going to also just have overall impact on G&A as well for things like policy-related expenses and the like.", 0], ["As I mentioned, I think to Toni, we have higher cost structures every time we launch new products.", 0], ["Video I think will be huge.", 1], ["And we look forward to working with them in the future.", 1], ["We are constantly working from an auction perspective.", 0], ["A lot of people don't have a factory, so they can't build a TV.", 0], ["So you see that we make significant investments in R&D.", 0], ["There's a lot of data, sociological data outside, that shows that a physical group membership in the world off the Internet has been declining for decades.", 0], ["I\u2019m sorry I skipped over that gross margin question earlier, but yeah, gross margins were well up 180 basis points year-over-year, were not up as much as prior quarters.", 0], ["Dynamics 365 and its architecture at least in my eyes is a thing of beauty because it's completely been rewritten for the new database technology, whether it is on the data base side or on the data warehouse side, again uses a whole bunch of micro services and functions so that you can do AI close to data.", 0], ["So, I think, we're really excited to get that technology out there for Brazilians.", 1], ["And so while we of course get some strength from our largest geos, and I would say they were probably the largest contributors if it was actually quite broad there is not only one place for me to say that we just saw it here, and then the final component that I would say was better than we anticipated and the way you\u2019d see that cash, again versus the unearned guidance and the beat that we had there with that final piece around our security value prop, ATP - Windows annuity growth was very good.", 1], ["And we do a tremendous amount of marketing for developers, including the new Today Editorial that we just started in the past few months, personal recommendations, search tools, and so on and so forth.", 1], ["So we believe this is a good opportunity we're going to continue to invest.", 1], ["But again, it's all areas that we will continue to invest in, some of which I just actually went through the laundry list.", 1], ["I see that the first time buyer rates are very high.", 0], ["We've got those offerings in more than 30 countries now and the catalog there's tens of millions of songs, and a lot of rich playlists, personalized stations, those kinds of things.", 0], ["We even did previously deals with Oracle.", 0], ["But regardless, it will be huge.", 1], ["In terms of penetration, we work with almost all the large marketers almost everywhere in the world.", 0], ["Last year, there was a lot of first half investment.", 0], ["and we've rolled out again in a few markets, and those tests have gone well.", 1], ["It's much better for us, for example, to add capabilities.", 0], ["And I don't think that's going to change anytime soon.", 1], ["So, those are the opportunities we want to be able to take advantage of by doing some good work both in the public cloud, as well as with our server products.", 1], ["So over 2 million SMBs have posted a video, both paid and organic, in the last month.", 0], ["For September, we're also guiding about flat sequentially at the midpoint.", 1], ["But you also saw - and what really does matter, especially in Azure is usage of growth, really consumption growth having customers use deploy, be successful, and really continue to get you think sort of meters up and running and that continues to build on itself, and so when you start to see that you can, and I do think and we will continue to see good growth in this number.", 1], ["You can go to a lot of places to consume content, but there aren't a lot of services where you can strengthen your relationships, that's what people want, so that's the right thing for us to focus on, and it also lines up with all the well being research that we've done which \u2013 and as you know, there have been a lot of debate over the last year about the utility of social media on the Internet, and we take this very seriously, right.", 0], ["In Q2, we had a meaningful step up in the one-day shipments, primarily in North America.", 0], ["So it\u2019s good for everyone but that\u2019s how we think about that.", 1], ["The first question around is there anything structural or different in that server product line, really it has been and is that transactional component.", 1], ["We've been adding products at a rate of 40,000 products per day so far this year.", 0], ["There are a bunch of different use cases, and we want to be the best at each of them.", 0], ["I'm very optimistic about AI overall and being able to use more computing resources to be able to crunch more data to be able to rank News Feed and ads and search and friend suggestions, and all the important things that we use our AI systems to do in addition to the integrity and security work.", 1], ["So, as I said early days, but I think with the engagement of the device community, the fact that we\u2019re really excited with the progress and improvements of these devices, I think yeah, again a lot of opportunity there.", 1], ["And what you see is that it's as easy for them to use it as profile and we can give them opportunities to do things they otherwise couldn't do.", 1], ["They're moving at a speed that I have not seen in any other country in the world once they were started, and it is truly impressive.", 0], ["We don't break out how many advertisers are advertising on the Audience Network, but we're seeing solid and growing adoption of the Audience Network across the board, as we are with Instagram.", 0], ["Obviously, all of them will add to our base and will help us with growth rates as we get into next year.", 1], ["And then as well software improvements, they continue to go on to increase our ability to run more or less.", 0], ["So that's another place where we're seeing wide adoption", 0], ["I think the good news we have here is that mobile first video on Facebook right now is now over 50% of video revenue.", 0], ["We certainly as I said earlier, we see this as a natural extension of our existing infrastructure investments we've \u2013 the 109 fulfillment centers, again very close to customers.", 1], ["A lot of us here, everyone we know is on the internet and we think about the internet as entertainment and basic communication but if you don't have access to a good school, then getting basic Internet access could be your best educational information or if you don't have access to a good doctor, then getting access to the Internet could be the only way that you can learn about how to avoid certain diseases or how to raise your kids and help them avoid certain diseases and find jobs and a lot of stuff.", 0], ["For the balance of the Company, in the aggregate, we expect to grow strong double-digits year-over-year and particularly very strong performance in service and in wearables like we\u2019ve seen during the December quarter.", 1], ["On your comment about the economic drivers of Prime Now, what I'll say is customers really value it.", 0], ["And so I think in retrospect, you can look at it and say, well maybe the appropriate measure is more to the iPhone 5s, and I think everybody intuitively thought that the upgrades were accelerated with the iPhone 6.", 1], ["That is, at the gross margin level, is 40 bps.", 0], ["And I would also say retail was very strong.", 1], ["I think we're getting people up the curve well this time.", 1], ["And in these very large transactions, many of which we've been signing recently, where you'll see some of that volatility would be in bookings.", 1], ["We believe that those will be relatively minor.", 0], ["And then in the long-term, we're investing in areas like the next-generation computing platform, internet.org, AI.", 0], ["For example, video content spend will increase year-over-year, and we'll continue to hire, in particular, software engineers.", 0], ["So, we\u2019re seeing good impression growth across all of those.", 1], ["We think that is very interesting.", 1], ["The PowerPoint designer if you want the most practical use of it, even identify great PowerPoint slides now because of AI.", 0], ["So that's one of the reasons why you hear us talk about quantum as the long-term goal, but you can fully expect us to take a lot of learnings, advances in that roadmap and bring them to market earlier.", 1], ["On Ad Breaks, we're currently really just testing the ability to put a short Ad Break in uploaded videos.", 1], ["And I think just to add on that, which is whether it's Minecraft or LinkedIn or many other acquisitions we've done as part of Azure, I think the key thing that we are very, very focused on is how do we make this culturally accretive, management times accretive as well as revenue.", 1], ["because they believe in a hybrid model, is actually the structural guide post we have on a multi-year -- on a multi-year journey.", 0], ["The ad load opportunities are higher on Instagram", 1], ["That's on top of working with the channel and looking at expanding our go-to-market in general.", 1], ["Is it growing the top line?", 0], ["We priced it at a level that represented the value of it and we could not be happier that it has been the top selling iPhone since the launch, and so we feel terrific about iPhone X.", 1], ["We tend to look at our gross margin dynamics on a sequential basis, and essentially we're guiding to about flat on a sequential basis.", 1], ["People had display ads or search ads before they really did Facebook ads, if you look back a decade.", 0], ["Even in Office 365 it\u2019s not just one-for-one shift.", 1], ["We can, again, shift order cutoff times out and time is valuable to us because, again, we can avoid split shipments, we can avoid other costs of acceleration.", 0], ["And so I would say that FBA is helping drive some of the selection growth we're seeing here, so selection growth and Prime though are two very key drivers of our growth.", 1], ["Our challenge generally is the volume of head count that we're looking to hire and we work well in advance with agencies to help to get seasonal employees and many of them turn into full-time employees after the holiday.", 1], ["We're simply more supply constrained this year than we were a year ago.", 0], ["I think, from a supply perspective, both now from a feed perspective are at similar ad loads.", 0], ["That would be the iPad with obviously the highest price on it.", 0], ["This is really about seeing improvement in some of our largest services and continue to see improvement year-over-year in the largest services.", 1], ["So we feel like we have a very open field in front of us.", 1], ["On top of that and from an ASP point of view, in the year-ago quarter we launched the iPad Pro 13 Edge.", 0], ["And we continue to add content.", 0], ["And so it's somewhat like buying a sofa, and you charge somebody a different price depending upon the price of the house that it goes into.", 0], ["And I think that's the process we're on.", 1], ["I should also say most of the weakness we saw was in the standard workloads, which I think lends itself to again some of those pressures.", 0], ["It's driven the creation of sort centers.", 0], ["But like I said, it's early.", 1], ["That did spur a lot of unit growth in the second and third quarter.", 1], ["because when an ad is more targeted, more relevant, when you see a product you're interested in or a service you're interested in, that's a better experience.", 0], ["And then finally, we've made our own product changes that gives users the ability to limit our use of such data signals to improve ads and other experiences.", 0], ["And you can look at the results in other elections around the world where, for example, in the EU elections last year where a lot of people were very worried that there would be this kind of foreign interference.", 0], ["So we'll just have to watch how that plays out over time.", 1], ["So there are lots of different ways that over time this kind of content is going to both augment existing real-world objects and eventually replace them, which I think is going to be an interesting opportunity.", 1], ["Internally, we call that component part of our Microsoft 365 Value.", 0], ["And then, I'd also make the comment that a lot of our growth is coming from markets in Asia, our top growth countries were India, Indonesia and the Philippines.", 0], ["So yes, we did make some changes to the pricing formula for this holiday season.", 0], ["To put this in some context, those two stores for the months that we had them operational, which was several months, the revenue was less than $1 million.", 0], ["We\u2019re going to -- but most importantly we\u2019re going to be thrilled to start shipping it,", 1], ["In terms of Apple Music, we're well over 50 million listeners now when you add our paid subscribers and the folks in the trial, and so we're moving along at a very, very good rate.", 1], ["We clearly saw that this year.", 0], ["So the state that we're trying to get to and hold ourselves accountable to is where we have these transparency reports \u2013 right now every six months, but we want to get to quarterly on those soon.", 1], ["When I look at every business becoming a digital business and then take that opportunity and map that to our capability, we have the broadest platform of anyone in the tech sector to really help every customer in every country become that digital business.", 0], ["So, we are growing at very, very healthy levels okay.", 1], ["And our Two-Day shipping, it's now available on over 100 million items, up from 20 million as recently as 2014.", 0], ["So we ended the year at 123 fulfillment centers, up a net 14, and we have 23 sortation centers in the US, up four year-over-year.", 1], ["And again this is sequentially right.", 1], ["And when you think about what Facebook stands for in the world, and the really unique value that we can deliver to people, it\u2019s primarily around helping people stay connected and have a meaningful interaction.", 0], ["It's more what happens over the long time.", 0], ["And so I look around, I see opportunity left and right.", 1], ["It's getting them to be able to measure our results.", 0], ["We protect it by encrypting it, and we keep the bulk of information or a significant amount of information on the device so that the user is in control of it.", 1], ["And so far I think there are a few tweaks that we needed to make to reaction since initially testing it.", 1], ["So that's a pretty different intent than how people come to Facebook today.", 0], ["The most important thing for us is that really the number, it\u2019s customer satisfaction.", 1], ["Because so much of our installed base was already on an annuity contract, it makes the transition mathematically hard.", 0], ["And even at that point, we're not going to be perfect", 1], ["You know we don't guide past the June quarter, but we expect it to be there for the time being.", 1], ["And now seven of our top ten highest traffic stores in the world are in Greater China.", 0], ["and so it can be lumpy, but over the long haul that's the model we follow.", 1], ["We feel like we had a great Q3 as well and have made rapid progress on our One Day shipping.", 1], ["Whereas when you engage with public content, you might get informed or be entertained, but it's not necessarily increasing social capital in the same way or building relationships between people", 0], ["People have bought from us previously just standard editions are able to now look at our enterprise editions and that\u2019s what\u2019s playing out.", 0], ["And I think you've got upside growth potential in the long run in those markets.", 0], ["WhatsApp really takes the place of SMS in a lot of the markets where it operates.", 0], ["So, the move into Boston and also now into London give us some really good data points and as \u2013 it's a great customer feature for the Prime offering.", 1], ["And we see a lot of opportunity to continue that growth.", 1], ["That said, the trade relationships and agreements that the U.S. has between the U.S. and other major economies are very complex and it's clear that several are in need of modernizing, but we think that in the vast majority of situations that tariffs are not the approach to doing that and so we're sort of encouraging dialogue and so forth.", 1], ["The second part is the ISVs.", 1], ["It has been heterogeneous.", 0], ["But even in the shorter-term all time spent on Facebook is not equal,", 1], ["That\u2019s why I think of our servers as the edge of our Cloud, and as I said there\u2019s a huge software asset in there which is becoming increasingly competitive.", 0], ["So yeah, I would say my comments around pricing were as much mix as absolute price decreases or competitive price pressures.", 1], ["I expect to work through that in Q2, I mean Q3.", 0], ["That is AI as applied today.", 0], ["But at the same time, we will not shrink away from our ability to go put investment, be it in sales, marketing or product R&D, when we clearly have unique things in secular categories of growth.", 1], ["So we're seeing a decrease in certain types of time spent such as passive video consumption as a result of that and an increase in areas like sharing.", 0], ["And so obviously that's certainly encouraging as we look on a go-forward basis for the rest of the year.", 1], ["We\u2019re very focused on payments with fiat currencies as well and making it so that when you pay in one service, whether it\u2019s WhatsApp or in Instagram Shopping or in Marketplace your credentials can be shared and there\u2019s a shared payment system across all those things.", 1], ["In addition, we\u2019ve introduced restrictions on the use of certain targeting criteria from some ads.", 0], ["And everyone has friends and family and wants to stay connected and uses a variety of tools and ways to do that in the world today, which are often very inefficient, and the Internet offers new opportunities to make that a lot better.", 0], ["So main goal here is that it will allow customers to have the broadest selection, the best available price and also the most convenient options on how they receive the item.", 1], ["We are again working on two fronts.", 1], ["And so when we look at that and then we look at the things going on, on our other products and services, and we think Services will continue to grow very briskly.", 1], ["We did that now in a quarter that included Chinese New Year, and so we have the help of a strong holiday season, much like the U.S. has a strong season in December.", 0], ["In addition because of the macroeconomic conditions are actually quite good on this front and with the business optimism creating some wind at our back, I also think people look and say if security and value are important, this is a great time to invest in modern PCs.", 0], ["And the last one, which is really significant, is on the infrastructure side.", 1], ["And so for us, we also didn't wait when we thought about capital return.", 0], ["I think on how people use our products in life stages, I would just \u2013 I would say generally, what we're trying to do is build a variety of different types of social products that can help in a variety of different use cases, so it can be one-on-one messaging with WhatsApp and Messenger.", 1], ["We talk efficiency.", 1], ["But I think we're making progress.", 1], ["So that then in turn results in a better and stronger overall OEM PC commercial market.", 0], ["We've certainly thought about lots of other forms of monetization, including subscriptions, and we'll always continue to consider everything.", 1], ["And then, we've got lots of what I would call core technology kinds of things like augmented reality, where we're placing big bets and bet that we have a big future, in addition to the health kinds of things that may fall out of the watch.", 1], ["As you probably saw, head count is up 38% year-over-year in Q3 and that is a continuation of a lot of ops roles they're supporting this high demand, the opening of the fulfillment centers we talked about, new Fresh locations, Prime Now.", 0], ["During the quarter, we always have some loss of leverage because of our typical seasonality.", 1], ["So we're feeling good about Q4.", 1], ["We definitely are seeing one-for-one migration, but the opportunity in everyone one of our offerings from Office 365 to Dynamics to Azure has a non-zero-sum component to it.", 1], ["So, overall we feel very strong guidance for the first quarter.", 1], ["And also, we had favorable mix.", 0], ["When we get into Q4, we\u2019re going to be similar to how we had good product wins in Q2.", 1], ["Any IoT project on Azure leads to a Dynamics field service project in most instances.", 0], ["Some have a 24-month clock, and there are even some that have a 30-month clock.", 0], ["And we have more advertisers really embracing the measurement that helps close the loop and helps make their ads more effective.", 0], ["We continue to expand the coverage for delivery.", 1], ["On vehicles, Amazon Vehicles is really a car research destination and really builds the automotive community for customers and gets information they need when shopping for vehicles offsite or shopping for parts and accessories onsite.", 1], ["Those do naturally have longer sales cycles.", 0], ["We think we've got the best mobile ad product out there in the market and it's just getting better.", 0], ["Most of what we build \u2013 one of the things that\u2019s different about Facebook and social products is more of it is about people interacting with each other than just people interacting with us, right?", 0], ["I think we are starting, as Satya said, we started to see some impact from that in my opinion in Q4 in the on-prem KPI.", 1], ["But architecturally, some of the examples I used are about the digital estate that actually doesn't start with Azure.", 1], ["So there is always a - generally a sequential drop in Q4.", 0], ["And then on the actual delivery of video side, it's just much more intensive technically.", 0], ["That way, an engineer improving the efficiency of one system makes all of the apps better.", 0], ["The one other benefit, to sort of tease off with some of the comments Amy was making is that security compliance and governance is a huge issue for enterprise customers and commercial customers at scale.", 1], ["So I think the impact on revenue growth rate, since the revenue component of that is not as large, is probably something to consider on a year-over-year period.", 1], ["We'll also add sales capacity across some of the other opportunities we've seen broadly.", 0], ["That being said, we do think there is a lot of margin potential in this business, given the focus on advertising, but no target at this point.", 1], ["We even launched a new packaging of it with the IoT Central, which allows developers who are building IoT solutions, instead of assembling it themselves to be able to use this managed service to be that much more agile and productive.", 0], ["Not only does it have the possibility of being the next major computing platform, AR and VR together, but I think it has the possibility of being much more social and intuitive and natural than some of the devices that we have today, whether they're computers or phones.", 0], ["But obviously, it's very early on those products.", 1], ["We're continuing to build out features and functionality for the community across a wide range of different products, whether it be the ad products that Sheryl talked about or IGTV and the like.", 0], ["As customers get more comfortable and begin to put more sustained workloads into the AWS services through buying RIs, they're able to get fairly significant discounts on their usage.", 0], ["Your comment on revenue growth differential, I mean there's so many different factors going on in every country that's hard to compare North America to international.", 1], ["I mean we announced this program last year that basically we'll make it so if you pay for something in any of our apps, you only need to enter your credit card once, and then you can use that to have a more frictionless checkout experience across the other apps.", 0], ["In many cases we are already are and the places where we have very high AMZL percentages, the U.K. for instance, in some cases we\u2019re lacking alternative options for the type of delivery that we\u2019re doing.", 0], ["So what I would say is, I'm not sure about the breakthrough element of it.", 1], ["It's just we've had to add some resources on our own.", 0], ["So we think it's a very meaningful increase for all the investors that value income.", 1], ["And then secondly in some markets as I had talked about in my prepared remarks, the subsidy is probably the bigger of the issues in the developed markets.", 1], ["Now in the past, sometimes we had also given a total active customers count, and so that number for this quarter was over $310 million.", 0], ["Obviously, we were particularly pleased that there was really strong demand that benefited regions like APAC and rest-of-world, so really broad-based strength in APAC.", 0], ["As Brian's mentioned, allowed them to shop even up to Christmas Eve and then have their items delivered in two hours.", 0], ["So, at least in the intermediate timeframe, we do not see cannibalization.", 1], ["And that has driven tourism, international shopping, and trading down significantly compared to what it was in the year ago.", 0], ["And so the idea for us is to continue to invest in the business, making the right trade-offs and the results from the December quarter give us very good confidence for the future.", 1], ["There are about -- I think it\u2019s around 250 million people who have Xboxes, Play Station, or Wiis.", 0], ["That's going to continue to have some lumpiness still as we go over the years.", 1], ["So that's why we've done the deals with Red Hat.", 0], ["This is going to be a big part of our shipment zero program, a vision to make all Amazon shipment net carbon zero.", 0], ["We have higher level data services like Azure ML, which is about advanced analytics, a category we didn't even participate in the past.", 0], ["On the issue you raised with the Facebook female engineers, I'm really glad to have a chance to address this because this is an issue I take very seriously.", 1], ["We also reclassify the cost that we need to incur to provide those services.", 0], ["And so when I back up and look at all of these, and I believe that over the long arc of time that the iPad is the great business, I also have visibility obviously of what\u2019s in the pipeline and feel very, very good about that.", 1], ["In terms of our long-term margins, we\u2019re not managing the business to a specific margin target in any year.", 1], ["That said, we had a strong quarter and we\u2019re pleased with results in currencies of factor in that delta as well.", 1], ["And we hear from them and we continue to see in our results that we continue to deliver strong results.", 0], ["We recently announced that we're updating the definition of CPC so that includes only websites and apps.", 0], ["Over the long run, we feel confident that we're very well placed to navigate the transition.", 1], ["Obviously, bringing Game Pass to even the PC is going to be a big element of that.", 0], ["But I do think over time, we do expect that to trend in that general direction.", 1], ["That's a bunch of hard work that goes into making our ads more targeted that makes the outcomes that advertisers get more valuable.", 0], ["I think you're not going to see the same thing going forward.", 1], ["Last year we said that was a 40% \u2013 nearly 40% growth worldwide.", 0], ["So there aren't that many companies that can do this at the scale that we're talking about, and this has been a big advantage for us.", 1], ["So a number of -- there's a number of things beyond that, but features out there that are just going to, I think, make it easier for companies to grow with the ad tools and the ad services that we offer and we're continually excited about the opportunity there.", 1], ["E-commerce is and remains and was one of our strongest verticals in Q4, and we think we're doing an excellent job of building the right products for e-commerce retailers.", 0], ["We also continue to see a reasonable percentage of first time buyers, particularly in some of the emerging markets.", 0], ["We're going from 10,000 people working on safety and security to more than doubling that to 20,000.", 0], ["We were definitely the one to democratize servers by bringing servers to small businesses.", 0], ["We continue to watch the end of support.", 1], ["That's up 35 bps sequentially.", 0], ["What we try to do is get our community to tell us what matters to them,", 1], ["We've been talking about expecting a deceleration in ad revenue growth, and we saw that play out in the U.S. and Canada modestly.", 0], ["Once we work through sort of the end of XP bump, that really should be in the line.", 0], ["The first is obviously the OEM and chip supply.", 1], ["I think what we said was that we're really pleased with the consumer adoption we're seeing.", 1], ["Having said that, the way it fills up is by the value-add that we can do.", 0], ["I mean, these are the products that are growing the quickest and these are differentiating parts of why they work and why people prefer them as opposed to other services.", 1], ["So, the overall level of sharing is up on Facebook.", 1], ["I'm less worried at this point about it not working because we're starting to see it really take off.", 1], ["So it's a business we're really excited about.", 1], ["We have a business in Brazil.", 0], ["On the other side I think the partnership with IBM and the work that we have going on in the Enterprise is profound.", 0], ["because we think we give politicians and people a really compelling way to interact.", 0], ["We're shifting over the next few years to a much more proactive model of moderation.", 1], ["I think that the vast majority of people are very happy with it, including the most important people at all, which is the user.", 1], ["It's the rationale for why we're putting a huge investment in the home, making \u2013 really bringing home automation to life for people in a very simple and elegant way.", 0], ["So it's a good sounding theory, and I can get why people repeat it, but it's not true.", 1], ["If ad quality was low, we wouldn't be able to put as many ads in because people wouldn't want them.", 0], ["It's also \u2013 there was a good bit of FX gain due to the shift in currency and the weakening of the dollar.", 0], ["So Washington State started as of January 1, Pennsylvania as of April 1, and most recently Oklahoma on July 1.", 0], ["And so the onboarding has been incredibly important and incredibly effective.", 1], ["I see these things as being somewhat fluid and different for each user.", 1], ["so not only was it a great day for Amazon, it was also a great day for our sellers which is great.", 1], ["But now with the growth of actually mobile devices and SaaS applications, our opportunity with EMS is much bigger than anything that we had in the client server era", 0], ["I would say that while our 20-year head start in investments in logistics and fulfillment capacity and partner networks that we've built are helping us, we also do have a network that is tuned to two-day delivery right now, principally for two-day delivery.", 1], ["And I think we were quite encouraged by E5 performance, particularly in Q4 as we ended the quarter, which was great to see.", 1], ["So I see a lot of runway.", 1], ["You can buy Instagram.", 0], ["I think we're making progress there.", 1], ["So in China, we bought an existing business Joyo.com and built off that base.", 0], ["And so I see all of those things as vectors that are incredibly positive.", 1], ["Some of our social tools like Yammer are increasingly getting used for broad communications, inclusive of Skype for Teams.", 0], ["So the content that we are creating, especially through Amazon Studios, we are generally holding the worldwide rights to and can use that in other countries as well.", 0], ["They're pretty significant when you add up all the things that we have done in the Office 365 space, all of the things that we have done in the Azure space", 0], ["So we view the social space as almost this matrix.", 1], ["If you're trying to sell a direct product, then you want to use DPA ads.", 0], ["So, when we talk about the time spent per DAU growing worldwide across our family in double-digit percentages, video is making a contribution there more broadly.", 1], ["But we think we offer something pretty compelling, which is the reach of Facebook with very unique targeting.", 1], ["So the immediacy, the perishability are all challenges everyone has in this area, but we're confident that we will have a good service and continue to delight customers.", 0], ["So - and then, they represent different use cases in terms of the components of Azure that get used.", 0], ["so really pleased with that.", 1], ["So I think that that's where the synergies lie,", 1], ["So I don't think of it as a delay in the way you're talking about it.", 0], ["So as we bring more formats to Stories and bring more advertisers to Stories, we can build up that demand and balance that out with supply.", 0], ["We of course have Amazon bookstores, 18 bookstores in the U.S.", 0], ["We will continue to add fulfillment capacity, we will work with FBA sellers on inventory stocking and timing and we think that there's things that we can do better as we do every year, come out of fourth quarter with immense learnings", 0], ["So those are all security features", 0], ["I mean, overall we did take an approach that we want to make sure we meet the real world needs across the globe.", 1], ["And the link to basically do the messaging is over Messenger, but in that country, where people really want to be using it, is WhatsApp and we need to make it so that people can communicate across the different networks and graphs that they have or be able to do that integration better in order to facilitate more transactions and connections there.", 1], ["We're just trying to make the best decisions we can to grow long-term free cash flow per share.", 0], ["So it will be demand-driven, but I don't want to essentially put a cap because if the opportunity arises, and for us it's a high ROI decision to open a new region, we will do so.", 0], ["So it will fluctuate quarter-to-quarter.", 1], ["And our goal is to just constantly refine this and make it better and we're going to keep on doing that because we think there's a lot of upside and there's a lot more that we can do.", 1], ["And I think it's going to be one of the next big areas that I'm really excited about the Facebook uptick.", 1], ["This is providing us with permission to trial new methods in the space, including beyond line-of-sight operation, sense-and-avoid technologies and flights where one person operates multiple drones.", 0], ["What we've seen is that it depends on what you compare it to.", 1], ["As you point out, and I think this is a major point that many people miss, the LTE penetration in China is only at 12%.", 0], ["But I think as I look to 2016, I\u2019m excited about the designs we\u2019ve seen, I\u2019m excited about the products that are possible with Windows 10, and I think we feel good and are looking forward to sharing some of that excitement next week.", 1], ["We saw good acceleration in both North America and International this quarter.", 1], ["And certainly, I think people are thinking about all of these issues.", 1], ["We're going to continue to invest in video and increase that investment in 2018.", 1], ["And so, and we feel really great about the product lineup.", 1], ["We've had very strong iPad revenue growth.", 1], ["We don't break out marketer segments, but mobile app install ads, which is where the revenue would come from developers, is a relatively small part of our advertising revenue", 0], ["We're doubling down on that investment, video content and marketing, not only in the U.S. but globally with the launch of our Prime Video in the fall.", 0], ["The operating margin itself will fluctuate quarter-to-quarter, a very strong performance this quarter.", 1], ["Because on a year-over-year basis actually the impact is larger, given the fact that currencies have moved during the last 12 months.", 0], ["The way we've added these services in the past, obviously, we're also very interested in adding new services that can provide great value to our customers in the future.", 1], ["Our profitability will also improve", 0], ["And so as we\u2019ve always said, there is a large part of the -- or the vast majority of the services are mapped to the install base instead of the quarterly sales.", 1], ["And so, we're working very hard to -- at the -- but at the very beginning of the ramp there.", 1], ["And so we think there's a lot of opportunity there to add convenience for customers.", 1], ["They had an average view rate of 23 seconds across those Canvas ads, so clearly people were really engaged in the brand experience of the ads, and they had a 13-point lift in add recall and a 9-point lift in purchase intent.", 0], ["And so if you, and look at iPhone X in particular, it's the most innovative smartphone on the market.", 1], ["And then on the technology side, as you said, yes we will continue and invest in SDEs and software engineers to build these you know products that customers love, continue to respond to their demands, and that will push or inform our product portfolio.", 1], ["I talked about Mary Barra and what she and I did together in New York at Adweek, and we're seeing them not just use the platform for advertising but really use the platform.", 0], ["So yes -- sorry, the operating margin in AWS, just like the revenue rate it's such a rapidly growing business with different timing of investments and global expansion in investment in marketing and other infrastructure that is going to vary quarter-to-quarter.", 1], ["We continue to expect that we'll see deceleration in ad revenue growth.", 1], ["So your question about the AWS margins, that business as they continued to learn and as we continue to invent and get better at designing and operating the infrastructure and assets, we have been able to drive costs out of that business.", 1], ["And when we can do that, then that decreases the latency.", 1], ["Some clients are comfortable with Instagram and bringing a new budget to bear", 0], ["We think that her incomparable ability and talent to connect with audiences around the world, that there's sort of no match and we think that we can do some great original content together and so we could not be happier in working with Oprah.", 1], ["We have more advertisers experimenting with different formats.", 0], ["Yes, I think vision that we have always had is that distributed computing in some sense will remain distributed.", 1], ["As you do more of that, what happens is you need to - and then you start doing sensor fusion, which is your multiple sensors that you want to be able to fuse and take action.", 0], ["It's early but the trends look very good.", 1], ["We were very full.", 0], ["Our servers even this quarter grew 9%.", 0], ["We are continuing to drive operational improvement in every business that we are in, but we are also investing in large opportunities that are in front of us, particularly in Marketplace Prime and AWS.", 1], ["So, obviously, we started with ads in Facebook, and that was something we have grown and they continue to grow.", 1], ["In terms of measurement capabilities, I don't think there's a direct thing we're exactly worried about right now.", 1], ["As I mentioned in a number of comments earlier, we're very happy with the results, the customer adoption, the device sales that we're seeing and the general customer acceptance there.", 1], ["There are a few big reasons why I'm excited about this and think it'll be good for the user experience, which is the reason that we're doing it.", 1], ["So we're ranking longer-form video, but that's still relatively short video views.", 0], ["And so it's still down year over year but less so than it was and part of that is the compare is an easier compare.", 0], ["On a profitability standpoint, our hedging program partially mitigated the impact from the volatility in currencies.", 1], ["I do think that there is a very broad sense, as you're saying, that - and greater awareness that having data stored for long periods of time with companies cannot only be an asset, and that it can help provide better services but can also be a liability in that there could be breaches or the data could be used in ways that weren't intended.", 0], ["We have an iCloud business that is growing very quickly, faster than the App Store from a much lower base, but I think it's important for us as we continue to develop these businesses.", 0], ["Having been in the server business all my life, I've never seen a lot of the small business customers adopt some of the rich capabilities like it's possible now, and that's great growth as well.", 0], ["You take somebody like a Nalco Water.", 0], ["Marketers have always loved video", 1], ["We really have a view of distributed computing which is more expansive doing just even our HyperScale cloud.", 1], ["There's now over 12,000 Alexa skills.", 0], ["Our goal here is to be helpful to consumers and help them make better shopping and selection choices.", 1], ["So these are capabilities that are not easy to build if you don't have a real commitment to research and then the ability to take that research and then ultimately turn into products.", 0], ["What we\u2019ve definitely done over the last year and plan to invest even more in over the next year is worked hard on vertical specific targeting.", 1], ["However, there's a number of plans that people began signing up for in the last year that could change it.", 0], ["Our real goal for LinkedIn is \u2013 over time of course I'm sure they'll want to take advantage as we build new services together of some of our infrastructure assets.", 1], ["I can't give an exact split of the investments by geography, but I would say most of the fulfillment expansion was in North America last year.", 1], ["What we focus on is innovating on behalf of customers and expanding the geographic footprint to make our services more widely available.", 1], ["And you saw that in the non-Pro revenue performance.", 0], ["They're more correlated to the active installed base and also the level of transacting customers that are there and the amount per customer, which relates also to the offering that we have.", 0], ["It's no secret that the Internet has disrupted the business model for journalism.", 0], ["So I think we'll continue to iterate on those and try to find different areas.", 1], ["I mentioned that four years ago when we last increased the price of Prime, you could get 20 million products within two days.", 0], ["As we get into new fiscal year, so many things change and we need to take that into account, the geographic mix of our products and so on.", 1], ["And it's not just CRM.", 0], ["So it was the largest device sales day that we've ever had and essentially pretty much across all of our device types, E-readers, tablets, Fire TV and Echo.", 0], ["And while we haven't solved all of the issues yet - you never solve all of the issues, but we certainly have a lot more to do on our road map.", 1], ["If you look underneath the numbers, mainland China was actually flat year-over-year during Q3.", 0], ["And we've seen a lot of improvement in the past four quarters on that front.", 1], ["We know how much we need to invest in the business.", 0], ["We believe that we're going to start seeing some improvement from here on.", 1], ["That is above the Amazon fulfilled unit growth rate, but we combined the strength of the FBA program and the space requirements as we get into bigger and bigger products.", 0], ["I think we feel really good about where we are, and the value and our opportunity both from small business up to the large enterprise from first line workers to do all of these - do all these things and continue to execute well.", 1], ["And that will be very valuable for businesses.", 1], ["We now have more than 45,000 skills available to customers.", 0], ["And obviously those sort of global macroeconomic and currency factors will continue to impact us.", 1], ["We've not only had the Echo, but we have the Echo Dot and Tab, so we're branching off that product line and having trouble keeping those in stock.", 0], ["When we get to lapping our efforts on desktop, I do think you're going to \u2013 you have a secular trend away from desktop.", 0], ["People in manufacturing and other in field service, where they were never issued a standard laptop or even a phone are being issued a HoloLens as their first computing device, and that's just because of the productivity it drives.", 0], ["Making that investment to match up with very strong Fulfilled by Amazon demand and AFN or Amazon Fulfilled Network units that are growing at a faster rate than our paid units.", 1], ["First, even for the customers who are already on Office 365 at any given licensing level, we focus quite a bit on their increased usage and intensity.", 0], ["So we continue to build the underpinnings of the Prime program in our international countries.", 1], ["We outperformed significantly in both those products in Q4, and that took us a little bit outside the COGS range but not as much as our revenue outperformed.", 0], ["And so there's quite a bit of room there.", 1], ["The IGTV product approach is very focused on helping people connect with creators in a mobile-native vertical video format and helping people not only see content that they love from people that they want to follow, but build a community around those creators, which is what we see people are trying to do.", 0], ["but we're still in the phase of just making it easier for people to find all the content they want and connect with businesses organically.", 1], ["We've been really excited by what we've seen in the commerce vertical of our ad products.", 1], ["What I mean that is that 27% seat growth is starting to include some lower ARPU seats that Satya just mentioned whether that's in academic, in edu, in front-line workers and that's really important for us to keep having that seat growth even if it\u2019s not at the same ARPU level those are not seats that we ever could reach before at any level and that's absolutely new opportunity for us.", 1], ["We also had several product optimizations in Q4 that contributed a strong performance that quarter.", 0], ["And the best of them actually carry over into the Facebook community,", 1], ["Most of those are in North America but that compares to 14 last year and I would look, looking back the last time we had double-digit increase in fulfillment centers was in 2012 when we added 11 in the third quarter.", 0], ["And so, we\u2019re continuing to see solid performance on Facebook, and we\u2019re pleased with the engagement levels that we\u2019re seeing overall on the Facebook app.", 1], ["We put resources at customers ahead of the curve, we did that you saw that and the operating in the intelligent cloud OpEx growth over the past few quarters, that execution is what\u2019s landing.", 0], ["We're taking a very long-term view on this business.", 1], ["On the first, we're always trying to improve our ad products so marketers can buy what they want and pay as they want to pay.", 1], ["Yes, I am going to - if I add one thing, I will just say that nothing shows up in just one quarter.", 1], ["We obviously feel good about the business during the December quarter.", 1], ["So when we think about capital allocation, what\u2019s happening in the Cloud, what\u2019s happening in the Edge, how we build the network to optimize for streaming the same infrastructure, for example, is what Sony has decided to use as well, and be on Azure as well as use our AI capability.", 0], ["If you take iPhone out of the market number, the certain market x iPhone actually contracted slightly.", 0], ["When you measure it in these 90-day clips, as we do in the short run, I don\u2019t think you're going to see a miraculous change in the -- or an improvement in the year-over-year.", 0], ["And so that is really why we have the constraint that we have.", 1], ["In the medium-term, we're focused on those next generation of services, Instagram, Messenger and WhatsApp.", 0], ["Tim mentioned Apple Music, but we got other parts of the business that continue to do well, even as I said during a period of time when our sales have come down a bit.", 0], ["Of course maybe the one thing that I want to point out again as we get into the following year, is that of course currency will be an issue.", 1], ["And what we're seeing is big brand advertisers, and this is actually particularly strong growth.", 1], ["So now that we find ourselves at that capability, we're saying look, what's the way to think about all the markets that we can in fact take this product to, and the Linux operating system database market is not something that, which is mostly primarily a Tier 1 segment, is something that we never worked in.", 0], ["I think it's definitely expanding the market opportunity.", 0], ["So, that's factored into our international \u2013 excuse me, our, revenue growth rate for the quarter.", 1], ["And clearly, as you said the idea of adding new services is very important to us.", 1], ["When they want to specifically come and engage around video or communities around that, they can go to the Watch tab.", 0], ["Our goal is to be helpful to consumers and enhance their shopping or their viewing experience with targeted recommendations, and we think a lot of the information we have and preferences of customers and recommendations help us do that for customers.", 1], ["You've been quoting an overall total company growth rate.", 0], ["And we see continued increase in video sharing and photos and stickers, and a lot of stuff that you would just call fun but that people really enjoy as different ways to express themselves.", 0], ["And he mentioned we are feeling I think a lot of excitement from the ecosystem about what's possible with some of the new devices that will come.", 1], ["It's also about, are we putting every dollar most efficiently to help customers be successful?", 0], ["I think our targeting abilities are really second to none, and I'll share a recent example.", 1], ["It happens also come with directory implementation and so we generally think of a fast deployment also and then adding on workloads and premium workflow cycles.", 0], ["As part of the rollout of GDPR, we're providing a lot of control to people around their ad settings and we're committed, as Sheryl and Mark mentioned, to providing those same controls worldwide.", 0], ["One of my great regrets in how we've run the company so far is I feel like we didn't get to shape the way that mobile platforms developed as much as would be good because they were developed contemporaneously with Facebook early on, right.", 0], ["Just quickly on the Alexa point and auto, Alexa is really a more and more place.", 1], ["And so these are extraordinary numbers", 0], ["And the brains of Echo are in the AWS cloud.", 0], ["In fact, you could say the measure of a company going digital is the amount of compute they use.", 0], ["So it\u2019s the things that we \u2013 both Brian and I talked about that we're doing globally to support Prime platform all of those things that we mentioned, video content, original content, Prime Now, category expansion, investing on behalf of FBA, which also helps Prime devices.", 1], ["And so that thinking has I think proven out over time and I think been very good for our shareholders.", 1], ["The first category is app development.", 1], ["But at the same time, we are going to have a great server wave.", 0], ["We talked about the unfavorable FX, which again is 400 basis points.", 0], ["It's been really popular.", 0], ["So that way, through a combination of the AI tooling that we build and having people to look at these things, we can get it right faster for more of the types of content.", 0], ["Of course, we do always talk about \u2013 we always usually get asked about profitability and it is a very hard service to deliver and make money on, but we know customers love it and we're in a great position to do this because of our long-term approach, our drive of greater efficiencies and our proximity to the customer with our vast global FC network", 0], ["While people wanted to consume a lot of video and we thought that there were new ways that people could interact around that, we wanted to create a separate place, where people could go to do that.", 1], ["It's much different than it was in 2014.", 0], ["I certainly would help you in that number and say a little lower, just so that you're getting into something closer.", 1], ["So in 2004, when I was starting in my dorm room, for a number of reasons, it was just me, so we didn't have a lot of capacity to have thousands of people reviewing content.", 0], ["So I think we're very well positioned in the e-commerce space.", 1], ["We are accepting, for example, more forms of payment today than we were 12 months ago or even 6 months ago.", 0], ["We're continuing to expect ARPU increases, premium mix increases and installed base growth.", 1], ["In the past that deferral and the subsequent amortization was reported under products.", 0], ["And as we talked about, Q3 has that same attribute, it's higher than it was a year-ago Q2.", 0], ["So, if you think about what we are doing with xCloud, it's a hero workload on top of Azure.", 1], ["And I would say, Raimo, a way to think about this is we've always had that trusted relationship, which we're incredibly proud of as a company with our enterprise customers.", 1], ["When I talked about Cosmos DB growth, Cosmos DB happens to be one of the best database products to be able to capture the signals that you want around your customers from a variety of different sources.", 0], ["We're seeing less forfeitures, which is a great sign for our employee retention, but you have to make adjustments to your reserves as you see that.", 0], ["We are clearly investing for the growth of both Facebook at its core and then also the additional services that we're bringing on.", 0], ["So I really am very committed to this idea of making sure that the next platform reflects those values that Facebook stands for.", 1], ["So the Watch tab is mainly \u2013 it's a way to give people a tool to do that.", 1], ["Headcount was up 49% year-over-year, which is higher than Q2 \u2013 we saw in Q2.", 0], ["It was for group communication and that's what people were using it for.", 0], ["And then the line item, subscription services revenue, that increased about 56% ex-FX year-over-year.", 0], ["At our partner conference, there was a significant amount of excitement with the tools that we announced like PowerApps and Power BI, Azure functions and Flow.", 0], ["But fundamentally, we're trying to serve our community the best we can, and we'll do that across all these platforms.", 1], ["As you know, our E-to-R, expense-to-revenue ratio, is around 10%.", 0], ["And as they move to Instagram, some of that will come from Facebook.", 0], ["And so as I look at that number, that suggests there\u2019s plenty of upgrade headroom in addition to we want to keep inviting over as many switchers as we can.", 1], ["So the main value proposition for the Facebook app is helping people share any type of content that they want with any audience that matters to them.", 1], ["And so I don't believe that a \u2013 I don't believe anyone is going to decide to enjoin the iPhone based on that.", 1], ["And as I believe, the industry that Satya is talking about pivots to be more about the engagement and monetization of that member network, you can expect that margin profile as well of our traditional, more hardware-focused Xbox to evolve, to be a real combination of those two things going forward.", 1], ["There is a fourth tariff which includes goods valued at $200 billion, also focused on goods that are imported from China.", 0], ["In general, fiscal 2019 will have a higher base than fiscal 2018, just as you start to think through the impacts on bookings for the next year.", 1], ["When you have files, they are synching with one drive.", 0], ["And as we were just talking with Carlos, the capital investment is very large as well, so we continue to fund it.", 0], ["But really from an ARPU perspective, the biggest driver continues to be the transition to E3.", 0], ["But it's got a topology associated with it, going all the way to the sensors, whether it's at home, whether it's in a hospital, whether it's in a factory.", 0], ["And if anything, at our scale, as you can imagine, we are becoming much more efficient in how we use software to utilize the capacity we have.", 1], ["I think I would say we do continue to believe that the sales tax issue needs to be resolved at the federal level, and we're actively working with the states, with retailers and Congress to get federal legislation passed.", 1], ["But the numbers are only comparable if I quote the third-party source for both and so that's what I'm doing.", 0], ["But excluding India and Souq, the rest is the Prime benefits and the continued growth in the other countries that we have been in for a while, continue to roll out Prime Now and AmazonFresh.", 0], ["I don't know many people who like calling businesses to deal with issues that they have.", 0], ["So variable marketing was pretty consistent with prior periods and we feel good about our return on investment on the marketing, the variable marketing.", 1], ["We feel like we're going to have great capacity not only for retail products but also for FBA.", 1], ["We don't obviously provide geographic-specific guidance but you can see from our overall guidance, we think we're going to have a really strong quarter.", 1], ["And the team there is one of our best.", 0], ["And I'm still optimistic, I think that the long-term vision and the reasons why I thought this -- we're going to be important and big are unchanged.", 1], ["India's growth, as you know, is very good.", 1], ["And the one thing I\u2019d mention is the having compliance security that spans all of these tools, is also proving out to be a very big architectural advantage in a customer value proposition because I think, our customers look to use more SaaS applications, they don't want an exponential increase in their security exposure or more compliance burden.", 1], ["So, really Q4 wasn\u2019t just renewal activity, it was also new workloads and new value.", 1], ["The more important part around the security management value prop is in fact I'm going to pivot back again a little bit, because it's the same thing we saw in Office.", 1], ["There's a number of different areas, at least, that we've called out in our filings with the 10-Q in the past and the 10-K that will be on file shortly that talk about the different areas that are impacted us.", 0], ["We've put our current thinking in the guidance and you can tell from the guidance we are bullish.", 1], ["And one thing I would just add because a lot of folks even ask about our business process and business applications, I want to build a long-term profitable business.", 1], ["With our EU-approved AWS data protection agreement and model clauses we have in place, AWS customers can keep running their global operations using AWS and be in compliance with the e-law.", 1], ["there were some clearly that were offered in the market prior to this cycle.", 0], ["And they have differences in industry patterns,", 1], ["So over time, we believe that the dollar shifts with eyeballs and we want to earn it from our clients and be the best dollar and the best minute they spend and help them measure across channels.", 1], ["The way that -- the only other way that, that Azure number, to think about it, is when we've talked about the Azure Hybrid Benefits that exist, those show up actually in the on-prem number, right, even if they ultimately get used on the Azure side.", 1], ["Anthony, on the on the marketing budgets, we continue to think we've got great opportunities to grow in the large global advertising market.", 1], ["The customer response, literally, from what I\u2019ve seen, is close to 100% positive.", 0], ["If we can help people close the loop a little more, so they are looking more directly products, that makes our ads more valuable.", 0], ["On top of the data is where the AI services, where the bot framework, the cognitive services.", 0], ["We set a goal for ourselves to double what we did in fiscal 2016, and the trajectory is actually quite positive.", 1], ["And as you know, we've been putting increasingly more energy in India.", 0], ["The Mac revenue growth was up 20% in China, and we had extremely strong Services growth during the quarter in China.", 0], ["The people, places, things and how we reason about it and help users, whether they're at home or whether they're at work.", 0], ["And really, driver of these per user services, such as EMS, actually is the value proposition that Satya refers to, and we refer to as Microsoft 365 and we saw strength broadly.", 1], ["If you look at the second area, we have purchased \u2013 or we purchased last year about $50 billion worth of goods and services from U.S.-based suppliers.", 1], ["As we looked in Q4 of 2019, we believe it's -- there's enough trend now to show that the useful life is exceeding four years.", 1], ["We're also excited about how they work together.", 1], ["But the opportunity to take not just video ads, but other ad formats we have, bring them to the rest of the web and other apps with our ability to target and measure, we think is a big one.", 1], ["So on that front, it's better control, better capacity control, especially search capacity, and also good costs.", 0], ["Offerings like the Amazon Global Store where Chinese customers can access those international brands on the China website and have them shipped directly to their houses is something we're focused on.", 0], ["And we do that by building very simple ad products.", 0], ["As you know, we increased iPhone channel inventory by 3.3 million units in the first quarter of 2016.", 0], ["We're seeing a lot of again continued strong adoption and the usage and viewing and hours watched of our -- both our music and our seasoned video and music.", 0], ["When you think about the transition or people using feed versus Stories, there are a couple of things that are different.", 1], ["that I think all speak to a really good business environment for the future.", 1], ["Yes, I am happy.", 1], ["On the search opportunity, there's a growing number of searches on Facebook, but we're still a ways off from monetization.", 1], ["we have a lot of work to do to work on the format of that.", 1], ["You can see the \u2013 in our supplemental revenue disclosure, it's in other revenue, and it's the majority of the other revenue in that line item.", 0], ["And then keep in mind that there were a couple of things that affect the compare as well, which is the fact that a year ago, we had an award for a patent infringement of $548 million, which is obviously a one-off item that is not going to repeat this year.", 0], ["So, about a third of the impact of those was seen in Q4, and then again that's one element of the sequential operating margin.", 0], ["These are upgrade any time kind of plans.", 0], ["so it was somewhat expected but a very strong quarter in AWS.", 1], ["And what we see there is again, original content is a fixed cost expense.", 0], ["So they are meaningful impacts, and I think that is what I think probably you're referring to.", 1], ["We feel that we're well positioned for both meeting today's realities of our enterprise customers, but most importantly, where on a secular basis I believe hybrid computing is going, which is to this architectural pattern of intelligent cloud, intelligent edge.", 1], ["We believe that it\u2019s the best smartphone in the world.", 1], ["And I'll talk a little bit about Japan and Walter to answer your question, I don't have any concerns if that expands such that in this unique issue beyond Japan, with the Windows end of XP plus the VAT increase, I do think, as well as some of the macroeconomic environments, it tightened far faster than we had anticipated and Japan in particular because of its model for us, it is a non-annuity geography for us.", 1], ["We love \u2013 we think there is a great opportunity to do that to continue to expand the existing business that we have.", 1], ["And if you kind of look through at the different countries, in almost every country, we grew at a multiple of the market.", 0], ["You know, do you want to pay a few dollars or a few pounds or a few euro to sponsor this post is a really easy on-ramp for a small business.", 0], ["The number of warehouses that we added represents a 30% increase in square footage year-over-year.", 0], ["Those advertisers are of all shapes and sizes with the main goal of, again, trying to reach our customers whether it's to drive brand awareness, discovery or hopefully purchase.", 1], ["I think overall, what we're seeing is continued momentum, if you think about even our overall approach has been to have a view of an architecture that is grounded in our customers\u2019 needs.", 1], ["because it\u2019s obviously a firm asset marketers have long loved.", 0], ["in fact what we hear from our customers is that the ability to move faster and more agiley is what they value.", 0], ["And here's the best part, they had a 73% sales lift in the United States.", 0], ["And so to the degree that sales are distributed in the countries with disproportionally with shorter supply chains, or the standard deviation demand is less, we would always choose to have less", 0], ["And now I think the important thing is that we execute on all the things that we need to do to make sure that we keep people safe.", 1], ["And I see apps that makes me want to go back to K-12 again and repeat my schooling because I think it changes the game in the classroom a lot.", 0], ["For businesses I think that this is going to help complete the loop and help them to actually sell more things which ultimately is what they care about when they're using the platform.", 1], ["I think I mean, we're continuing to -- there's a lot of focus on serving that customer set.", 1], ["And under that new guidance, we capitalize production cost for original video content.", 0], ["Both were very good this quarter and it wasn't while certainly long-term Azure contracts had a meaningful component of the new, they weren't alone and being the only component of the new.", 1], ["Either one of those things, I think if we started viewing it quarter to quarter or year to year, we'll completely miss the trend.", 0], ["And so the other things that you named, whether it be Apple Music or Apple Pay, both of these are very important to us.", 1], ["So we do have Stories ads available across Facebook, Instagram and Messenger, and I think one of the most important things we learned as we were doing it transition to mobile is if we made it easy for our advertisers to place the ads, make sure they understood the measurement they were having and also make sure the ad format worked, businesses would move more quickly.", 1], ["More I view, is the return healthy?", 0], ["Our services business, and I've said it in the past, is accretive to company margins.", 0], ["So we had continued efficiency.", 1], ["So I mean across the whole family of apps, I mean all of this engagement is growing quickly and we're very happy with how we're enabling people to share.", 1], ["So we're going to keep on doing more there.", 0], ["Obviously, we need to make some assumptions around the take rate of our customers on the -- on Apple TV+, right.", 1], ["So one of our theories in this is that it's one of the reasons why voice calling has been a little slower to catch on is because you need the large established network of people who you know will have access to be able to receive a voice call before it, before that behavior can really take on in a big global community.", 0], ["There are, within the 300 million-plus paid subscriptions, some of these are third party video subscriptions and we see the growth that is going on there.", 0], ["We have a good operating system release for the core desktop user, and second, I believe is that we also expand out into new usage patterns.", 0], ["And we're growing that capability there.", 1], ["First, we need to convince marketers that people are using Stories, and I think having seen the mobile shift, their process \u2013 they\u2019re getting that I think more quickly.", 1], ["And Cosmos DB I think is very unique in its capability.", 1], ["In fact there is always, and I think we also talked about how we get licenses sold and then, or subscriptions sold and then there's deployment.", 0], ["On the demand side, all of the things we do to get more advertisers active in our system, means we'll have more ads to choose from, to make those ads more relevant, to measure the ROI of those ads so that people can then iterate and, again, make those more relevant.", 0], ["We're going to all know a lot more after we roll out, but the thing that won't change is that advertisers are going to look at the highest ROI opportunity.", 0], ["Obviously, part of that was in the capital leases being flat year-over-year, and the team's ability to really run the data centers at a higher efficiency.", 0], ["So, by default, the International growth rate was higher.", 0], ["And the execution is hard, right?", 0], ["We had a, as I think Dave mentioned, the Echo Dot was the highest selling unit globally, so devices had very strong sales in the quarter.", 0], ["As Tim said, the interest from customers on iPhone 7 and 7 Plus is very strong.", 0], ["So I think your basic point is right, that the reason why we started working on Marketplace and the tab around that is because when we were exploring what the biggest use cases were of Groups, we uncovered that a very large number of people, hundreds of millions, use Groups to buy and sell different things.", 0], ["And all they need is just a very robust field service module that's cost-effective and efficient.", 0], ["Sequentially, we increased 170 basis points.", 0], ["And so we could not be more pleased with how we're doing.", 1], ["For example, we felt very, very good about the unit growth that we had in many markets around the world.", 0], ["But if you look at areas like hate speech, which are just much more nuanced linguistically, it really depends on the local language, that's an area where I think it's going to take more years to be able to do something reasonably.", 1], ["What I look and say that this number shows is that we are doing and it is encouraging that the plan that we put in place, that the sales team has done a really terrific job of executing on.", 0], ["We also get incredible feedback on the iPhone 7.", 1], ["So I don't feel like you'd expect any material change in those, Mark.", 1], ["So if you think back to how we've talked about the long term, the lifetime value equation, it's those components that I really think about proving out over time, and we had lots of encouraging signs about that.", 1], ["Our strategy is always to make the best products.", 1], ["I look back to last year's first quarter and we grew 82% year-over-year.", 0], ["We also have a more difficult memory pricing environment this year than a year ago.", 0], ["No real surprises there.", 1], ["And part of why I think you see this is that there are just so many different ways that people want to share so many different kinds of content, ranging from text to photo to video, just richer and richer and more immersive content.", 0], ["We see a lot of growth there.", 1], ["So that's why we're giving that indication of what we expect.", 1], ["The iPhone 6s upgrade cycle that we've measured for the first half of this year, so the first six months of our fiscal year to be precise, is slightly better than the rate that we saw with the iPhone 5s two years ago, but it's lower than the iPhone 6.", 0], ["The other area is streaming.", 1], ["As I said, there will be a lot of work together between Prime Now, AmazonFresh, Whole Foods, Whole Foods products on the Amazon site, Amazon Lockers at the Whole Foods stores.", 0], ["They reached over 36 million people in a target demo within three days.", 0], ["And so I'll share just one example but one I really love, which is the Alameda County Fair, which is a local fairground in Pleasanton, California.", 0], ["And so I think it's product first, and then prices sort of falls out of that, and we did decide to be more aggressive.", 1], ["Yes, order size can go up, but we ship a lot of toys and bigger items.", 0], ["And of course, as I\u2019ve said before, we\u2019ve never worried about that.", 1], ["And that diversity is going really well.", 1], ["I\u2019m not going to comment on any specific dollar terms, it is the largest commercial deal that we\u2019ve signed of the size and we see -- we\u2019ve line of sight to many more such deals.", 0], ["The subsidy, the lack of that \u2013 and this is more of a U.S. phenomenon than the rest of the world, some of that can be a shock for people that were used to paying $199 for their smartphone.", 0], ["I think if we can really change the way people work, I think the opportunity is enormous.", 1], ["And the residual value for iPhone tends to be the highest in the industry and many people pick up $300, $350 or so for their iPhone and so that even reduces the monthly payment less.", 1], ["So on that, I think what we're continuing to see with Stories monetization is, that is a product that's experiencing a lot of impression growth.", 1], ["We think we're at the very beginning of what's possible when we combine these two.", 1], ["And I would expect, I think we actually even talked about that last quarter, that the RPL delta which we've seen in Q1 and Q2 would go away in Q3 and Q4 and it would trend much more similarly to the overall consumer PC market.", 0], ["We think to have a great platform you have to have a really healthy ecosystem.", 1], ["But I do think the more helpful KPI for us in terms of bookings is the commercial one.", 1], ["So the work that we started talking about at F8 that we are releasing slowly over the course of the year is certainly one of the precursors for building out that ecosystem that I'm excited about.", 1], ["but we're pleased with the growth.", 1], ["And there's a lot of research that we've seen and reports that third parties have put out that show, that when you connect to place like India, it makes a very big difference socially and for the economy there.", 1], ["It was slightly under that despite the higher volumes and revenue growth than was in our guidance.", 0], ["So the pricing is really attractive.", 0], ["You can see that a little bit in the announcement and launch of Instagram Stories and what we're doing with Messenger and some of the additional tests on Facebook and the camera work that we're doing in WhatsApp.", 0], ["So it is the country in the world that benefits the most from connectivity.", 0], ["Where there's areas we can improve our selection and delivery for customers, we'll do so.", 0], ["But now between Facebook Messenger and WhatsApp, which are two very broad communication networks, we're pretty confident that because of the higher quality of calling that you can get through the services that we're providing that this is going to continue growing very quickly.", 1], ["In terms of monetizing some of our newer attempts at products in News Feed such as Ad Break, those are really in early experimental stages, and for now, we're really focused primarily on our core business, our core ad products, of which video is one.", 1], ["As you've seen from our track record during the last five years, we will do it at a very fast pace but we also want to do it efficiently.", 1], ["It's rather a reflection of the work that we've done to make our server capacity last longer.", 1], ["We thought it made sense to go ahead and buy some trailers, we're actually still contracting out for the truck part.", 0], ["That starts in Q3, but there's a number of other factors that I also pointed to, including the desktop lapping some of the efforts we made on desktop in terms of unblocking or working against the ad blocking technologies.", 0], ["It's a bunch of different places in which I think we made improvements.", 1], ["And you think about the impact that this is having on local demand, obviously that doesn't help us.", 0], ["At the time, what I basically said was, that even though this might decrease time spent and we expected that it would, is we took out especially a bunch of watching of viral videos.", 0], ["On local, we think this is a really big opportunity, and you see this in the large base of existing businesses using Facebook and Instagram increasingly.", 1], ["It's obviously transportation where you're building out new transportation modes, you're adding new deliveries.", 0], ["So when you put things in perspective and you add the $10 billion of growth that we had in the first quarter and the $7 billion to $9 billion that we're guiding to for the second quarter, you're talking about $17 billion to $19 billion of growth in six months.", 0], ["Secondly, mobile operating systems and browser providers such as Apple and Google have announced product changes and future plans that will limit our ability to use those signals.", 0], ["It in essence from an engineering point of view is similar to a phone in terms of the intricacies and so forth.", 0], ["And that's been factored into our guidance range.", 1], ["So becoming more engaged and we're also doing the basic blocking, tackling of adding selection, especially FBA selection, increasing free shipping offers and also speed of shipping offers.", 0], ["And it's tech infrastructure assets.", 0], ["We're not providing a specific time spent update but I think it paints the picture well on the DAU front.", 1], ["and the willingness of advertisers continue to grow budgets with us I think highlights our progress there.", 0], ["But we're very optimistic about it.", 1], ["We've increased Prime selection by 75% since launching that nine months ago in India, also increased the fulfillment capacity for sellers by 26% this year.", 0], ["That allows us to not only do things around accessibility, to show somebody who is visually impaired to be able to read to them what might be in a video or a photo.", 0], ["because our cloud, our public cloud runs on our software assets, our software asset gets packaged up as our servers.", 0], ["And that\u2019s an optimistic sign for me for the future.", 1], ["There was pent-up demand for the larger screen phones.", 0], ["Not only did we lower the prices of our products but we also create new services that are cheaper that customers can switch to.", 0], ["We're in four countries right now, the U.S., UK, Germany and Japan.", 0], ["Some of that cost of start-up is before the start-up some comes in a quarter afterwards.", 0], ["On your second question on Prime Now, so Prime Now is now available in 50 cities across eight countries.", 0], ["There is probably some level of cannibalization that's going on with the Mac on one side and the Phone on the other.", 0], ["I'll share one example of how ads are driving a small business on Facebook through ads, which is a company called Sparkle in Pink.", 0], ["This year, it's 35% to 28%.", 0], ["Because we are looking to show relevant ads to the right person at the right time, the systems we have that understand in a privacy-protected way what ads people are likely to be more interested in, those work, whether you're in Stories or Watch or Instagram Feed or News Feed.", 0], ["And obviously in - finally in getting more people that are enjoying things for free to - let to pay for some of the premium services.", 1], ["In terms of why mid-roll is preferable to pre-roll, Facebook is well suited for shorter-form content where we're ranking things to be longer-form as well.", 0], ["But ultimately, I think that humans have such a deep desire to express themselves and want to connect with the people around them that I think that all of these audiences and all of these different types of media should grow over time.", 1], ["We also have in the same vein of, I think what you called maybe automated consumption, the same day has expanded.", 0], ["If you're a business and you have a higher ROI for interacting with a person in your messaging thread than you do on the mobile web or trying to get them to install an app, then that creates this positive feedback loop, where you're going to point your ads towards the Messenger thread.", 0], ["But if you look at iPad as just an example, in China, 68% of the people that purchased an iPad it was the first tablet they've owned and 40% of those have never owned any Apple product.", 0], ["So it's a different consumer format, and we believe that the ad format should follow the consumer format, so it's really integrated as part of the experience.", 0], ["I would attribute it to the Prime flywheel.", 1], ["And so for us I think really the way to think about the early signs of the impact were the strong device mix, some higher priced units across a wide variety of OEMs as we build into holiday, did provide some slightly better than expected results, as you noted in the non-Pro business.", 0], ["Last year we added 30% additional square footage to handle that additional shipping volume, and about 80% of that went into service in the back end of last year.", 0], ["Messenger, I think, is a really important thing and WhatsApp over a three- to five-year period, and we're investing a lot in it.", 1], ["The emerging markets which has been a source to great questions over time, the growth was absolutely stunning,", 1], ["On the Audience Network, we continue to invest in ad tech, and the Audience Network is a key part of our focus there.", 1], ["What matters the most is the A/B test that these people saw ads on Facebook and Instagram, these people didn't, and here's the sales lift.", 0], ["That's because you can shoot it on your mobile device, you can upload it, you can do that for free or you can pay us for the ad.", 0], ["And, Lloyd, on the margin question, as I mentioned, 2019 will be a big investment year.", 0], ["And on Live video, the theme that I think is most important is just that there's so much that people want to express and share with the people around them that they don't have the tools to do today.", 1], ["So we're making the investments in warehouses, fulfillment capacity and delivery capacity to handle that.", 0], ["Over the next several years as we develop an understanding of all of the content on Facebook that won\u2019t be a constraint anymore.", 0], ["and we take this very seriously, from the work we've done with LinkedIn to get CS&E Lean In circles all over college campuses, to encourage more women and under-represented minorities to come into our field.", 1], ["Obviously, I'm very pleased with the strength of North American ad revenue and, overall, all the different regions, but that's a factor there, and IG is, obviously, contributing nicely to growth in North America and worldwide.", 1], ["We had a strong holiday season despite it being abbreviated.", 0], ["That generally went to service that 40% growth in units, in AFN units.", 0], ["So that's the core platform.", 1], ["We're adding regions and seeing a lot of global demand, and so -- and improving margin, so I think that\u2019s clearly the very high level as you asked the question.", 0], ["It should be designed around our relationships because that's what matters to people.", 0], ["And if you look at some of our new offerings like Prime Now that's available through a mobile app and very convenient for customers.", 0], ["We\u2019re, I think, in a much stronger place in elections now.", 1], ["We not only see Windows Server obviously but we see 20%-plus of Linux growth.", 0], ["There's a couple of other factors while I'm at it for guidance.", 1], ["And the second group were people that hadn't engaged with them directly but were quick service restaurant purchasers.", 0], ["We were not doing that a few years ago.", 0], ["But again take all the other things I described, power BI , Dell and the list goes on, take eDiscovery; even for the largest of enterprise these were things that had low penetration or low deployment.", 0], ["Essentially for the last five years, the way we've run the company is essentially to return our free cash flow to our investors.", 0], ["So as we have to help advertisers move, we've learned how to make those investments in making the formats really easy, the measurement really easy, the buying really easy.", 0], ["So, we're moving quick, but we'd always like to move quicker obviously.", 1], ["The first one was the benefit that we saw from hybrid, in particular, with an outsized impact on Windows Server.", 1], ["Overall, when you think about COGS and the pacing, the depreciation rates of our servers don't change.", 1], ["So, overall, I think there's no question this last fiscal year has been an absolute breakout year for Teams in terms of both the product innovation and most importantly at-scale deployment and usage that we\u2019re seeing.", 1], ["I mean in terms of the focus on privacy, the one thing that I would \u2013 I would sort of cite there, if anything the priority for messaging is clear, the focus on privacy and interoperability, and that means that monetization for messaging is a lower, near-term priority so that has some \u2013 has some impact on the outlook.", 1], ["We're very interested in making sure that marketers can verify or measure outcomes through third-parties,", 1], ["So many years ago when the homepage ticker was in vogue, we never did that.", 0], ["So in terms of our ability to continue to do that, of course there are opportunities.", 1], ["So, just broadly, I think we expect the revenue deceleration trend that Q2 is not mark a reversal of that, but we expect to kind of return to constant currency revenue growth deceleration as you get into the remainder of 2019.", 1], ["We've done \u2013 obviously, we have 80 million now pages, so we have 80 million businesses using Facebook on a monthly basis, of which 6 million are advertisers.", 0], ["25 million Instagram business profiles, 2 million advertisers.", 0], ["That ultimately will flow through into how we can realize price on the impressions that we're selling.", 0], ["Amazon Fashion is one area where you're seeing us offer a number of private apparel brands and some of the more popular lines with customers things like Good Threads, Amazon's Essentials, which is men's and women's basics; consumables, is, of course, another big area where we have the benefit of working with some of the Whole Foods private label, but also doing some of our other Amazon brands, things like Happy Belly and [indiscernible] Prime and others.", 0], ["And we like the ramp there and we're continuing to invest in India.", 1], ["As I mentioned earlier new costs and things like expanding inventory, getting it closer to the customer.", 1], ["Those have been the weakest markets in this macro environment and specifically some of the geos we called out have more exposure in this place.", 0], ["And I think we've done a good job.", 1], ["From an upgrade point of view, there are pluses and minuses as I see it.", 1], ["One of the things that we've done to respond to the foreign exchange situation has been to increase the price of some of our products in certain international markets.", 0], ["because a lot of when people are finding videos on Facebook is you're scrolling through News Feed, you're looking at what story seems interesting to you, which is why we did the auto play videos so that rather than having to take an action, you can just start experiencing the video automatically and continue watching it if it's something that you're interested in.", 0], ["But given the growth we have in the business, given the opportunity we have before us, we're very much in investment mode in terms of the infrastructure.", 1], ["But we continue to obviously invest heavily in that work and we'll continue to work with other partners in that space.", 1], ["But stepping beyond any short-term issues, the commitment is -- remains to have healthy, high-quality selection in stock for products.", 1], ["And then after they launched, they did purchasing ads and re-targeted people who had viewed those initial ads.", 0], ["They're obviously both critical platforms.", 1], ["What we're excited about is that our business is helping people connect with things they want to buy.", 1], ["So we're very excited about continuing to do our work to help unlock all the expression and connection that people want to do.", 1], ["So that's been our goal and that's working well and it sort of shows up in our all-up growth.", 1], ["But we also think of in fact our servers as the edge of our cloud.", 1], ["So we're working with policymakers to ensure that people can share and express themselves while still protecting copyright.", 1], ["And we go to a lot of lengths to make sure that we're getting signals from people in our community to make sure that we're doing this correctly, in addition to the different signals that we would get from seeing people use the products.", 0], ["Bots, very early but giving the opportunity for more personal interactions between businesses and mobile.", 0], ["And so, I'd see that is opportunity.", 1], ["Having said all that guiding 38.5% to 39.5%,", 0], ["Do they rely on us for more products and more services?", 0], ["And this is in spite of the fact, as you know, that we lose leverage as we go from the December quarter to the March quarter.", 0], ["So, there's a polarization of tends to be a polarization to early shipping -- or excuse me early purchase and late purchases.", 1], ["So on the Dash Buttons, we're really excited about what we're delivering there.", 1], ["Just on the accounting piece, specifically to Q2, the impact of the Accounting Standards Update, revenue recognition changes we did starting in the first part of year, it's a $640 million increase to other revenue, specifically related to how we treat some of the advertising service.", 0], ["And I think when people think about our mobile app install ads they often think this only applies to developers and small companies, and really it's them as well but it's also companies like HBO which are using those ads to drive adoption and downloads.", 0], ["It's hard to be too prescriptive about 2020 and beyond, but I think the biggest change will be 2019.", 1], ["So these are all got a different profile in terms of margin and they are all now pretty high growth businesses for us.", 1], ["The reason why it needs to be a different tab or at least a different service from News Feed is because people come to it with a different intent.", 0], ["I think it's actually the best market in the world to be in for someone that is in the business that we're in.", 1], ["But when we look at what we're doing in the cloud, it's mostly about attaching to one of the secular growth trajectories going forward, be it open source Linux development, mobile use and SaaS applications.", 0], ["There is a \u2013 certainly a mix of products and services.", 0], ["So that's what's happening in Dynamics.", 1], ["because Facebook and Instagram are the two most important mobile ad platforms.", 0], ["One is, overall the need to get on the latest and greatest database technology just because of what is the increasing need for compute and data at the edge is what's driving a lot of the conversations on SQL Server.", 1], ["I think that that will ultimately be most of the value that's generated", 1], ["And it's through a curated feed that features the brand's lifestyle content and it's on a mobile detail page.", 0], ["And AI even makes it even more and more.", 0], ["We have over 18 million businesses now communicating with their customers through Messenger.", 0], ["If you look at iPhone 7 Plus, it was the most popular Plus model that we've ever had.", 1], ["I think we\u2019re well positioned to make it the best holiday ever for our customers.", 1], ["We're going to have to watch how that evolves, but we do think that that's a factor that we're watching closely and we'll just have to see how that develops.", 1], ["So that answers the question around Q2.", 1], ["And so on a blended basis, of course the ASPs will be different because of the two ranges.", 0], ["because it's a natural evolution of our 20-year effort to grow our fulfillment center network and our scale quite frankly makes it possible to even offer this to customers.", 0], ["But there are different social utilities that even if not everyone wants to use them, hundreds of millions of people might find value in.", 1], ["And what we want to make sure as a company is to cover all of that landscape with a very rich data platform.", 0], ["A lot of what we're trying to do here is not just about getting content off Facebook.", 1], ["On advertising, technically what I said is the sales force has grown higher than the rate of growth in the business itself, which was 42% regular head count and that sales force is primarily AWS and advertising.", 0], ["Facebook has a mix of text and news and links and visual content like photos and videos.", 0], ["because they don\u2019t perform the same way.", 0], ["We are on our way there.", 1], ["We are very proud of the launches in Q4.", 1], ["And even inclusive of LinkedIn, I continue to believe it's about a point.", 1], ["In other words, there is intelligent cloud and the intelligent edge is the architecture of pattern for which we are building, whether it is SQL server 2017 or with Windows server, the container service everything that we do assumes that distributed computing will actually remain distributed, and it turns out that it\u2019s helpful to think about it that way both for customers who are rationalizing their portfolios of apps as they lift shift modernize as to what they run in their data centers are in our data centers, but also forward-looking new workloads.", 0], ["And we've been pleased with how Instagram is growing.", 1], ["And if they work, can be big.", 0], ["That's a large number.", 0], ["I do think we\u2019ve made a lot of progress.", 1], ["I think what you will see from us is always a focus on driving users and driving engagement.", 1], ["In terms of the gross margin question, I feel very good talk about this quarter about our improvement year-over-year and remain confident that we are heading in the right direction and so, I think when you think about that plus the rest of our offerings, I think we're pretty confident.", 1], ["And one of the big takeaways from that is that time when people are engaging and building relationships, is good time and that correlates with all the aspect of long-term well being that you'd expect like happiness, and health, and feeling more connected and feeling less alone, and in all of the things that qualitatively matter in our lives.", 0], ["The reality is pricing is a function of supply and demand and how demand grows versus supply.", 0], ["We think there is good ROI to putting more servers behind things like choosing the right ad for the right impression opportunity that we have.", 0], ["So really, our kind of goal philosophy here is to drive efficiencies in our ops and pass those savings on to customers, and some of that's through, again, with the more than 60 price reductions, but also finding through new service and future launches, better options for customer that -- customers to present more efficient features for them to be able to run their businesses.", 1], ["On the ad supported question, I think what you've seen to-date is really particularly as you're looking as a customer, as a Prime Video member and watching content, we view that as you've paid into that service and able to watch those shows ad free.", 1], ["And then at the same time, we're bringing more and more advertisers into the system and that's giving us a better selection of the ads that we can serve to the people using Facebook, and that, again, improves the quality and the relevance.", 0], ["And the infrastructure has come quite a ways since we began to put a lot of energy in there because of their leadership and so forth.", 0], ["On story monetization, ads in Stories on Instagram is a small, but quickly growing part of our revenue.", 1], ["Especially for example, if you move a VM with some data into the cloud, you may want to use the same data to build a mobile front end and that\u2019s when you're starting to use some of our platform as a service components like our Azure Mobile Services, Azure Media Services.", 0], ["So there's different revenue streams that we see.", 1], ["The second one was the virtualization drive or data center modernization, another one, do move the premium mix up a bit.", 0], ["The iPhone X was the most popular and that\u2019s particularly noteworthy given that we didn\u2019t start shipping until early November, and we\u2019re constrained for a while.", 0], ["So total revenue has not changed, we just report that estimated value under the Services category.", 1], ["It comes at a different ASP point, so it's not exactly the same as E5, but very important for us strategically to be able to increase the appeal of Office 365.", 0], ["I'm excited about our SQL product.", 1], ["And so it was a stellar quarter for iPhone.", 1], ["We also said that every time we launch new products, the cost structures of the new products tend to be higher than the products that they replace.", 1], ["We have a lot of yen exposure in that segment, so the Japan performance being better also helped.", 0], ["And the way that would show up Mark is a little bit I think where you were leading with the question you asked which is when we think about the Microsoft commercial cloud at $9.6 billion and growing over 40% how do you see that evolving and really the question is we have quite a bit of per seat or per user type businesses but what Satya just talked about is really about the Azure concept or participating both in an expand scenario total addressable market which I think people have talked about for a long time but what was different about what Satya just said is our ability to frankly to have higher share in the next era than we had in the last era.", 1], ["So it's generally a headwind every Q1.", 1], ["So we think paid messaging, as we've talked about.", 0], ["As you know currency markets tend to be very volatile", 0], ["Perhaps SharePoint was the last time we had a platform effect of this kind.", 0], ["And, of course, we had Prime Video in some of our existing countries prior to that.", 0], ["But as hopefully you've seen as we began to give you more information about India, we've been investing quite a bit.", 1], ["We think that's the right thing to do for the business in terms of ensuring the community's safety and security and the durability of the franchise.", 0], ["As that business continues to grow, it'll get less of that impact.", 1], ["So, it's actually a pretty small difference in the United States compared to last year.", 1], ["We think AWS is that.", 0], ["In fact, the work that we did with the Surface line has really stimulated the entire ecosystem to do some of the best innovative work, and you saw that even at CES.", 0], ["Our goal is to be the best dollar and the best minute anyone spends, and the case we make is that we want them to take advantage of the opportunity that is mobile and the opportunity for the targeting we offer and the measurement we offer.", 1], ["Any metric we look at, everything was a huge success.", 0], ["So on the CapEx growth for this year, Paul, yeah, we are ramping CapEx, obviously, to support the initiatives that we have.", 0], ["When you look at private brands, it's very much meant to supplement that great selection, and we look for ways to be able to find private label items that have a high-caliber of quality, but also can bring that selection and that convenience for customers and really supplement what vendors and sellers are already providing the customers in many cases.", 0], ["And so that's the set of things on the plus and minus side.", 1], ["So our philosophy there again is we're continuing to focus on finding valuable ways to make our advertising opportunities better for customers, showing them new products that they may not have seen otherwise and also for emerging and established brands, helping them to reach customers.", 1], ["The loyalty rate that we have versus competition, an enormous gap there.", 0], ["And so, we're really excited about it.", 1], ["They're great from a customer experience standpoint because we can do what we do best with the logistics.", 0], ["And then finally, you've got \u2013 you have Facebook Feed which we're still seeing impression growth and that's coming around the globe.", 0], ["And I think the new feature of Always-On on Series 5 is a game changer for many of our users.", 1], ["So the data estate, one of the largest things that happens is people consolidate the data that they have and so that they can reason over it.", 0], ["So it was a good test for us.", 1], ["At the time of the acquisition, we had stepped up the fair market value of certain assets on the balance sheet.", 0], ["You've got the opportunity, I think, for ARPU growth in those regions, and that's going to depend on the mix of countries in those regions and the GDP per capita in those countries as well as the relative size of the ad markets.", 1], ["GDPR encodes a lot of important principles and in order for businesses to be able to operate, especially starts to get started and keep the market competitive, you want to make sure that there aren't 50 different regulatory frameworks that companies need to follow.", 0], ["We were a little bit higher than that number in total cost.", 1], ["because it doesn't have that constraint.", 0], ["So while I do expect that we'll bring more advertisers to Stories and we'll bring more advertising formats to Stories and that will create more demand for Stories, we're also growing Stories inventory quickly.", 1], ["And so I don't really associate it probably as much with a quote-unquote, budget that sits in IT very narrowly.", 0], ["We did lower the free shipping threshold ahead in to the fourth quarter, so customers took advantage of that and that was a great offer for them in the holidays.", 0], ["We're continuing to engage with many large customers globally.", 1], ["We're going to continue to work to do that, and we're going to continue to invest in making improvements in the ad products, and we think there are great opportunities to continue to make improvements to ROI.", 1], ["So that impacts the overall capital intensity.", 1], ["When we find bugs or errors, we're reporting them to our clients and addressing the issue and continuing with that analysis as we work through all of our metrics.", 0], ["And so, for us, what we really want is people to experiment and learn and get to experience Instagram as they have on Facebook so that we can make the case that we can improve the ROI and then we believe if you look at the consumer metrics of where people were spending their time, we will be able to gain share compared to almost anything else you can buy out there.", 0], ["I think we have a freedom to make those choices quickly and I feel very good those about the decisiveness that comes with it, but also the empowerment that we give to people within our organizations to make those calls, to increase our performance without waiting to an annual budget process.", 0], ["In other geographies, the way that we win is to get people to buy their first smartphone.", 0], ["It is different than \u2013 we have multiple options for you in grocery delivery.", 0], ["But you're also seeing additional expansion.", 0], ["It's getting better.", 0], ["So, even though obviously it comes at a little lower gross margin percentage, our ability to add workloads, add premium services and to increase our overall footprint inside a customer is really where the life time value goes up.", 0], ["And so it has several catalysts and I'm very pleased with the results that we were able to show during the quarter.", 1], ["You can't just start a webpage.", 0], ["When we have 500 million new applications built in the next five years, you're going to see and I believe Teams to be one of the major interfaces through which that experience and business process reinvention will happen.", 1], ["The median age there is 27.", 0], ["And so the fact that we will become a very competitive supplier of this technology at a time where the world needs more business process automation, we feel good about the opportunity ahead.", 1], ["The other growth driver of server products is cybersecurity and the security value in our servers.", 0], ["because most people don't use the mobile web and mobile apps are expensive to build and hard to get people to use, especially if you're a small business.", 0], ["so it's going to have a different margin profile than core Facebook News Feed from an expense profile perspective.", 1], ["On the social security information, social security is not an input people put into Facebook and posts containing information like social security numbers or credit cards are not allowed on our site and we remove them as soon as we become aware of it.", 0], ["So, we built self-service tools and obviously we want to make those as efficient as possible for customers and advertisers, but we realize that we will need actual sales contact with the accounts as well.", 1], ["We're really excited about the ecosystem and some of the skills that are being added to Echo, as well as some of the other devices that are taking advantage of Alexa, which is kind of the brains behind Echo.", 1], ["And even something like IoT, they're not just at the consumption meters, but they're also got SaaS like qualities to them.", 0], ["It was the largest contributor of year-over-year impression growth in the quarter.", 0], ["But it's not a primary metric for us.", 1], ["That\u2019s Windows 10 with securities and services.", 0], ["Those growth rates really at 58% on that total cloud number, it's pretty good demand signal on a global basis.", 0], ["And we're seeing people like, one example is Elise Stefanik, the youngest person in the Congress.", 0], ["The features include research tools, community engagement where you can talk to other customers, and certainly we'll try to build a one-stop shop for vehicles as an extension to the automotive store which engages customers to add information about their cars in their garage and which makes it actually easier to shop for parts and accessories for your particular vehicle.", 0], ["Yeah, I mean, on the options on video monetization, it's going to be, still our focus is going to be on continuing to grow autoplay and continuing to leverage the video unit in News Feed.", 1], ["We have free shipping on 10 million items there and we're continuing to add benefits; Prime Video, Amazon Family.", 0], ["There's a lot of different effects that come from the different quality changes and focus on meaningful social interactions,", 0], ["And to a lesser extent, versus grocery, I would say we continue to build our business, B2B businesses, and very happy with the initial performance there with a number of the companies and universities that we've been working with and their initial results.", 1], ["Parts of this, we already have a strong foundation on, where WhatsApp and Messenger are strong around the world.", 0], ["The Diwali holiday in India was all in Q4 last year and a bit of it was in Q3 this year.", 0], ["And I mean, this goes back to the beginning of the service, right?", 0], ["Definitely a part of the story here is video.", 1], ["FBA is bringing more Prime-eligible selection to Prime and then the growth of Prime and the type of customers that utilize Prime and their buying behavior is a great traction for other FBA sellers.", 0], ["But it's a very hard \u2013 but that's a component of the number, not the total.", 0], ["On the services side, we're thrilled with the results.", 1], ["We've had circumstances around the world this year where frankly we didn't have many options because the currency movement was so large and so we've had to reprice.", 0], ["the EU, the strength in Europe was driven by SMBs.", 1], ["And so if that\u2019s the basis for your comment, I\u2019d really dig on the data if I were you.", 1], ["So that's one of the issues that we see with operating margin.", 0], ["And as we continue to work on Facebook Stories, we\u2019ll have more opportunity as well with Facebook and will map to the reasons where Facebook is stronger.", 1], ["And what I can tell you right now is that the -- we're taking sort of consumer interest on the Apple Card and there's been a significant level of interest on that and we're excited.", 1], ["There is a smaller portion of our services business that is not related to installed base and more related to when we sell a device.", 1], ["So amid all these opening of new buildings, many of them late in the year, the ops team did a fantastic job.", 1], ["We have looked to really leverage our investment from the last couple years and as we've funded and moved, invested in a lot of new areas as we've talked about, AWS, devices, digital content, we've had a lot of movement within the company that has filled a lot of those roles.", 0], ["I'll also point out that worldwide FBA unit growth approached 300%,", 0], ["And the way you've seen that, and I'll relate it to margins, is this continued and consistent installed base growth, and even still having the opportunities Satya laid out.", 0], ["So we're going to have some real work to do.", 1], ["But the most importantly, I think you see it in the customer momentum and what I believe is what is customer success.", 1], ["So working with folks across Europe and the other continents as well is important too.", 1], ["And certainly as we look ahead, we have a role to play.", 1], ["They were pretty much across the board, as I indicated.", 1], ["And to your specific question, Heather, on the impact of some of the price increases that went into effect in Q2, I'd say it's a couple of points.", 1], ["So you'll see devices, you see video content.", 0], ["So of course we want to build tools to enable them to share their content and all of that, but we're constantly refining the algorithms in order to make it so the experience is the best for you when you open up your phone and look at Facebook and, there are a bunch of things that are going on, we want to make sure that we're getting what you care about the most.", 1], ["We always evaluate the price of Prime in all the countries we're in, and we're looking for creative ways to reach the customer.", 1], ["They may have consumed one or two workloads but now they can have the opportunity to consume the entirety of the portfolio and not just that.", 0], ["So I think that these are just going to keep on growing is my expectation and hope, and we're excited to kind of pursue both different products to serve the different communities.", 1], ["We are the only cloud that operates in China under Chinese law, the only cloud that operates in Germany under German law.", 0], ["The investment that we are seeing is a step-up versus what we have experienced in particularly the first half of this year and the last half, the second half of last year which I mentioned.", 1], ["We are always looking at the long run.", 0], ["We've in fact continued to do what we thought created the most value for shareholders, which is to invest in ourselves, acquire companies that help us expand our TAM and grow, return dividends, as well as repurchase shares.", 1], ["So the smartphone has become the repository that goes across the whole of your life, not something that is just meant for a portion of it and so I think all of those are important and we're focused on all of them.", 1], ["We mentioned that we were up almost 50% in the June quarter, or actually over 50% in the June quarter.", 0], ["I think the sponsor products was a very inventive move for us, and I think that is having some really good impact on advertising growth.", 1], ["So we're still very optimistic long-term that Watch will be used for video that helps to bring people closer together and that will correlate with all the things that our community is telling us they want and that correlate with the measures of wellbeing that we think that social products can generate by helping people build relationships in terms of all the long-term measures of wellbeing that we care about like long-term happiness and health et cetera.", 1], ["because generally most people sort of lock down and don\u2019t do very much.", 0], ["I think most notably they did a lot of the Sunday delivery that you saw when we started launching Sunday delivery.", 0], ["We've been expanding since we started this effort in Q2 of last year.", 0], ["It performed so well that they decided to run the 60-second version on Facebook and Instagram.", 0], ["Number one I would say, we have - when we have seen an opportunity to invest, we have not really waited for tax reform to do that.", 1], ["And so overall, I think while it is certainly aided by the large expiry base because it tends to impact the CNB balance the most, it is really I think to your point; it is clearly encouraging because it gives us a very good base of support going into FY 2018 to come in to the GAAP reporting numbers.", 1], ["So there is a certain bit of mix issue that we are always up against.", 1], ["So I think what people are going to search Facebook for are finding people and content that they know is on Facebook and that isn't in other places.", 0], ["So we\u2019re guiding about flat sequentially in spite of the loss of leverage.", 1], ["During the last two years, the U.S. dollar has appreciated by 15% over the basket of currencies where we do business.", 0], ["And so we think the combination of the discovery ads that we can do, clicking through the Messenger right now already shows the potential of how important messaging can be for businesses.", 1], ["If you look at the upgrade rate, it's similar to last year.", 0], ["That's a direct response ad buy", 1], ["Lots of very popular, critically acclaimed shows have obviously come out, things like Homecoming, Jack Ryan, more recently Hanna, Guava Island, and some great titles.", 0], ["We have PaaS services in infrastructure like EMS that have SaaS-like margins, and then of course we have SaaS services in Office 365.", 0], ["So on the tax rate, the rate came in better than guidance in terms of the tax rate, but it's consistent with the long-term trend that I'd indicated.", 0], ["And we like \u2013 we continue to see, like what we see in India.", 1], ["and we remain extremely bullish on China and we're continuing to invest.", 1], ["But the way I would think about it is we are moving such a substantive piece of our EA business and with our annuity mix all up in commercial, up to 86% percent, we're feeling very good about our ability to transition people at LTV and grow the business overall at a very high level.", 0], ["Our real focus has been on the organic connections between businesses and consumers, where this is a really strong channel for customer service.", 1], ["The macroeconomic environment is weakening.", 1], ["It's also very core to our mission.", 0], ["We also had strong AWS revenue strength, where I already mentioned that we accelerated into the quarter, which is a different trend that we've seen recently.", 0], ["I see an installed base that has gotten incredibly large.", 0], ["So even if we just convert people who are advertising on Facebook into Instagram, that's a lot of a growth opportunity.", 0], ["I would say last year in the first half was a pretty large investment area.", 0], ["So, there's several things going on there that are quite positive.", 1], ["I would say Mark the main thing that this offering enables is the flexibility with which customers can adopt hybrid computing.", 1], ["I think the home business, Laura, is bigger than the HomePod and Apple TV.", 1], ["And we expect - we built the Q2 range about - around what we've seen.", 1], ["And, of course, there are other messaging products in the world besides these as well.", 0], ["We're confidently we were near but just above our $800 million estimate in Q2.", 0], ["So overall, you will see us do good work on the console, we'll compete there.", 0], ["On the 2020 expense outlook, that includes headcount growth and also other expense growth sort of around infrastructure is a big factor as well.", 1], ["So we feel pretty good about also the guidance for the fourth quarter.", 1], ["And so, while those are very attractive, we believe, to serve both in the near and in the long run, they're going to have a different impact on margin because the cost to support those users relative to the revenue they bring in does have an impact on margins in the medium-term.", 1], ["So, it's very similar to the U.S. story, potentially time lagged a bit, but we are seeing the same customer adoption and impact on growth rates.", 0], ["Things that help our ad business sell products.", 0], ["So we\u2019re filling orders completely online at the moment.", 0], ["In fact, we are seeing very good adoption in scientific labs, in universities and some pharma companies and others who are looking at really building their quantum algorithmic promise long before the quantum computer cloud is real so that they are ready to be able to take advantage of that computing resource.", 0], ["Importantly, marketers have to adjust sometimes.", 1], ["Then also what we think about as the mix our goal is not just to sell commodity services, but to actually use commodity services in some cases as a bootstrap for higher level services because of things like data gravity.", 0], ["I feel confident in our ability to continue to make progress on our overall commercial cloud gross margin growth, and I am encouraged by the demand signals we are getting.", 0], ["we're going to build the services that we think are useful.", 0], ["We do view that we have a responsibility in the U.S. to increase economic activity, including increasing jobs, because Apple could have only been created here.", 1], ["We're breaking ground on a new 10-acre campus there.", 0], ["FBA as Prime selection and Prime growth attracts more FBA sellers.", 0], ["We never could have done that without Atlas measurements.", 0], ["And I think the investments that we're doing there will continue to enable us to drive advertiser demand.", 0], ["But you can also buy on a cost per engagement basis, and that include likes, comments, and shares.", 0], ["But if you're talking about watching inline and feed, that's not the place where you're necessarily going to see a TV show and then watch an hour-long clip right there.", 0], ["So it's really an important part of what we're offering for people to share real experiences.", 0], ["In terms of how we think about the absolute numbers, first I should say I think most people assume \u2013 and it is true to a certain extent \u2013 so much of this is the growth in our Commercial businesses across Azure and Dynamics and Office 365, and that's true.", 0], ["And that has allowed us to really increase the amount of video that people are watching without getting in the way of the core mission of what we do, which is helping people interact.", 0], ["And we still like the customer reaction.", 0], ["So we expect a lot of the strength areas to continue, consumer demand, AWS and advertising.", 1], ["So that all impacts both North America segment and international.", 1], ["One of the important things that's distinct about the small business market is that there tends not to be much of a lag in terms of buying and deployment.", 1], ["And as we\u2019ve said in the past, we plan to continue to increase the dividend every year.", 1], ["These are people who are using Facebook and this free product to create an online and increasingly a mobile presence.", 0], ["In fact, one of the cultural changes inside the company is everyone from the frontline engineer to the frontline salesperson is responsible for usage.", 1], ["The ads have expanded quite nicely to Instagram, and Instagram represents a very healthy part of the growth and we expect that to continue as well.", 1], ["In Q3, we rolled out Shopping in Stories globally and began testing the Shopping Channel in Explore.", 0], ["So whether someone is ordering off their Alexa device or whether they're going to their phone, or going to their computer, it all has the same effect for us.", 0], ["And we continue to improve pricing and fast delivery", 0], ["So there's a little bit of a headwind there as well.", 1], ["A new pilot season including Man in the High Castle and Hand of God so stay tuned for that \u2013 or seasons of Man in the High Castle and Hand of God.", 0], ["And that's what I think we're going to unlock with this tab.", 0], ["So you can think of all of this work and Sheryl talked about the value optimization efforts as part of that as being an effort to improve the yield of the impressions that we have to drive downstream business results for advertising partners.", 0], ["But at the same time, one of the things that customers are looking for is making an enterprise-wide architectural decision across all of the workloads.", 0], ["One, it is about the hybrid design point that is at the core of how we are billed, both Azure as well as our servers.", 1], ["And customer satisfaction is literally off the charts on iPhone X.", 0], ["Our focus, however, continues to be on our ad products", 1], ["As far as Surface, Surface is playing an increasing role for us in both consumer as well as in the enterprise market.", 0], ["We also had currency issues in India, as everybody else did", 1], ["So yes is the basic answer that Messenger and WhatsApp serve somewhat different utilities for people.", 1], ["Overall the thing that we are most focused on with Office 365 is how do we make sure that we have the Office 365 end points everywhere and good usage.", 0], ["And we believe that trend will continue because we\u2019re at the very beginning with people really understanding the power of the smartphones and lot of people are walking around with particularly in developed market.", 1], ["For the developer, we obviously provide the developers a tremendous amount of developer tools, programs, compilers, languages, of course the operating system, APIs, SDKs, and have a huge developer relations team.", 1], ["One of the things that I'm very explicit about is we will have an open platform for other business process applications", 1], ["It\u2019s growing very fast.", 1], ["And so we feel fantastic about the results.", 1], ["Free trial conversion rates are higher when Prime members stream, and they also renew at a higher rate their annual subscriptions.", 0], ["That is how I think about it", 1], ["And then I think the EU Parliament President after released a statement saying that we'd met our commitments and did the things that we said we were going to do, and it was a relatively clean election.", 0], ["In terms of the market in general, if you look at last year, which is the last data point we have on the full market, there were still 0.5 billion feature phones sold in the world.", 0], ["And that's how we thought about it and that's what we're executing on.", 1], ["So in this case we're not taking these positions of which regions to open and where to open them well in advance of our demand.", 0], ["In fact, you can just look at Siri today and this is now accelerating with iOS 10 and the Mac, but we've been getting 2 billion requests a week for Siri.", 0], ["The other piece also that's driving is hardware innovation by the entire ecosystem.", 1], ["When it comes to infrastructure, we're the only cloud provider that provides true hybrid cloud computing with Azure and Azure Stack.", 0], ["If you think about the journey that the company has really been on for the last couple of years, it's moving from reactively dealing with issues that our community flags.", 0], ["McKinsey, I saw a recent study from McKinsey that's projecting the upper middle class to grow from 14% to 54% of households over the ten-year period from 2012 to 2022.", 0], ["So that's certainly been helpful in terms of making News Feed even more engaging and we'll continue to be focusing on a number of initiatives, public content and just sharing with your friends.", 0], ["We had a record day for sign-ups for free trials for Prime in Prime Day globally, had a very strong Prime Day in particular internationally.", 0], ["The other thing I would add to that is that the margin you see in any quarter is really the output of our rate of investment at some places and drive for efficiencies in others.", 1], ["It's taking something that's very unique, builds off of our core in the server business, and allows us to both grow and add new perspective there.", 0], ["And we launched Prime there a year ago, if you remember, and we've had more Prime members join in India than in any other country in the first 12 months.", 0], ["During the quarter, we returned to growth there.", 0], ["because we've heard some significant level of interest around this, is starting with the December quarter, for the first time we're going to be providing information on revenue and cost of sales, and therefore gross margins for both products and services.", 0], ["Now that being said, I want to point to the core, which is that renewal rates were very good, and a big quarter.", 1], ["The other thing I will mention is, we have more of a commitment I would say which is been there from a long time to build out a global footprint with more regions and anyone.", 1], ["because we have that position in the client server space.", 0], ["And then in terms of the margin profile, I mean the entire story of having the E3 mix first to be high and now E5, that's the thing that Amy talked about, which is we now have good premium tier value in all of our products, in Office 365 that's most evident with E3 and now E5.", 0], ["So, we don\u2019t split this into, there is an edge computing, there is a cloud computing.", 1], ["Our ability to quickly, I think, move our customer base through stronger execution, both direct through retail and having our channel execute well and partner with us on this transition.", 0], ["Office has obviously had very, very successful individual products that have been deployed broadly, but each of them was a singular tool.", 0], ["And I think we've got the best line-up we've ever had in the customer response to the product and what the product does for them is really incredible.", 1], ["So that\u2019s again non-zero-sum .", 1], ["What you're seeing there is also obviously colored by our investment our increased investment in India based on the momentum and the success we've been seeing there so far.", 0], ["So, while these long-term large contracts will add volatility to that number, if you look at our -- see in our balance of $91 billion and see that that also grew 25% year-over-year, you will get a sense that it certainly wasn't alone in its impact for the year.", 1], ["And we're going to build scale across all of them.", 1], ["Also the commerce taking place across the iPad is enormous.", 0], ["We have now the Data Lake service for basically petabyte, exabyte scale data management.", 0], ["And so Messenger and messaging services, if Stories is one click different from that, that's a few clicks different than that.", 0], ["The other thing to mention is that we continue to see very strong usage of growth that's outpacing the revenue growth of 81% obviously.", 0], ["But when I think about what's happening for example in Office 365, where we are adding 50,000 small business customers who now get the most sophisticated server technology, but now as a SaaS service, that's what's really happening world over with all application categories and that's where the growth is.", 0], ["That means those people are seeing less relevant ads and that\u2019s an ad targeting headwind for our business.", 0], ["So basically, in order for -- to fully meet the needs that people have for video, we started creating a separate tab, Watch, and that's been growing quickly as well.", 1], ["First of all, it is very important for us to ensure that we did everything to enable LinkedIn to keep their product and cultural ethos of putting members first and innovating on their behalf.", 1], ["Are they in the might market?", 0], ["And on a sequential basis, when we look into the June quarter, we expect to see another 40 basis points of negative impact from currency.", 1], ["The installed base of all our major product categories is at an all-time high and has been growing over the last several quarters, so the opportunity for us to monetize our services business continues to grow over time.", 1], ["And so we\u2019re very bullish that it does have legs.", 1], ["In fact, this morning I was reading a news article in Hacker News, which is a community where we have been working hard to make sure that Azure is growing in popularity.", 0], ["We\u2019re not -- you won\u2019t have any specific stats other than the hours per day -- or sorry time spent per day that Mark mentioned on video.", 0], ["So the business is going incredibly well.", 1], ["And I was pleasantly surprised to see that we have made a lot of progress, in some sense, that at least basically said that we are neck to neck with Amazon when it comes to even elite developers as represented in that community.", 0], ["And so then that leads to your question on do you continue to believe there's some margin expansion possible as you add newer and higher value workloads.", 1], ["Then given that what you are saying is true, which is there will be some which will be lift and shift of workloads, but then there is lift, shift, and modernizing of workloads.", 1], ["In our case, the impact on margin after the hedges is going to be about 30 basis points for Q4.", 0], ["So, we worked with the 27 other members of the association to publish the white paper to put the idea out there expecting that this is a very important and heavily regulated area and there were going to be a lot of questions.", 0], ["And on payments, we're focused in different places with different products.", 1], ["In Q1, we opened this up to unverified pages so we could enable more people to take advantage of this kind of targeting.", 0], ["And that needs to be taken into account in our guidance.", 1], ["So, we pick our spots carefully.", 0], ["In particular what we saw this quarter was really as much about the mix of the devices that the OEMs are bringing to market as it was in the absolute unit distinction.", 1], ["And that is even through today, actually through January.", 0], ["I talked a little bit about home automation, but I could have talked about health.", 0], ["So EGM growth, North America EGM growth of 28% was actually also the highest in the last 4 years.", 0], ["But if you remember at the time, Instagram was focused on helping people take photos, apply creative filters and share them publicly across different social networks including Facebook.", 0], ["And I was mentioning to you in the prepared remarks that these changes have been received very favorably.", 0], ["And so, we're always testing different levels of that and trying to understand, and the various features, whether it's display or some of the sponsored elements that are out there, what kind of feedback is out there, but certainly keep that in mind as we roll out new things.", 0], ["In terms of emerging markets we picked sort of locally relevant prices, and in some cases where the dollar had become stronger, we took an exchange rate that would have reflected a while back, instead of the current exchange rate.", 1], ["On the other side, foreign exchange for us continues to be probably the biggest headwind that we've got right now is going to be negative 70 basis points on a sequential basis.", 1], ["because it's very present for the consumer.", 0], ["And so we're very focused on getting more people to use our targeting tools from Custom Audiences which lets people target ads differently to their current customers or people who they'd like to be their customers to look like audiences which enables us to identify the kind of characteristics of your current customers and then find other people on Facebook who share those characteristics so, again, the ad is well targeted.", 0], ["That news feed for me is kind of the lifeblood of Microsoft.", 0], ["And it was really propelled by the demand for iPhone 7 Plus, which is growing incredibly fast around the world.", 1], ["Yes, we\u2019re very, very excited about the progress again in the last fiscal year around Dynamics 365.", 1], ["We're now per month at a billion messages sent between people and businesses,", 0], ["And WhatsApp has demonstrated significant engagement with crossing 1 billion daily actives.", 0], ["All of those tenants get into Azure Active Directory which is our largest PaaS service because it's got even developer API, so that means more developers are using it.", 0], ["And it's a minority of the content, but I'm really focused on making sure that our company gets faster at taking the bad stuff down.", 0], ["But if you're a professional publisher, you need to have the ability to share a version of the content that you're producing that you're proud of, that can load quickly, that can be as rich as the tools enable people to see, and we're working on a lot of different tools for that.", 0], ["And we're trying to make a different experience than what you might be able to get on YouTube or any of these other services by making it more about connecting with people in different ways.", 1], ["So we can continue to grow engagement on core Facebook, as well as there are opportunities with Instagram and the other services that we have that are not monetizing significantly today, so there are opportunities there.", 1], ["And the current estimates from Kantar are that that would mean that we would gain more than 9 points of share on a year over year basis.", 0], ["And then a few other things you may have seen in our press release today, the launch of Mexico which we are excited about and Amazon business.", 0], ["We now have over 8 billion messages sent between people and businesses per month, which includes automated messages.", 0], ["As Brian said, we're feeding the platform and certainly common thing with category expansion, new FCs, original content, Prime Instant Video devices, Prime Now.", 0], ["At 58% growth, it certainly speaks to having a big base and a big growth number.", 0], ["We've taken a lot of actions on the cost side, on the pricing side, and obviously with hedges.", 0], ["These things are incredible features.", 0], ["But what I can say is that all of the trends that we've seen suggests that in the not too distant future people will be sharing more into Stories than they will into feeds, and that the whole market across all of the Stories type of products will be bigger in a market where people are sharing more moments from their days into Stories-type products than into feed-type products.", 1], ["We make investments with the idea that they are going to pay off and they pay off in either directly in the business they're in or in their contribution to the total business many times as a part of the Prime program.", 0], ["Our services business, we set an all-time record in June.", 1], ["And creators now uniquely have the ability to both reach a large audience and connect and engage the community through the social network on Instagram at the same time.", 0], ["I mean, iOS and Android came out around 2007.", 0], ["On Apple Pay, both the contactless payment and the in app are both important.", 1], ["That\u2019s what I\u2019d expect because of the, first amendment here is a strong protections on speech.", 0], ["And one of the things we've learned over the years is that the easier we make it for our advertisers, whether they're really big or really small, the more they'll adopt.", 1], ["So we feel good about the business position we're in and our position with customers.", 1], ["The investments we've made over the past years are about hiring the type of talent that can go and sit with a customer and drive the customer's successful outcomes of the projects they deploy.", 0], ["We have seen Prime members increase their orders, spend more, so that they must also see it as a real help to them in their daily lives.", 0], ["But again, we'll continue to give revenue guidance and also operating income to an appropriately conservative level that we've tried to maintain over time.", 1], ["That's pretty unprecedented.", 0], ["So that's why we're investing so much capital in content to feed the ecosystem and solve this chicken and egg problem if you need the content in order to create the ecosystem.", 1], ["And to answer your question about what category it starts in, just take a look at what's already on the web in terms of what people are doing and it is all over the place.", 1], ["And you see it in the numbers.", 0], ["because it comes at the low end of the range.", 0], ["It's quickly becoming the fastest growing BRIC country.", 0], ["We are looking for return on invested capital, free cash flow, and happy customers in the space.", 1], ["So we always believe that in distributed computing, you need a cloud and an edge.", 0], ["So we are very happy with the progress in the advertising business, continue to focus on advancing advertising experiences there, helpful for customers, helping them to see new products, we want to empower our businesses to find attracting and engage these customers and it\u2019s increasingly popular with vendor sellers and third-party advertisers.", 1], ["It's the communications tool, it's the collaboration tool, it's the line of business tool for meetings as well as business process.", 0], ["If you think about it from our reporting segments it's the D&C licensing segment as well as our commercial licensing segment and specifically our transactional revenue growth year-over-year.", 0], ["I mean overall, I feel very, very good about the opportunity ahead in business applications for us.", 1], ["And so when we do one, it is significant", 1], ["We have used the capital markets and the debt market to fund those to make sure that we made the right investments to grow our business.", 0], ["In other words, we want to make sure that we are, in fact, making our customers fully capable digital companies in their own right, whether they're in retail, whether they're in oil and gas, whether they're in health care because that's really what's in our long-term interest, which is to ensure that they have full digital capability, and then they'd use the subscriptions and the consumption capabilities of our cloud.", 0], ["So, obviously, as more and more advertisers come in and do that, the more and the better ads we'll have.", 1], ["So it\u2019s a headwind if you think about it for Q1.", 1], ["Our direct response business continues to be very strong.", 1], ["And if you look at even the examples I used in this quarterly earnings call, Maersk and what they are trying to do across all of those is pretty transformative.", 0], ["And I would say, Mark, while I appreciate your point that it takes \u2013 and we do build data centers in advance, the majority of the cost obviously in a data center is in the equipment inside.", 1], ["There is about 40 basis points of favorability in Q3 and it\u2019s expected to be about 80 basis point headwind in Q4.", 0], ["And we're in compliance and very, very happy with the progress of the business in India.", 0], ["So aside from a bit of the lumpiness that you do note and we have from time to time, the execution in the quarter was very strong.", 0], ["And so we couldn't be more satisfied with it.", 1], ["The first reason that I'm excited about this is moving more to end-to-end encryption by default in more of our products.", 0], ["And also, that's coupled with good engagement growth, so we're doing a nice balance of having an experience that's working well for our advertisers but it's also working really well for the people who are using Facebook.", 1], ["That's the guidance we gave.", 0], ["Again, when Prime Video is used by our Prime members, it drives adoption and retention, higher free trial conversion rates, and higher renewal rates for subscribers.", 0], ["So while we have a signal come in, you see a very quick turn from demand signal to us having servers in place and ready to be utilized very quickly.", 0], ["And so, therefore you see us, whether it's our subscription offer, whether it's our streaming efforts that are increasingly bringing the console plus PC together.", 0], ["And to your point on the component, the on-prem component, even with comparable doing well, let me break Satya's comment into sort of two drivers that have been actually more sustaining.", 1], ["We're also selling more subscriptions, Amazon Music Unlimited, multiple Kindle Unlimited, there's a number of services.", 0], ["Frankly, the numbers in those in terms of IT spend or intent to spend, they aren't much different than we've seen.", 1], ["There's lots of different underlying metrics, but the overall kind of reported metric is really \u2013 continues to be driven by the mix shift away from right-hand column ads, which are lower price and lower value.", 1], ["So we're running enough volume there that we're using trucks already.", 0], ["But we really want to emphasize, especially since there are so many questions on Messenger monetization on this call, that we're going to be slow and deliberate.", 1], ["And so, we're working and investing currently in capacity to do so, because we want to continue to be here.", 1], ["And then once you have that, the quality of those interactions is really what contributes to the scale of how much you can grow.", 1], ["So that year-over-year growth rate for that line item would have been higher, but for that change.", 1], ["Prime", 1], ["Now if you separate the fact that we had the larger base with clearly contribute to that bookings number being big, aside from that in particular Azure in the last year point did really show up in that 18.9, it didn't, the strong billings growth really showed up in that unearned outperformance, which you saw versus the guide and it was significant, a lot of that is the Azure fillings.", 0], ["So for example, whether it's developer productivity or IT productivity, it\u2019s not any one dimension, you need to bring IT and developers together to drive agility in an organization and their digital capability building.", 0], ["It's some of the largest brands in the world really going for the results that they're looking for.", 0], ["It will, as it gets used, go straight to that Azure revenue growth number on the P&L.", 1], ["So back in Q2, I said that we were estimating an $800 million expense tied to One Day in Q2, and we actually were just above that in Q2.", 0], ["so we're pleased with that.", 1], ["And frankly we've the most proven reliability of security and performance, and we've been at this longer than anyone else.", 0], ["And our ability to optimize the inventory that we have against those downstream activities allows us to deliver those at still good prices while still seeing effective CPMs go up.", 0], ["And we would like to place retail stores there.", 1], ["We certainly have a lot of areas where we continue to invest not the least of which is our AWS business, devices, video, the global expansion of a lot of our Prime Benefits and things like stores and grocery delivery through Whole Foods, Prime Now and AmazonFresh.", 1], ["So there's all kinds of new features that we've continually added to the Prime program.", 0], ["Yeah, on a deferred revenue balances, as we've said in the past, the primary drivers of that increase are both the activity that we're seeing with our AWS customers and the purchase of Reserved Instances and prepaid credits for their account, as well as Prime member purchases.", 1], ["You are seeing it even in our intelligent cloud results for the last quarter and this quarter.", 0], ["So you're right, other revenue grew 58% in the quarter.", 0], ["It exceeded our - even our expectations.", 1], ["I think we're very happy with the FBA program.", 1], ["And that's what we're working on, and that really takes time.", 1], ["And we got the Apple Watch.", 0], ["So there are really two components, and I think Satya has talked about why you would enter a region and its ROI, and there's also the correlation to how many servers and that spend and pace over time based on demand.", 0], ["We remain solidly in investment mode.", 1], ["We expect to see that roll out pretty rapidly.", 1], ["I think of the China age being young, at 36, 37 and so 27 is unbelievable.", 0], ["But the majority of the investment today is continuing to build capacity inside existing incredibly large data centers.", 1], ["Automating, we're doing a lot of work on automating the activities that the advertisers need to do, and continue to invent new products for those advertisers.", 0], ["This is tied in with the Prime Now offering in a handful of cities at this point.", 0], ["We did perform about where I thought we would.", 1], ["We're working really hard to give customers as many options as possible and allowing them to choose.", 1], ["So we have stepped up investment, although it did not go up as much year-over-year this quarter, we are still spending almost $10 billion on what essentially is fulfillment capacity in support of really strong growth, unit growth and FBA, and global expansion and then also on AWS, additional capacity for existing customers as they grow their business and also new regions.", 0], ["And so one of the opportunities we have here is increasing inventory, and it's particularly good inventory for marketers because we're seeing nice adoption of video views and really nice impact from those sales.", 1], ["So right now, as you mentioned 45 states that have state-imposed sales tax, first-party products we do our own collection on that.", 1], ["The way we look at it and the way we believe it works at least in our business is that customers will have a holiday budget and they will spend it between generally the middle of November.", 1], ["That number speaks to the strength of the product the loyalty of the customer, the strength of the ecosystem.", 0], ["And that is now up to 40 cities across seven countries versus 17 this time last year.", 0], ["It's a third-party marketplace offering.", 0], ["We've been acquiring companies over the years.", 1], ["And then even after we establish a flywheel here and get content being produced for ad revenue share, that's going have a different margin structure than core News Feed.", 0], ["So demand has been a big factor in what's been driving our growth to date.", 1], ["And I think we talked about it in prior calls, the 6 Plus is doing particularly well in the markets that you would expect, Greater China, other Asian markets.", 1], ["One of the things that we're proud of there is, there are now 99% of the ISIS and Al Qaeda content that we take down, our AI flags it, removes it before people see it.", 0], ["It wasn't showing up in Q1.", 0], ["And similarly with Azure, we're making sure that as people are tapping into the cloud and moving to the cloud, we can get all workloads to be as first class as on Azure.", 1], ["So I would just say Prime Day had enormous impact on the device business and devices were well featured and also well adopted by customers.", 1], ["Even EMS, when I think about our management, our management was just about Windows management.", 0], ["And Apple Watch margins will be lower than company average.", 0], ["So there, we've really had this dynamic over the last 12 to 18 months where we've limited the amount of video that we've shown in order to make sure - in News Feed, to make sure that it doesn't displace interactions, social interactions that people are having.", 1], ["So it's not just the commerce is being driven in ads in marketplace.", 0], ["And so I think we're leading and I think we have a lot more to do.", 1], ["And the process for that is often that small businesses become organic users, so those 40 million small business Pages that are using it once a month and then we're able to move them onto being advertisers.", 0], ["We're figuring out the extent to which those should grow to be big, independent apps over time, or should be integrated into the core of the Instagram service or our other messaging apps.", 1], ["This is again, a place where we've had traditional strength.", 1], [".", 0], ["What's happening with SQL Server, SQL Server is no longer just about a database that's on-premise.", 0], ["The hypothesis when we rolled it out was that if we removed the latency, which is often 10 seconds to 15 seconds of opening up a web view from News Feed that more people would read news.", 0], ["As we look forward, and we look into particularly the March quarter, the foreign exchange headwinds will be stronger in Q2 than they were in Q1 for two main reasons.", 1], ["We have introduced a number of things like that for public figures, for groups, messengers, probably been the most successful; it\u2019s something that\u2019s connected to the Facebook experience that now has more than 800 million people using it.", 0], ["We have partner and ecosystem that others don't.", 1], ["We have a dedicated place for people to watch and comment, where heavily focused on the social aspects of video viewing,", 1], ["But I just said earlier that we have more than 900 million people are using that every month.", 0], ["The way we think about this is we're trying to help marketers reach their customers, both their existing and their new customers, effectively.", 1], ["Overall, we are very, very excited about what we are seeing with SQL on Linux", 1], ["So that will have an impact on our overall product development as well.", 1], ["So, on the grocery side, for fresh we're in a handful of metropolitan areas here in the U.S.", 1], ["But what really matters to us and what we look at -- when we look at the elasticity of these programs is to see the impact on our gross margin dollars.", 1], ["As part of the adoption beginning in Q1, certain advertising services were classified as revenue rather than a reduction of costs of sales.", 0], ["And so it's not part of a broader pattern, or although I wouldn't want to rule out for the future that we might not see another opportunity at some point in time.", 1], ["There is lots of ways we use data to make the product better.", 0], ["But you're right, there are always pressures in that.", 0], ["And that includes advertising services and other things such as our cobranded credit card agreements.", 0], ["And also just on the growth point, I just think the team that's working on that is executing extremely well.", 1], ["Also, I will mention that we did see a small operating income loss for the quarter from Whole Foods.", 0], ["I mean we saw the impact in places like Brazil, where you\u2019ve gotten in currency headwind of over 30%.", 0], ["It's a long-term play.", 1], ["We continue to invest heavily in those two areas.", 1], ["And it can be a much more immersive experience and we've already found from the initial experiments that we've done that the engagement is positive and we're starting to roll that out more broadly.", 0], ["So there'll be an incremental differential in Q1 on those price cuts, but this is something that we again have quite frequently and I don't think it's a large factor in Q1.", 1], ["and that's because I think we solve a really big problem for SMBs, which is how are they going to reach customers.", 0], ["And we're a company that generates two thirds of our revenues outside the United States, 15% appreciation of the U.S. dollar.", 0], ["The layer above that is the place which we are very excited about.", 0], ["And as we lower costs, we pass those along to customers, either through new rates or new deals that we have.", 0], ["In terms of China, the LTE penetration as of the end of last October, which is the last data I've got, was in the mid-20s.", 0], ["That's actually a segment we don't today have good devices, and we hope to change that with Windows 10.", 0], ["I think that the far bigger thing is to look over a longer period of time.", 1], ["So we're very happy, very encouraged early on with what we've seen in the ramping of the business, the level of invention going on for both customers and sellers.", 1], ["But more importantly, we have a much more broader gaming view in terms of what value we can add with our subscription services streaming services across all devices.", 1], ["The number of people who have opted out on using context from the apps and websites they visit for ad targeting has continued to increase since the adoption of GDPR, so we\u2019ve seen that come up both in Europe and around the world.", 0], ["That\u2019s the initial market.", 1], ["And so you're seeing \u2013 of course, the auction drives pricing and there has been interplay between the supply growth and the pricing growth, and we're seeing the strong demand play through on the pricing side.", 0], ["So our intent is to use that more widely and stay tuned.", 1], ["In fact, we are adding significant value in security", 1], ["And yes, I view AR as profound.", 1], ["More IT professionals are using it as the control plane.", 0], ["I think that, yes, I mean, Cosmos DB's pretty unique capability in combination with everything else we do in both the data layer, the AI layer and the infrastructure layer, I think we have a tremendous opportunity,", 1], ["They've built a great business, focus around quality and customer.", 0], ["And as you probably know, as I had reviewed earlier, the online sales were so great at the beginning, we were not able to feed inventory to our stores until mid-June.", 0], ["and we're going to continue to invest there.", 1], ["It's still definitely having some overhang.", 0], ["And we do expect material improvement in FY 2017, both from the benefits of scale and the investments we've made, but importantly also in the revenue trajectory we're seeing and the makeup of that revenue.", 1], ["So we look at China holistically, not only as a market.", 1], ["So Amazon Music and Kindle Unlimited, while they're very successful and it's a good transition, they just \u2013 the units do not count in this unit calculation.", 0], ["And to your point on where we are and what's driving that delta and its consistency, frankly, over time, actually still the biggest impact is from the transition to E3.", 1], ["On Amazon Web Services margin, again, this is primarily due to efficiencies gained on our infrastructure, better utilization, better cost out.", 1], ["We continue to see good growth opportunities across the platform on both Facebook and Instagram and feed and Stories.", 0], ["We're growing quite nicely across brand and DR.", 0], ["That clearly is going to have implications for margins along with the other big investments that we're making next year.", 1], ["We\u2019ve taken our brand to more places and we continue to open new retail stores around the world.", 0], ["Right so establishing, we have to rewrite the networks on Messenger and on Instagram to be more client and server oriented to be end-to-end encrypted.", 1], ["So, you will see significant synergies in terms of the architectural platform underneath gaming, Microsoft 365, Dynamics 365, LinkedIn all being the same.", 1], ["We signed many of those this quarter that we feel quite good about.", 0], ["So, you had some G&A expenses that were higher in the quarter as a result of that.", 1], ["It's very hard to gauge demand, as you know, when you're selling everything you're making.", 0], ["And it will just be an interesting exercise to see how many of the things that we have that are physical things don't actually need to be physical in that world, and how much innovation that opens up for independent developers all around the world.", 0], ["You're starting to see some of that show up in things like Amazon Go, our beta store that we have developed in Seattle, drones.", 0], ["People weren't really doing mobile ads and we helped them get there.", 0], ["First, on guidance, we keep it pretty consistent process on how we look at guidance and how we value or how we estimate the near-term view of the business.", 1], ["But I think in the longer term, it's a great move, and I feel really good about how we're doing there.", 1], ["So we don't expect them to have any impact on us.", 1], ["There are people who will have a social budget or a digital budget.", 0], ["But I would say, generally, we're very pleased with the advertising business.", 1], ["Finally, on the GDPR trend, that's just based on what we're expecting given that you're having to bring people through these consent flows, and we have been modeling it and expect there would be a flat to down impact on MAU and DAU.", 1], ["Last year, we launched the top end of our iPhone lineup, which was iPhone X, during Q1 and placed the entirety of the channel fill for iPhone X in Q1.", 0], ["When someone thinks that only using one cloud, we're definitely one of the names.", 0], ["We had double digit services growth in all of the geographic segments and the App Store, AppleCare, Apple Music, cloud services, Apple Pay all set new June quarter records and of course subscriptions have now passed the 300 million, as I'd mentioned before, and so we couldn't be happier with how things are going.", 0], ["And you're right, we do expect to see and continue to do that as we lead into 2017 within the overall envelope I discussed.", 1], ["When you look at our financial performance in recent years, take the last three years, for example, the number of units sold during any quarter has not been necessarily representative of the underlying strength of our business.", 1], ["So we'll continue to try to work with folks to try to do what we can to help there.", 1], ["For example, right when everyone's talking about the cloud, the most interesting part is the edge of the cloud.", 0], ["It's worth pointing out that, as Sheryl mentioned, video does displace other ads in News Feed.", 0], ["And it should, to your point, match increasingly the market and we do get to some slightly bigger comps in H2 which I would agree with.", 0], ["Most people think about hybrid where they think about the cloud as the edge of their server.", 0], ["And I would say, the way to think about that and you see it in the gross margin percentages and the improvements we've continued to see is the Azure premium revenue growth exceeding the overall revenue growth that actually is a benefit to the gross margin rate.", 1], ["In the short run, some of the spend is incremental and some isn't.", 1], ["But the biggest, I would say the biggest impact in this operating profit was the addition of sales and marketing personnel in AWS and also to a lesser extent the stock-based compensation, which certainly hits across all of our businesses.", 0], ["And I talk about AWS revenue, again, we're \u2013 we are accelerating.", 1], ["So for the next year to two a lot of the work that we need to do is just about getting the architecture right.", 1], ["So our APAC business is robust, and I think the global nature of our business is part of driving that.", 1], ["We got room on user growth, which you continue to see that number go up across segments.", 0], ["It set a unit record, so that I can share.", 0], ["We also look at the number of people that have upgraded, that were in the installed base prior to iPhone 6 and 6 Plus.", 0], ["So, we\u2019re going to have a tougher compare on that basis.", 1], ["So, without it, our gross margin would have been 39.7%.", 0], ["We\u2019ve opened a period of, however, long it takes to address regulators and different experts and constituents questions about this and then figure out what the best way to move forward is and that\u2019s certainly what we\u2019re planning to do with Libra.", 1], ["That's a different margin structure.", 0], ["We're really excited about it in terms of it providing an authentic and real form of sharing for people, and we're really trying to give people the full range of tools to share what they care about with anyone that they want, and Live is really effective there.", 1], ["It's been a great strategy for us.", 0], ["To put that in perspective, we launched six in Q3 of last year.", 0], ["And they're using our services to achieve their marketing goals to \u2013 whether that's to drive new brand awareness, discovery or ultimately purchase decisions on our site.", 0], ["The third-party revenue, it's a positive factor in gross margin and can be a negative factor in fulfillment costs and some of the other metrics", 1], ["If I can add, Wamsi, keep in mind that in a lot of countries around the world, the reality is that our customers have seen some significant price increases", 1], ["The important thing to understand here is that they're not only used by developers, they're used by all four marketer segments.", 0], ["CapEx, we've seen great efficiencies in capital expenditures, particularly in AWS.", 1], ["We spent a tremendous amount of time on our seller business over the years and trying to improve both the experience for sellers, as well as customers.", 1], ["And I think we're going to be receiving, over the next few months, implementation guidance.", 1], ["But again, we're taking a long-term view on the business and interested in helping customers as much as possible in that space.", 1], ["The other dynamic in our company though is definitely working on cost reductions and efficiency.", 1], ["When we launched iPad, we had about a thousand.", 0], ["Are we growing customer bases?", 0], ["So teams grow.", 0], ["But depending on how broadly the controls are adopted and set, there is a potential to impact targeting for our advertisers.", 0], ["I think that's very consistent with what we've been talking about over the last several quarters.", 1], ["That's going to take a long time.", 0], ["There are a group of customers who use our devices and then we monetize that in different ways to commitment to Amazon and the video and everything else.", 0], ["In fact, I sort of internally think of them as what our relationships with our traditional OEM partners in the PC ecosystem were.", 0], ["Now when you launch mid quarter, there's always some timing aspect to that, but I feel very good about the execution of those and that is a meaningful component of that out-performance.", 0], ["We also like that the \u2013 on Prime Day, we were able to expand our list of countries that experience Prime Day; this year to Australia, Singapore, the Netherlands and Luxembourg.", 0], ["And then from there, we'll start to roll it out broadly across the world, hopefully sooner rather than later.", 1], ["A lot of the concerns that we have with some of the potential changes to the ecosystem we think will disproportionately hurt small businesses' ability to compete with larger companies.", 1], ["And I think in terms of competition falling out and so forth, the watch area is really hard.", 1], ["And we\u2019re very proud of the fact, when you look, for example, at the last two quarters, the first half of 2015, our revenue growth has been higher than our opex growth.", 0], ["We continue to invest in that.", 0], ["As I talked about it in the comments, the iPhone 6s upgrade rate is slightly higher than the iPhone 5s but lower than the iPhone 6.", 0], ["And that is going to be the business that we hope to build on Messenger and WhatsApp over time.", 0], ["So Stories is a new format.", 1], ["We\u2019ve seen consistent double-digit billings in this segment and it speaks to that.", 0], ["I think, the announcement I just made about morphing to a one-day free shipping offer will make it even more the best deal in retail, as we say.", 1], ["So we're comping that year-over-year.", 1], ["And that's where things like AI services all get used.", 0], ["So, we\u2019re still positioned to invest aggressively both in 2019 and beyond.", 1], ["And so that part we really need to protect and we want to continue to invest in the business.", 1], ["The events we have for Diwali were all in Q4 last year some of them are in Q3 this year based on the timing of the holiday.", 0], ["From an absolute quantity point of view, the upgrades for this fiscal year are the highest that we've seen.", 0], ["We've worked very closely with them to line up capacity, share capacity plans.", 0], ["We hit an all-time record at $9.2 billion, first time we cleared $9 billion.", 0], ["That\u2019s in the KPI Windows commercial products and services.", 0], ["Obviously, what is different and particularly as we look at it on a sequential basis coming out of the March quarter, we will have lots of leverage, and that obviously is going to have a negative impact on margins.", 0], ["Much of our, not only our revenue for the quarter, but also for the year comes in that very tight window between middle of November and the end of the year.", 0], ["And that's always been where the Facebook app has excelled.", 0], ["So understanding photos, what's in photos, what's in videos, what people are doing.", 0], ["We started last quarter for buy-on Facebook, and that enables people to buy products from merchants with a buy button on Pages, and it is a product that is used and aimed at SMBs.", 0], ["Devices, we'll continue to invest in as particularly Alexa and the Echo products.", 0], ["So, very happy with the EGM business as a whole.", 1], ["The reason I'm so excited about AR is I view that it amplifies human performance instead of isolates humans.", 1], ["But again, beyond the 90-day clock, I'm very bullish on iPad.", 1], ["And it's a business that the team is excited about and working hard on.", 1], ["We're pleased with what's happened with quality on our platform overall.", 1], ["And in the long-term, we've got the investments we're making and things like artificial intelligence, VR, and obviously the Internet.org efforts that Mark just spoke about.", 0], ["And so I view all of that to be incredibly positive.", 1], ["We're quite happy with consumer engagement with 1.3 billion monthly actives on the platform, and we continue to see a lot of organic connections between businesses and consumers on the messaging platform.", 0], ["But a great majority of those do have a Facebook page, and that's because setting up a web presence for an SMB is complicated and expensive.", 0], ["And then the third phase is once there's good organic interaction between people and those businesses, give those businesses tools that they can pay for to reach more people and amplify those interactions.", 0], ["We see that as an opportunity, an opportunity that we can build and we can bring to sellers.", 1], ["One, we made some price adjustments essentially backing out the weaker currency effect and then some.", 0], ["Produce publishers, the thing that I'm excited about is, look, I do think that we have a responsibility to help work with newest publishers to fund high quality journalism.", 1], ["We're now over a $14 billion run rate.", 0], ["In terms of autonomous systems, what we've said is that we are very focused on autonomous systems from a core technology point of view.", 1], ["The app store hit a new record again last quarter and the growth seems to be really great there.", 0], ["We believe the stock is undervalued and so we have a bias towards the buyback.", 1], ["It's about building great products and delighting customers.", 0], ["But I mean, the team has just done really good work in terms of ranking the content and making the experience faster and building out better ways to get feedback from our community on what kinds of content they want to see in News Feed and helping people have the tools that they need to share the social content and news and video content that they want so that way it exists in the corpus of content that can be shown.", 0], ["So I feel great about our sales execution especially in terms of growing the recapture rate at accounts.", 1], ["We continue to develop new functionality for that country, whether it's delivery, whether it's seller features.", 0], ["In terms of AR and the Pok\u00e9mon phenomenon, it's incredible what has happened there.", 1], ["Again, I would say that we're very happy with the Prime membership growth and it has remained pretty consistent both in Q4 and then through Q1 and Q2 of this year.", 1], ["And so these numbers are not numbers that you would get if the market were saturated.", 1], ["As far as, the six days that sort of time period between Thanksgiving and the Christmas holiday, we don't see an impact on that.", 0], ["And we're doing an enormous amount of things to deliver curriculum to both K-12 with Swift Playgrounds in the K-to-6 area, other curriculum as you proceed beyond grade 6 under the Everyone Can Code area.", 0], ["Now today, we don't have to wait for someone to report it a lot of the time.", 0], ["So, we're very bullish on it, and I would point out that we're investing in China not for next or the quarter after, or the quarter after, we're investing for the decades ahead and as we look at it our own views is that China will be Apple's top market in the world.", 1], ["But all in all, we're really pleased with the revenue growth that we're seeing.", 1], ["The component that actually has impacted -- the second component in Pro that is a quote unquote \u201cASP/mix comment\u201d is the academic licenses that I referred to earlier where we did lower the price and saw an increased unit number.", 0], ["The way the Windows ecosystem works is there are phases to it.", 1], ["So in some ways, I guess you could say it implies slightly better at the company level, if that's how you're thinking about it.", 0], ["And then there's obviously different engagement levels, maturity of Instagram in those markets that also plays into it.", 1], ["And hiring was moderate; we actually are down to 12% on a trailing 12-month basis.", 0], ["So the fully immersive format with the targeting and optimization of Facebook ads is a pretty unmatched opportunity.", 1], ["So there's new growth in Azure.", 0], ["And as people consume more content on Facebook, there's opportunities to show them ads in Feed, so there's an opportunity there, but it's really around engaging with content that you want to find on Facebook.", 0], ["But if we started playing an ad in the middle of a feed before you got to the video, then that would really go against that.", 0], ["So those three areas have driven a lot of the cost performance and a lot of the deviation from probably the estimates that I've come up with this year.", 1], ["As I mentioned, particularly on the App Store, which is very important to us, the number of paying accounts has grown a lot.", 1], ["So multiple drivers of what is essentially the server and cloud number in combination.", 1], ["So the way to think about it is over the year, it's up a little and in Q2, it happens to be just a low quarter of the 12 that come up through the cycle, much like Q4 was quite large in the cycle.", 1], ["If you think about where SQL Server now with this new release, SQL Server 2016, it's become a fantastic database for many, many of the workloads, everything from OLTP to data warehousing to BI to advanced analytics for the Tier 1.", 0], ["So I'm excited about built new workloads that in many cases are born in the cloud workloads where we are expanding our market opportunity and continuing to outperform our peers and grab share when it comes to on-premise", 1], ["We finally have a space where the business model forward really works for us to be in a long-term sustainable financial relationship with news publishers, where we can pay them for high quality content that can go in there that will be what would fuels the tab.", 1], ["And there's a special property with Instagram, which is that the increasing visualization of ads and the creative canvas it offers with the science behind the Facebook targeting and measurement system is really a pretty unusual combination.", 0], ["That will unleash the power and capability of the iPhone in a way that an older network, a 2.5G or even some 3G networks, would not do.", 1], ["You're browsing through a News Feed, you tap on a link, if you're not on a good connection, the content isn't cached, it can take 10 or 20 seconds in some cases for that content to load.", 0], ["Just as Mark said with Groups, Events are growing quickly on Facebook.", 0], ["If you compared male and female engineers at the same level, there was not this discrepancy.", 0], ["And so some of the confidence I think that we have in the transition of that investment in operating expense into even more revenue growth comes from seeing the consumed revenue trend that we're seeing today as well as the pipeline of projects and customers that we have.", 1], ["And that's one where I look at that and I wonder if Facebook can play a role in helping to strengthen that.", 1], ["On the Prime pricing, we do have a few different programs for different demographics today with programs like Prime Student or Prime Family, which we're very excited about.", 0], ["We're seeing it in terms of deployments on new and existing devices and the security and manageability value prop that comes with a modern device and the experiences that employers want their employees to have and be able to take advantage of, along with some of the end-of-support deadlines that we have talked about, there is still an opportunity for us to remain focused on and execute on through this calendar year.", 0], ["The other thing that we see is that with our vast offering of selection and faster and faster shipping programs, we have more competitive offering for many things that they buy.", 0], ["And obviously, we've got broader family growth as well.", 1], ["That will play out, and at some point, it will stabilize.", 0], ["First of all, the new tax law in the United States is complex.", 0], ["And so the Watch had a more of a back-ended kind of a skewing.", 1], ["So we think PillPack has got all those traits, and we look forward to the deal closing and working with them.", 1], ["At this point, I would say it's pretty broad even use cases for even enterprise customers.", 1], ["And then the last one of course is the new value in things like E5 with voice or analytics and security.", 0], ["We did have an exceptional quarter with iPhone, and that was with the backdrop of not predicting the demand very well on the iPhone 7 Plus and therefore being in constraint on it through the quarter.", 1], ["The double-digit annuity growth has been consistent for us, and that I think is a driver we continue to look for and be confident in its execution quarter to quarter.", 0], ["So that's where we're going to end up, which is a true distributed computing fabric that the world needs in order to be digitally transformed.", 0], ["But what we also found was that just straight consuming a lot of video on News Feed was displacing some of the social interactions and connecting with people that was the real core of what people came to our services for.", 0], ["That continues to drive the great, great majority of our business and well for the foreseeable future.", 0], ["So \u2013 and then I think they are.", 1], ["So our guidance for the fourth quarter implies 10% to 20% growth and includes an 80-basis point unfavorable impact from foreign exchange.", 1], ["So video is growing incredibly quickly, and that goes across both social content and more passive public consumption of content.", 0], ["First of all, we don't think of our servers as distinct from our cloud.", 1], ["And so we want to be having a platform play as well as our own business applications play, and both of them should be high-growth for us.", 0], ["And so that\u2019s what we're doing, but we're excited about the opportunity and that\u2019s why you see the results that you're seeing there.", 1], ["So we have hundreds of thousands of emerging and established advertisers.", 0], ["So you can think about some overlap in the core use case, you might message your close friends and family on either.", 0], ["I think the initial data suggests that that's probably true.", 0], ["And so as I think about moderation, it is the absolute dollar.", 1], ["I would also add, Heather, the importance of the motion in our field organization and go-to-market with ISVs is incredibly high in terms of selling with and along with those ISVs, both making them successful and thereby helping us build very important scale through the platform.", 1], ["And in the value smartphones, that's the place where I want us to be much more efficient.", 1], ["And the number of people using them, I think it's still pretty early in terms of there are more than 1 billion people using Messenger, so we need to get that rolled out pretty widely.", 0], ["We\u2019re taking that learning over the past 18 months and really applying it at a broader scale across the sales force to put those resources where we feel confident that they will have a good long-term return in that next phase of transformation.", 0], ["And so to me that's another huge advantage and a competitive differentiation for us.", 1], ["So we're building capacity to serve that Asian peak and those users are at a lower ARPU.", 0], ["But there's also a whole class of premium content that the creators need to get paid a good amount in order to support the creation of that content, and we need to be able to support that with a business model, which we're working on through ads to fund that.", 0], ["Of course, it's relevant in recruiting, it's relevant in training, it's relevant in marketing.", 0], ["And we see customer satisfaction at or near 100%.", 0], ["In terms of gross margins, and you know that we look our gross margins on a sequential basis, the gross margin percentage after the offset that we're getting from the hedging program will be impacted by over 100 basis points.", 1], ["We think there are great things for customers and a great commercial opportunity", 0], ["because this is the fastest growing job segment in the country, and I think will be for quite some time.", 0], ["So, for visual content, we want to be able to look at a photo and understand what's in it, right, and whether that's something that you're going to be interested in, right?", 0], ["So yes, we still think there's a lot of people in the country who are not Prime members.", 1], ["And our view on tariffs is that they show up as a tax on the consumer and wind up resulting in lower economic growth and sometimes can bring about significant risk of unintended consequences.", 0], ["We grew 16%, which we're very happy with.", 0], ["And so these kinds of partnerships, whether it's with Adobe or others, we are very focused on making sure that ISVs and partners have success on our platforms.", 1], ["Yes, the shipping costs are going to be very tied to AFN unit growth and also the impact often greater Prime adoption and faster shipping methods.", 0], ["I would note that Mark talked about some of the changes we're making to focus on connections over consumption.", 1], ["We're doing quite well, but really, the key thing in music is not the competition between companies that are providing music.", 0], ["Let me go through the bookings, again with that 30% the first and best contributor to that is the strong performance on the renewals in quarter.", 1], ["Those are the two factors that I would point to.", 0], ["I mean, the next closest usage of the next competitor, we're six times greater.", 0], ["A lot of that is based on efficiencies of our data centers, not only for the AWS business, they're also for our Amazon consumer businesses, who is AWS' biggest customer.", 0], ["So, a lot of the focus for us is really making sure that that flywheel keep spinning, and that we continue to roll out a lot of great services the customers are looking for.", 1], ["The consumer value, especially now that we have even all the endpoints covered with Office, the definition of Office and where all it's present is also changed, and that all accrues to consumers being willing to have a subscription relationship with us.", 0], ["In-stock is very strong, especially as we head into the holiday period.", 0], ["And the results were amazing.", 0], ["So the issue is not that, and it\u2019s not a market share number,", 1], ["This is a place as Satya said we have made a lot of progress in being data-driven.", 1], ["And compared to Facebook lead ads, which were already performing well, those ads had 2.4x more qualified leads and a 4x increase in sales.", 0], ["But it \u2013 as I mentioned last quarter, it did result in higher fulfillment costs in the fourth quarter as a result, and I think you'll see some of that dissipated now in Q1, so you could tell it was a Q4 issue.", 0], ["We very much believe that Apple is very undervalued, and so we're investing with confidence in the company that we know really well.", 1], ["So physical stores decreased 3% year-over-year and this is primarily Whole Foods, but also includes our other stores, the Amazon Books stores, Amazon Go, Amazon 4 star.", 0], ["What I said on the investor part is that I think every investor has to look at their own situation and conclude the things that they think are important.", 1], ["So, very pleased with the initial progress.", 1], ["And that's why on a lot of these calls, I emphasize products like Instagram Stories or WhatsApp Status, which are very video-based products, but they're improving social interactions.", 0], ["And we've been on that path for a number of years.", 0], ["We also have this trend going on in our fulfillment networks where strong FBA growth and high growth in Amazon fulfilled unit is resulting in a large increase in fulfillment capacity.", 0], ["So, the way we need to drive sales around the world is by understanding markets, launching things like click to missed call ads in India and making sure our products work for market but also being able to connect to those advertising metrics and business metrics around the world.", 1], ["We had essentially 59% growth, as you said, 600 basis points higher than Q2.", 0], ["When we mentioned E5, I think that\u2019s frankly encouraging for us because all of these premium offers do best when you start the deployment motion.", 1], ["But increasingly as we move into the future, we're going to be able to proactively take down some negative content.", 0], ["And we're investing in trying to figure out what that's going to look like, and that's ultimately a lot of what we're extremely excited about for a number of years down the road.", 1], ["And I think that's a very exciting opportunity ahead, and that's one of the reasons that I'm very optimistic about the Watch growth that we've started to see recently up about 3x in the last few months in the U.S. alone.", 1], ["We\u2019re still expecting to continue to invest aggressively in the business, and that will have an impact on operating margins.", 1], ["I would also say across geo.", 1], ["The net result was a pull forward of some purchases by Japanese customers into Q3 and also some negative elasticity effects post October 1.", 0], ["And there's volatility to it.", 1], ["I will point out that the prior year was $6.1 billion.", 0], ["But I would expect that that will mostly come and affect the business through as those products that we build help businesses convert better, they\u2019ll \u2013 it will be more valuable to them and therefore that\u2019ll translate into higher bids for the advertising and that\u2019ll be how we see it.", 1], ["And in particular, in this quarter, how to think about I think some of the in-period outperformance versus what we see consistently, in the bucket of consistently, premium workload growth has been consistent for us.", 1], ["The new regulations need to be interpreted, need to be -- need to make sure they don't have unintended consequences.", 0], ["Use all the same mechanism last year through the year.", 0], ["As well, we're seeing a mix shift towards Stories.", 0], ["You're as likely to text your barber or someone that you're going to transact with, who you would have a phone number with, as you would be a friend.", 0], ["And it's across both Windows in particular, but also SQL, which are obviously the largest products within our server portfolio.", 0], ["And so I look and see that as an opportunity to accelerate top line growth.", 1], ["So we're just going to go down the list of every basic type of bad content.", 0], ["Lot of good cost efficiency, but again we're continuing to invest so actively as we build the Prime platform and that we have customers.", 1], ["And so that\u2019s important for us to increase the dividend.", 1], ["That\u2019s up about 9% year on year.", 0], ["As far as pricing is concerned, we had a price reduction in January for our EC2 services.", 0], ["But we can drive more efficiently and we can sometimes bank the efficiencies of prior investments that we've made in other periods.", 1], ["We may impact on board a few customers who first on board a lot of storage at commodity service levels, and then later on start some of the high level services.", 0], ["We usually quote the number of new features and services to you each quarter, we had 214 in Q1, up from 170 the first quarter of last year.", 0], ["We are big believers in a unified developer platform and a unified Store, and then as Windows 10 monthly active devices increases and the Store usage increases, we'll see more and more developers take advantage of it.", 0], ["We face a very wide range of issues here from really hard technological problems to issues scaling large organizations to of course a lot of now major regulatory and social issues and having different people or different perspectives can help us navigate that and provide both advice and oversight to make sure that we're doing a good job is really important.", 0], ["The first thing really that I think Satya and I both focus on every quarter, every month, is how much of our business are we continuing to shift to annuity and specifically to the cloud.", 1], ["As you point out, we're \u2013 we have expanded our own fleet.", 0], ["So whether that's in messaging, it's people messaging their friends or groups and News Feed.", 0], ["We also know, and understand, that we have several investors that value income.", 0], ["So, one of the things that we have seen is a lot of new used cases of Azure, which were really new Greenfield territory for us.", 0], ["At the same time, there is a need for the application suite to be built very differently.", 1], ["And AppSource is a pretty major announcement for us", 1], ["I'm just saying on a balance point of view, I think the usage of one on the phone will likely be much greater.", 1], ["Japan grew over five times market.", 0], ["I would say it's a culmination of a lot of separate investments that we're making.", 1], ["So, we\u2019ll continue to monitor engagement and sentiment very carefully.", 1], ["If I was to point to \u2013 there's really no single driver, but I'll point to a few that contributed.", 1], ["On a constant currency basis, we're only down 7%.", 0], ["Our current outlook for 2019 does suggests that we\u2019ll see margins come down this year versus 2018.", 1], ["To offset that, and actually do better than that, we had very good cost performance on other commodities", 0], ["It's stunning.", 0], ["And then the remainder - the biggest other investment area is obviously India.", 0], ["We had about $2 billion left as of the end of the quarter.", 0], ["But in general, we're very happy with that team and the progress they're making.", 1], ["We generally work to change the fees to make sure that the incentives are strong on both sides and we continue to have a healthy growth in third party.", 1], ["because we think over time our systems will do a better job deciding where your ads should be placed and even helping you target until you\u2019re seeing us build tools in that direction as well.", 0], ["And the reason for that is it's much easier to build an AI system that can detect a nipple than it is to determine what is linguistically hate speech.", 0], ["And we feel really great about the things that we've got.", 1], ["We do manufacture some of the entry iPhones in India, and that project has gone well.", 1], ["But the things that we're seeing hit the P&L are the fixed and variable expenses that it takes to run the building and I think that's what Brian's pointing out most pointedly in terms of what is impacting the profitability of the second half.", 0], ["Even this quarter, we returned almost all of our free cash flow generation in dividends and share repurchase.", 0], ["And in fact, a lot of the core Azure technology around machine management and data center management comes out of our bring efforts.", 1], ["We are obviously taking those programs and advocating those more widely and that is at different levels of implementation throughout different geographies.", 1], ["So on gaming, we feel good about Xbox One X, the premium console launch.", 1], ["Plus we're in an environment now that is dramatically different from a macroeconomic point of view than last Q2, from a currency point of view, from the level of which we've had to adjust pricing in several of these markets, and sort pf the overall [Indiscernible] in virtually every country in the world.", 0], ["So, on Stories, we've seen great progress with Stories as a format for people to share on our platforms.", 1], ["In terms of working with folks to produce all kinds of content, sports is probably something that we'll want to try at some point.", 0], ["You\u2019ve got Gear VR and Samsung is really handling all of that from a hardware perspective, and obviously they\u2019re well prepared on that front.", 0], ["In 2018, that number grew by 15%.", 0], ["And that's the opportunity we have in front of us.", 1], ["And so versus September of 2014, for example, the U.S. dollar has now strengthened on average against international currencies by about 15%.", 0], ["So in many ways your question shows itself in Office, but the trends are the same if you look at EMS growth or if you were to look at that Windows commercial growth number.", 1], ["I would just say that we don't anticipate that that will be a continuing trend, but given the high penetration rates, we do think they'll be some fluctuation there.", 1], ["So that's what I would think of on ASC 606.", 1], ["So that is certainly a factor that we consider a positive from a customer standpoint and it's one from a cost standpoint that we certainly continue to work on every day.", 1], ["It's definitely true that most of our advertisers are advertising on TV and advertising with us on mobile, and they should be.", 1], ["The thing I can tell you about pricing is that our pricing is, price reductions are a core part of our philosophy, of course.", 1], ["And on the contextualizing opportunity, the reason I said it's not the primary driver is because of that vast, vast majority of our server business is annuity based.", 1], ["And it hit a new record across all geographies and across all categories.", 1], ["So that's the transformation that you will increasingly see us push forward, and no status quo on any part of Microsoft's organization should be counted on.", 0], ["I think I have a strong line of sight to AWS's margin profile and still feel good about the progress we're making, not just on the workloads that are relevant, apples to apples with Azure, but also in our broader cloud portfolio and our ability to have very healthy margins across Dynamics 365 as well as Office 365 in conjunction with many of the innovations we're doing across Azure.", 1], ["You've seen the growth rates over the last couple of years.", 0], ["And as we do better and better on the monetization there, that will support people with higher production costs and doing more premium production and bringing their content to the platform.", 0], ["Every member of Congress in the United States is now on Facebook.", 0], ["because, as I said, this AI era is mostly first a data era.", 0], ["So media services, mobile services, WAB which is another place where we actually have lot of traction.", 0], ["And most importantly, what's our role in it?", 0], ["We're continuing to treat the product to emphasize that kind of content more while building more of these social features.", 0], ["And so we believe in engaging with governments even when we disagree.", 1], ["So that will first take hold as the series of News Feed changes, but over time there are going to be new products that we build new interfaces that the team is designed with the goal of encouraging interactions between people.", 0], ["because we had no ads on mobile, and that was because we always prioritized the experience for people above, even if it\u2019s going to be a painful thing for the company.", 0], ["I think Amazon Global Store continues to expand the selection there.", 1], ["I do think we saw some benefit of end of support, but I would not say it was the primary benefit this quarter.", 1], ["And that's not just for sales, that's also developer community is growing faster than any other country in the world.", 0], ["You do have obviously people who are bidding on impressions if they're looking for a brand campaign or a reach campaign, but those aren't necessarily a part of the business that's driving up prices.", 0], ["And I think just more broadly, we're seeing continued momentum in enterprise migrations to AWS, and people are moving their workloads to AWS at a faster pace.", 1], ["It's just a great way to access Prime Music and more and more the Amazon site.", 1], ["So we're happy to do whatever we can to help develop the economies in both of those countries and they're both long-term efforts for us.", 1], ["And I mentioned that the percentage of paid accounts has increased strong double-digits.", 0], ["They use click-to-messaging ads to generate qualify leads.", 0], ["We're not doing this to be positive or negative for revenue.", 1], ["And then the initial version of what we shipped I just think wasn't as high-quality as where it needed to be.", 1], ["There was very strong performance on that front, very strong performance in moving customers to annuity as well as to the cloud.", 0], ["These are longer term things.", 0], ["We haven\u2019t been in the business long enough to say that with certainty, but that\u2019s what we think.", 1], ["I mean it\u2019s hard to compare Stories exactly to Feed,", 1], ["Our focus is on bringing people-based marketing and the effectiveness and relevance of Facebook ads off of Facebook so we can give marketers and publishers the tools to reach people across all of their devices.", 1], ["The iPad, Steve, we had a 1.6 million-unit swing on channel inventory between the years.", 0], ["It's going well.", 1], ["The two big things that we're really focused on now in Watch are, within the Watch tab, also just making sure that the consumption isn't all just passive consumption and making it so that there are more two-way interactions between viewers and the creators and that we can help build community around that,", 1], ["But if you look at what is secular in terms of growth going forward, it\u2019s data, data management in a variety of new ways.", 0], ["And that's the philosophy that we have.", 1], ["We did the Souq acquisition last year in May.", 0], ["And so there is a very slight growth there.", 1], ["As I said earlier we benefit from the efficiency gains of the AWS business on the Amazon site as well.", 0], ["And so I think there are many, many factors in that.", 1], ["There are good reasons to be very optimistic about the monetization.", 1], ["One example is Toyota used Facebook for the launch of the RAV4 Hybrid with Saatchi in Los Angeles.", 0], ["So that does have some impact on capital intensity and part of the driver, where we\u2019re seeing kind of capital intensity increase over the \u2013 over the past several years.", 1], ["And so we're working very closely with the appropriate government agencies, and we hope to make books and movies available again to our customers there.", 0], ["And we built that not only that cost structure, but an accelerating cost penalty into our Q3 guidance that was released with our earnings today.", 1], ["We have delivery from 75 - into 75 U.S. metros through the Prime Now app, and we also have pickup in over 30 metros also through the Prime Now app.", 0], ["If you look at the underlying data, it makes you feel a lot better than the sales do.", 1], ["We'll have the Apple Arcade and the Apple TV+ products in the market in the fall and Apple Card will go out in the summer timeframe.", 0], ["We fortunately are strong enough to continue investing and we think it's in Apple's best long-term interest to do so.", 0], ["For DRAM, we also think that we are near the peak, possibly at the end of this year.", 1], ["Once we start getting a bit further along with that, then the next thing that we think is going to be huge is video and immersive experiences, both things that people can create, like the social content that they share on Facebook today, and more professional and premium content both short form and longer form.", 1], ["So for example, in the election, you saw Hillary Clinton announce her candidacy very recently, obviously, and that video got 2.7 million views.", 0], ["We're increasing it by 16%.", 0], ["So I look and say, seeing growth in that number allows us to actually grow the ARPU, and the new services that Satya mentioned continues to let us grow the installed base.", 1], ["One of the things that I would call out in Q1 as a contributing factor on the impression growth side was our decision to rank longer-form video higher in News Feed.", 0], ["We're excited about a new surface where businesses can interact with consumers, but also really a new functionality.", 1], ["But certainly very happy with that business and its role in Prime as well, total customer satisfaction.", 1], ["That end of support is about five quarters away, so we'll continue to expect good signal and good demand in that Pro segment.", 1], ["There's the user and there's the developer.", 1], ["I think, to Ad Breaks in the sense that it's early in terms of using the ads formats in Stories.", 1], ["I would say there's no let-up in the pace of invention here, particularly on the AWS side.", 1], ["I think it's worth adding that the ad inventory itself is really valuable for marketers and our clients and also works very well with our other ad products,", 1], ["We started testing in Q3 shopping ads, the idea that shoppers can tap on ad, see a product description page and can purchase from the business' mobile site.", 0], ["We also need to keep in mind that we continue to experience a difficult memory pricing environment, which we think is going to start improving as we move into the second half of our fiscal year.", 1], ["So, we don\u2019t view ourselves as a payments business, that\u2019s not the type of company that we are.", 1], ["We\u2019re also developing some core foundational technologies more in house now than we were in the past.", 0], ["And that\u2019s when we made the shift, not in our business first but in how we develop products.", 1], ["So for example, I talked about earlier, we are building this Moments app, so that way you can take photos on your phone.", 0], ["And that is where the product roadmap, whether it's the integration with Office 365 or Dynamics 365, we'll be staying focused on it.", 1], ["One of the things that I think should be fairly clear is the high correlation between our services in Office 365 as well as Dynamics 365 around data in particular with Azure.", 1], ["So it's still pretty early for a lot of the really expedited delivery options.", 0], ["Sorry, let me finish my answer to him, please.", 0], ["And they started running video ads in Facebook Stories and News Feed.", 0], ["You tap on a photo, you expect it to expand immediately, but you tap on a link, and often it can take 10 seconds to load and if you're on a 2G connection somewhere in the developing world, that could take 30 seconds to load.", 0], ["We now have the ability to take Linux workloads and run them first class and over 20% plus of Azure is Linux workloads, which was sort of a growth opportunity we tapped into with the cloud which we didn't have previously.", 0], ["It is amazing.", 1], ["I guess, just a reminder on our pricing philosophy for AWS, I mean periodic price reductions are a normal part of our business where reduced prices more than 60x with AWS since launching.", 0], ["I couldn't be happier with it.", 1], ["In fact the first -- the fact that -- I celebrate the fact that we don\u2019t have just one first party workload", 1], ["So even when we do other things, like we're running tests of payments, we have Marketplace which is growing and doing well, there may be other ways that we could think about making money from those, but in general our strategy is to offer those services at cost and make it so that businesses can bid what it is worth to them to run ads in the system.", 0], ["And we strongly believe that participating in markets and bringing benefits to customers is in the best interest of the folks there and in other countries as well.", 1], ["There are certain workloads like the IoT workload, where we do see very advanced action in countries like Germany, especially with the industrial customers in terms of smart factories, Japan.", 0], ["Obviously, on the CapEx side, we've got a number of projects underway on the data center front.", 1], ["Just on the 2019 expense growth guide, a lot of that is consistent with what we've been talking about as our big investment areas.", 1], ["Our installed base is growing very well, which is very important for us", 1], ["But I would say essentially, in a nutshell, our logistics deliveries allow us to have better control of the end delivery in markets where we use it.", 1], ["It's going incredibly well.", 1], ["The North America segment is a little further along in the Prime, excuse me, yes, the Prime membership growth curve.", 0], ["So on the second one, I would say we\u2019re certainly very diligent on trying to catch counterfeit products.", 1], ["We think it makes the warehouse jobs better and I think it makes our warehouses more productive.", 1], ["So we're continuing to invent both on the product side, the tools side with our goal being improve the usability of the tools for advertisers, make smarter recommendations for customers, automate activities so that advertisers don't have to work as hard, and invent new products for advertisers.", 1], ["The 6 cycle was certainly a phenomenal cycle.", 1], ["But in the near term, what we've found is that a lot of businesses are creating ads in News Feed that then they can follow up and do transactions with people in Messenger,", 0], ["We also don't think of Office 365 and Dynamics 365 as independent, we think of them altogether building out our commercial cloud", 1], ["So I think we'll -- we continue to face those headwinds, and they will be more impactful as we move forward.", 1], ["And I think about this huge opportunity, not just in Live video, but in a lot of things that we're talking about.", 1], ["because there are lots of different segments for what people are trying to do.", 0], ["Yes, when I think overall, you all I think do a good job of tracking what is the public cloud competition and that\u2019s the competition we pay most attention to.", 1], ["One of the things that I want to ask team to be very focused on is to bring uniqueness that only Microsoft can bring it to the marketplace.", 0], ["And then on capital, especially infrastructure capital, if you use the capital lease slide as maybe an indicator for what we have invested into our AWS business to support infrastructure and global expansion, that number grew 10% last year, when it had grown 69% in 2017.", 0], ["Look, in the long run a strong US dollar is not a positive for our international business.", 0], ["So all of those will play into the potential deceleration of revenue growth in 2020.", 1], ["I would say that we have 23 sort centers, which allows us to control a lot more of our shipments for longer.", 0], ["And I personally enjoy a lot of the different bots that people are using or making, especially the news one where you get these digests at the end of the day of different kinds of content.", 0], ["Yes, most of the expense has been in the U.S., but we have also increased our One Day selection internationally.", 1], ["And that I think is driving most of the volume today and I think can get us to be \u2013 we're already one of the largest search engines in the world, but to be even bigger on that front.", 1], ["When they start transacting on the Store, they start at a certain level and they tend over time to get more familiar with the Store and they start to spend more.", 1], ["We've added four sort centers in the U.S., bringing U.S. footprint to 23.", 0], ["That will continue, but our focus is on transitioning to the cloud.", 1], ["I think with Office 365, we are trying to expand the appeal of Office 365 on multiple dimensions.", 1], ["It's very early days, but the average viewing time is over 30 seconds,", 0], ["In China, we saw significant acceleration.", 1], ["That we think is driving a lot of value and good content for people who are using the platform and helping a lot of businesses find customers and sell their products and grow overall.", 1], ["And so once again bucking the tide.", 0], ["The other bigger element though is the third-party contribution.", 1], ["We now are at 35.", 0], ["That showed up on a lot of lines on the P&L, but that one was positive.", 0], ["A big component of CapEx\u2019s data center builds.", 0], ["The 4G network investment really began rolling in in a significant way toward the last quarter of last year, as you know.", 0], ["And so I think this is exactly the period that you want to invest and do so confidently.", 1], ["But of course a lot of opportunity in terms of gross margin dollar growth and of course operating margin dollar growth as we move forward.", 1], ["So, we feel that we are in good shape there.", 1], ["We are learning quickly about customer preferences between the different configurations.", 0], ["You're right, we had a number of price cuts timed about around December 1 of last year.", 0], ["Those are large complex projects, so the timing of that spend, we just get better visibility on as the year progresses, but no real change in outlook.", 0], ["The second category, I would call qualitative changes and how we do business.", 0], ["And on a longer-term bigger basis, the continued growth of Prime, the continued selection expansion, is helping with the unit's growth there.", 1], ["We're seeing a lot of our growth areas being fueled by head count that's moving within the company.", 1], ["Not all of it, some of the stuff is longer term.", 1], ["A one-on-one product for sharing text or calling, that's clearly a thing.", 0], ["And so that\u2019s a good example to say, every three years tends to be the length of our agreements and so you to tend to see that repeated, and that\u2019s what we mean by sort of the record or the largest expiry base and that is the pattern.", 1], ["I think we, because the Watch is relatively young.", 1], ["Customers well taken care of, but we had additional fulfillment costs from being so tight on capacity.", 0], ["We're seeing strong growth in the face of really a tough currency environment.", 0], ["And the thought process is always to acquire something that allows us to either accelerate our product roadmaps, filling gap in our portfolio, providing a new experience to customers.", 0], ["That happens from two things, premium mix revenue doing well, as well as the efficiencies we expect to get in COGS resulting in gross margin improvement.", 0], ["We also have a huge opportunity within Instagram.", 1], ["because of the pent-up demand that left from Q1 in addition to Q2.", 0], ["Our top verticals are pretty consistent in e-commerce, CPG, entertainment, media, retail, and gaming.", 0], ["One of the things, Heather, that's happening is there is growth in Azure across each of the layers.", 1], ["where we've built this great feature, Watch Party, that allows people to come together with their friends to watch different content and premiers.", 0], ["I don't know what the most recent public stat is on that.", 0], ["When you come to non-Pro, I think this really refers back to Satya's comments, which is we saw device growth in low price devices opening price points, we actually made I believe a strategic decision to increase our ability to put devices on the shelf, especially at retail at prices under $200 to $249 is how to think about the price points that were the most impacted.", 0], ["We have a very, very good compelling platform across our commercial cloud.", 1], ["And so you can see this enormous momentum building in the developer community there as well.", 1], ["So, my confidence for FY19 in that number being the double digits we talked about in the full year guide, only gets raised by seeing that execution.", 1], ["So shipping cost is always going to be a strong part of our offering, and we're -- it's going to be increasing due to our business model, and we, at the same time, look then to minimize the cost by getting more and more efficient in that area, AWS, yes, if you remember last year, we did have price increases in December of last year towards the end.", 0], ["It's not as simple as lapping a cost error -- excuse me, price decrease last year, but we're very happy with the performance in the AWS business.", 0], ["In terms of the migration process, this is an enterprise sale.", 1], ["But Prime Day was very successful for us.", 1], ["The first one is the fact that the U.S. dollar has continued to appreciate against foreign currencies during the last few weeks.", 0], ["And certainly, everything that we've seen since then suggests that, that is right.", 0], ["Engagement across the different regions as we think about it from a DAU-to-MAU perspective was at record levels in the quarter, so we're pleased with that.", 0], ["He said we're going to look for things that are important to customers, customers love them, businesses that can grow to be a large size that can generate a high return on invested capital and are durable and can last for decades.", 0], ["So in Internet.org in India now, there are already more than 1 million people who now have access to the Internet who didn't otherwise because of our efforts, so we're proud of that but obviously that's still very early on.", 1], ["When you think about messaging, if we've already made the transition in a big way to feed, if we are starting to see real success in Stories, messaging is in a much earlier stage.", 1], ["Well we will continue to invest in the business where we are seeing significant customer traction.", 1], ["As I've mentioned before, we've never had three products and it's only today that the first customers can sort of look at all three of those and I'm sure there's been some people that wanted to do that before deciding even which one.", 1], ["We've worked hard on products ads that get to products.", 1], ["At the end of the day, when you show an ad, you want to move a product off a lot, off a shelf, into a shopping cart, whether it's online or offline, and that's where our focus is and will continue to be.", 0], ["So those are our core attributes that are driving our growth and will continue to stay focused on them.", 1], ["We're lower than the iPhone 6, but I think all of us know that that was an extraordinary cycle that accelerated upgrades from 2016 into 2015.", 0], ["That type of architectural approach is what we see is possible now for every SaaS application vendor out there as well.", 1], ["Over time, the AI tools will get better.", 1], ["We took some pricing action, we instituted our trade-in and financing programs in our retail stores and worked with certain channel partners on that as well.", 0], ["You see that already with Minecraft going to all platforms and that increasing the intensity of the community and you'll see us do more of that.", 0], ["We have a lot of opportunity to invest in advertising across our different platforms.", 0], ["We're also doing more with public content.", 1], ["What happened in the quarter was we were lapping a period last year when we \u2013 we had purchased Whole Foods in Q3, as you remember of 2017.", 0], ["We've launched multiple devices including e-readers, tablets that are priced under $50, Echo, Dash Button.", 0], ["In fact, more Prime members joined India's Prime program in the first year than we've seen in any other country in the history of the world, our world.", 0], ["This year we're only adding about 15% to our square footage.", 0], ["And then we're working hard to build products that work, in-store visits, and then to use simplified ad products that convert them over to advertising.", 0], ["Now we've added 11 metro areas, bringing the total to 27 metro areas that are qualified for same day.", 0], ["The other thing that we saw is increasing focus as we were having more conversations across organizations around Azure and rethinking their digital transformation plans with us, it opens up a very large conversation around the value Microsoft 365 can bring as people go through and think about those transitions.", 1], ["Installed base has grown nicely over the last several years.", 0], ["You can tier SQL databases with the cloud.", 0], ["There are a number of differences.", 1], ["and because we're very focused on investing in simplifying our products so that all SMBs can use them.", 0], ["And we're also working on the economics.", 0], ["The Windows 10 Pro strength and I think commercial strength we've seen, we continue to see good signs on the commercial refresh, really security, manageability of modern hardware and software together continues to be a good signal for us.", 0], ["So we feel we have a lead in this space and we don't take it for granted and we want to serve customers better each year.", 1], ["So continuing to work on Prime.", 0], ["As you know, back in Q1 we gave an active customer count that exceeded 300 million and I can say it's still growing and we're pleased with the number there.", 0], ["That's just a great example of someone using video ads, optimizing a format, but also using the pretty unique targeting we can offer to drive sales.", 0], ["I mean that\u2019s the biggest opportunity is to be able to get into space.", 1], ["We've started issuing transparency reports so we can be held publicly accountable on this.", 0], ["And so there will be \u2013 there's no doubt in my mind there have already been some large developers that concluded that they could do something on their own.", 1], ["It's going to be used by hundreds of millions of people.", 1], ["And I think what you're hearing in that answer from Satya, Keith, is really about whether the premium services exist as you heard at the Azure layer, or whether they show themselves in our Productivity and Business Processes segment.", 0], ["I've always felt that in some sense, most of the time we even automate business processes, but we spend really getting our business done in our communication and collaboration tools.", 0], ["People start at a certain level and then they tend to spend more over time.", 0], ["The other way is of course eventually showing paid content in Messenger, whether that's in the inbox or in relevant ways throughout the product.", 1], ["The first and most tactical or just the optimization to everything that you see, right, from ranking in News Feeds, your ranking of ads or search, or improving our security systems, and that's driving a lot of the business and the quality improvement that we're seeing and that's really important.", 0], ["I referenced the MSQRD app that we acquired earlier in my remarks.", 0], ["So, it was a help to Q3 and a penalty to Q4.", 1], ["So we think that, when you look at it, why do people come to us?", 1], ["So we feel very good about that, which is users with in terms of coverage and usage.", 1], ["On the Pro side as I mentioned, we'll have a couple point impact that would make a difference between that on the Pro side.", 1], ["And so what we have to do and what we're doing is innovating like crazy and delivering the best smartphone to our customers there.", 0], ["So as far as lumpiness, admittedly it is lumpy and we will continue to work on both those tracks going forward.", 1], ["Similarly, we\u2019ve had conversations with makers of Premium Content, I think they\u2019re excited by the work they already do with us to use Facebook to distribute their content and we\u2019re interested and doing more.", 0], ["There's this whole other use case around content, which is going to the app or sitting down at a TV because there's some content that you want to watch and you want to go directly to it.", 0], ["No one else who is in the public cloud business at any scale has that kind of capability.", 0], ["So again, getting better efficiencies on what we have and banking the multi-year investment that we've been making.", 1], ["So this past quarter, we announced 700 million monthly actives, so that was a big announcement.", 0], ["In addition, on the CapEx side, we're continuing to invest heavily on capital expenditures, first, to just get ahead of user growth and engagement and then also to make sure that we've got the compute available to support the growth of a number of the key drivers of our business around feed ranking and ads ranking.", 1], ["I'm very optimistic that a lot of this stuff will be able to be supported long term, but you're certainly right that not all of it will be able to be supported by ad models alone.", 1], ["because that usage is so active,", 0], ["And then on emerging markets, if you take a look at India, we grew by 56%, and we're placing increasing emphasis in these areas, where it's clear there will be disproportionate growth versus the more developed areas.", 0], ["So that's really what's driven the difference in ARPUs, and you're also getting faster growth in general in the lower-ARPU countries both within Europe and within APAC.", 0], ["And so when we look at all these things in its totality, we think that for the total company of course, we believe that revenue's going to grow.", 1], ["The other thing to keep in mind is that many people are now trading in their current iPhone on the next iPhone.", 0], ["In terms of LinkedIn having any impact?", 0], ["The one thing that I would say that I am increasingly seeing is Tier 1 workloads.", 1], ["So we continue to be selective in our investments there, but we're taking the long-term view and we have hopes for the new initiatives along the global \u2013 with the global store and the team of flagship store.", 1], ["We think we can grow this year.", 1], ["We're working hard in the direct response area, rolling out things like carousel ads and dynamic product ads.", 0], ["On the Kiva question, the last update we've given is more than 30,000 robots.", 0], ["For example, you know that on the App Store, we book revenue on a net basis and therefore the gross margins tend to be accretive.", 0], ["So, we\u2019re excited about these efforts for doing a lot across the board.", 1], ["So, we're really excited about that and I think working together, will bring our different strengths to the table and really be able to build on behalf of customers.", 1], ["We've been able to increase service levels in many cases by delivering ourselves.", 0], ["This category also includes AWS sales and marketing and keep that in mind, because that's where a lot of our headcount investment is going.", 0], ["Creating shorter ads, creating ads that can work even without sound, more personal ads has really mattered.", 1], ["The improvements particularly in the IaaS and PaaS, gross margin of Azure did offset the cloud mix to Azure within the segment, going forward continuing to see that.", 1], ["There is the type of content that people will produce socially for friends.", 0], ["So, we continue to be happy with our top line growth.", 1], ["I mean, for me it all comes down to really having an architectural advantage on what is a new secular trend.", 1], ["So we've been able to build that up, not just because of the ongoing investment in technology and infrastructure here, but because we're building on this strong base.", 1], ["Having said all that, that we've given ourselves a couple of targets and we feel very confident about reaching those targets.", 1], ["And I think they each sold in the hundreds of thousands of units.", 1], ["Through messaging specifically, I'm more optimistic because of the private nature of this space, right?", 1], ["We\u2019re also pleased, in addition to the switcher number, that we\u2019re doing fairly well with first time buyers, which is also a key metric for us.", 1], ["The opportunity, full-screen, authentic, very engaging, different format than feed, gives us an opportunity to grow.", 0], ["But then particularly in the fourth quarter, one of the callouts that we've seen, an increase in third-party promotional free data plans in places like India.", 0], ["So I don't think there's anything specific to ARPU, it's just a reflection of what we're seeing on the revenue front as we scale, and it's sort of as expected there.", 1], ["But we're excited.", 1], ["But we're trying to minimize the negative impact on any vendor or seller out there.", 1], ["And so the benefit for sellers is they get to take advantage of our multi newer fulfillment network globally, we have a 109 fulfillment centers globally, as well as our customers get to take advantage of that as prime numbers where we offer in those geography.", 0], ["So that gives you some color on the sort of the type of impression growth that we're seeing.", 1], ["So we're looking forward to seeing how that trends.", 1], ["I mean\u2013 and in other initiatives as well, where we can get food through Pantry, Go, there's a number of initiatives there.", 0], ["We do see some pretty cool examples of people using it well.", 0], ["In general, what's interesting I think is you're getting to the crux of it is do we have incremental workloads that are unique to the cloud.", 1], ["If I look at the quarterly trends, you're right, that this quarter was up 33% in isolation versus last year.", 0], ["So those are the kinds of TAM expansion we see across Microsoft 365.", 1], ["So, I\u2019m quite confident that when we can roll this out broadly it\u2019s going to be meaningfully valuable to the user experience.", 1], ["And we're super excited from what we see there right now.", 1], ["That's what happened with mobile ads.", 0], ["We've had sequential increase in growth rate the prior three quarters, I believe, it was.", 0], ["We've put our best estimate into the guidance, and you can see from the guidance that we are very bullish.", 1], ["Last year, we were down 40 bps.", 0], ["And then of course, there is the other dimension, which is the levels of Office 365 all the way to E5 with significant value.", 1], ["We're seeing a lot of organic connections between businesses and consumers.", 0], ["So part of our playbook for building out these ecosystems at scale is we start with the person-to-person user base.", 1], ["In the accelerated, I've never seen a Windows release in the enterprise with this level of accelerated deployment planned.", 0], ["And as I said, we're adding new services and features all the time, over 1,400 in 2017 alone.", 0], ["We're seeing good growth and year-over-year in terms of overall unit growth, in terms of revenue growth, certainly ex-exchange, as I mentioned earlier, it\u2019s early in the year.", 1], ["and we'll continue to invest there.", 1], ["And so things that used to look more to them like capital expense or COGS or not just an IT budget, this is literally changing every business process they run or changing the services they offer, and thinking about literally driving their revenue differently.", 0], ["It's the planet-scale database that supports JSON and much more, and we see that as a core part of the data tier for many, many applications.", 0], ["The 10 received APIs (56:26), so that businesses could send immediate responses to common questions, including engaging images and call to action as well as texts.", 0], ["And in those transparency reports, we break down every category of harmful content, everything from terrorism, to hate speech, to bullying, to nudity.", 0], ["So I think that that's something that if folks read the research that we put out there, then they'll see that.", 0], ["And obviously, as we go through the year those comps become a bit more difficult.", 1], ["Obviously, we would like to see that be a huge growth.", 1], ["Ecosystem and ads are ramping well with good high quality ads", 1], ["You'll see even this quarter we started to have greater expansion of our grocery delivery out of Whole Foods using Prime Now.", 1], ["We're developing a number of new ad products as well as enhancing the ad products that we have out in the market today.", 0], ["On Kiva, we are up to 30,000 bots at the end of Q3, and they're in 13 fulfillment centers.", 0], ["But, clearly, we've got a lot of areas that we're investing in, including video, including the various other services on top of Facebook.", 0], ["Consumers have shifted to mobile and consumers have moved to Facebook and Instagram more quickly than ad budgets.", 0], ["And so these kind of numbers, along with intent to buy numbers, everything looks fantastic, the ecommerce numbers.", 1], ["We're in this for the long haul.", 1], ["And we found that these have generally encouraged more interaction or positives,", 0], ["But I completely understand that all of you measure us to what we have done for you lately.", 0], ["And so in four of the five operating segments, as I think Luca mentioned in his comments, we had very good growth.", 1], ["So it ramped up in the back end of the year.", 0], ["There are situations where commodity markets can be a bit out of balance.", 0], ["And the first time buyer number is surprisingly strong.", 1], ["So, we do feel it's still the best deal in retail, and we just work to make it better and better each day.", 1], ["Of course, in November, we announce we selected New York City and Northern Virginia and between the two cities, we will be investing $5 billion and creating more than 50000 jobs.", 0], ["On your saturation question, keep in mind that even in the U.S., which is our most mature by years of launch, we still grew last year at 47% year-over-year membership growth, and we continue to make the program better and better.", 0], ["So you'll see that other revenue, in total, increased 132% ex-FX year-over-year to about $2 billion in the first quarter.", 1], ["I'd count Amazon in that category, because on the consumer side of the business, we increasingly see infrastructure savings due to the conversion to AWS resources.", 0], ["Yeah so overall at the highest level, our strategy here is to make sure that the Microsoft Services i.e. cloud services be it Azure, Office 365, CRM Online or Enterprise Mobility suite are covering all the devices out there in the marketplace.", 1], ["And secondly, I think it\u2019s a general belief held at the highest levels of the company, that operating efficiency increases our ability to be responsive, both to the needs of our customers, as well as innovate faster inside this place.", 0], ["But also can handle request to like home automation to close your garage door, open your door, turn the light on, turn the fireplace on, change the thermostat, all of the things that you would like to do in home automation.", 0], ["It's not like people have forgotten iPad or anything.", 0], ["And we are constantly looking for a fourth or fifth business that fits that criteria.", 0], ["On the AWS side we continue to invest in that infrastructure.", 1], ["But over the long term and as we continue to move aggressively, we will continue to seek growth dissipate, but I would also say this is going to take longer than I think many people would have thought, there\u2019re lots of users as we continue to redefine what Office is that you add to the base.", 1], ["When people do multiple objectives and video, we're seeing lower cost per click than single image link ads.", 0], ["I would say, though, that we're much more focused on operating profit dollars and free cash flow dollars, as we've probably talked about before.", 1], ["because a lot of public figures and businesses are already investing in creating that kind of good content that goes in Instagram.", 0], ["It's building stores.", 0], ["We grew in Brazil as well.", 0], ["We're starting with people being able to sell things and connect to other people who want to buy them, just like they've been doing in for-sale groups for many years, but we're excited to evolve this and grow it over time as well.", 0], ["So the first thing is on the infrastructure side itself with the combination of the edge and the cloud I believe between Azure Stack and Azure as well as inclusive of our servers, we have the best crowd platform for what is going to be hybrid computing and we'll continue to push on that, so you'll see growth.", 0], ["One is the one unified developer platform, which I think is perhaps the most strategic piece of Windows 10 along with the unified store.", 0], ["And so what's happening is that people are really using the Facebook business pages and increasingly the Instagram business profile as their mobile presence, and we think that's what's working.", 1], ["I can't forecast into the future on that but I will reiterate the investments we have going on right now which again, we're looking to invest to strengthen the Prime platform.", 1], ["So we're in the experimentation phase I think with the platform.", 1], ["In terms of the monetization question on AR/VR, we tend to focus first and foremost on customer experience.", 1], ["And I think the other good news is that because our active installed base is at such a level, that last quarter we said that we had exceeded 1.3 billion.", 0], ["So we continue to innovate on behalf of customers.", 1], ["And so we\u2019ll try to be to be very thoughtful.", 1], ["First is, I think we have exhibited an increasing ability, over the course of the year, to reallocate during the year, both at the organization level and at the team level, to make sure our dollars are going to the highest ROI things.", 0], ["In terms of the election, it\u2019s important to note that we\u2019re large and diversified,", 0], ["So it\u2019s a regulatory approval question in India at this point and we had a license to roll it out as part of an initial test, the test went better than we even expected it would.", 0], ["I did -- we are proud of the increase in shareholder return this quarter and importantly we\u2019re focused on how we can continue to do that as a part of our overall long-term shareholder growth.", 1], ["And we're anxious to have them try it and sign up and join.", 1], ["We see great opportunity there to help customers engage with our services and migrate to our products.", 1], ["So, the skills addition should continue.", 1], ["And on advertising, I would say our strategy is to make the customer experience additive by the ad process.", 1], ["EMS , it\u2019s completely a new category.", 0], ["We have customers using us for true hybrid, if you were deploying for example a SQL server, you can have high availability using Azure that\u2019s a pretty common deployment now using Azure as the backplane for disaster recovery and high availability, that\u2019s for sure is a workload.", 0], ["What I can tell you again is that we've ramped up considerably.", 1], ["We launched on Alipay, for example, in China during the December quarter.", 0], ["There may be instances where you're viewing a first episode and there's an ad leading into that if it's the first free episode, but generally we like to have that as customers have paid into that program and they'll be able to enjoy that without interruption.", 1], ["The way we designed Dynamics 365, both on the technology front as well as on the business model front was to get away from what I would describe as the old-school suite-based selling or suite-based building of these things, whether it's CRM or ERP or SCM.", 1], ["I would say that, in addition to the operating efficiencies, advertising is also starting to make an impact on gross profit, although advertising is smaller in International segment than it's in North America, it's growing at a same rapid clip year-over-year.", 1], ["How we're doing containers for example in Windows Server 2016 we have great container support as well as support for things like our service fabric so that people can have absolute application portability and in fact people can even [indiscernible] applications.", 0], ["And that's just a big thing that we're continuing to focus on.", 1], ["They are not in the ad load calculation per se.", 0], ["So for example, Nestl\u00e9 Purina PetCare did an ad campaign in Germany with ZenithOptimedia, and they defined five distinct cat owner personality types and created different creatives for each group.", 0], ["That's important for all companies.", 0], ["We're certainly still investing very heavily.", 0], ["On your second question in terms of capital spent, if you think about it at a high level, our capital expenditures are growing at a lower rate than our overall cloud revenue is growing, and that\u2019s why we\u2019re starting to see leverage, right, flow through the P&L.", 1], ["That's kind of the fundamental table stakes that need to be there and that's the most important thing, and we're really pleased with the 4 billion video views daily that we're getting.", 0], ["So that's another opportunity that we believe will shape in addition to things like e-sports and so on.", 1], ["So we continue to invest on behalf of customers.", 0], ["We're very optimistic that we're going to able to launch to everyone in India soon, but of course will share more news when we have that.", 1], ["We felt very good about the gross margins for the quarter.", 1], ["So this is going to be one of the increasing focuses for us or just the different ways that people want to interact and build communities.", 1], ["And so we want to make sure we get this right as we focus on continued engagement.", 0], ["And if I triangulate between all those three, just like I did in Q4, I feel really good about our commercial performance.", 1], ["And we think all of these platforms together really help give us the ability to serve our clients in a very leveraged way, and use the targeting and measurement capabilities we have invested in across multiple platforms.", 1], ["So we're looking forward to that.", 1], ["So we are really looking forward to accelerating our business with GE and many others to come.", 1], ["But we did see, certainly saw some additional units as a result of Prime Day.", 0], ["You'll get a $1 app that you can watch it screen on.", 0], ["Sometimes, when you have new workloads and new customers onboard, they start with in some sense the IaaS and the data more at Blob storage, but then scale to higher layer services like our Cosmos DB or even some of our compute higher-level services like in AI.", 0], ["And Instagram is obviously another great place to reach Millennials,", 0], ["We think about the advances in technology that were a part of the iPhone X from -- we went from Touch ID to Face ID; Face ID has been incredibly well received; the wireless charging, the edge to edge super retina display; and totally new gestures, the user experience is different.", 0], ["And we began to produce the iPhone SE there during the quarter, and we're really happy with how that's going.", 1], ["You see continued significant investments in research and development because we really believe that's the future of the company.", 0], ["But I think we are making progress.", 1], ["It's a collaboration and the movement between warehouses and sort centers and then to the end customer.", 0], ["I don't expect to see any impact from changing inventory levels through the next quarter.", 1], ["For 3P sellers right now, it's three states.", 1], ["Because if you look at Windows 10 we've already talked a lot about all the consumer value.", 0], ["We're pleased that it's going well and that we can do both live and uploaded videos.", 1], ["because you really need the kind of infrastructure and the technology to do that.", 0], ["The Prime program continues to drive great strength in our top line, as you've seen over the last few years actually.", 1], ["The capital intensity of the business over the last several years had come up, and part of what is driving that are real changes in the business as it relates to our opportunity to deploy capital against things like ads targeting as well as the fact that we\u2019ve seen the user base growth shift to regions like Asia and we\u2019re now building our CapEx to what\u2019s effectively an Asian peak and so that\u2019s a lower ARPU user base.", 0], ["And on the question on capacity, \u2013 excuse me, cap \u2013 I'll address it as CapEx and capital leases, we're still seeing strong investment there.", 1], ["And that you can gain value without some kind of rev share, and that's why the video ecosystem has grown so quickly even before we rolled out a revenue share.", 0], ["And so as I back up from this and look at the larger picture, I think China is not weak as has been talked about.", 1], ["To your question on Prime Now, so I will point out Prime Now is now in more than 40 metro areas worldwide.", 0], ["But it has really important impacts, not just in their ability to serve the right ads to the right person at the right time, but also their ability to optimize their ads for our format.", 0], ["So across the board, we would expect expense growth ramp throughout the year.", 1], ["It's in beta right now and we like the promise of that.", 1], ["One of the things that we emphasize is it's not about our technology, but it's our ability to transfer that capability to our customer because they're increasingly becoming, whether you're in retail or you're in oil and gas or you're in financial services, every one of them is trying to build their own software capability and we are uniquely capable of doing so.", 0], ["Now, we\u2019re really applying that lesson to Stories.", 1], ["I see things that consumers will love on the gaming side and the entertainment side.", 0], ["As you know, there is game playing and game watching and there is secular growth on both fronts.", 0], ["So there's going to be a lot of, as you say, omni-channel overlap, especially in the grocery business.", 1], ["We're expecting annuity double-digit revenue growth and again it's the transactional weakness that you're seeing overall as well as the very specific geo weakness we saw which I called out earlier.", 1], ["We're not going to update our Prime subscription growth beyond what we said last year at the end of last year, which last year in a year when we raised prices early in 2014.", 1], ["Also keep in mind that during the holiday season, we have a higher mix of products revenue than we have in other quarters, and that obviously is dilutive to the company -- to the company margin.", 0], ["So I think look for us to continue to invest there.", 1], ["And, Brent, to your specific question on Windows Server 2003, we did have a good quarter, as we talked about, in Windows Server.", 1], ["But I have to tell you that given that we\u2019ve launched in October, I'm actually unbelievably shocked, positively shocked at how many merchants were able to implement Apple Pay in the heart of their holiday season,", 1], ["We\u2019re also obviously \u2013 stimulated this so that we can be much more effective even in the educational markets worldwide.", 0], ["But it's come from sustainable investment and our sales, technical resources, and in the engineering to deliver a differentiated value at the customer.", 1], ["Yes, we feel very, very good about the data platform and the portfolio we have, whether it's on the relational side with obviously SQL and now Postgres support.", 1], ["So in the main Facebook app, we're doing a number of different things.", 1], ["And what I mean by that is that there's this trend where ten years back, most of what you saw and shared online was text, and then we went through a phase where most of it is photos.", 0], ["But I think that's probably the way to more appropriately think about over time you expect to see gross margin improvement and operating profit improvement as opposed to focusing on the revenue line.", 1], ["I will say that, the majority of it is being put in service in the back-end of the year, just like in the last two years.", 1], ["So there we talked about all the things that we're building around VR and AR and the ability to be present with anyone, anywhere.", 0], ["So, there will be a lot of integration, a lot of touch points and a lot of working together as we go forward.", 0], ["And again, like I said earlier, the point here isn't to charge for payments.", 0], ["And to now be able to talk about the full SQL estate one of the other conversations that we are having is not just about SQL but our analytics and advanced analytics with where we've done some very, very compelling work again across Linux and Windows and then of course the cloud.", 0], ["So this very large number of people coming into the ecosystem, experiencing the ecosystem, which is obviously improving all the time in quality and quantity, and then start paying and transacting on our stores, and that number is growing very, very strongly, strong double digits.", 0], ["You can see it in our revenue acceleration and also in our unit growth acceleration.", 0], ["I'm not sure that I would say that there's any structural reason other than, the change in my worldview, other than maybe the budget and macro pressure tend to exert itself on that transactional business.", 1], ["I also think the shift we're seeing towards people doing more measurable results, and this is important to understand.", 1], ["And looking at the results in the early going, I think it was the right call.", 1], ["Well, you know, Shannon, we've gone through different cycles.", 1], ["So the biggest thing that we're focused on with artificial intelligence is building computer services that have better perception than people, so the basic human senses like seeing, hearing, language, core things that we do.", 0], ["We like what we see in India.", 1], ["First of all, it\u2019s a 20% year-over-year growth that we\u2019re guiding at the top end of the range.", 0], ["There's great customer demand for the value that comes in security and analytics, in meetings, in voice, in collab.", 1], ["And so many of these assets, including increased usage of our consumer properties inside our productivity business and Office, do require capital spend.", 0], ["so it includes all the R&D investments we're making.", 0], ["And as we like, we see -- we continue to see that engagement growing.", 1], ["The queries will work across both the tiering.", 0], ["But I would say that we are attributing a good bit of the revenue growth acceleration from 17% in Q1 to 20% in Q2 to the rollout of one-day and the impact of that.", 1], ["We feel that it's had a lot of growth in the past year.", 1], ["As we said earlier, the purchase value of the installed base services grew by 27% during the quarter, which was an acceleration over the previous quarter.", 0], ["When you think about GDPR, the Facebook family of apps already applies the core principles in GDPR frame, which are transparency and control and we are building on this to make we\u2019re ready to fully comply by May.", 1], ["The Azure has a benefit.", 1], ["We added this advertising business on our App Store.", 0], ["Overall in the commercial business, I think we continue to see gross margin improvement and that is sustainable improvement as opposed to I think what you characterized as some non-recurring things that I have mentioned.", 1], ["in Brazil and Mainland China more than doubling year-over-year which is 3x to 4x what those markets were doing according to IDC.", 0], ["For things like Instagram and even a lot of what we're doing on Facebook, it's a lot more developed countries.", 1], ["I think history shows us that countries that embrace openness and diversity do much, much better than the ones that are closed.", 0], ["And I think this area in general and all the things we do for the developer community will be the largest contribution that Apple can make", 1], ["It's a very exciting time in India and again, the invention is off the charts.", 1], ["Marketers also really love video and it\u2019s a really compelling way to reach people and video is contributing to our growth.", 0], ["That said, I don't think it\u2019s growing as fast as it was, but I also don't think that Apple's results are largely dependent on minor changes than growth.", 1], ["I would expect these investments to increase relative to 2018 and we've reflected what we see so far in Q1 in our guidance.", 1], ["I actually think over the next couple of years or few years, the much bigger driver of the business and determinant of how we do is going to be video, not Messenger.", 1], ["In context, it's $7 billion to $9 billion above last year.", 0], ["I\u2019m really happy with the early days of Apple Music and the people moving from the free trial to the music business", 0], ["So, really good strong growth across the globe on a DAU to MAU ratio.", 0], ["And if you look at the \u2013 it sounds like you're honing in on the Greater China results themselves.", 0], ["Those are trends I'd expect to see obviously as we look into 2017.", 1], ["But just take security itself, I think that Windows 10 represents a real breakthrough in terms of security on the endpoint as well as in embedded, which we are really excited about in terms of driving the enterprise upgrade cycle.", 1], ["And so that's the transformation at play.", 1], ["On Messenger, the platform efforts in 2015 focused on two things.", 1], ["And I think that those questions around video, which I'm optimistic about, but there are real questions there that we need to manage well, is going to be a much bigger driver of the business over the next two to three years likely even than the trajectory of what we're doing on Messenger and WhatsApp.", 1], ["We're getting the highest conversion rates that we've had since the launch of the service.", 0], ["We've added 800 new services and features so far this year; that's an accelerated pace from last year, which was a record year.", 0], ["They manage those pages and then they can promote those pages via our easy-to-use ad products.", 0], ["We are pretty excited to have 1 million advertisers and 8 million Instagram business profiles on the platform.", 0], ["I think to answer your second question first, I think that most people would like an assistant with them all the time.", 1], ["There was no change in any way to invoicing people paying earlier, paying more upfront, that\u2019s definitely not an impact on that number.", 0], ["And our customers have responded really well to the shows that we've created.", 0], ["We provide an advertising service for developers in the App Store.", 0], ["For example, our cost structures that we are able to manage throughout the year.", 0], ["So there's not really a question of whether that should be a separate app.", 1], ["We saw in Q2 a performance that combined with Q1 to form the first half of the year was much better than what we experienced in the second half of last year.", 1], ["So overall sharing is up across Facebook, and people are spending more time on Facebook and the whole family of apps.", 1], ["First of all, there's the currency, which is going from being a tailwind to being a modest headwind, we expect.", 0], ["We're very excited to work with Oprah.", 1], ["I think that there's plenty of case law around that subject, but we shall see.", 0], ["When you see longer commitments under 606, you often have more recognition upfront.", 0], ["That's going to be the primary driver of video growth for us.", 0], ["And so therefore, we will, as I said, we'll provide qualitative commentary when it is important and relevant.", 1], ["Because we\u2019re running our public cloud in it and that\u2019s what anyone deploying their own private cloud expects to have.", 0], ["I think as far as the low-cost devices, it\u2019s pretty broad.", 1], ["The reason we called it out, obviously, because it was such an outlier.", 0], ["It's very specific.", 1], ["And so we're going to see what happens, but we put our absolutely best thinking that we have here in the guidance that Luca presented, and you can tell from that, that we're bullish.", 1], ["This is a young and rapidly growing business, and as you've seen looking backwards, certainly growth rates and margins and capital expenditure timing can be bumpy.", 0], ["Overall, I mean the way that Dating fits into the strategy here is within the Facebook app, we think that News Feed is really central and that it's one of the only things that we think everyone who uses the app is really going to use on a daily basis.", 1], ["In terms of making money on that, once we have that behavior, I think there are going to be a number of ways that we can amplify that.", 1], ["We've also learned a lot about managing quite an assortment and so forth.", 0], ["It's clear that we also have a fantastic alignment of our business model with the interest of our customers.", 1], ["But now you can have a small business in a country like India, buy Office 365 as a subscription service.", 0], ["No one else provides that kind of a unified market place for developers and especially the changes we've made to the desktop user interface means these universal applications are in fact very naturally discoverable right where we have high usage, which is the desktop.", 0], ["We've done pretty well with that up until the December quarter, right?", 0], ["Things like Watch or the News tab that we have started rolling out are not things that we expect everyone to use.", 0], ["When we look at our services business, we think about the fact that we have a very large and growing installed base.", 1], ["There are 60 million small business pages up on Facebook and 1.5 million Instagram business profiles, which are the similar, the equivalent for Instagram.", 0], ["And at the time of course in some way we considered Instagram to be a competitor, but we've always thought that the better way to target -- to think about Instagram was that it's complementary to Facebook and what we're doing.", 1], ["An ad that works really well 30 seconds in other platforms and more traditional platforms can work on ours, but the ones that are optimized and use our targeting really perform better.", 1], ["That has had the effect of protecting our margins, which you've seen have been very strong, both in the December quarter and in the guidance that we provide for the March quarter.", 1], ["You clearly see our \u2013 we break out very clearly our AWS segment revenue and operating income, and you'll also keep in mind that there's price decreases that are part of the business, and we're pretty public when we do those.", 0], ["But our real strategy going forward is not only to do great work on the console, but to complement that with the work we're doing on the PC.", 1], ["We don't break out revenue by our different platforms.", 0], ["$400 million of -- roughly $400 million of that was due to foreign exchange, but what we saw was essentially very strong holiday performance from the middle of November on.", 1], ["And as we continue to improve the margin profile of our devices, we continue to see the OEM business health improve", 0], ["But the long term bet is that by enabling people to have good organic interactions with businesses, that will end up being a massive multiplier on the value of the monetization down the road when we work on that and really focus on that in a bigger way.", 1], ["It took us a little while to really get it to work the way that we wanted, but now it's growing quickly, that's going to be hundreds of millions of people who are using it.", 0], ["AWS continues to expand their global footprint.", 0], ["We\u2019re already at 420 million now.", 0], ["We're enabling that through Instagram and Facebook and then increasingly through messaging as well.", 0], ["We've got 4 million advertisers on Facebook; 0.5 million advertisers on Instagram.", 0], ["And internationally, we had twice as member Prime members streaming year-over-year.", 0], ["We are very thrilled with what we're seeing in early going on iPhone 11 and iPhone 11 Pro and Pro Max.", 1], ["And just a couple months ago, we announced a new curriculum that's focused on community schools and community colleges, junior colleges, technical colleges, for kids that did not have coding in their elementary and high school years.", 0], ["The other dynamic is that, similar to last year, a large percentage of our new fulfillment centers are coming online in the second half of the year, a lot of them in Q3.", 0], ["That Originals content for TV and movies, that content can be used globally.", 0], ["We're obviously very committed to driving Prime and it's important to the company.", 1], ["So in the near term, we're focused on growing the community and executing on our existing business.", 0], ["We added Apple Pay, we added Apple Music.", 0], ["But what happened last quarter in China was a confluence of things.", 1], ["I would say what we've found is in order to serve \u2013 properly serve our customers at peak.", 1], ["It's normal to see a drop in demand when prices go up.", 0], ["On one side, the App Store, I mentioned in my prepared remarks that growth accelerated sequentially.", 1], ["So, I think overall we\u2019re kind of pleased with what we\u2019re seeing around Europe, but it\u2019s still growing more a little more slowly than North America and APAC.", 1], ["We are going through a period where now it's mostly visual and photos.", 0], ["And then when we have new opportunities that open up like Stories, even with some pressure on pricing, we think that gives us more inventory and more opportunity and more formats, and we haven't really even gotten started on future things like messaging.", 1], ["R&D head count grew 48% year over year in Q2, and that's what's going to be a key driver along with the content layering in.", 0], ["Whether it is GE or Adobe and many others can all now benefit, both because of our enterprise partnership and credibility, and more importantly because of the field resources we have put in place.", 0], ["It's also probably worth noting that the experiences we had to date, moving from Facebook to Instagram, were more similar, that the Instagram feed is similar to the Facebook feed in terms of what you can do with advertising.", 0], ["China\u2019s is obviously in the March quarter.", 0], ["We continue to test store on Tmall as well.", 0], ["And so we're working hard on tools to make the formats easier, and I talked about one of those examples before.", 1], ["And so that's I think a powerful point.", 1], ["It's a big step up in my mind, but we'll get more customer feedback as we go along.", 1], ["As the phone becomes more and more your assistant, it's one of those that you're not going to leave without it.", 0], ["I would say we're going to continue to invest in core product development and infrastructure.", 1], ["I would say we're pleased at the growth that we're seeing at the scale at which we're operating.", 1], ["iPhone revenues are up 20% for the quarter over last year.", 0], ["So we have to just continue to work to build that format on Facebook.", 1], ["So we started off pretty slowly, but that\u2019s going to be some of the basis for how we look to make Messenger a business going forward.", 1], ["I mean, on the messaging question, yeah, we're pretty happy with how it's all going.", 1], ["We continue to see good demand on DC -- sorry, data center modernization as well as some of the premium SKUs.", 1], ["So our data platform growth as well as competitiveness is very good and increasing.", 1], ["Right now, demand is greater than supply.", 0], ["Yeah, talking more about specifically India, so India, for those of you on the call last quarter, we're just heading into an uncertain period with the PN2 ruling.", 1], ["So Azure is a complete open platform where of course you can run all the Windows workloads, the .NET workloads", 0], ["On SMBs, we have a very small test in the U.S.", 0], ["So the fulfillment network as we built it, yes, they'll be more productive next year than they are this holiday peak and probably even more productive in 2018.", 1], ["So as more people use Stories, we think they will increasingly feel comfortable in Stories.", 1], ["The growth in quarter versus our expectations was really two things that are transactionally focused.", 0], ["So for example, Lead Ads, where people can fill out forms on a mobile device, take their contact info from Facebook, we've rolled that out fully this quarter.", 0], ["We do feel very good about a new and very engaging opportunity for ads.", 1], ["So seeing great progress with downloads, innovations for sellers and customers alike.", 0], ["First, we continue to invest in search.", 1], ["So I just wanted to put that in there as well, as there is of course E3.", 1], ["So the first driver is growing the installed base.", 1], ["It's part of our overall ad tech push to bring the effectiveness and relevance of our ads off us.", 0], ["1.5 million SMBs have not posted or created video on any other platform, but with us it's cheap, it's very easy to use and that gives us a way to continue to work with SMBs and increasingly grow our business with them.", 0], ["And so we're taking a long-term approach and doing what we normally do, which is really focus on continuing to drive greater and greater efficiency.", 0], ["We did pick up share in iPhone and iPad, but if you look more holistically at our complete line, we had double digit growth from services to iPad to iPhone and to our other product category which the watch did extremely well, and so there are lots of good things happening there.", 1], ["If you think about the portion of our commercial cloud gross margins that come from depreciation, it's best to think of it as roughly half.", 1], ["So, one example of some of the things that we're excited about, again, are the click-to-Messenger ads.", 1], ["And the age of the population, if you look at India, almost 50% of the population is under 25.", 0], ["because our R&D is focused on that, which is how do we take these buckets of value creation and reinforce them with all of the future R&D as well.", 0], ["I think it goes into the first preview next \u2013 in fact, tomorrow.", 1], ["If you compare to the iPhone 5s, what we're seeing is the upgrade rate today is slightly higher or that there are more people upgrading, if you will, in a similar time period in terms of rate than the iPhone 5s.", 0], ["Most of those 26 warehouses we talked about.", 0], ["And so we think that does help us in that environment, but clearly, macroeconomics stands out there as a risk on top of other issues that we face, leading to a deceleration of revenue growth in 2019.", 1], ["So, yes, that will be a factor that we're comping for the next 12 months.", 1], ["Definitely, Stories is a big part of the success.", 1], ["because they want to watch a video and browse and see what's going on.", 0], ["So at least the vision that we have is that every customer is a digital company that will have a digital IP component to it, and that we want to be able to partner with them in pretty unique ways.", 0], ["So there was a long time where people thought that our business might not be as good", 1], ["One of the benefits of rapid growth is the ability to create leverage on purchases and a lot of the processes that we run.", 1], ["Because paid unit growth continues to be strong and Amazon fulfilled unit growth which includes what we ship, includes FBA, is significantly higher than even that.", 0], ["We see lots of Hadoop usage inside of IaaS but we also see HD inside growth.", 0], ["We think that has a lot of potential.", 1], ["So now, we have self-service ads rolled out.", 0], ["It's focused on Apple Music.", 0], ["We discussed how we don't price devices to make money.", 1], ["And also there's a range from private one-on-one type sharing to small groups, all of your friends at once, large interface communities, and then ultimately fully public.", 0], ["So we've been rolling out a number of changes, both product changes and ranking the News Feed.", 1], ["So, on LiveRail, we're pleased with the performance and the changes we've been able to make.", 1], ["I think you see the growth rate of the segment at 27%.", 0], ["One thing that we know that's not going to change is that advertisers are always looking for the highest ROI opportunity.", 0], ["What I now believe is that we'll improve a bit more during this current quarter, not back to growth, but improve \u2013 but make more progress.", 1], ["So we've seen a lot of good partnerships and arrangements with companies like BMW and Mini and not just in the U.S., but in places like Europe as well.", 0], ["The other element that is there and it\u2019s very seasonal, it\u2019s always there, it\u2019s the loss of leverage that we got from Q1 to Q2.", 0], ["So I think in terms of the ROI we are able to offer our marketers, the signs are strong, and we also continue to see there's a lot of room for improvement.", 1], ["So other revenue, which is principally advertising grew 45% this quarter, up from 37% last quarter and the biggest thing in there is advertising and advertising grew at a rate higher than that 45%.", 0], ["I think we can continue to improve gross margin percentages in the cloud across all the core cloud services.", 0], ["I think that's quite a good result, right, and one that we're very happy with, and just shows how strong of a company Samsung is at being able to build these products and sell them through into the world.", 1], ["That's a way to expand seats even beyond what is the traditional knowledge worker.", 0], ["So we've entered that category, Revolution R fits into that.", 0], ["But we also work very hard at efficiencies and scaling the businesses that we have.", 0], ["We've seen a growth of native ads.", 1], ["So, to give that some perspective, the Amazon-fulfilled network, or the combination of retail and FBA shipments coming out of our warehouses has been nearly 40%.", 0], ["Bursting is something for sure a lot of people do but that\u2019s more on the high end because in the SMB segment, the real movement there is more to Office 365.", 0], ["That technology continues to improve, and we have \u2013 we're now multiple generations down.", 0], ["So we look \u2013 I think going forward, you'll look to see \u2013 or you'll see us do much more of this with many other customers of ours.", 1], ["It really is about continuing to benefit from scale and engineering improvements that will allow us to do that even as we see broad-based growth.", 1], ["And we want to uniquely think about what are the things that we can do to differentiate and add value to our customers' digital estate in the cloud in that context.", 0], ["And that happens to be many times the number of SMBs that have shot or placed a TV commercial.", 0], ["So what we've seen \u2013 we've done some research on this.", 0], ["We're very pleased with our FBA offering, and that's really helpful to sellers around the world.", 1], ["And we don't want to get into the details of that because we do those assumptions as confidential and competitively sensitive.", 1], ["Keep in mind for all these services, there's a trial period up front, there's going to be different trial periods, we'll see what that what they look like.", 0], ["We're very excited about what we see and we will continue to invest heavily in India.", 1], ["With Whole Foods, it was 66%, but without Whole Foods we still grew 38%.", 0], ["We're starting to see the benefit of that already in our top line numbers.", 1], ["But again, we are spending almost $10 billion.", 0], ["We -- and it's consistent with the rest of what we're trying to do on creating these other tabs and social utilities as well.", 1], ["Part of that is due to the fact that we don\u2019t have as many direct response formats in Stories, so that reduces the opportunities for conversion opportunities on Stories.", 0], ["Again, we think interesting product, but very nascent.", 1], ["The other comment I would say about video is we're very happy with the Amazon Studios content, in particular.", 1], ["We have had 422 new significant services and features added in the first half of this year.", 0], ["There's a motion around renewals and there's a motion around new.", 1], ["And I do feel great about the growth rate.", 1], ["It was a very busy quarter and it did increase some of our variable costs as a result, primarily in the US, but a very strong quarter for FBA.", 0], ["We're incenting customers and our partners to move to the cloud.", 0], ["I think there we're testing the ability and are putting short Ad Breaks into longer-form live and on-demand videos.", 0], ["So that's the idea.", 1], ["More of the content is visual, right.", 0], ["Ads gives us the ability to provide a free service to the world.", 0], ["But if you look at the number of services that have been added over the years, it's significant and people love them.", 1], ["And so, that's the metrics we're using.", 0], ["But we do plan to continue to invest aggressively in the priority areas, including on the innovation side with AR/VR and AI and continuing to invest in the safety and security programs that we're undergoing.", 1], ["The Amazon trucks, we did invest in those - this past year.", 0], ["It adds selection.", 0], ["When you think about video ads, video ads are pretty exciting,", 1], ["There's also material change in the Diwali calendar in India.", 0], ["For me that is more symbolic of how you should think about the pace.", 0], ["We remain very, very confident about the portfolio of products and services that we have in the market today and we remain very, very confident in the pipeline of products and services that we have.", 1], ["We've been pretty clear that this business is all about creating new functionality for customers, giving price cuts and then working on the operating efficiencies.", 1], ["And because of that, you're actually already seeing that impact in the MPC gross margins.", 1], ["The exact [ph] percentage we can monetize that we\u2019ll see, but we certainly think that we will continue to benefit from the consumer shift to mobile, because businesses are behind.", 1], ["It's up 300 basis points year-over-year.", 0], ["because for the first time you can take a single table in a database and you would tier it with the cloud, and that kind of capability only we can provide, and that's something that I'm looking forward to.", 0], ["Again, we have great partners in place for our business and support globally, what we do is add capacity where we feel we need to speed up service or ensure demand, particularly at peak.", 0], ["In terms of Instagram and Facebook, we believe that marketers are looking to connect with people in a really deep way, connect with the right people, and our targeting we think is really strong compared to any other platform, at the right time.", 1], ["And the biggest issue you're trying to get at is having the most valuable products for holiday in the warehouse in the Prime space and not having the warehouse filled with things that may not sell until after the New Year.", 0], ["We also have recently announced that Aurora, which is our new database software, is our fastest-growing service ever.", 0], ["So as part of the overall hiring on R&D head count, there's going be a pretty significant allocation of that to some of the product-related security initiatives that we're doing.", 0], ["And I think that's more the case than the risk that a lot of folks have pointed out.", 1], ["Similarly on Talent, they want to be able to \u2013 if you start on LinkedIn with hiring, you want to be able to do the on-boarding and talent management.", 0], ["I think, I mean, we have no plans to build an ad-supported Prime Video offering for free at this time.", 1], ["But in our case, we have a very diverse set of workload.", 1], ["Already fully rolled out around WhatsApp.", 0], ["So that's a transformational outcome where we're very well positioned.", 0], ["We put a lot of effort into that, we put a lot of human effort, we put a lot of machine learning and algorithmic effort into that as well.", 0], ["What that means to us going forward for the March quarter is that revenue growth on a year-over-year basis in constant currency would be five point higher than what we are guiding to, if it wasn\u2019t for the FX movements.", 1], ["The business is now a $14 billion annualized \u2013 running at a $14 billion run rate.", 0], ["We're expanding into new geographies as well and we still have more geographies out there that we think can move the dial further.", 1], ["So that's still our mission.", 1], ["We opened five in the quarter.", 0], ["But whether or not you see that in transactional, the Uber trend of being able to see it through the all-up KPI, the dynamic Satya has talked about, you're going to hear us talk more and more about, whether it's a quote-unquote, on-prem server launch or an Azure feature, about the integration of the two.", 1], ["Amit, so we're guiding 38% to 38.5%.", 0], ["And so the cycle some of the pricing actions obviously were anniversary out, but the overall thing that I\u2019m focused on is how can we continue to run our software asset ourselves in public cloud and translate that into our servers.", 0], ["Well, I think the answer to that is we don't know all the answers around what kinds of content are going to work and are not, so we will probably experiment with a number of different things.", 1], ["Same thing on Azure, which is \u2013 the driver is \u2013 a lot of it is net new.", 1], ["So while I am focused on both the workload improvement, I'm also focused on what's possible across the entirety of the cloud.", 1], ["We've announced our channel service, which has also become available a few weeks ago.", 1], ["The more we're able to innovate with new generations of products, clearly that plays a role in the upgrade rate.", 0], ["And all of the things that are coming both in the fall, the things that we've announced that you can see with iOS 10, hopefully you're running by now with the beta, those and other things make it even more instrumental.", 0], ["If you wanted to feel like you were interacting with someone running for office before, you had to go to a town hall meeting.", 0], ["Whether you're a public figure that is using it to hold a town hall or interact with a lot of people at the same time, or you're hanging out with your friends by going live and you have 10 people who are just there with you chatting with you while you're doing something, going about throughout your day, it's not the kind of traditional video experience; it's actually a more social experience.", 0], ["The vast selection which is helped by the FBA sellers and the strong convenience that we can offer through FREE Two-Day Shipping and the multitude of other faster shipping options such as Same-Day, Next-Day and in some cases with Prime Now, the 1-Hour Delivery to 2-Hour Delivery.", 0], ["And the LTE adoption continues to rise there, but it's got a long way ahead of it.", 0], ["So, it's a pretty similar in period in quarter impact.", 1], ["So that leaves us now continuing to grow internationally as well because we continue to see strong FBA adoption, and it's a big part of our business, and it's a big part of our value with the additional Prime eligible ASNs that FBA provides.", 0], ["And as of Q3, ads were available to 100% of advertisers.", 0], ["A lot of that account value frankly, Walter, today is coming in the form of consumed revenue.", 0], ["I'm really excited about the apps that are coming out and how fast the partnership is getting up and running.", 1], ["You see it frankly in the guide.", 0], ["So I wouldn't break out the dollar term.", 1], ["Also, if I zoom out and look at China, as I have said before and just to make the point once again is we see an enormous change in China over the next several years.", 1], ["And in addition to that, we know that some shareholders really like a dividend and some ongoing income, and so we've provided a amount that we think is a good amount and have a good track record of raising it annually.", 1], ["We think they are very customer-centric, just like us.", 1], ["So we're very - excuse me, the other point I'll make is just like last quarter, I'll remind you that the physical stores revenue is principally Whole Foods revenue, but it excludes the online ordering component where people order on the Prime Now app and it's delivered to them.", 0], ["Right now, we're doing it, I think it's every six months, but the goal is to get that to the cadence by, I think it's the end of this year, we're going to be doing it quarterly and doing calls to discuss the results just like we do for earnings", 1], ["So the customers can pick up at the Whole Foods store.", 0], ["I think some of it will start to be more visible across the apps.", 1], ["We have been working significantly on expanding our ecosystem there, and so we added Union Pay as a payment option for customers.", 0], ["We've also introduced package-free shipment program in nine cities.", 0], ["That's just due to product marketing and that's just not going to necessarily be a steady quarter-to-quarter trend.", 0], ["It's that E3 transition as well as installed base growth.", 1], ["There's going to be quarters where the opposite is going to happen.", 0], ["So we felt like that was not sustainable.", 0], ["We're also adding restaurant, Amazon Restaurant Delivery to the Prime Now offer in 19 metropolitan cities in the U.S. and that's up from two last year.", 0], ["I think that will continue and continue to drive impression growth and then we hope to continue to make progress on Facebook where we\u2019re seeing growth, but it\u2019s off a smaller base.", 1], ["And the Prime Rewards Visa Card, which gives you 5% off on all purchases has been applied to Whole Foods' purchases as well.", 0], ["So we\u2019re seeing a cumulative impact from all of these factors leading to \u2013 leading to what we expect to be targeting headwinds for the \u2013 for the back half of the year.", 1], ["We obviously have felt some good and robust ad tools that are helping us grow our business quarter-after-quarter.", 0], ["We're not going to give out projections on it, but I would tell you that we were really pleased with the number of people that enter the trial period.", 1], ["And you can see from our past several years that we have an intense interest in the space and are adding products and services, non-monetized services, so far to that.", 1], ["To give you an example, the unit sales of iPhone at the top end of the line have been very strong during the September quarter, and that's very important because we're attracting customers to the most recent technologies and features and innovation that we bring into the lineup, but you don't necessarily see that in the number that is reported.", 0], ["We're really in the \u2013 in that phase two where we're really talking about building those organic interactions.", 1], ["It was a good quarter for that.", 1], ["That was one of our biggest strategic objectives was to get active devices and with Store integrated into the installed base and in the user experience so that we could increase these successful developers.", 1], ["And we're working with the government to seek approval to do that.", 0], ["And as I mentioned, I think we believe we still have a lot of work to do to continue to improve that.", 0], ["iPhone 6 was the number one selling smartphone in Mainland, China last quarter and iPhone 6 Plus was number three.", 0], ["We increased market share for iPhone, Mac and iPad during the quarter.", 1], ["On Messenger, we continue to be primarily focused on consumer growth and engagement, and we're being slow and deliberate with monetization.", 1], ["And so all of those things make me optimistic.", 1], ["which shows how immersive that is.", 1], ["I've said logistics, we will continue to build our logistics capability both -- and that will be all the way to end delivery.", 1], ["So, what's going on in ops is we've added 14 net fulfillment centers this year, bringing the total to 123 globally.", 0], ["because we think that the proper way to look at it is to look at active devices.", 0], ["but dollars are shifting from all types of media formats to where consumers are spending their time.", 0], ["It's coming in customer service.", 0], ["And we've added a very useful service to our developers.", 0], ["And similarly, we want to be able look at a video and watch it and understand whether that's something that you're going to be interested in.", 0], ["And then at F8 we made two more announcements that I mentioned.", 0], ["And so we will track that, and we will be very demand driven.", 0], ["I think we've done a pretty remarkable job during the last several years at managing all these different variables and coming out with a level of gross margins that we think is really good for investors and certainly it is our plan to continue to manage them that way.", 1], ["That will generate more upgrades over time.", 1], ["So our goal is to make it as easy as possible for marketers to get to the format of Stories and then deliver the ads where they're going to get the best experience and the best ROI.", 1], ["We've seen adoptions around people who are opting out of allowing us to use context from the apps.", 0], ["We know that the next year is going to represent an additional challenge given where the dollar has moved.", 0], ["In addition to those core developments, we're also making the significant long-term investments in safety and security.", 0], ["But overall, I would say not all time spent is created equal.", 0], ["So new platforms demand new measurement, and so people are measuring all kinds of different things from viewability to how many people see the ad to how long they run the ad.", 0], ["I think there are probably several plants that can benefit from having some investment to grow or expand or even maybe set up shop in the U.S. for the first time, so we're very excited about that.", 1], ["But I would just note that we are not changing our overall philosophy of continuing to invest aggressively across the business in these important areas like safety, and security and innovation, which are going to play into continued expense growth both in 2019 and 2020.", 1], ["On the content front, we're looking at investing in kick-starting an ecosystem for longer-form content on Facebook, and that involves us working with content providers to develop that content.", 0], ["And so with the combination of these, we feel great about hitting our objectives and maybe even doing a little better.", 1], ["So we think all of these things work together.", 1], ["So it's the all-up, as long as we're growing our premium services attach and margins for those remain strong, we feel that the mix can be different and it's okay.", 1], ["Well, there are elements today that are not necessarily tethered to iPhone, right?", 1], ["If you look back over the last few years and adjust for the acquisition of Whole Foods and Soup, which obscured this a bit in the last couple of years.", 0], ["But we also have other businesses that are growing very, very fast and actually accelerating.", 1], ["So we already become the size of a Fortune 100 company.", 1], ["I think One Day should help with holiday shipping.", 1], ["because really when you think about the commercial cloud, it's really about capturing the opportunity of selling more complete solutions which include dynamics and office plus some components of Azure which is I think really the trend you'll see us talk about from here on out.", 0], ["But as far as pricing, there's no capacity constraint, and I would a little bit dispute the deceleration comment on, yes, on a percentage basis, 69% is lower than Q3.", 0], ["I think it's definitely on the Fire TV devices as well is a great way to consume content.", 1], ["And I feel like we're making good progress there and are gaining understanding of the market, but we still have a long way to go, which I sort of see as an opportunity instead of a problem.", 1], ["What you are seeing is two things.", 1], ["Even in Azure, we have things like EMS, we have our data services, even our developer services.", 0], ["I actually didn't think of it as a significant change in trajectory from what we expected.", 1], ["And that correlates very strongly to our opportunity and our potential ARPU.", 1], ["And so I do think \u2013 I don't buy the view that market's saturated.", 1], ["So I think we have a very rich vision and execution on what is an expanding data platform opportunity.", 0], ["On the first question, I think it boils down to whether it will be competitive long term with other options out there.", 1], ["Let me take that first question on Prime Air in the UK, we've been working with and developing Prime Air for some time to develop a rapid delivery system that is safe, environmentally sound and it really enhances the services that we provide for millions of customers.", 0], ["And so that's our strategy there.", 1], ["I think there's lots more to do.", 1], ["The standalone margins on the licensing business have been pretty stable just because transactionally, we understand and continue to bring down the fixed cost base there and any that's required.", 0], ["We also think that continued consumer shift to mobile devices bodes well for our growth as well.", 1], ["this was a fantastic quarter for overall growth of the Facebook community, our strongest absolute MAU and DAU additions year-over-year since being a public company,", 0], ["We have rolled out different types of product ads that we think will help.", 0], ["They've increased 71% through the end of Q2 versus last year.", 0], ["So we\u2019re going to do that though, with great discipline, and that\u2019s what I think you\u2019ve seen us do over the course of the last year, and we\u2019ll continue to exhibit that.", 1], ["And that's where we are seeing some very significant good feedback loops and shaping even our future road map.", 1], ["Of course, there are several customers that subscribe to more than one of our services.", 0], ["From a mix of services, it starts always with, I would say, infrastructure, so this is the edge and the cloud, the infrastructure being used as compute.", 1], ["We actually saw better bookings in Q1 again on Azure, as I mentioned, just like we did in Q4.", 1], ["And so while we have a comparability issue that will show itself most directly as weakness in commercial licensing and most specifically as weakness in Office transactional licensing which will be a headwind, the overall goal of continuing to have more customers every quarter move to the cloud or whether or not they move, adding cloud services even if they have on prem", 1], ["So Azure's stack is completely unique to Microsoft.", 0], ["We've managed to do that by continuing to pivot to what I believe are these very high ROI opportunities, and pivoting away from opportunities where we've had a chance to become more efficient, and the rate of returns are not going to be as high, or the structural growth isn't there.", 0], ["We also are working to make Office 365 and seeing good traction in segments like small business.", 0], ["So, there's a lot of great work going on there and I think that's what you're seeing reflected in the tech and content line.", 1], ["It surpassed all of our expectations.", 0], ["Are we penetrating segments and you also saw that in the quarter.", 0], ["We do believe that, although there's not explicit lift built in for the faster shipping, we have seen good order trends month to date.", 1], ["So for example, when you log into Windows, you are logging in with Microsoft account or Azure ID.", 0], ["And so we have a very good process and that\u2019s a place were quite frankly a lot of the proprietary advantage of someone who is an at scale public cloud provider, not just with one application.", 1], ["One of the things that we realize is as every company out there becomes a software company, beyond even our traditional reach through IT, everyone has a digital office inside the company.", 0], ["I think one of the challenges we\u2019ve had is training the market that you can\u2019t just take your TV ads and put them on video \u2013 I\u2019m sorry, put them on mobile or put them into Facebook,", 1], ["There is new type of business process automation with operations.", 0], ["So when it comes to \u2013 there are lots of businesses on Facebook, there are professional content producers, our main interest here is the people in the community who are using News Feed, not those guys, right?", 0], ["So we have an approach which takes all of our cloud pieces together.", 0], ["So those are all the things that are in play.", 1], ["We definitely are seeing production workloads that are moving over from on premise, but I think the more interesting thing Heather for us is to see new workloads.", 1], ["But in the short term, the most important thing is they continue to add value and usage and great experience for their members.", 1], ["Manulife from Vietnam is an insurance company.", 0], ["We continue to be really pleased with the program and like what it does in the warehouse, both from a density of storage, as well as from making the jobs easier for the associates who are picking packages, by bringing the packages actually to the associates.", 1], ["So that's where TRP buying comes in, allowing people who usually buy TV ads to plan, buy and measure Facebook ads the same way, enables apples-to-apples comparison that we believe is very strong for our ROI.", 0], ["I gave the example of the terrorism-related content and some things around suicidal post where if someone posts something that they're thinking about suicide.", 0], ["But again, not material in the aggregate.", 1], ["Office Commercial actually had a pretty reasonable quarter given some of the impacts we had in Q1, a couple of points of impact of extra growth that we talked about.", 1], ["Those are headwinds that we had this year and were not there a year ago.", 0], ["We would obviously rather not remove the apps, but like we do in other countries, we follow the law wherever we do business.", 1], ["And in each one, we talk about the prevalence of the content that people see because we think what matters is the number of impressions or people who are seeing the content, not just \u2013 not if a lot of people are sharing something but no one sees it \u2013 but what is actually getting seen.", 0], ["People post videos.", 0], ["So for a long time, we talked about Redshift, and Aurora has now outpaced that.", 0], ["These are all the growth numbers and the usage growth numbers.", 0], ["The Mac grew much more than the market.", 1], ["And what you're going to see from us is very small steps to get more people in and make this deeper across the experience people have.", 1], ["So there's not differential pricing by product, it's just what are you willing to bid for the format that you want to show to the people that you want to show it to and that's how the system works.", 1], ["And so I think as long as we focus on providing that value, we'll feel good about our opportunity to both grow and take share in the market.", 1], ["because as Mark said, we care not just about time spent on Facebook, but time well spent.", 0], ["And then finally, we're seeing the introduction of low-priced data plans in markets like India and Mexico contributing.", 0], ["We would have done the channel fill plus the launch of the product, and so that would have bolstered the ASPs in that particular quarter.", 0], ["Now right now, one of the interesting things about Stories is there's a benefit to being an early adopter.", 1], ["I see things that the consumer's going to love because it's going to change shopping.", 0], ["If we do it cost effectively can also have favorable benefits both for our warehouse flow and also for our customers and their ordering pattern.", 0], ["We're continuing to build the products that allow businesses to get a higher return for the dollars they spend and allow people to see more relevant information in ads on our platform.", 0], ["And so there's various time schedules there.", 1], ["So we \u2013 for example, you can in fact do a single sign-on using EMS and Azure AD in Azure and use \u2013 so your resources on AWS.", 0], ["So over 26% growth in this quarter alone coming off a year where I believe the number was 722 significant new features and services delivered for AWS customers last year.", 0], ["We continue to see growth across Facebook, across Instagram in people who are discovering products they're interested in, and we're continuing to make a lot of investments there.", 1], ["So we're very happy with the continued adoption of FBA and what that does to Prime, eligible selection for Prime members.", 1], ["It grew 53% year-over-year versus 52% in Q1.", 0], ["On Instagram, we think that with Facebook and Instagram, we now have the two most important mobile platforms out there.", 0], ["As we mentioned in our press release, the unit sales of Echoes grew nine times, 9x, year-over-year during the holiday period.", 0], ["We're getting great feedback on that.", 1], ["And I think maybe, I should have also mentioned, when you think about seeing that type of performance and Satya mentioned it is not just because of work done this quarter, it is a great point, but it\u2019s also the investments we\u2019ve made.", 1], ["But more importantly, we have great content that we want to share with people outside of our primary retail countries.", 0], ["And so while we feel great about continuing to add seats at that type of rate, converting and adding net new into our install base, you will see that growth rate come down just because the business is getting quite big.", 0], ["I think the first half of your question was does the $32.1 billion to $32.4 billion full-year OpEx guide reflect the timing of the implementation of our restructuring, and it certainly does.", 1], ["We're able to do this, because we spent 20 plus years expanding our fulfillment and logistics network, but this is still a big investment and a lot of work to do ahead of us.", 0], ["On the rest of the P&L, there again we have, I believe some of the best infrastructure people in the industry.", 1], ["The second piece is that, the -- as you said, the online orders where people go to the Prime Now app and then order for delivery or pick up at Whole Foods stores does count or is counted in the online stores component of revenues.", 0], ["So that\u2019s how Windows will differentiate and not to mention, our Gaming and Xbox Live experiences.", 0], ["And so, I think that that basic model where you look around the world and find the best in different areas, I don't expect that model to go out of style, so to speak.", 1], ["It's something that we're very proud of.", 0], ["To the Instagram question, what we see in the short run is that some of the spend on Instagram is incremental to Facebook and some isn't.", 1], ["Our iCloud storage business continues to grow very, very fast.", 1], ["We want to invest in the business.", 1], ["And from our point of view, this has affected consumer confidence on the ground there in a positive way.", 0], ["I do think, as you say, this is one of the rare times in business where you can look at messaging platforms that exist and see how they've successfully monetized in other parts of the world and have that be a floor.", 0], ["They're not coming necessarily to engage in a specific type of video or specific community around video.", 0], ["But that's all part of Azure.", 0], ["It is true that a lot of those are in emerging markets, but we have done \u2013 we've had reasonable business success in several emerging markets.", 0], ["One that is very, very important for us is the fact that the App Store, which is the largest of our Services categories, is seeing an increasingly larger amount of paying accounts.", 0], ["You don't want to just look at these as one thing.", 0], ["Services is doing extremely well.", 0], ["If you look at server shipments, you'd say that's actually a macro statement.", 0], ["During the last three years, we've added Apple Pay, which has been incredibly successful and is a wonderful customer experience.", 0], ["And so what's happening is that SMBs are turning to Facebook pages as their mobile solution.", 1], ["We really need to prove to clients particularly as they scale and we become a bigger part of their spent that we\u2019re driving results.", 0], ["And we think that that's the kind of experience that we can uniquely build and that that's going to further our mission and just be a unique thing that we can add to the world.", 0], ["So working with us, they did five video ads, and on our platform, they could not just do the video format but they could target millennials and people who like spicy food, which is very specific targeting.", 0], ["Keep in mind that the guidance includes an estimated almost $1 billion of foreign exchange headwind for the quarter.", 0], ["It could be a message that you have on Messenger or Whatsapp.", 0], ["When you look at the specific products that \u2013 and the work that we're doing, there's this process that we've followed that \u2013 where basically we'll look at an area of our products that people are using.", 1], ["So that's our primary focus.", 1], ["So we view the payment in that context not as the goal, but as something that's helping the business and the person succeed at having the transaction or doing what they're trying to do.", 0], ["So the decision logic was driven primarily by what I would say is the increased competitiveness of SQL Server.", 1], ["If you look at the products in Office 365 that we have, take eDiscovery it\u2019s a complete new space for us where we are able to do things in security eDiscovery enterprise management that we didn\u2019t even do for the top end of the enterprise in the service side, so that\u2019s what we\u2019re seeing.", 0], ["In order to hit a number like 21% on the growth that you see on your data sheet there, there has to be several things working well.", 1], ["And of course, that includes automated messages as well.", 0], ["I think it's comparable to \u2013 last question first.", 1], ["It's a good user experience.", 0], ["So those are the places where there are PaaS services.", 1], ["We have other products where people are both purchasing things, they're watching Apple TV.", 0], ["And then if you think about some of the key studies I shared, targeting people who purchase a certain item, targeting people who are interested in a certain item, we think that's very substantial.", 1], ["And then we're seeing some impact from how advertisers are using their own data for targeting.", 0], ["So I kind of expect in a year or 2, the world that we're going to be in is people use Facebook, they're going to use News Feed, and then they're probably each going to have 2 or 3 other of these social utilities that they find valuable.", 1], ["There is production IaaS infrastructure-as-a-service deployment given some of the new high-performance SKUs and storage options that we have.", 0], ["And so therefore, I feel very, very good, as I said even earlier, whenever these customer digital transformation projects start, they start by really getting their data into shape.", 1], ["We increased hiring and we invested in direct customer acquisition cost.", 0], ["So that's trending.", 1], ["It's grown a lot because, as you said, the installed base has grown, but also because we have made a number of changes that have made it easier for our customers around the world to participate on the App Store and be able to transact on the App Store.", 0], ["We tend to think about maximizing gross margin dollars because we think that's the most important thing for investors at the end of the day.", 1], ["So that's why I'm really excited about that.", 1], ["And so the advantage of having a assistant on your phone is it's with you all the time.", 1], ["We also saw, and I would expect annuity shifts there, which is the final component.", 0], ["And when we kicked off this big initiative, a lot of the stuff was long-term infrastructure that we needed to get started building.", 0], ["We continue to see the annuity growth.", 0], ["So we're proud about the efficiencies that we've had.", 1], ["So there\u2019s a lot of richness there.", 0], ["August 28 was the close date and what I can tell you is I have been in meetings with John Mackey and his team, and they are very like-minded with us, customer-obsessed, ready to work together to continue their mission and expand on their offerings that we can offer customers.", 0], ["We are in the middle of the Diwali season that is going really well.", 0], ["We also think that there's a real competitive advantage in focusing on business results, as we have.", 0], ["So we feel good about the growth in the quarter and also the total revenue and income.", 1], ["And all did well.", 1], ["because part of it is as you know not just adding the first few in notes in E3 is continuing to add E5 and new scenarios over time that will continue to create.", 0], ["But it also helps us rank News Feed better, so that way we can help understand what is in the content and show people more of what is going to be meaningful to them.", 0], ["because we feel like we're delivering value for advertisers and publishers, so we're investing behind the growth we've seen.", 0], ["so you'd expect to see that line grow in line with the expense guidance that we're giving.", 1], ["And second, our customer expectations and our partner expectations of how we show up with them has changed, and so over the years we have been making changes and now that we have a lot more momentum and critical mass, we are going to that next phase and that\u2019s what you are seeing us in terms of changing the skill set, changing the scope of how we show up to support the digital transformation needs of both large customers, as well as small businesses.", 1], ["If you go further out, you would then start thinking about WhatsApp.", 0], ["We've been in this business longer than anyone.", 0], ["The fact that we now have SQL and, for example, when you think about SQL itself, it's a hybrid product.", 0], ["And if you want the most eyeballs and we think the highest ROI, over time we think that will benefit Facebook and Instagram.", 1], ["And so with the number of middle class \u2013 people growing into the middle class and the LTE adoption rate being still fairly low, around 45%, 50% or so, then I think we continue to have a really good opportunity there,", 0], ["And we're doing that on a number of different fronts.", 0], ["The question again that gets asked is about the cannibalization.", 1], ["I want to make this simple and unfortunately it's just slightly complicated.", 1], ["This is going to be primarily in our ops area.", 0], ["There's no such thing as a canonical business in time.", 1], ["So it's at 97%, still very strong, year-over-year growth in the fourth quarter in other revenue as I think you're aware, there are a number of components, but the largest by a good margin is the advertising revenue and we are comping a period of rapid growth in the prior year, so that is part of the factor there as you mentioned, but I\u2019d just reiterate, we're continuing to see quite strong adoption across Amazon\u2019s vendors, sellers, authors, all types of advertisers that are utilizing that.", 1], ["So as the business gets bigger and we do bigger and larger deals and some of them are on-prem and some of them are in Azure, you're going to see volatility frankly in both of those.", 1], ["And I\u2019m so excited about the space.", 1], ["I think Amy talked about we have a $1 billion quarter with 29% growth and good share position growth in the United States.", 0], ["I'd point to India and AWS, but primarily the two biggest issues in Q3 guidance I would say are the operational ramp and also the increase in digital content spend", 0], ["We definitely need to be smart about two things that Amy said before, which is pick markets that are secular growth markets and got big TAM.", 0], ["And particular in market where pro mix has been strong, I continue to expect to see all of those things happen, through the course of next year.", 1], ["Facebook Messenger people use to connect with people that they know on Facebook primarily.", 0], ["This is down to a monthly review by workload, by property, by geo.", 0], ["I continue and we continue to be very bullish on this channel", 1], ["We've had tens of thousands of customers who are now using AWS machine learning services and we'll continue to innovate on behalf of those customers.", 1], ["On the consumer side, as you noted, we are growing 1 million subs a month, and that's fantastic growth for us.", 0], ["Overall, I am thrilled about both the AI group that we have formed, the AI research and the heritage we have with them even this week I think we publicly are talking about setting the state-of-the-art when it comes to something like speech recognition and something that we did even with image net an image recognition and object.", 1], ["In terms of the sort of the key catalysts and the changes, the cord cutting in our view is only going to accelerate and probably accelerate at a much faster rate than is widely thought.", 1], ["We actually had our annuity volume licensing business as you know, has been showing growth and stability for a while as we talked about Pro is back to the pre-XP levels and while could see some fluctuation, I think this has been a very stable business for us for a long period of time when you take out that XP bump from last year.", 0], ["For brands, we think the value proposition is that we can find ways for them, especially emerging brands, to reach new customers.", 1], ["So, first of all, we've had very strong growth in some very profitable businesses that we have, most notably AWS and advertising.", 1], ["We definitely are delivering a lot of packages with the post office.", 0], ["And part of the reason why we're investing in it is we see that video as a medium is not only in the future going to be about people producing content that looks like traditional content and then consuming it in a static rectangle video screen.", 1], ["And what we believe is that you can intersect at any point on that.", 1], ["The first is that we really have a great platform to do creative storytelling on mobile and I think we have that in a way that no one else does.", 0], ["I think it's going well.", 1], ["When I look at the customer stat on iPad, it's literally off the charts, in some cases a 100%, which is unheard of in surveys to get these kind of customer stat ratings.", 0], ["We think its very big opportunity and we're investing appropriately for that big opportunity.", 1], ["And it's growing at a double digit number on a year-over-year basis.", 0], ["And so, we saw longer commitment and we\u2019ve got a little bit more recognition in the quarter, and so you saw then revenue grow a little faster.", 1], ["So we don't focus as much on the number and we direct you more to the supplemental revenue guidance that breaks out the component parts.", 1], ["We do expect that ad load will be a less significant factor driving overall growth, especially after mid-2017.", 1], ["If you look at just head count growth in the past year, it's up 45%.", 0], ["And what's most important in winning budgets is relative performance in the industry.", 0], ["You could say they're a water company, but now they're pure water service company.", 0], ["Just a year ago, practically a year ago, we came out with ARKit 1.", 0], ["On the first question on the server and product KPI, obviously the strong performance this quarter gives me higher confidence in my commitment to high teens growth in that number.", 1], ["because AI starts with having a data estate that can really bring data from all of your applications, silos in some sense, together so that you can start doing, building that analytical power that you can then visualize and put in the hands of people using Power BI or run an AI model that does some prediction that you can deploy in your system, whether it's forecasting, sales lead scoring, what have you.", 0], ["And the best results combined the Ad Breaks and the News Feed.", 0], ["Obviously, you can't have a mission of wanting to connect everyone in the world and leave out the biggest country.", 0], ["We\u2019re expecting that it will be again a great help to customers in Q4.", 1], ["Future expansion, services expansion Internationally very similar to the U.S. on a number of the Prime fronts but also the investment in India.", 0], ["And so to your question on Transactional performance, there were some deals that didn't get done in Q3 that got done in Q4, and there were some deals done in Q4 on the Office side with large companies that I'm thrilled by.", 1], ["We're focused on the certainly brands as an advertising customer set and a lot of focus on providing the products and tools that are going to help customers and really inspire them.", 1], ["And then immediately after you do something like preventive maintenance, you need field service.", 0], ["As I said, right, our objective is to make great products, provide the best customer experience, and get our customer satisfied, engaged and loyal to our ecosystem.", 1], ["That was really by design and so we are happy to see that.", 0], ["It's been a relatively measured rollout by Amazon standards.", 0], ["We continue to run SG&A tightly.", 1], ["First of all, it\u2019s the loss of leverage from the sequential decline in revenue.", 0], ["So we continue to build out our sales force and our marketing programs.", 1], ["With this specific change which is one of a number of News Feed changes that are geared at improving the quality and trustworthiness of news on Facebook.", 0], ["Our mobile ad product is so integrated into the user experience and provides real creative flexibility that people have a way to reach people on mobile and that's becoming increasingly important in telling the stories that drive their business.", 0], ["And so even though we were reporting a similar year-over-year growth for Greater China, if you change that reporting to an average weekly sales, which probably is much better way to look at it, there was actually a really nice acceleration.", 1], ["We continue to invest.", 1], ["That was about $750 million increase to that other sales revenue category here in the third quarter.", 0], ["And so when you think about upgrade cycles, upgrade cycles would have varying rates on it.", 1], ["On that latter point, really the mix of ad units is part of what we're doing I think really well.", 1], ["And it feels great to get this thing going at a level that can get all of the developers behind it, so I couldn't be more excited about it.", 1], ["But you are right that we are moving very slowly and very, very, very carefully because we want to make sure the entire experiences is right across the board before we go deeper and go broader.", 1], ["We're seeing strong growth in brand, and we believe that's because we're delivering on the promise of personalized marketing at scale.", 0], ["And obviously with the aggregate or the consolidated number being 112%, it's hard to find a lot of bad things in the numbers.", 0], ["The emerging markets that we're seeing pressure in are markets like Turkey, India, Brazil, Russia.", 0], ["And the data center capacity that we put in place is to provide the services that are tied to the installed base.", 0], ["It's more around just us doing a better job at being able to optimize campaigns for people who have downstream activities that we can do that for.", 0], ["In terms of overall, rough orders of magnitude, the Intelligent Cloud segment has the least exposure to the transactional business.", 1], ["And to your point, we actually saw it this quarter because we again saw a quite good performance in some of these larger long-term Azure contracts which added on a flat expiry base to that 15% bookings growth, which was good.", 0], ["Advertising revenue is as a subset been growing at about the same rate year-over-year in the fourth quarter than it did in the third quarter.", 0], ["The first thing that we need to do on Messenger and WhatsApp is get a lot of businesses using it organically and build the behavior for people that they reach out to businesses for different things, like customer support or for getting news content, things that may not eventually be the big business use cases but establish the behavior of people interacting not only with their close friends, but also with businesses.", 1], ["I think, in general, what we've seen in prior releases is, it does extend a bit past the deadline, especially in our small and mid-sized business customers, and it's really important for us to continue to work hard to have the small and medium businesses find a path forward to make sure they can experience the most secure computing environment we have.", 1], ["We did adopt that revenue recognition standard in 2018 as I mentioned.", 0], ["So in Instagram and Facebook, you have shopping, and you have Marketplace and you have all the tens of millions of small businesses that use pages and a lot that use Instagram for sharing their inventory and being able to help people discover and pay.", 0], ["I talked about the revenue growth rate, and that's definitely going to be what's going to be true in the quarters to come and the years to come.", 0], ["That's been a key part of what we've been doing, and that will just continue to be the big driver in the near- and medium-term.", 1], ["So we are always thinking at least of the technical architecture that makes us unique and differentiated spanning all of it.", 1], ["We are over $25 million or excuse me, 25 million names (14:02) which is the largest online store in India.", 0], ["And to the extent that there is going be a lot of public content, which there will be, a big part of the focus is going to be around building community and interactions around that content.", 1], ["But we like the initial engagement we're seeing and the response from, again, both customers and sellers.", 1], ["Our annuity numbers and renewal numbers were very good in Intelligent Cloud.", 0], ["It\u2019s just going to be volatile as CapEx tends to be quarter-to-quarter based on both supply chain and demand.", 1], ["And so all of those I think bode well.", 1], ["So that\u2019s the core rational for why we are doing cross platform.", 1], ["On Prime Now, it is our intent to roll out benefits and functionality globally as quickly as possible.", 1], ["And so you will see also some different dynamics within that Azure revenue number.", 0], ["clearly the commodity environment remains quite favorable, and we continue to expect cost improvements.", 1], ["We\u2019ll see how it works; we\u2019re pretty open to experimentation.", 0], ["We have a case right now around memory pricing, which is a headwind for the time being.", 0], ["I think we're still at the beginning of this.", 1], ["It was a record day for Amazon devices.", 1], ["And then on the 35% increases in ad prices, this is really being driven off of a couple things.", 1], ["because Instagram is at a lower ad load than Facebook,", 0], ["So most of our focus has been on again adding more functionality, adding more products and adding - reporting for businesses and advertisers, so they can understand the incremental customers they're seeing on Amazon through advertising with Amazon.", 0], ["On Instagram Feed, which was the second factor, we have seen some increase in ad load on Instagram on a year-over-year basis, but we expect that there'll be less significant growth opportunities going forward on Instagram Feed ad load.", 0], ["When I think about the MSI changes, obviously any change that's beneficial for our community is good for the long run health of our business,", 1], ["And so we're excited about that because we think it could increase the diversity of the developer community and the quantity.", 1], ["I would say Sponsored Products is off to a great start.", 1], ["Just quickly on the ASC impact, Brian mentioned earlier that of course we've been talking about it all year the changing, and the subscription revenue recognition is now straight line.", 1], ["Also, in China, consistent with the company but at a much different rate, the App Store had a record quarter and grew over 100% year over year.", 0], ["We're seeing lower cost per conversion.", 0], ["The value of Prime to customers has never been greater.", 1], ["The other side of it is the edge, so Azure IOT, our service both in the cloud and the edge and Azure Stack now truly are starting this quarter is going to be another way to extend out the rich services of Azure even beyond public cloud deployment.", 0], ["And this is a place where we are leading.", 1], ["If you could almost take out that 606 impact in the billings team to almost mirror the Microsoft 365 SKUs we sell.", 0], ["In ads in Stories, we rolled out globally about 1.5 years after launching Instagram so it's still early but we're definitely seeing a lot of value for businesses on Instagram, and we believe same on Facebook.", 1], ["We're seeing a lot of good ideas getting tried out.", 0], ["It's impact on Prime and we think Prime and FBA are self-reinforcing.", 1], ["so we're very pleased with the results both in constant currency terms and nominal terms.", 1], ["The thing that I'm seeing a lot of is we've had traditional strength with SQL as well as .Net.", 0], ["We're using software and algorithms to make decisions rather than people, which we think it's more efficient and scales better and will be more accurate, especially as we insert machine learning into the decisions.", 0], ["And I\u2019d say the way we think about it is actually more -- we're talking about Azure per user, it really does move more with M365 per user.", 1], ["We have Amazon fulfilled units are still growing faster than paid units.", 0], ["It\u2019s a little bit different than Feed posts, so comparing apples and oranges a bit.", 0], ["Our business in China was very strong last quarter.", 1], ["So I would say it's not as much of pendulum as maybe it's been portrayed.", 0], ["We think it's a similar - we know it's a consistent process and there are times when we under run and sometimes we over run it.", 1], ["Yeah, I think my own view is that China and the U.S. have this unavoidable mutuality where China only wins if the U.S. wins and the U.S. only wins if China wins and the world only wins if China and the U.S. win.", 0], ["I expect our overall Pro business to remain in line with business PCs.", 1], ["And then Brazil was particularly weak last Q3.", 0], ["And so we see that benefit even on that front.", 1], ["I use Power BI .", 0], ["That includes video content including Amazon Originals, Prime Music, Prime Now.", 0], ["And in constant currency terms, we were actually up 6% in mainland China.", 0], ["So we are starting to get to that point Mark where you have a big base, which is still growing at a fast rate, and so especially ARR numbers can see big jumps in the one that you saw this quarter, and your right, Q4 is also historically quite a big quarter and this one certainly was as well.", 1], ["We've had multiple price cuts this year", 0], ["And this is a different approach than we would\u2019ve taken a few years ago, right?", 0], ["I feel we've got a very broad base of customers from startups to small-medium businesses to large enterprises to the public sector.", 1], ["The number of people transacting on our stores continues to grow.", 1], ["So the first thing that I want to stress here is that these kind of new platforms take a long time to develop", 1], ["But we are still early in the development stage, so it'd be early to be talking about large volume shipments.", 0], ["And the number of switchers through the nine months are the highest absolute numbers that we've ever had.", 0], ["It includes the content.", 0], ["It's now a multibillion-dollar program and growing very quickly.", 1], ["Number one, the unearned strength that we saw at the end of Q4, you\u2019re right, was very good execution on renewals on a reasonably large renewal base.", 1], ["Again, we like our position, our industry leading position in the cloud space, and we're working on things that would incent more and more customers to accelerate their cloud conversion.", 1], ["But it was coming at the expense of people interacting with each other as much.", 0], ["We're excited about the number of customers that are trying it and that all the value it offers.", 1], ["In developed markets, it is stable and we feel like we're pretty close to saturation in a lot of countries, like the U.S.", 0], ["And it's going to depend obviously also on regional mixes too,", 1], ["So there are all these transitions.", 1], ["It doesn't provide a meaningful financial contribution at this point, but as we look at the amount of transactions that are going through Apple Pay right now and we think ahead for the long term, that could be an interesting business for us as well.", 0], ["And we see all of those continuing to be factors for growth going forward.", 0], ["We also launched a new pricing plan which is a monthly $14.99 add-on to Prime in the U.S. and we've expanded, as you know, previously into London.", 0], ["Those taken together continue to show gross margin improvement.", 0], ["And so -- and I feel like we are reasonably well positioned in China, I\u2019m sure we can do better, but I think we are doing fairly well there.", 1], ["And our supply chain management is optimized for it.", 1], ["So I would say that we're continuing to frontload Prime benefits in the newer geographies.", 1], ["So they look for people that at a certain date have used specific itineraries and then created Dynamic Ads which showed the available cruises and pricing and had a Book Now button.", 0], ["But at the same time, I think we want to be smart about how many of these phones do we want to generate, how many, which price points we want to participate", 1], ["So I don't think anything has changed since Q3 in terms of our outlook on the headwinds that we have around ad signals.", 1], ["I think with all products, I think about the complete sales cycle and I am really encouraged by the fact that we're doing a good job of moving from the initial sales through deployment, through adding on services and back to renewals and I think the importance of that customer lifecycle is really how we think about our workloads and our workload health in the cloud.", 1], ["From the price-volume perspective, yeah, the price per ad increased modestly 3%.", 0], ["So you'll still see the percentage of third-party units increased and has been steadily over the last few years.", 0], ["We do spend a lot of time driving better efficiency in our data centers.", 0], ["The good thing about 30% revenue growth is it gives you a lot more cost to work on as well.", 0], ["But in general, we feel good about the growth in the quarter.", 1], ["We also look at our pipeline, and we're very excited about what's in our pipeline", 0], ["If you're starting new, you will have PaaS, which is going to be the first thing you do, but then you'll always find the need to go integrate with something that was already existing, existing data, existing code in a virtual machine.", 0], ["The best way to think about how people are using, whether it's Azure or Dynamics 365 or other capabilities we have, is in the context of that digital transformation and the outcome.", 0], ["And we think that we can help drive that and improve people's lives by doing that, so we're absolutely going to go do that.", 1], ["So I feel we are well positioned to what is going to be a much larger market than what was traditionally gaming, in spite of all the success we\u2019ve had over the years in gaming.", 1], ["That's the kind of mission based work that we're happy about", 1], ["So the business side is not the main focus right now,", 0], ["But one of the big things that we need to think about here is, of course, we're only going to do this in a way that we're comfortable with over the long term.", 0], ["We will continue to generate cash in the U.S., but definitely a good portion of the program will be funded through debt.", 0], ["Customers certainly like that model.", 1], ["because more than 2 billion people are communicating on the service.", 0], ["And so I think there's lots of things that bind the countries together and I'm actually very optimistic.", 1], ["I do believe that the market that which we are operating, the set of assets we've picked, the team we've built, the investments we made in our sales force, even some extent the acquisitions we've done, these are all showing up as top line revenue growth for us.", 0], ["So let me also say, after a year of working with them closely, my appreciation and, frankly, a lot of inspiration that I think you've seen in our own product development has been their focus on users and how important it is and how focused they are on it.", 0], ["And the operational improvements, excuse me, the gross margin, operating margin year-over-year that we've seen in the AWS business has been heavily driven by operating efficiencies, both purchase reductions and purchase prices and also efficiency in driving greater utilization of the assets that we have.", 1], ["And then the third is our own product changes as we put privacy more front and center.", 0], ["I look at something like Sway which I\u2019m pretty excited about because basically we\u2019re taking the concept of what is an interactive document and the website and bringing it all together into these Sway documents if you well and if you\u2019re excited about what that could mean in customer service marketing or for school reports.", 0], ["So I think making her smarter and seeing that she gets smarter with all the skills, leveraging the cloud and AI, becoming more knowledgeable and introducing a lot of really new cool new features.", 1], ["And so that to us is intuitive that they would be.", 1], ["And of course being used together delivered more value to customers and that\u2019s where our competitive advantage comes.", 0], ["And structurally, that would of course have higher operating margin.", 1], ["We think it's being critically acclaimed and also a big hit with customers.", 0], ["Kind of more like Facebook to the Instagram example that we used before, whereas WhatsApp I think is a much more utilitarian experience with a much more stark UI where there's just not as much emphasis on having a lot of different ways to engage.", 0], ["I think its good clarification.", 1], ["And so hopefully, you see that in the list of things we've launched recently and the continued cadence of making the services we have better.", 1], ["Expansion means additional cities, additional routes, additional zip codes.", 0], ["But principally, what we're trying to do now is \u2013 again, make the Prime experiences as strong as possible for consumers.", 1], ["We continue to expand the list of Prime benefits for customers to make it more valuable, and none is more valuable than FBA, which we've talked a lot about the value of Prime to FBA and vice-versa.", 0], ["We had Oracle.", 0], ["It's not going to be exactly the same format.", 0], ["That goes not only for just being able to deliver the content, but being able to understand what it is so we can rank it in News Feed better and show people the right content.", 0], ["So we needed to figure out a way so that video can grow, but people can also keep on interacting doing what they tell us that they uniquely want from Facebook.", 1], ["And that's going to have a negative impact on revenue growth.", 0], ["And so we\u2019re very, very bullish.", 1], ["So Instagram ads, now that we've rolled out as we have this past quarter and gotten to a really good product offering, combined the creative format of Instagram which is very visually compelling and has a lot of engagement from people with the back-end infrastructure and marketer base that Facebook has.", 1], ["So we are seeing more of our impression growth coming from Stories, and when I outlined the factors driving impression growth, I listed Stories first.", 1], ["In the past we participated, but a lot of Tier 1 workloads were not on Microsoft stack, whereas now, a lot of Tier 1 workloads are in fact increasingly on Microsoft cloud.", 0], ["So they targeted 18- to 34-year olds, they did five short videos with these funny moments of where you're about to break your phone, and they got a 6 point lift in awareness of what is a warranty program.", 0], ["In terms of the share repurchase authorization, I would just say that we've just about gotten our way through that.", 1], ["We've invested a lot in our global selling program, which helps Indian sellers not only reach customers in India, but also in other geographies around the world.", 1], ["The Productivity and Business Process segment has a bit more transactional exposure just because it has both the consumer and the commercial Office business, which is more attached on a transactional basis to PCs, so it's slightly higher all up.", 0], ["Overall, what we're seeing is, clearly there is increased usage of infrastructure as a service", 1], ["And so to us it's sort of within the range and it\u2019s basically when we thought.", 1], ["And I think the government there is very interested economic reforms and so forth", 0], ["When we introduce ads into feed and continue to increase the ad load, we monitor really carefully.", 1], ["We saw a 14-point lift in ad recall, a seven-point lift in message association.", 0], ["I think we're well positioned for the holiday.", 1], ["If you think about it in the client server era we never participated in the core of the digital infrastructure or financial services or in healthcare or in retail or in manufacturing and absolutely when we think about the digital transformational and design wins, deployment, consumption, it's kind of like what we would have done with some ISVs of the past, how we worked perhaps with SAP in the 90s when we were coming out with SQL server and they were coming out with R3 is what we are now doing with many, many, many businesses as they build out their digital businesses.", 0], ["And so we're investing, and the number one thing is to make sure our products work well with other developers' products like Pok\u00e9mon.", 1], ["So that is the cleanest way to think about that number.", 1], ["because there's already strong demand for feed products.", 0], ["The second or the previously owned market has expanded in units over the years.", 0], ["So, again, widespread usage and new customer adoption, which is great.", 1], ["So the unique capability we now have in Windows Server, SQL Server is becoming that much more competitive.", 0], ["I would say in places like Europe and Japan, we're seeing many of the efficiencies I talked about earlier on fixed head count, operations costs, infrastructure costs, and also things like marketing working to be very efficient.", 0], ["The TV+ product plays in a market where it's -- there's a huge move from the cable bundle to over the top.", 0], ["So it's a really unique combination of the power of creative that was designed for video for mobile with very specific targeting and very specific measurements.", 1], ["Essentially, there is a new business application like set of services that are getting developed to help people manage their complex IoT application development.", 0], ["And then of course, I think that search is often driven by what unique content is in a system and not just the ability to find it.", 1], ["As part of the adoption, certain advertising services were classified as revenue rather than a reduction of cost of sales.", 0], ["So this is something that we're going to continue engaging in and thinking about, how to move forward on, and long-term it's very important.", 1], ["A public sharing and consumption product for video, that's a thing.", 0], ["I think the specific ads will be part of how we do that, but it won't be the only way.", 1], ["When we tend to have these, we tried to call them out like we did in Q3 leading into Q4.", 0], ["So there's a lot going on in international.", 0], ["Because a lot of the best episodic content is professionally created, and those folks need to make a good amount of money in order to support their business model.", 0], ["For example, we innovate the products.", 0], ["But the top priority right now is just building out the base of organic interaction between people and businesses that they want to interact with.", 1], ["In other regions, we're seeing good strength in video.", 0], ["We did adopt a new standard in January 1 of this year, 2018, and you'll see that reflected in our financials for the first quarter coming up.", 0], ["Right now, we're really just testing and reacting to the customer demand and the customers' preferences and we'll do so for the foreseeable future.", 1], ["The new services and features last year were over 1,000 versus 700 or so the \u2013 excuse me, in 2015.", 0], ["And that's something that we will in fact have distribution agreements with.", 0], ["So on Facebook, you can target an ad by district, by interest.", 0], ["We'll continue to invest in things that we believe enhance the customer experience, particularly the Prime experience.", 0], ["And giving a focused experience for the person who wants to run their business through Facebook and be communicating with their customers all day long, that\u2019s just proven to be an incredibly engaging experience that drives content into the system and is good overall.", 0], ["Video is another big contributor there as well.", 0], ["Whether it's IoT, whether it's the auto industry, whether it's what's happening in retail, essentially compute is going where the data gets generated, and increasingly data is getting generated at the volumes in which it's drawing compute to it, which is the edge.", 0], ["For the company, it\u2019s not as large an issue.", 1], ["So you've got Eastern Europe, and you've got Turkey in there.", 0], ["And really when you look around the world, it's really if you exclude China, essentially every single currency has weakened against the dollar.", 0], ["And I think as Luca said earlier, when you change that for an average weekly sales basis, it\u2019s actually 22%.", 0], ["So actually, margins structurally were better than I thought they would be.", 0], ["We are right now, the second half of this year looks like a big step-up compared to the first half and it is.", 0], ["And so it does seem to me there's an extraordinary opportunity in that business to grow the market well and I think if we put our emphasis there, which we're doing, that will be a beneficiary of that as other people will as well.", 1], ["So I associate it, yes, with lifetime value, and I also associate it with our ability to move our gross margin percentage up.", 1], ["There is a metric employment of full-time hires.", 0], ["On your comment, I assume you meant vendors not merchants, but on the move from 1P to 3P, but no there shouldn't be -- I can't highlight anything related shifting in channel there, but I would say that we remain in different on whether -- we're focused on price convenience and selection for our customers.", 1], ["So that is going more global and will be more balanced.", 1], ["Amazon Go is now up to six stores.", 0], ["Ads for us is a very natural fit for our business, and we have a lot of runway ahead of us.", 1], ["And that growth is great to see.", 1], ["And, but I think for us, the thing that we always have to do is come out with a really great innovative product, and I think that iPhone X shows that when you deliver a great innovative product, there's enough people there that would like that and it can be a really good business, and so that's how to look at that.", 1], ["Right now, the big theme and strategy that we're executing is we're going to become video first.", 1], ["So we like our device business in general.", 1], ["So as you move Office, it\u2019s simply the first step.", 0], ["We do not expect to be paying more than what we are accruing right now.", 0], ["And to your second question, most of these larger contracts are showing up in that commercial bookings number, and we referenced that on these -- when we say the longer -- larger, longer-term contracts, that is where they show up.", 0], ["As far as penetration, we don't have that quantified for you, but we still believe that there is a lot of room to continue to improve the presentation of and bringing to our customers new and more relevant purchase options.", 1], ["And trade-in as a percentage of their total sales is significant and financing is a key element of it.", 1], ["So, I think from a secular trend point of view, we\u2019re very well-positioned, but obviously we\u2019ll continue to monitor the macro conditions and currency.", 1], ["One of the other categories that I see lot of lately is IOT.", 0], ["And we think this provides us a great opportunity to win over some of those customers into the Apple ecosystem.", 0], ["It's having the right product lineup for the market.", 0], ["So is innovation.", 1], ["At a macro level, because about two-thirds of our company is outside the United States, a weak dollar is a positive for our gross margins; a strong dollar, as it's been during the last four years, has been a bit of a headwind for the company.", 0], ["The next thing is with the iPhone SE, we have seen our ability to attract even more customers into the platform with an incredible product that is at a new price point for us with the latest technology, and so we're optimistic about attracting even more customers with that.", 0], ["As I said in my opening remarks, that has increased or we've observed increases in some types of sharing and interaction between people based on that.", 0], ["We're very happy with their order patterns from Prime Now, and very happy with it.", 1], ["But I could not be happier with how things are going right now.", 1], ["And as I've mentioned before, 3 out of 4 customers buying an Apple Watch currently or last quarter I should say were buying an Apple Watch for the first time.", 0], ["So there was a bit of growth, particularly in lower ASP items from that, that we saw last year.", 1], ["We are paying some tariffs today as you know, some that went into effect pre-September, and some others that went into effect in September.", 1], ["However, in terms of ARPU impact very, very small in quarter.", 0], ["As opposed to driving our own top line/bottom line growth, I think we can bring real innovation, and that's what is exciting to see.", 1], ["But the mix will also shift each quarter, just because the mix is not a stable mix.", 0], ["Feed from a growth perspective on an impression front is more constrained given where we are with ad loads on Facebook and Instagram.", 0], ["So that's going to be an increasing part of that experience too.", 1], ["In the case of Maersk, they were using field service and operations inside of Dynamics 365.", 0], ["We do think that it does pay benefits both for ourselves and for our customers because of the expansion, and we're happy to have added the region in Mumbai this past quarter.", 1], ["You're going to have some of the ads work that we're doing, the ads quality work showing up in the sales and marketing line, so you're going to see some there.", 0], ["The current market of trying to help people share and experience all these shorter form clips is massive.", 0], ["We were not able to reach a balanced state during our fiscal Q1.", 1], ["And there will be changes in seasonality from quarter to quarter, but structurally those two things, the diversity of what we are doing and how capital is utilized across all of it is I think a big structural differentiator for us.", 1], ["So we obviously feel good about a 20% growth.", 1], ["Part of the advance in AI technology now allows us to use more compute to use all the data that's in the system to provide better results,", 0], ["We had a -- we've come off a period where if you remember last year we had less investment needed in infrastructure both for AWS and for Amazon in total.", 0], ["In Urban China and the U.S., the top five smartphones last quarter were all iPhones.", 0], ["We had a very strong holiday season.", 0], ["And so that\u2019s also a factor that impacts the sequential compare.", 1], ["When it comes to our build out, Heather, I tend to think two components.", 1], ["We're going to be investing in content to help build a platform for content producers to find an audience and monetize.", 0], ["That's very different from saying, hey, I want to watch video content now.", 0], ["One of the other things also is a huge benefit for us is,", 1], ["But as Watch has grown, it has proven to us that that these sub-experiences as part of our different apps, similar with IGTV, can be quite successful.", 0], ["And from what you\u2019ve seen from our guidance for the March quarter, we\u2019re guiding to a growth in OpEx on a year-over-year basis that is similar to what we\u2019ve experienced during the course of the December quarter.", 0], ["But quite frankly if you sort of looked at what\u2019s broadly happening in the Cloud transition, we are participating in both the private hybrid Cloud as well as the public Cloud.", 0], ["because we believe that we can get an accurate signal from the community then \u2013 people are smart.", 0], ["We are high on AR for the long run.", 1], ["So on Prime Video, again we're very happy with the customer adoption of Prime Video, and we know the customers love it.", 1], ["I think the biggest differences there focused on sellers and the connection of sellers.", 1], ["Japan grew double digits in terms of units.", 0], ["And so, we're focusing on products and services and there will be some services that aren't hooked and some that are hooked not on current period sales mostly, very much services are rarely connected on that today or at least not a high percentage by any means there.", 1], ["So I won't shy away from it because what's important to us is growth in areas where we have something unique to contribute and long-term profitability.", 1], ["So, so far, our focus has been on continuing to lower prices even beyond the initial ones that we discussed at the close of the deal in late August.", 0], ["So that's the first thing that we're seeing is increased usage of our servers with the cloud component.", 1], ["So it's a \u2013 there's a bit of timing at play here, but I think overall, in the longer-term, we certainly work to drive efficiency in both AWS infrastructure capability, and also in our warehouse networks.", 1], ["Three, our trade-in and financing programs that we\u2019ve implemented in our retail stores have been very well received there, and I'm happy with the results to date there.", 0], ["So, we\u2019re very excited about that.", 1], ["Marketplace is growing nicely.", 1], ["So live video we think represents an example of something new, which is video which is a medium for doing something that's really interacting with other people.", 1], ["We are also nearly doubling our content spend in the second half of this year versus the second half of 2015.", 0], ["That bodes very well for our business because we think we can do that very efficiently.", 0], ["They are native format, so they decrease that initial drop-off you see when people click off to another site.", 0], ["And so, on the AWS side, we've got investment going on around the world, certainly additional servers to support the strong growth we have.", 0], ["And because of the successful results that we've seen in a number of elections recently, we feel like our road map and our level of preparation is much higher now than it has been.", 0], ["Those are the kinds of things that we are excited about.", 1], ["In India, India is also incredibly exciting.", 1], ["We price for the value that we're delivering, and iPhone X is the most innovative product on the market.", 1], ["So on the OpEx guide, clearly the biggest driver there is going to be the accelerating head count growth.", 1], ["our approach to OpEx is quite clear and quite simple.", 1], ["We'll have some costs in Q2 ahead of what's anticipated to be a Prime Day in early Q3.", 0], ["but also about helping people when they're in need on the platform, and we take that very, very seriously.", 0], ["But obviously we are investing in the business and we will never under invest in the business.", 1], ["But here is what I see when I look at it and the reason that I'm so optimistic.", 1], ["People start using E1 then they use E3 and then you start to see the momentum in E5, and we did see that.", 0], ["because our people started building their mobile back end, web back end using Big Data not workloads we have.", 0], ["It's more of a constant.", 0], ["And we do see obviously spikes in Black Friday and Cyber Monday and we also see relative tick-up in trends as we get closer to the holiday and for the shipping threshold cutoff.", 0], ["And so we're very much, we're confidently investing in the future, and that's the reason you see the R&D spend increasing.", 1], ["We think over time that marketers will follow where people are spending their time.", 1], ["We think once we do, the returns will be good.", 1], ["So I think the mix of our gross, or rather that mix will define our long-term gross margin and operating margin for our cloud services.", 1], ["What we're focused on doing is providing more higher quality services for free than what you could otherwise get in paying for them.", 0], ["The biggest strategic thing that we really need to do in messaging right now is make it so that people organically interact with businesses and that that is a good interaction both for people and for the businesses.", 0], ["We are always looking to not be beat on price.", 1], ["Yes, the CapEx, which is principally the fulfillment centers was \u2013 grew 51% year-over-year.", 0], ["We are continuing to invest to support the video strategy on Watch.", 0], ["We don't actually look at the photo and deeply understand what's in it or look at the videos and understand what's in it or read the links that people share and understand what's in them, but in the future we'll be able to, I think in a five or 10-year period.", 0], ["We're very pleased with the results we're seeing on the top and bottom line, but margins are going to be bumpy and affected by levels of investing, price reductions and also cost efficiencies that we're driving.", 1], ["So what we find through the research is that for every 10 people who get connected to the Internet, just a little less than or right around one person gets lifted out of poverty and one new job gets created.", 0], ["And then on Windows 10, I mean I'm very, very excited obviously about what's happening with Bing.", 0], ["It will moderate through next year.", 0], ["We will not be providing the granular customer detail unfortunately but we will say the growth of 81% was up 49% in Q1.", 0], ["Well, what I can say is our approach to pricing has not changed.", 1], ["And so that's what we're doing.", 0], ["The rise of the middle class there is continuing, and it is transforming China.", 1], ["Those of you who have been following us for a while know that periodically we make changes to the product that is going to impact some of the metrics.", 0], ["In addition, we've done a lot of hard engineering work I believe over the past six quarters to be able to take advantage of more utilization and capacity over time and I'll let Satya maybe add a little bit technically.", 0], ["It's now a multibillion-dollar program.", 1], ["Quarter to quarter, there will be all kinds of volatility.", 0], ["In fact, I just called out a few things that are going to be stepping up in investment levels in Q3, mostly ops and digital content.", 0], ["So lots of innovation, invention on that front as well.", 1], ["We think that the more money that creators can make through Watch, there will be a virtuous cycle there.", 0], ["So as I've said a number of times before, our mission is to connect everyone in the world, and it's hard to do that over the long term if we don't find a way to serve more than a billion people who live in China", 0], ["We are very focused on growing iPhone around the world, not just in one geography and getting our message out there through ads is one way to do that.", 1], ["So all of these millions and millions of pieces content that are out there, whether or not you've added someone as a friend or have liked a page, we'll be able to know a lot better what types of things are going to be interesting to you to produce a much better feed of content.", 0], ["So we're also hoping to roll that out pretty soon widely.", 1], ["I mentioned the foreign exchange headwinds.", 0], ["So we are not afraid to bring in new capability, but then also questioning what is the allocation we have.", 1], ["It's not like you have to search one-day shipping specifically to find out what's available.", 0], ["And so the fact that there's so much consumer video, that gives us the opportunity to do more marketing video as well.", 0], ["We just opened up Amazon Fresh in Tokyo last weekend, but also Prime Now.", 0], ["There's tons of things on our roadmap of adding functionality to it.", 0], ["I guess not for the Facebook-only stats, but I think you just get different dynamics based on the, really, characteristics of those countries.", 0], ["As you may know, we have three physical bookstores, one Seattle, one in San Diego and one in Portland and two more coming, one in Boston and one in Chicago.", 0], ["And as you need to reason over larger amounts of data, you need not only storage and compute to be co-located all over as the world get them embedded with computing, that\u2019s what we are building for.", 0], ["Our video demand is very deep.", 0], ["We're invested in the long-term success of Sizmek.", 1], ["That's a faster pace than last year when we added 722 services and features.", 0], ["So we're seeing the breadth and depth of our cloud offering, which is what we are really architected to have real synergies in the context of what our customers want to achieve, and that's what we are seeing.", 1], ["And the long term I think is very, very strong there.", 1], ["So it builds a better engagement for the brand and the customer.", 0], ["And on AmazonFresh, we continue to have a strong Fresh business in a number of cities in the U.S.", 1], ["And that's going to be particularly pronounced as we get into the second half of 2017 because ad load will be a less significant factor driving growth starting in the second half.", 0], ["When you think about our marketer growth, I think we have an ability to grow both the number of advertisers who use our platform, but also the percentage of their business that we get.", 1], ["And the idea is that there are all these different barriers that any given person has to being able to share and express everything that they want, from technical barriers, it's really hard to communicate with someone if you're not on the internet and they're far away, to product barriers, it's hard to share videos if we don't have a good product for sharing videos, to legal barriers, it's hard to share content that your government says is illegal for you to share.", 0], ["We're very encouraged.", 1], ["In our physical stores, it feels there are supplemental disclosure that physical stores revenue was $4.5 billion in Q4, which is primarily comprised of Whole Foods and was slightly better than what was built into our guidance that I gave you last call.", 0], ["And so it\u2019s great to get that kind of feedback.", 1], ["And just as importantly, tens of thousands of developers are also using the Alexa Voice Service to help integrate Alexa into their products, which then creates a great network effect.", 0], ["And I do think that that is likely going to continue this trend of decreasing passive consumption, but if we do our jobs well, it should increase the number of meaningful interactions that people have.", 0], ["We've made no changes post acquisition that would have impacted anything related to in stock, except perhaps the fact that the price decreases have brought up demand and there's an amount of rebalancing related to that.", 0], ["This gives us extra capacity and we think it's good to be able to deliver to customers, and we think it makes sense over the long-term.", 1], ["When it comes to our appetite for M&A, actually it has remained unchanged, which is when things meet our criteria and when we feel like it's in core areas for us, where markets are expanding, where the companies have a unique asset, I think that our ability to both execute on those and see them both execute on their own and execute inside Microsoft, I actually feel quite good that we don't worry about our ability to do them, but I wouldn't say that's new this quarter.", 1], ["And of course, our focus is -- continues to be on adding some of the features around Prime that Brian's been talking about, but also importantly, making sure we're adding more selection to the offering through our own efforts, first party, but also programs like Fulfillment by Amazon, which continues to be a fast grower for us", 1], ["On AWS revenue, let me just remind you that quarterly growth last year on an FX-neutral basis, so Q1 was 48%, then 49%, then 46% and 46%.", 0], ["I mean that service with full compatibility with SQL Server is a fantastic value proposition for our customers who have huge estates whether it's the Data Warehouse that's become very, very competitive, the Data Lake.", 0], ["We've already announced the next operating system, watchOS 2.", 0], ["The clarity of focus and clarity of the vision that Kevin and Mike have has been exceptional.", 0], ["So on the first, Atlas is really important", 1], ["And so I see a lot of good things and hope for better results, but we are still currently in this shortage issue now, and I'm not projecting to get out of that totally during the quarter.", 0], ["We're happy with the business and the team, and again, for us innovation is going to be key as we move forward.", 1], ["For the first few years of virtual reality, I think gaming and video are going to be the big ones.", 1], ["Of course, we're also improving the quality of the services that we provide and if you look back during the last three years, we've added new services to our portfolio.", 1], ["And I would just add that as we think about that long-term trajectory, our ability to continue to improve margins in our SaaS portfolio and our PaaS portfolio and IaaS portfolio still exists.", 1], ["So when you think about the types of products that we're building on messaging, where encryption is going to play a huge role, sharing with your friends, where Stories, which is ephemeral, is the main thing that's growing.", 1], ["And I think a lot of those were discovered and purchased right through that advertising funnel.", 0], ["They got an 89% increase in brand awareness and a 20% lift in sales.", 0], ["So, Q1 I would say is just up a little.", 0], ["And there's a strong technological underpinning for that, which is that if you go back five years and you tried to watch a video on your phone, it would probably have to buffer for a minute or so before you'd actually get to watch it, which wasn't a good experience.", 0], ["They have the capability of upgrading on a more consistent basis using more of these premium services.", 0], ["So we're seeing a lot of people use these products and love them and because of that I think that we're still going to get there.", 1], ["So it takes a lot of engineering investment, and we will be prioritizing that, in some cases by adding people to teams and in other cases by trading off and doing more security work instead of other product work that we might have done, but this is really important and this is our priority.", 1], ["He will continue to see us do that.", 0], ["And so what that means is, you'll see some volatility in that and you're also going to see some volatility in commercial unearned, specifically because whenever you see hybrid strength, it won't land as much in unearned.", 1], ["And we have seen that those changes have improved the trajectory of how people are interacting.", 1], ["But the privacy efforts do require significant investments obviously and compliance processes, people and then technical infrastructure and those are factored into the 2019 operating expense outlook.", 0], ["And if you look at it there, we were down 5%.", 0], ["And most of the ARPU improvement that we've seen has been, in fact still due to the E3 transition, not due to the E5 transition.", 0], ["And I think in the last six months or a year alone, there have been hundreds, if not thousands, of cases where we're we've been able to get first responders to people when they needed help", 1], ["As we go through 2019, though, we would expect the impact to increase in the latter part of the second half of the year, in line with our production schedule as it grows throughout the year.", 1], ["What we see is that people in Instagram are using Instagram to browse for products and make those connections, and so we then make the product investments to make those a little bit easier.", 0], ["Work is important.", 1], ["The Amazon Go is in beta in Seattle, and while that's not large and only one site, we're excited about the potential there and the use of the technologies of computer vision, sensor fusion and deep learning.", 0], ["You need the full comprehensive platform and then the ability to able -- to do things like AI and analytics on top of all of this data.", 0], ["So, I think it's part of that offering, and we will really have to see how that evolves.", 1], ["So that's also another helpful side benefit for consumers when we are doing our own logistics, excuse me, transportation final delivery.", 1], ["So those are all things that I would say are premium services that just talking about new applications being built on Azure, not counting all of the SaaS applications about that.", 1], ["Now by doing that at the Oscars, that's obviously TV and it's a very broad ad and that's because they were both showing a product but also working on their brand.", 0], ["I do really focused and I think it's important if you're trying to understand the buildup of our commercial business to focus only on the unearned commercial balance.", 1], ["The truth is, there's going to be a lot of people there and a lot of people in the middle class that will really want a smartphone, and I think we can compete well for some percentage of those.", 0], ["It\u2019s also worth noting that we work really well with TV.", 1], ["So that tends to also have a mitigating impact on ARPU because of the mix towards those lower-ARPU countries as the users grow there more quickly.", 1], ["In constant currency, when you look at it for the March quarter, revenue would be down between 5% and 10%.", 0], ["If they do, we ask them why they're Xing out the ads and we just continue to monitor the metrics.", 1], ["Outside the United States, in many markets, not every form of payment is accepted.", 0], ["So if you think about it from a product portfolio, it really is Windows and Office.", 0], ["We really see Facebook being embraced by politicians all over the world to get in touch with their constituents.", 0], ["So we're very happy with that.", 1], ["Q3, yes, I would say we had a very strong Prime Day.", 1], ["But both did incredibly well, and we\u2019re really proud of them, along with the iPhone 5S and 5C as well, which continues to in the lineup.", 1], ["On the capitalization point, I'd say the things we capitalized are the core buildings and leasehold improvements in the buildings.", 1], ["At the end of the quarter, we were within the target range of channel inventory on iPad.", 1], ["And we continue to bring more and more forms of payment in the App Store around the world.", 0], ["So we ended the year last year with 109 fulfillment centers around the world and 19 U.S. sort centers.", 0], ["35% of SMBs in the United States, which is probably ahead of most other countries, don't have a web presence at all, and an even smaller percentage of SMBs have a mobile web presence or any kind of mobile presence that works.", 0], ["Like you said, we're not specifically breaking out revenue numbers.", 1], ["And our performance continued to be weak in Hong Kong, which has been hit a bit harder as the tourism market continues to slump.", 0], ["And those carriers are just not - no longer able to handle all of our capacity that we need at peak.", 0], ["One is just the auction dynamic, which as supply growth has slowed, then there's more competition, and you're seeing prices increase as demand continues to grow.", 0], ["So Prime members have adopted this benefit, it's one of the fastest rates we've ever seen for a Prime benefit, and they've already saved millions of dollars on everything from seasonal favorites to as I said popular daily sales.", 1], ["So I would say there is a real good mix of those two.", 0], ["So those are all things that we participate in which we didn't participate in the past.", 1], ["But I would generally point back and say most of these are driven at the structural level, which is \u2013 structurally over time, on-premises Transactional business will move to the cloud or to a hybrid structure through an annuity revenue stream.", 0], ["because that\u2019s where both product value which is unique to us and also the quality of revenue that\u2019s unique to us", 0], ["I also think the importance of it is that it tends to also come with higher margin.", 0], ["And if you compare that to traditional media where people will typically pick a newspaper or a TV station that they want to watch and just get 100% of the view from that, people are actually getting exposed to much more different kinds of content through social media than they would have otherwise or have been in the past.", 0], ["The relationships with the customers that we have now signed up with span a lot more of our capability and also drives a lot more of their own ambition.", 1], ["On pricing specifically, we\u2019re seeing such strong impression growth that this supply growth keeps prices low and creates an opportunity for advertisers, and we\u2019re seeing smart advertisers take advantage of that.", 0], ["We do expect that that rate will be approximately the rate that will continue for the rest of the year.", 1], ["I talked about the 50,000 businesses, small and medium-sized businesses each month signing up for Office 365.", 0], ["We get a lot of feedback directly from people who use Facebook.", 1], ["Innovations around teams, innovations in AI in the actual Office products themselves are now being experienced by our customers.", 0], ["We are seeing faster growth in impressions coming from Stories and then also coming from geographies that monetize at lower rates on things like Facebook News Feed.", 0], ["From a distribution of customers, it is a global business.", 1], ["Same thing with our Dynamics business.", 1], ["And each one gets to be more natural to interact with, more natural gestures for controlling, more immersive, more portable.", 0], ["One of the factors driving that is that's where we're categorizing our community operations investment and other operations teams that support the quality initiatives and the safety initiatives.", 0], ["And so I'm sure there are examples where that has elongated the sales cycle, for good reason.", 1], ["Justin, then your question on ARPU in the U.S., we do think that there are opportunities to continue to grow the business in the U.S. on a lot of different fronts.", 1], ["They also touched on a number of the other issues that we face, including foreign interference in elections and that's something that we're incredibly focused on.", 0], ["So last quarter, I told you that our growth in store sales, including both shopping and also online deliveries, was closer to 6% in Q4, and it's a similar number in Q1.", 0], ["There's lots of fantastic people here and they're doing unbelievable things.", 1], ["So, Kash, the way I think about it is, even in the client server era, we had tough competition.", 1], ["And so we are learning as we go, learn as we grow internationally as well.", 1], ["And we've done studies that show with Nielsen that our ads can be a really big complement to TV, particularly enabling you to reach people who really aren't on TV and you can't reach.", 0], ["It's growing quite quickly just as it is in North America.", 0], ["We've been really pleased with the adoption of our targeting products from Custom Audiences to Lookalikes to Dynamic Ads, and we think all of these can improve the relevance of the ad by making ads more targeted,", 1], ["I think there's a reason why things have developed in that way and I think it's great for all countries and citizens of countries that are involved in that.", 1], ["Usage growth continues to be higher than revenue growth rates.", 1], ["And we've got room in ARPU, which you've continued to see us have.", 0], ["Previously, we only capitalized a portion of those costs.", 0], ["So that's why we think of this as one cloud play but that should give you a feel for how the customers are looking at it.", 1], ["because they facilitate people going and doing things together in person as well.", 0], ["So if you think about what is enabling video to become huge right now, it's that fundamentally the mobile networks are getting to a point where a large enough people around the world can have a good experience watching a video.", 1], ["So again, it was the biggest global day ever for Amazon and was up 60% on a order product sales basis versus Prime Day 2015.", 0], ["We also saw some costs were moving -- buying more inventory and moving inventory around in our network to have it be closer to customers.", 0], ["One is ads that actually display a News Feed, not in Messenger or WhatsApp, but that link to the ability to communicate with a business directly in Messenger or eventually WhatsApp.", 1], ["That's just inside of Azure.", 0], ["And what we do is we monitor it carefully.", 1], ["We\u2019d said we'd anticipated about 300 million lower sort of headwind to subscription services revenue due to the accounting change.", 0], ["So that\u2019s just the reality of having most of our development resources for instance in the U.S.", 0], ["because it speaks to the vision that we have, which is the cloud is what enables the mobility of the human experience across all of the devices in your life", 0], ["Whether it's voice or analytics and security, it resonates.", 0], ["We think we're uniquely placed to bring people-based marketing to scale and solve the measurement problem, and the Audience Network is a place we're really focused", 1], ["And then the enterprise upgrades; in fact, we have a release of enterprise features, which I mentioned in my script, which will ship in that timeframe.", 0], ["What you saw a little bit and I referred to it was some more in-quarter recognition, but let me talk about why that\u2019s happening because it's got two important and positive trends that underlie it.", 1], ["And so things like first time buyer rates, the latest numbers from the U.S. are somewhere around 40%.", 0], ["It's really critical for us for customers to have a terrific experience as we upgrade them and ask them to move to Windows 10 with a lot of value.", 0], ["I think it's a bold move.", 1], ["So that will always be an important part of our Prime offer, and we'll continue to use the data that we have to make better and better decisions about where to invest our dollars in Prime Video.", 0], ["This quarter is a good example of that happening.", 0], ["On iPhone X specifically, I think it's important to maybe emphasize again one of the things I mentioned in my opening comments, that customers chose iPhone X more than any other iPhone each and every week in the March quarter, just as they did following its launch in the December quarter.", 0], ["So when people join Prime, they are certainly buying EGM in strong quantity.", 0], ["It\u2019s the same thing that I would say at least in the last couple of years clearly have played out.", 0], ["And then if you look at the G&A line, obviously that was impacted by the accrual for the FTC settlement as well as some other legal expenses including the SEC settlement.", 0], ["And so, we will see some extension pass the line, we certainly have seen three or four quarters of that and we certainly expect H1 to remain strong.", 1], ["It was a great day for small businesses and sellers who saw great year-over improvement in their sales.", 0], ["It is, well, but on your point though, it is clear from communications I've had with users that some of them were attracted to iPhone because of the Apple Watch.", 1], ["It's inevitable.", 1], ["because we've announced the iPhone SE.", 0], ["I shared a stat before in some of my comments that on Gear VR alone, we are now at more than 2 million hours of video have been watched on the platform,", 0], ["So \u2013 and that's of course another area is AWS continues to grow and add services and features and doing so at an accelerating rate.", 1], ["It was also a very strong quarter for AWS.", 1], ["It was the lowest that we\u2019ve had in two years.", 0], ["Similarly with travel, this is a vertical that we are really investing in.", 1], ["If you look at Mainland China, which is one that I am personally very focused on, we are down 11% in Mainland China on a reported basis.", 0], ["The watch units more than doubled in six of our top ten markets, which is phenomenal growth, particularly in a non-holiday quarter.", 0], ["But I expect the mix to increasingly shift toward the cloud given its sort of robust growth rate, which will impact the gross margin percentage over time.", 1], ["So my bullishness for Windows 10 is more in the second half of the fiscal year, and of course it will build.", 1], ["And when you look at our expense to revenue ratio, which, for the first half of the year, has been 8.2%, it\u2019s lower than it was a year ago, and it\u2019s definitely something that we consider extremely competitive, and we\u2019re very proud of.", 0], ["What we basically are trying to do is work on over time adding more and more signals to the News Feed model to help us fully value what people in the community value about the different content that we show them.", 0], ["And so we have really reorganized ourselves, both in the headquarters and in the field, to be able to recognize that shift.", 1], ["But the one other thing that I \u2013 see my world view is not that all compute storage networks just goes to one place.", 1], ["So this is something that I think we will make progress on and will get better on over time.", 1], ["So again, we continue to deliver for customers.", 1], ["And then stay tuned, because we'll be building this - most of this capacity through the year in 2019.", 1], ["It's an important way for us to monetize our ecosystem.", 1], ["We haven't launched the service yet - we're going to serve - serving our customers tomorrow.", 1], ["And so even if you have a tougher comp, I think the demand signal and our opportunity to continue to sell Microsoft 365 in that process and then upgrade to Office 365 as they do deployments is a big opportunity for us to excel.", 1], ["As it is with digital content, you may have seen the recent announcements that we're working on a great amount of new content for Prime members.", 0], ["The ability to control shipments within our network has gone up, and we think the cost is very good.", 1], ["Our main issue and our main concern is trying to minimize the impact to our customers and sellers in India.", 1], ["Currently, we have some more that's launching in a week or so that will be made available on Apple Music.", 1], ["There were bugs.", 0], ["And that is going to be something that will contribute to a deceleration of our revenue growth.", 0], ["Apple Watch is just getting going.", 0], ["The Echo Spot in India and Japan, and we announced that we're going to expand Echo and Alexa soon to Italy, Mexico and Spain.", 0], ["What that means for our Prime customers is there's more for them to choose from, obviously that gives them more they can purchase, it makes Prime more valuable.", 0], ["It's all about supplementing our existing capacity both our partners and ourselves and essentially building capacity that can handle this top line growth and also the growth in AFN or Amazon Fulfilled Network units which as I just mentioned is even higher than our paid unit growth.", 0], ["So we've got other markets in which we can recruit and grow engineering and other technical team.", 0], ["Facebook is driving about half their sales.", 0], ["This is business customers who are actually buying phone devices, which is basically a radio with essentially a smartphone to be able to deploy their line-of-business applications.", 0], ["But as I said, I think the key things that we think about is differentiation of Azure at each level", 1], ["There is E3 to E5.", 1], ["Its full screen is authentic, it\u2019s very engaging.", 0], ["They're not buying through us.", 0], ["We\u2019re optimistic about the growth over the long run, but we are as always very prudent and careful on the consumer experience.", 1], ["On the variance to guidance, what I'll say is, we came in the very high end of our revenue guidance.", 1], ["In terms of number two, we have an ad model where we're able to use the targeting capabilities for Facebook.", 0], ["And I think our ability to help people migrate is something that we're able to prove out quarter over quarter.", 1], ["And these new formats fit in really nicely with the ad system we built, which underlies all of the opportunity.", 1], ["The other thing that is obviously happening is in many areas, the ARPU is increasing.", 1], ["A plus is that more and more people have already joined upgrade programs.", 0], ["And then four, there's an improved trade dialog between the U.S. and China.", 0], ["so VR is becoming a more significant part of the Instagram story, where it was originally more brand-focused.", 0], ["because a lot of these initiatives have long-term development needs.", 0], ["So in Norway, most retailers are closed Saturday to Sunday night.", 0], ["But one of the things we're most proud of, and Mark talked about it in his remarks as well, is that we take tools that were previously only available to large companies and make them available to small companies.", 1], ["A very classic scenario would be I\u2019ll take a SQL database application, bring it to the Cloud and then build a new mobile back end using the same data.", 0], ["So that's the opportunity we see, whether it's -- for all front line, whether it's in manufacturing, whether it's in retail, whether it's in healthcare.", 1], ["That's where you will see the most significant operational changes from how we operated last year to the coming year.", 1], ["We learn, frankly, I think every week where we can do better and where we can continue to invest to accelerate.", 0], ["Obviously we're getting the leverage from the larger volumes.", 1], ["The way I'd think about that one, Walter, is in general, our premium or enterprise workloads across Windows, SQL, System Center, et cetera, grew double digits.", 0], ["Some clients are shifting some of their Facebook budget.", 0], ["So specific to Q4, the impact of that change was an increase of approximately $1 billion to other revenue, so you will see that in the other revenue in total.", 1], ["And so -- as to add confidence to my high teens KPI growth for the year is that this is a very customer value oriented offer.", 1], ["But gaming is the other place where we talked about Xbox Live now that spans both console and PC.", 0], ["And all of those are very important for us.", 1], ["So that modern developers as well as IT can use the compute available from Azure Sphere to Azure.", 0], ["It\u2019s going to be gaming for the beginning.", 1], ["Frankly, from first read, we don't anticipate that they're going to have any material impact on our tax situation.", 1], ["If you look at Q2, our marketing expense was up 48% year-over-year and that's a combination of a few things.", 1], ["So the big initiative that we have here which I'm really excited about is Instant Articles and the big thing that that does is just it lets publishers basically put the content on our servers ahead of time and that way when people tap on it, it loads instantaneously.", 0], ["I would say the positive tailwinds still remain, AWS has strong growth of 46% on an FX neutral basis.", 0], ["We've launched devices in multiple countries, Echo and Alexa were launched in France.", 0], ["It's hard to tease out every individual component of it.", 1], ["It's a noncash charge, but it will increase the amortization over the useful life, and a lot of that is forward frontloaded, so we'll see higher amortization in the first few years, and then it reverse later.", 1], ["So compared to November a year before, the number of their app installs increased by 115%.", 0], ["We can \u2013 on the cost side, we run our facilities more efficiently, we can buy better, we can look to in-source some things that we may have paid externally for.", 0], ["2015 is a big investment year for us, both in CapEx and OpEx.", 1], ["So it's a mix.", 1], ["And Prime Now, we're also very happy with, although obviously the economics in that business are even tougher, but we do feel that our scale makes that possible because of the geographic footprint and how close we already are to customers.", 1], ["Starting with the growth in the install base of iPhones, yes, it's growing strong double digits, and that's very good for us for a number of reasons, including the fact that it's a big driver for our Services business.", 1], ["So it's those three factors.", 1], ["Mark talked about how we have 4 billion video views on Facebook everyday and we've always believed that the format of our ads should follow the format of what consumers are doing on Facebook.", 0], ["Yes, Chris, I think that the price moves we've made have been smart and well received and do show a level of elasticity, but the most important thing by far is the product.", 1], ["We are not just building or moving their IT but they are building new digital services for HyperScale and that's what it is probably unique in terms of what is changed year-over-year for us.", 0], ["And so with that in mind, we have done $23.5 billion of repurchases during the March quarter.", 0], ["From a funding standpoint, of course we have a very strong balance sheet.", 1], ["We have the News+ in the market today.", 0], ["So if you wrap those together, we expect it\u2019s going to be more of an issue with our international growth rate.", 1], ["The best example of that is probably news with Instant Articles where we figured out that, it was the slowest upload experience you could have in newsfeed to link off to an outside article.", 0], ["Hong Kong continued to drag down the total Greater China segment.", 0], ["We increased the iPhone point of sales to over 40,000 during the quarter.", 0], ["And what we found is that the main reason code was sent back at different rates was not correlated with gender.", 1], ["And I apologize, I didn't answer Marks last component, so let me just go back and I had forgotten, which was, was there anything unique in the expiry base for Q1, the answer is, it is up a little year-over-year, but in certainly not through the same type of Q4 comparable.", 1], ["And with 1 billion active people on the platform, I think Instagram is definitely both a direct response opportunity but an opportunity for discovery.", 1], ["And the thing that we have realized is, that businesses are in fact looking to spend more for those first line worker productivity.", 0], ["And so in this particular quarter, we were able to end basically right at the bottom end of our range and we view that as a good thing, not a bad thing.", 1], ["This year, we launched the top end of the lineup, which is the XS and the XS Max during Q4.", 0], ["Apple Watch is not only a new product, but it\u2019s a brand new category with a lot of new features, a lot of new, innovative technologies.", 0], ["So the invention level is still really high.", 1], ["Just age and gender, we're 38% more accurate than broad-based targeting according to Nielsen in the U.S., and that's just age and gender.", 0], ["A more blended rate of those two is probably a better way to think about a go-forward margin.", 0], ["Our guidance, really, in terms of overall capital spend is unchanged from 90 days ago even if the timing of that can move month-to-month.", 1], ["So if you, even factoring that, and we're looking at Q4 and we have very high error bars on the quarter.", 0], ["When ads are really well targeted and taking full advantage of the kind of targeting we offer, so you're showing people something they want to see, we see engagement that we think is really critical.", 1], ["Because we realized that, for example, you take any IoT project that is starting in Azure, it first translates into an analytics workload that pulls through some Azure high router analytics services.", 0], ["We worked significantly on our online store.", 1], ["On that front, we're focused on building out the best video experiences for our community and growing longer-form content as a priority.", 0], ["So I think in the future if this works out, what we're going to see is that how people use the Facebook app is going to be, they're going to keep on using News Feed, they are going to keep on sharing with friends and family, but the average person will also probably have one, two or three other apps or kind of secondary tabs that they use that are quite useful for them in connecting with their broader community on Facebook.", 0], ["We've thought about making this transition as quickly as possible, but what we're seeing, which you heard us talk about, was a transition to increasing premium mix, selling more workloads, doing all of that while we're growing the installed base.", 0], ["We didn't see as much of it in Q1, mainly because of the timing of the seasonality of the year and getting things going.", 0], ["We've had same-day delivery now in 16 metro areas.", 0], ["It's also worth noting that the metrics that really matter at the end are driving sales", 1], ["And it's really just continuing to learn more and more about the people who are using Facebook and what types of ads they interact with and the like.", 0], ["Looking in the old segments, I know you all have done, we saw a year-over-year improvement in the overall commercial other segment that we disclosed this time too of about 10 points year over year.", 0], ["We're seeing that large CapEx build over the last several years flowing through depreciation and cost of revenue.", 0], ["On top of that, Services grew extremely strongly during the quarter.", 1], ["so it certainly has been helpful.", 1], ["We'll have significant gross margin dollar growth in that segment, and you'll actually continue to see operating margin dollar growth that's significant in that segment even as we reinvest into it, given the top line signal.", 0], ["And this quarter was the biggest recruiting quarter in terms of net hires ever for Facebook.", 0], ["But as has been noted on the call, video is both at large scale and the economics are quite different from the current feed-based businesses that we have today, especially around how, with mid-roll ads and rev share around that, the margin structure will be different.", 0], ["So, we're going to be investing to deliver the best quality services that we can for our users, so we'll continue to invest heavily on the datacenter and infrastructure side going forward.", 0], ["And someone in the world needs to focus on building it, and we want to play a role in that.", 1], ["We doubled in Korea versus a market that was shrinking.", 0], ["And every percentage utilization in our data centers is worth tens and more millions of dollars.", 0], ["As I said earlier, we're expanding Prime benefits in the U.S. and also globally.", 0], ["We've said we want things that customers will love, can grow to be large, will have strong financial returns and durable and can last for decades.", 0], ["Prime is growing at a faster rate.", 0], ["For Messenger and WhatsApp, our focus right now continues to be on growth and engagement.", 1], ["And friends and family is always going to be really central to what we do, but we just think that there's an opportunity now to do more and to make it so that people can also be a part of these meaningful communities.", 1], ["because it makes their buying much more effective because they understand real results in a new way.", 0], ["I would say on the category side, that the biggest effort will be on continuing to be on groceries and consumables with the Whole Foods acquisition and again, we continue to look at our whole offering of AmazonFresh, Prime Now, Whole Foods, how can they work together to create better and better offerings for our customer base.", 1], ["They took screenshots of a video ad they have produced for other markets, they uploaded them with text; and they reached 2 million people with a 10-point lift in ad awareness.", 0], ["And one thing that you may not know about voice calling is that by using the Internet for calling rather than the relatively low bit rate voice networks, you can actually get higher quality calls using VoIP.", 1], ["And increasingly, that's happening on Facebook.", 1], ["As I said earlier, we had a meaningful step up in shipments in Q2 versus Q1, but we're still on our way and Q3 will be a step up over Q2 in North America and we'll see more in international.", 1], ["It, of course, will increase our reach, but what I am most excited about is the core content and community and the platform we have for monetizing that usage.", 1], ["And I'm still of the mindset that I feel very optimistic and positive that the discussions that are going will be fruitful.", 1], ["So they are in general -- the way we think about this stuff is, we try not to put something in front of a lot of people unless we're confident that they're going to find it useful and want to come back and use it multiple times and we can put a lot of things in front of people not to try it once, but we want to wait until things are kind of retentive and useful.", 1], ["In fact, one of the things in Office 365 is we're getting people to effectively use servers, which now happens to be in cloud who never bought servers from us ever before because they didn\u2019t have exchange, they didn\u2019t have link, they didn\u2019t have any of the core capabilities of Office 365.", 0], ["There was - on the accounting side, we did adopt an accounting standard in January that amended our accounting for how we cap for produced original video content.", 0], ["I will also say that Amazon is one of the primary large customers of AWS so we see it in the consumer side of the business as well, although that's not included in AWS revenue.", 0], ["So we have significant gains in utilization across our estate.", 1], ["So that's going to show up in R&D.", 0], ["So whether that's Marketplace for buying and selling things.", 0], ["If anything, we'll push to make sure that we are addressing what is our growth opportunities pretty aggressively.", 1], ["They're a popular airline in China, but they don't really have \u2013 they're not really as well-known overseas.", 0], ["On operating margins internationally, I would step back and say a lot of the investments we're making in North America we're also making in international.", 1], ["I mean I think it is a very significant deal.", 1], ["It's interesting for us that our Music business, which had been declining for a number of quarters, now that we have both a download model and a streaming model, we have now hit an inflection point.", 0], ["Prime benefits including Prime Video and remember we launched Global Video in Q4 of last year to 200 countries, Prime Now, Amazon Fresh, the general rise of FBA and added selection, both retail and FBA to make Prime more attractive, and the fulfillment and logistics costs that go with that, and the additional constant effort to reduce prices and accelerate shipping.", 0], ["Overall, we are very committed and very bullish about the opportunity in dynamics.", 1], ["This year we were able to offset that with some cost improvements and also we had some favorability in foreign exchange on a sequential basis.", 1], ["On cannibalization, of course we've got limited experience", 1], ["The other thing was Japan was a little better", 0], ["So those two things tie in together.", 1], ["So, both because of the feedback that we were getting and the research, we felt like this was really the right direction to go in.", 1], ["It's much more broadly participating in the security market, and you have seen some of that in the inorganic moves and the suites we have created.", 0], ["I think it's the exact product portfolio that we talked about last year when the impact was happening, so let me take this opportunity to sort of walk you through those components again.", 1], ["So, greater control of our processes.", 0], ["We need to deal with them, but they obviously are a negative to revenue.", 0], ["There already is some very good content.", 0], ["And the same thing with advanced analytics.", 0], ["I mean I think for really since as long as AWS has been around, we really pride ourselves in getting really top, high caliber people both in the technical side, but also sales people that are plugged in and listening to customers, understanding issues that are emerging, having open lines of communication and that\u2019s really allowed us to innovate quickly and really faster than anyone else, and we see that in the terms of the service and feature breadth and depth that we have.", 1], ["We're seeing -- in the iPhone space, we saw a better year-over-year performance in the last weeks of the quarter as compared to the full quarter or November and December, which was sort of a -- it appears to be the trough.", 1], ["The first one is Windows 10.", 0], ["So very encouraged by the pickup and the response of customers.", 1], ["We have good interoperability between our respective document clouds.", 0], ["And like Brian said, we like to be close to customers and benefit from having inventory close to customers as well.", 1], ["So that's one area that I think you will see.", 1], ["It's the third largest smartphone market in the world, behind China and the United States.", 0], ["We feel very good as Tim said about the iPhone, the way the new cycle has started, and we do expect an improvement in our year-over-year growth rate on iPhone.", 1], ["And customers are moving databases to AWS as Aurora continues to grow at a very rapid clip.", 0], ["I think the bigger issues that you should look at in gross margin, and again starting with the comment that we expanded by 300 basis points year-over-year, that is really driven by, first of all, the AWS growth and again, $10 billion business growing 64% is very \u2013 we're very pleased with that and that affects gross margin as well.", 0], ["So again the biggest individual item is the one-day shipping.", 1], ["And so that's the transformational outcomes we see.", 1], ["And so there's a mix of things going on in China and we're happy with what we're seeing in both of those.", 1], ["Cetaphil is a skin care brand.", 0], ["And so we feel we have a lot of room for us to fund the program.", 1], ["So we do think that that will lead to the potential for additional revenue growth in the U.S.", 1], ["We continue to see really, yeah, sorry.", 1], ["It's building channels.", 0], ["Where we are seeing a lot of growth and really exciting metrics right now are click-to-messaging ads.", 1], ["The other is the move to gross versus net accounting on the Instant Articles product.", 0], ["It tends to be \u2013 in this instance, Japan was a little better.", 0], ["And then I think within that guidance, there's a reasonable amount of confidence that the server products and services KPI will remain quite healthy.", 1], ["We\u2019re going to keep doing that, and so we\u2019ve already sent some notes out today, moving the customers and versus what we had communicated to them previously.", 0], ["And one thing that's worth understanding is that all of these different marketer segments often work together.", 1], ["We want to offer the best options to customers and we saw a lot of great response from customers this holiday season.", 0], ["And so it's analogous to the many years that we put into China.", 1], ["We've added 4,000 skills to Alexa since I last spoke to you in October and we're working with a lot of major companies as they add abilities, too, for our customer base to use the Alexa or the Echo to reach them.", 0], ["We'll talk a lot more and build on that about that architecture and what we're seeing with customers.", 1], ["We've gone from ARkit 1.0 to 1.5 in just a matter of months.", 0], ["So Instant Articles makes it so that any publisher around the world now can deliver a really great native experience instantly with no latency in loading it.", 0], ["Unfortunately, as you know, the U.S. dollar has already appreciated again recently, so we do not expect to see that favorability to repeat during the September quarter.", 1], ["So I do think over time we will get to more different types of content and we'll build products that serve that.", 1], ["We have over 184 million people using Facebook everyday in the U.S., which is considerably more than the Super Bowl every day on mobile alone.", 0], ["Even the infrastructure that is there in Azure came out of some of our first-party investments in Office 365 or again Bing in other areas.", 0], ["We're not just trying to build things that everyone is going to want to use.", 1], ["And so that's part of what we're trying to do across the board.", 1], ["We have a traditional grocery store now with Whole Foods, and then we have the combination of those two with home delivery, and we're using Prime Now or Whole Foods products through Prime Now to make those deliveries as well as the new kind of stores with Amazon Go that we're experimenting with.", 0], ["That will take a period of years, though, to really reach the quality level that we want.", 1], ["iPhone led the way.", 0], ["But make no mistake, Facebook, core Facebook is really driving the top-line.", 0], ["And so to your point and it\u2019s a nice transition from Satya's point about, especially the midmarket offering coming in the fall for Microsoft 365 is installed base growth.", 1], ["So it's more right now about tools and making better recommendations, making it easier to use our Amazon demand-side platform, things like that, operational improvements.", 0], ["so it's a good experience.", 1], ["Developed two iPads.", 0], ["So ,and obviously we'll be working on the efficiencies of all the warehouses we have, including the ones we just started up this year.", 0], ["And you'll also notice that we have other ways for people to buy consumable products", 0], ["Then they have to choose us, then they have to migrate their systems, and so it's going to take time.", 0], ["So we do attribute it to One Day.", 0], ["And then we've got three new iPhones and people will look at these and decide which one they want.", 0], ["The warehouses are very clean.", 0], ["Again, the business has accelerated the last three quarters, and we're seeing great signs in a number of areas.", 0], ["because the video ads take the place of other ads that we would have served into News Feed.", 0], ["That value prop is resonating.", 0], ["And then we are planning on growing non-headcount related expenses as well like marketing and ultimately that will depend on how the ROI of those investments play out over time.", 1], ["I would say, the U.S. has been a lead market in general when it comes to the latest technology and architectural paradigm adoption, whether it'd like take something like AI or the higher-level services around data.", 1], ["As we noted again in our Q1 release, our active customer accounts exceeded 300 million.", 1], ["We\u2019re expanding distribution all over the world.", 0], ["In fact, I think of our servers as the edge of our cloud.", 1], ["One thing to just keep in mind is Instagram is known and operated property is represented gross in our revenue, so whereas as I mentioned the Audience Network is by and large going to be recognized net rather than gross.", 0], ["On the government side, our engagement with the Indian government makes us optimistic about partnering and collaborating to seek a stable predicable policy that allow us to continue investing in our technology and infrastructure.", 0], ["Thirty-five percent of small businesses in the United States, which is the most developed market in many cases, don't even have a webpage of any kind.", 0], ["We worked hard and I think Satya mentioned some of the new features as we continue to invest on security for all of our products.", 1], ["From an impression growth perspective, we're pleased with what we're seeing there, and we're optimistic on our ability to grow Stories on Facebook but it's much earlier on the Facebook platform.", 1], ["But we do have a lot of diverse profit streams here at Amazon and a lot of investments going on at any point in time.", 0], ["Essentially over 80% of the commerce on tablets are taking place on iPad.", 0], ["And we want to ensure that we have good delivery experience for our customers as we evolve this offer.", 1], ["So North America operating margin up a 120 basis points year-over-year to 3.9%.", 0], ["On iPad, we increased channel inventory by 1.1 million units from beginning of the quarter to end of the quarter.", 0], ["So the AI tools that we've built can enable a system to look at millions of pieces of content and make rough assessments on them and figure out what to flag for people.", 0], ["And two is to give the Apple Music subscriber some exclusive content and hopefully grow our subscriber base.", 0], ["So we're going to continue investing heavily in video content for Watch that is centered around people, that is centered around the things that people want to talk and connect around, that give people a sense of pride and bring people together.", 1], ["We\u2019re seeing stability in the developed markets and growth in the developing markets.", 0], ["But inevitably over time, higher prices affect demand and so we're capturing that in our guidance.", 0], ["They launched a Messenger bot to help with gift recommendations, and they created a click-to-Messenger ads that link to a LEGO bot which helped provide product and gift recommendations.", 0], ["Of course if you are \u2013 were using as a large enterprise Exchange and you moved to Office 365 you moved to using Exchange Online; same thing is true for SharePoint.", 0], ["When you think about AR glasses, the technology and science to build an experience that would be both comfortable to wear and something that people would actually want to wear out in public, that doesn't exist yet.", 0], ["I'll probably clarify that at the end of next quarter as we head into holiday, but if you think back, the last two years, we've added square footage that's exceeded 30% growth, both in 2016 and 2017.", 0], ["There is a camera plus VSCO Cam, Socialcam, Viddy, Snapseed.", 0], ["They ran Facebook video ads and Instagram Story ads for their Black Friday Campaign and then they target with a look a like people who had previously purchased and custom audiences that people who started, but then complete the purchase.", 0], ["We had double digit unit growth in iPhone and both the upgraders and Android switchers were both up on a year over year basis during the quarter, and so the results were broad based.", 1], ["So it's definitely an area that we'll be investing in on an ongoing basis and I wouldn't read too much into the quarterly trend there.", 0], ["So as you point out, the year-over-year difference is primarily driven by investments, what we were within the guidance range and we continue to invest in, as I said, fulfillment capacity and logistics services, digital video, our Echo and Alexa, Echo devices and Alexa platform India, the buildup at the AWS infrastructure, all the things I mentioned not to mention Prime Now and Amazon Fresh and Prime benefits.", 1], ["And all that does is build more confidence that both we've picked a good market and we're investing in the right type of people to make sure we land that opportunity at customers.", 0], ["because of this approach of being more proactive on looking at the content.", 0], ["And they're just doing an amazing job.", 1], ["The investment will, it sometimes ebbs and flows, but the cost reductions will be a constant presence and the increase in customer experience and shortening the time to delivery and making the customer experience better.", 0], ["In terms of ad load, as I said, it's been one of the factors driving supply,", 0], ["What matters is the impact on sales.", 1], ["So our process is, we have one sales team selling all of these products; I think that helps us a lot because they already have those relationships.", 0], ["This is what people want News Feed to be increasingly, so this is what it will become.", 1], ["You remember that we are lapping a number of large price decreases in Q2 of last year,", 0], ["But I think that the push for the next few years is we think that in running a company, I want to make it so it's not just the back end engineers when they improve something, it improves everything.", 1], ["Same thing on the Messenger side, as I mentioned, these products around my day, it's a similar video medium to Instagram Stories and a similar camera to what we're building in the Facebook app as well.", 0], ["For example, in the fall we plan to roll out our tool for seeing and clearing your off-Facebook browsing history.", 0], ["So, yeah, I don't have a lot to share on that today, but I think you hit on the main point, is selection and opportunities for sellers in \u2013 who are with us in different countries to reach buyers outside of their home country.", 0], ["We're very happy with the progression, both in the geographies that we've been in for a long time where we're at, continuing to add zip codes and additional neighborhoods and also in these new cities.", 1], ["I look at sort of everyday usage growth, even if they\u2019re creating a web workload it\u2019s for a very different type of web back end and a mobile back end.", 0], ["A couple of things that I\u2019d point to the cost of revenue was up 49% in Q2, and that\u2019s really the flow-through of depreciation that you\u2019re seeing from the big CapEx build cycle that we\u2019ve been in and that\u2019s starting to flow through in the cost profile of the business.", 1], ["The second opportunity is, if you look at Teams, as an example, we are now reaching a lot of first-line workers.", 1], ["I think really we're trying to invest behind opportunities where we see them.", 1], ["I think we're learning and are a very data interested company and working with a lot of great brands to be able to develop better toolkits for them, understand what types of metrics they want to make them more successful based on what they're telling us.", 1], ["The amount of ads we would feel comfortable inserting into a consumer experience really depends upon how many different things you go through.", 0], ["Certainly, our international sellers have access to more and more customers through that offering and that doesn't exclude sellers in China as well.", 0], ["I mean, I think the overall for me across all of our product lines, whether it be Windows or whether it be Office 365 or Azure, developer momentum, ISV momentum is super important priority for us, both in terms of our developer evangelism, our product engineering teams, as well as everything that we will do to even create success for our partners through our field sales organization is a top of mind priority.", 0], ["In India, India continues to be a good story for us.", 1], ["Europe is growing more slowly than North America and APAC.", 0], ["But the interesting thing is it's not just even for our own SaaS applications.", 0], ["Today you could get over 100 million products within two days, and many, many, many products within one day, same day or two hours.", 0], ["There's a significant level of content from the United States and a lot from Japan to Korea to China and the European Union also contributes a fair amount.", 0], ["Even in Facebook Messenger, it's been out for a little while and we're already more than 10% of the global VoIP market.", 0], ["Yes, so, first, I'd say we're customer-focused first and primarily, but we need to have good coordination across our teams and we grow fast and we add new things.", 1], ["So, as you know our 3P selection has -- our 3P percent of units has been increasing over time and increased again in this quarter to 54% of units.", 0], ["I mean I think there are two aspects of it.", 1], ["We've been in this business a bit longer and it's more mature.", 0], ["The other thing that's happened is that the decline that we've been experiencing in Hong Kong moderated.", 1], ["Our engagement in video benefit - excuse me, Prime benefits, shipping, hours watched on video, hours listened to on music, all of them are trending in the right direction and continue to get more and more sticky.", 1], ["I think we're also getting much better at adding capacity faster, so there's less need to build it 6 to 12 months in advance, I would say.", 1], ["So for example, using Facebook and Instagram ads you can target by congressional district, you can target by interest, you can target by demographics or any combination of those.", 0], ["We've announced Apple News+, and this is the service that is available for consumers right now.", 1], ["I am a big believer in India.", 1], ["And so to some degree that exists today, my perspective is that we will grow in the future to larger numbers that will grow disproportionately.", 1], ["The difference between core compute in-store versus the premium layers can be significant and we\u2019ve had improvements across all of them.", 0], ["And so I'm very, very bullish and very, very optimistic about India.", 1], ["So that\u2019s what Microsoft 365 embodies.", 0], ["So, a machine learning and advanced analytics of areas we did not participate even in the past.", 0], ["There's also an FX tailwind in there as well, which I think was about $60 million this quarter, which would contribute on a year-over-year basis, which really arises because we're largely priced in dollars, but have assets with local currency costs throughout the world.", 0], ["In terms of what the opportunity there is to drive it, it's really about increasing the relevance and quality of the ads.", 1], ["Yeah, John, on the video investment in the first quarter, it's clearly going to be more weighted towards the rest of the year, but we're already seeing the impact of some of that.", 1], ["Again, we're not going to tell you that you can't share other stuff, right.", 1], ["Beginning in the first quarter, sales of apps, in-app content, and certain digital media content are now presented on a net revenue basis and included in third-party seller services revenue, rather than that online stores revenue.", 0], ["We talked earlier this year about expecting to see a greater than or \u2013 roughly or greater than 30% square footage growth in operations.", 0], ["So we've taken some provisional estimates in coming up with our tax entries for the quarter, and we will have to do that as we go forward here during the year.", 1], ["The second component relates to the same trend we saw in our IP business that we saw in Q4 then in Q1, we\u2019re doing and seeing again in Q2.", 0], ["So I think all of, both of our cloud products, the major cloud products have these premium tiers that the mix shift to those or the addition of those is something that we're focused on and we see in our results", 1], ["In all the years I\u2019ve been at Microsoft it was always our dream to be able to sell more of the sophisticated capabilities of Office to individual consumers as well as small businesses.", 1], ["On marketplace, we're just going to continue to iterate on the ad test.", 1], ["Our scale and number of customers, number of clicks, number of eyeballs, and new content \u2013 video content and other opportunities for advertising has really helped create some scale in that business.", 0], ["And the first recipient is Corning in Kentucky, and they'll be using that money to expand the plant to make very innovative glass.", 0], ["I see China as may not have the wind at our backs that we once did, but it's a lot more stable than what I think is the common view of it.", 1], ["So a small group product for sharing video, that's going to be a thing.", 0], ["We know that marketers love videos", 0], ["One thing to keep in mind also, as you look at growth rate for Q1, is last year Q1 we talked about in April 1st there was a consumption tax increase in Japan.", 0], ["We are really following the model of giving our customers as many choices as possible and letting them choose whether they want to buy first-party or third-party and I think we're working really hard to make sellers succeed on the platform.", 1], ["When we grow at that clip, we can do a lot of good things it.", 1], ["We now have 10 billion messages being sent between people and businesses every month.", 0], ["Let me walk through a little bit of this, because there are some new behaviors that I think are important this quarter, but the fundaments that you talked about are relatively unchanged.", 1], ["And to your question about long form content, the more natural starting point for us is shorter form content which can either be social content or premium short form content.", 1], ["because ultimately this is all driven by the opportunity at hand, which is much bigger than anything that we have participated in the past, so the total addressable market is much bigger.", 0], ["Once you get beyond Azure, you have things like CRM Online, you have enterprise mobility suite and of course the Office 365 line up and when we think about our capital and in fact the core infrastructure, we don\u2019t have different infrastructure for these different services.", 0], ["But I would also point out that we had the highest number of customers new to iPhone last quarter than in any prior launch.", 0], ["On PillPack, yes, the deal of course hasn't closed, yet.", 1], ["But we see the pattern emerge pretty clearly in terms of where we need to go.", 0], ["And so we have the delivery people going out and making the deliveries in the neighborhoods.", 0], ["And then I'd point to significant investment areas like AR/VR efforts, the content ecosystem around video, and the ongoing investment in safety and security.", 0], ["because it helps those machine learning algorithms be able to learn what they're looking at.", 0], ["We didn't see it in any one particular workload; it's weakness across workloads, which tends to make more sense frankly with a macro or a budget IT spend constraint.", 0], ["And so we, of course, see multi-cloud in a lot of our larger accounts, but this type of significant commitments is an opportunity, I think, you will continue to see us execute well on.", 1], ["We talked about the growth of our EMS, which is a higher level service.", 0], ["This is an ongoing iterative process.", 0], ["So we're playing with a lot of different models to see what resonates with consumers and it'll guide our investment decisions going forward", 1], ["On the OpEx guide, Q1 came in slightly below our annual expense growth guidance, but we do expect that investments in areas like video and Oculus will impact the remainder of the year more substantially,", 0], ["I am still bullish on iPad.", 1], ["And so I think all of those, when you talk about should we expect the traditional business to be in decline, I don't think that's new.", 1], ["We think Prime is that.", 0], ["It's coming in operations, and we have some very competitive price points there.", 0], ["I don't know long-term whether there is a zero-sum equation, but right now and in the intermediate timeframe, we see in our case growth in both sides.", 0], ["And we rolled out a platform beta, which gives new opportunities to build compelling experiences.", 1], ["One of those is bots.", 0], ["On the restaurant delivery, it's just another great service we can offer for our Prime members.", 0], ["But again, price cuts and not only price cuts but new products that have lower average cost and can cannibalize more expensive products is pretty much a part of our business all the time in AWS.", 0], ["So we factor that in, and then there\u2019s also two other issues.", 1], ["We've already invested in accelerating our recruiting efforts, so I wanted to highlight that.", 1], ["So, yes, the growth rate of those two job categories actually exceeded the company growth rate.", 1], ["On the demand side, we see a good traction across both platforms, and we're rolling out more ability for advertisers to leverage ads in Stories with more formats and the like.", 0], ["I feel good about the hardware, especially the Surface performance as we launch into more geos.", 0], ["And we were able to do that with having only 680 points of sale.", 0], ["You're right, the fundamental driver is when I look forward into next year, I expect each service just like it did this year to really see gross margin improvement, whether that service is LinkedIn or Dynamics or Office 365, Azure per user or Azure IaaS in PaaS, but what you'll see is a revenue mix shift, right, that will offset that to Azure IaaS and PaaS.", 1], ["So we built \u2013 we're making the cameras inside the whole family of apps into the first augmented reality platform, into an open platform, which is different from what any other app that has a camera has done before.", 1], ["because of all the new products that we announced on iPad with the iPad Air 2 and the iPad Mini 3 in the October timeframe during the quarter.", 0], ["And I'm actually going to expand my comments a little bit because the sales motion is really broader than Office 365.", 1], ["And so for me, to your point, at a high-level, I think we can continue to drive revenue, especially annuity and cloud revenue.", 1], ["And people are already using Facebook to share during real-time events.", 0], ["They measured that they had over a 3.5% lift in sales driven by the Facebook and Instagram video ads.", 0], ["And if at times we grow services that are at a level of gross margins, which is below average, as long as this is good for the customer and as long as we generate gross margin dollars we're going to be very pleased.", 1], ["But this year it's a little more apparent.", 1], ["And so I think we have a considerable opportunity to grow, and we also expect those underlying numbers time on mobile to continue to grow.", 1], ["But now I think we're living in a world where \u2013 the way that I think about this is that people should really be at the center of how we design technology.", 0], ["But it's using some of the same technologies you would see in self-driving cars; computer vision, sensor, fusion, deep learning.", 0], ["The other part of it is that we always run with just the amount of inventory that we think we need.", 0], ["In particular on Prime Day, I think you'll see that we had -- over in the press release, we had more than $2 billion of products were bought from small and medium-sized businesses.", 0], ["So, we certainly have video in feed and people can put video into stories and different places.", 0], ["From a product perspective, as we get things like Dynamic Product Ads rolled out, those are incredibly valuable.", 1], ["And then finally we're continuing to invest in the long-term initiatives in areas like AR, VR, AI and connectivity.", 0], ["So we'll see how it goes, but we take into account all these different factors.", 1], ["I mean, that's their product, not ours, but we build technology that powers it.", 0], ["Secondly, I would say we were blown away by the level of Android switchers that we had last quarter.", 0], ["But to your previous question, even there, there are multiple trends here, and Amy referenced it in her remarks, which is for example, virtualization still continues to be a growth driver of server products.", 0], ["We still declined on a reported basis.", 0], ["It's been in the market a while, we're seeing that momentum, the value all up of E5 not just from an Office perspective, but from a Microsoft 365 perspective with security and management as well as some of the newer products that are getting some strong adoption like Teams.", 0], ["And we're learning, we're improving, and we're pushing forward on that front.", 0], ["But the adoption I think will get back to a normal PC Refresh in the enterprise.", 1], ["So that, that way we maximize the opportunity we have for each of these subscription and capacity based services.", 0], ["So GDPR didn't have a significant impact in Q2, partially because of its implementation date.", 1], ["So we're looking forward to work with that team and we'll share more updates as we invent and create new opportunities to serve advertisers in the future.", 1], ["We've made our best estimate of where we think we'll come in, and that's $45.5 billion to $47.5 billion.", 0], ["If you remember, back then we were building the Facebook camera app.", 0], ["So those are the two things that I'd point to as being drivers of that margin compression getting picked up in cost of revenue.", 1], ["And we can do better with people, but ultimately the best thing that we can do is build AI systems that can watch a video and understand that it's going to be problematic and violate the policies of our community and that people aren't going to want to see it and then just not show it to people before bad experiences happen and things like violence gets spread through \u2013 violent content gets spread through the network.", 0], ["AWS had its third consecutive quarter of accelerating growth, 49% FX-neutral growth.", 0], ["The Amazon Connect, which we think will provide customer service capability to customers, and Amazon Chime, which we also believe will resonate with customers.", 0], ["But in News Feed, we're going to just show that a little bit more to do what we view as our role is helping to build common ground, encounter some of these other forces in the world.", 1], ["And we've recently hired two great folks with lots of experience in creating content like Breaking Bad and The Crown and some really top-notch content.", 0], ["So while I can't share - I wouldn't share with you today the Prime - any Prime - specific Prime statistics about churn, it does remain a very compelling program.", 1], ["And more exciting for us, this was six times more efficient in terms of acquisition than any other digital media channel.", 0], ["Brian talked a little bit about it before, but pleased with the holiday season, both from sort of a first party side, but also sellers continuing to do well.", 1], ["We look at the stuff that Apple is doing with Apple Pay for example as a really neat innovation in the space that takes a lot of friction out of transactions as well.", 0], ["When your friend posts something and you get to engage with it, it might inform you and entertain you.", 0], ["You're right that historically it took us a longer time to break into some of these, particularly travel and auto were things that took us longer, but we are seeing some really nice traction.", 0], ["They discover something interesting that they weren't necessarily looking for previously that's very powerful because that's a behavior that there isn't really anywhere else to do at scale on the Internet today in a great way, and then people watch it there or they bookmark it to watch later.", 0], ["So for sure, the sales cycles are different.", 1], ["It wasn\u2019t as much different from the -- from past quarters.", 1], ["And I think that the opportunity will be bigger because there will be more in Stories \u2013 or more Stories overall than in feed.", 1], ["And I share that case because it shows what we're excited about.", 1], ["So overall, that story has played out as we thought, and that's one of the reasons you're seeing the impression growth come down.", 0], ["The way I think about it, we really \u2013 Satya and I and the leadership team decided, gosh, about 18 months ago \u2013 it's been a little longer than that now, to over-index on investing because of the TAM we saw in the Intelligent Cloud.", 1], ["The position that we have taken is that we want to serve customers where they are and not assume very simplistically that the digital sovereignty needs of customers can be met out of a fewer data center approach.", 1], ["So, a lot of positive momentum and investment going on in India, very pleased with that.", 1], ["But those things that each individual use, they're going to vary from person to person.", 1], ["And we feel, at Microsoft, we're well positioned both with the technology but also with our frontline sales capability, service capability and partner capacity to best address the digital transformation needs.", 1], ["I think we think of the U.S. itself being in fact a big driver of some of the growth on the consumer side.", 0], ["Customers are going to be able to continue to use those proven products and services.", 1], ["And what we're finding is they're great places for customers to browse what ends up being a curated selection of books and they also get to try out our devices, which is very beneficial.", 1], ["We've had \u2013 customers migrated more than 23,000 data basis using the AWS Database Migration Service since that launched last year.", 0], ["We've built 14 new fulfillment centers.", 0], ["We have our test going in India.", 0], ["And underneath that, if you look at the subscriptions, the number of subscriptions, I think I mentioned this in my comments, paid subscriptions had moved up over 100 million on a year-over-year basis to over 270 million by the end of the quarter.", 0], ["So, let me frame it first as this thing that I and we're are seeing really customers driven, which is, if you started Windows 10 and the value the customers seek.", 1], ["We have regions spread throughout the world; we have 11 regions at this point and have announced plans to launch a region in India in the future.", 0], ["You know, we like what it does for Prime members.", 1], ["On our marketer segments, we don't break out by segment, but all of our marketer segments are growing.", 1], ["So ad supported, so that's available on the IMDB website with your laptop or personal computer on.", 0], ["And as you even think about Microsoft 365, the value proposition of Microsoft 365 transcends Windows and Office on Windows.", 1], ["We have something called Azure Hybrid Benefits.", 0], ["A killer user experience that's integrated across their lives I think becomes more important and I think that really plays to our advantage.", 1], ["From the new regions, they are not the major driver in any way.", 1], ["We're seeing the things that we have on the periphery of this like Apple TV, units and revenue grew by very strong double digits, very, very strong double digits in Q3.", 1], ["So if you think about that as the primary components of our commercial cloud overall, we're certainly saying that it's a big business growing very fast at $6 billion not counting LinkedIn.", 0], ["On the Sports Stadium, this is an early test, but we\u2019re pretty excited about it.", 1], ["So in terms of the 55% revenue growth, obviously, it's mobile News Feed is what's driving it from a fundamental point of view.", 1], ["So that's, again, an important opportunity for growth is just continuing to build out more products on the demand side for Stories.", 1], ["So every year that we get to practice and get better and build our brand around Oculus in terms of building the best products that we can in this space, I just think that we're going to be better off when this is really ready to be a completely mainstream thing with hundreds of millions of people using it.", 1], ["One thing that we're optimistic about is our ability to hire technical talent outside of the Bay Area as well as in the Bay Area.", 1], ["We know that once customers try it, generally, they'll really like it.", 0], ["We continue to have an outlook for expense growth in 2019 of 40% to 50% total expense growth.", 1], ["So we have studied the effect that you're talking about, and published the results of our research that show that Facebook is actually, and social media in general, are the most diverse forms of media that are out there.", 1], ["It did put a lot of demands on our warehouses and we were full.", 0], ["And as said this is a global problem, not just these are global problem, not just American one.", 0], ["So, yes, on the one-day free shipping versus the two-day free shipping, our goal is to evolve the two-day free shipping program into a one-day free shipping program and we're making strides on that.", 1], ["As I said earlier, foreign exchange is clearly a headwind for us right now.", 1], ["because the phone has been in the market just for a few weeks.", 0], ["You'll see that we've started to tie Whole Foods into Alexa.", 0], ["They targeted outdoor enthusiasts then retargeted people who viewed the Instagram videos with Carousel ads on Facebook that highlighted the product features.", 0], ["If you look back on infrastructure and fixed head count that may be made that less pronounced.", 0], ["But really some of the other upside that we saw in the quarter was from things that are the second sort of derivative of that, which was our search results were better than we had thought", 0], ["And as I mentioned before, we now have over 3,500 apps in the App Store for the watch.", 0], ["We're starting to roll out Stories ads, but it is very early days and we think it will be a long road ahead.", 0], ["Remember, we don\u2019t have contracted revenue.", 0], ["I would also point out that some of these upgrade programs that are in the market, they sort of began to look more like a subscription business in terms of the way they operate.", 0], ["Transactional businesses tend to be more impacted in emerging markets where we have a higher percentage of non-annuity business that's transactional business.", 0], ["And so we couldn\u2019t be happier about how things are going from that point of view.", 1], ["It's worth noting that video ads take place on another avenue, and receipts are not all of the revenue incrementals (28:55).", 0], ["It's the only planet-scale database, that's multi-model, supports these new programming models of server-less and event-driven programming.", 0], ["I think it was up around 70% over the previous year.", 0], ["So all those good and subtle decisions that Kevin has made over the years add up to creating a different kind of community that what we're finding and that's great, is that it's really complementary to what people are doing on Facebook.", 1], ["and Marketplace I think is going to help people do that.", 1], ["And so we think the mix shift to Stories is the big opportunity for us and advertisers over time.", 1], ["We\u2019re seeing some of them post every vote and explain why they\u2019re doing votes.", 0], ["We grew up \u2013 we grew from in the $5 billion range in 2013 to $8.9 billion in 2014 and now over $9 billion in 2015.", 0], ["The other one is what I talked about in the Enterprise Mobility Suite, that's really got fantastic momentum in the marketplace because the solution has really come together and is fairly unique, as well as Dynamic CRM.", 0], ["On the ad pricing, what you're seeing is that most of the advertising that we get isn't necessarily bid on an impression basis.", 1], ["So particularly in North America, I would say there's the volume -- the strong volume -- top line volume, combined with increased advertising revenues and also very clean operational performance.", 1], ["A lot of different facets to those types of investments, won't go into too much for specifics, but a lot of work being done there.", 1], ["We are very pleased by the international growth, 22% FX neutral, was up 1000 basis points year-over-year.", 0], ["First of all, when Amy and I think about both our CapEx as well as our OpEx, both at the engineering side as well as on our sales and marketing side, we think about this still at a Microsoft cloud level.", 0], ["In general, what we want to do is try to understand the content that people are sharing and that's out there for them to see as best as possible.", 1], ["So I do think this is really an output of multiple years of concentration on delivering that capability.", 1], ["The portfolio of devices that are available are incredibly compelling.", 0], ["The watch hasn't out very long and AirPods has been out there for three, four months, and so we feel really great about it.", 1], ["In Q3, we expected that to grow, we put into our guidance and we hit essentially where we expected on the guidance.", 0], ["So certainly, a lot going on in international, a lot that's really good, adding Prime subscribers at a high clip, continuing to add selection at FBA sellers.", 1], ["They're just, they're different businesses.", 0], ["People love the format of video.", 0], ["We saw about a 200 basis point change this quarter.", 1], ["because we're convinced that the Watch is going to be one of the top gifts of the holiday season.", 0], ["When you see that deployment for security reasons, an externality of that is people often choose to upgrade machines in that process.", 0], ["And the other factor that's important to keep in mind is this different mix of products.", 0], ["On Messenger, there are two basic things that we're doing.", 1], ["But that 20%, right, lends itself in-quarter to the volatility you see.", 0], ["And during the period of her campaign, Instagram accounted for 79% of her sales.", 0], ["And again, Amazon advertising and Sizmek has many mutual customers, so we know how valued these prudent solutions are to the customer base.", 0], ["So I am actually as excited about new cloud growth from new cloud workloads from the same customers so the much interesting thing that I am observing is that it could be the same model customer that was participating with us in the client server area.", 1], ["It's really about us getting better at targeting and working with especially people where we get those downstream signals like direct response advertisers.", 1], ["So the team had some interesting ideas, really focused on making Amazon a trusted conduit for Chinese customers to access, authentic international branded products, and things that customers can't get.", 0], ["But there are also going to be all these new kinds of things that we're not even building today that developers will be able to experiment with.", 1], ["So it's really the combination of SQL advanced analytics and the cloud with things like Azure datalink that are really the choices customers are trying to make as they think about their digital capability and the next generation of services and policy storage and processing capability they need.", 1], ["But the 51% year-over-year is also \u2013 it's a combination of the hiring we've done but also an adjustment we made to our estimated forfeiture rate.", 0], ["And I will actually combine these, because really those are fundamental driver that sits underneath this and then we can get to the specifics of end of support.", 1], ["We couldn't be happier with the level of ASP that we generated in the December quarter.", 0], ["International's 26% FX-neutral growth rate was actually the strongest we've seen in three and a half years.", 0], ["We also have issue with digital content, not an issue, but the fact that digital content is moving to subscriptions, Amazon Music Unlimited and Kindle Unlimited in particular.", 1], ["So that's an important on-ramp to mobile advertising for a number of businesses around the world.", 0], ["The use of it in the enterprise is growing significantly.", 0], ["XFINITY put out a voice guide for visual disabilities, and they did this, they did this by doing an Oscar commercial with a girl who is blind imagining what Wizard of Oz characters looked like.", 0], ["So at some level, I do think that the core mission and promise of helping to connect people with their friends and family is very fundamental, right?", 1], ["So that's driven a lot of our expansion of Amazon Logistics.", 1], ["But with all of our partners, we work well in advance of the holiday to get our plans in place.", 0], ["In the last few months, there have already been more than 100 instances where we've been able to reach out and get in touch with first responders that they can give you people the help that they need, and that's a big structural change in the way that we do business in terms of protecting the security and integrity of our community.", 0], ["And I think that it'll likely take place at a much faster pace this year.", 1], ["We continue to see the growth through Azure and the offset to that has been the transactional business.", 0], ["And this is happening all over the world.", 0], ["As you know, we are the largest U.S. taxpayer by a wide margin, and we already pay full U.S. tax on all the profits from the sales that we make in the United States.", 0], ["But for the foreseeable future, even within this, ads remains the great focus.", 1], ["One is that video is naturally becoming a larger share of the content in News Feed because both people and pages are sharing more videos as a mix and people want to consume that content.", 1], ["As you see business process reinvention occur, I do think of this as the surface through which many people will experience that.", 1], ["I would say that we've had some particular success in -- recently with 10 Golden Globe nominations and 3 Oscar nominations and Jack Ryan homecoming in season two of the [indiscernible] in particular, were very well received during the quarter.", 1], ["We manage all of the supply chain, all of it is as one supply chain; we do SKU design as one SKU design; we drive costs of both network storage, compute down altogether.", 0], ["We see a lot of momentum there and we continue to invest.", 1], ["The majority of the increase will continue to come from R&D, given the fact that we\u2019ve expanded our product portfolio and we\u2019re making investments all the time ahead of the revenue that would be generated in the future.", 0], ["We are factoring that in this year, that\u2019s just something we\u2019re expecting.", 1], ["We'll see about Q4 when we talk and everything we know about or anticipate about Q3 is built into our guidance.", 1], ["So, the ability in 10 cities to get Prime Now deliveries of Whole Foods groceries is an added benefit for people in that market using Prime \u2013 those markets using Prime Now.", 1], ["The launch of Prime last year was a big turning point.", 1], ["We're also investing in things like video, Watch and the like, which have the potential to condition tribute on the revenue side, but still relatively small in perspective of the overall business.", 0], ["We\u2019re dealing with these headwinds.", 1], ["Our current estimate is that about 20% of the active installed base has upgraded to a 6 or 6 plus.", 0], ["And we think, in many ways, we're better positioned than anyone else in the industry to participate in the opportunity that should be there over the long run for businesses and consumers to connect on message.", 1], ["And because frankly we saw that macro weakness, you have even seen it in terms of server shipments, right.", 0], ["Of course, we have a very strong mid-tier this year in the portfolio, with 6 and 6 Plus.", 0], ["Generally, I do think that they will pay us for that, to your specific question.", 0], ["Now the good news is \u2013 the great news from my point of view is I think we're strategically positioned very well", 1], ["I don't think we have any large clients, if you look at 25% in the U.S. of consumer media time is on mobile and then 20% of mobile time goes to Facebook and Instagram that would be 5% of U.S. consumer media time.", 0], ["So, we feel very good about our channel inventory ranges as we get into the September quarter.", 1], ["So you see the online stores revenue growing about 11% ex-FX, to be higher than that, but for the adoption ad standard.", 0], ["Just on the user growth point, we're obviously pleased with the growth we're seeing across the globe in terms of DAU growth.", 1], ["because it's very specific carousel ads product but it's also a brand play for them as they strengthen their brand and get people to interact with them as they want them to.", 0], ["And we see a lot of small businesses really able to do things on the platform.", 0], ["So those are the natural places where you'll see us gain more developers and gain more traction.", 1], ["And as we said when we launched it, we were setting up the next decade.", 0], ["And so we like that model.", 1], ["I talked about the three factors that contributed to growth this quarter: ad demand, users and engagement and ad load.", 0], ["The biggest job that we have is to show people in the community what's going to be meaningful and important to them, and that is our goal in all of these changes.", 1], ["If you look at iPhone 6 today, and add iPhone 6 Plus and compare that to last year\u2019s 5s we are doing better, at that price point than we were previously.", 1], ["But it does tend to mask a little some of the ARPU improvement that we've seen, it's still E3 and E5, there\u2019s opportunity on both, although we are starting to see the impact of E5 in net ARPU number.", 1], ["So there will be some content expense in 2017,", 0], ["As we look at it on a sequential basis, there's a couple of things that I think is important to point out.", 1], ["I often talk about how when we develop new products we think about it in three phases.", 1], ["We\u2019re obviously benefiting from a strong secular shift to usage of mobile and we feel we\u2019re very well positioned in that.", 1], ["The big step forward that we announced at F8 is that there are lots of different apps that have cameras in them or that independent developers just build an app that has a single camera effect.", 0], ["We offer Apple Music on Android, and so there's a series of things that are outside of that.", 0], ["And, of course, ultimately the thing that builds the installed base is to make customers happy, and that's our -- always our top objective is to have satisfied customers.", 1], ["And especially when you take that in combination with AI, again, you train on the cloud and you score on the edge.", 0], ["So 30 million small business pages continuing to grow.", 0], ["On privacy, there are really important questions about how you define what you want the system to be in terms of how much you\u2019re locking down data versus are you making it portable for to enable competition and innovation and academic research and things like that.", 0], ["Over the last few quarters here, usage is growing faster than that, so we will be deploying more capital as we go there.", 0], ["And so, it\u2019s a huge number, we're very, very proud of that number.", 1], ["We do believe that some of our ad success is taking people from demand generation through demand fulfillment.", 1], ["The installed base is growing, hit a new record, that's obviously good.", 1], ["Many times they start with subscale volumes and you build them out, you get more efficient, you get more volume, more package density and that creates efficiency.", 0], ["So the playbook is going to be work on getting the basics right, make sure that we have safety rights from the beginning.", 1], ["So adding about 50 new cities by the end of this quarter.", 0], ["And so that\u2019s one of the things that working with IBM provides us, is both that and the knowledge of the verticals, which they bring a significant amount of knowledge on all of the verticals that I mentioned earlier.", 1], ["We bought a company in Colorado that's essentially a firewall on all your identity management.", 0], ["And delivering for free in two hours is difficult and expensive, but customers love it.", 0], ["These are companies actually deciding that the change is required, not from an infrastructure perspective, but to change how they're running their business itself.", 0], ["I mean, I've been around databases for a long time.", 0], ["Our online store has expanded to over 350 cities now, and in fact our online revenues in China last quarter were more than the sum of the previous five years.", 0], ["And then when you think about the percentage of spend we have, what I said before on this call, which is we only have a small percentage of even our large customers, that's true of our small customers, too.", 0], ["So, yes, we have seen over the last few quarters, improved operating margins internationally.", 1], ["And the uniqueness of Windows comes because we don\u2019t think of these services and their application end points as apps, but fundamentally core to the Windows experience.", 0], ["As you know, the launch timing of the new iPhone is different this year.", 0], ["It could be the friends that you have on Instagram", 0], ["This year, we were able to keep GM flat sequentially.", 1], ["New Prime members signed up in higher rates than we've ever seen.", 0], ["And you will look \u2013 you can see \u2013 you'll see us add more value to these packages as time goes on as well", 1], ["And I think the product teams, led by Mark, have done a great job of that over time and you're seeing the continued investment there.", 1], ["I am still very optimistic and bullish on iPad over the long run, as I\u2019ve indicated before.", 1], ["It's essentially set functionality and pace of innovation that we've demonstrated for multiple years.", 0], ["I think we\u2019re really going to change the way people work.", 1], ["Also point out that AWS stepped up its run rate from a $14 billion run rate last quarter to $16 billion.", 0], ["We think it's a valuable \u2013 all those are valuable services, Amazon Go is not out of beta, but the other ones are.", 1], ["And Teams in some sense helps them a lot, because it builds on all the rest of the investment they\u2019ve made already in Office 365.", 0], ["And so, with all of these events taking place around the world, there's no one event that we think drives a huge portion of revenue.", 1], ["Every time we go through a launch, we learn something.", 1], ["We are making it easier all the time.", 0], ["because it's a very fragmented market the world over, especially if you add SMB", 0], ["Most are being viewed with the sound on.", 0], ["And we continue to believe that there's an enormous opportunity there.", 1], ["One is the same-day that you've seen us rollout in number of markets here in the US.", 0], ["So we want to build those.", 1], ["Again, I think the way that shows itself in our financial results is you'd expect to continue to see the strong mix shift to the cloud.", 1], ["And we expect to offset the seasonality impact with cost improvements and with mix.", 1], ["But we've expanded the product offerings on the Direct Response front, and we're continuing to bring more ad products to Instagram.", 0], ["That said I\u2019ll say it again, we\u2019ve a lot of hard work to do.", 1], ["You remember that a few years ago, we were actually declining in Music; now with the streaming service in addition to the download business, the business is growing again.", 0], ["U.S. and Canada, sort of consistent with past quarters, has been flat at about 185 million, and we would expect that to continue to bounce around.", 0], ["There a lot of public figures who have pages often with millions or tens of millions of followers producing unique and really high-quality content that they're pushing out to all their fans on the network today.", 0], ["And so we felt like we had no choice was the net of it.", 1], ["So we don't think of our server as a legacy business.", 1], ["So I think there is a real opportunity.", 1], ["The sales motion is really about Microsoft 365.", 1], ["So in other words, it can be -- start with Teams.", 0], ["And so that's first and foremost.", 1], ["And we think again, this is activities we've been doing already which need to grow at a very rapid rate.", 1], ["So I think it's becomes a part of your routine.", 1], ["So we think there's opportunities here.", 1], ["So, we think there's a lot of shared purpose there and a good quarter where we're looking forward to the Diwali holiday this year.", 1], ["And if you've been tracking that number over time, we're now up over $10 million, which is good progress on that front.", 0], ["One of the products that's doing very, very well for us is the store simple product, which is essentially a storage product that cloud Tiers virtualization storage from on-premise to the cloud.", 1], ["So the thing that we're going to be measuring is basically the number of interactions that people have on the platform and off because of what they're seeing that they report to us is as meaningful.", 1], ["It's the same case with Schneider Electric or ABB or any one of the customers we are working with because they all are taking some of their assets and converting them into SaaS applications on Azure.", 0], ["So we obviously need to do a great job in continuing to push that, and we're focused on it.", 0], ["So I think of device gross margin in some cases", 1], ["And we think we'll be also developing new store formats and everything else just as we talked about in the past before Whole Foods.", 0], ["so we're going to keep on moving in this direction.", 1], ["I think that over time, we should be able to do better, but that at least provides this existence proof that despite \u2013 regardless of what our internal logic is of what we're doing, that someone has done it.", 0], ["And so we feel good about that.", 1], ["So we will -- we expect it to be very valuable to customers as we add selection into that one-day category.", 1], ["So the growth is actually across the board.", 1], ["What we do like is the engagement with Prime.", 1], ["At the unit level, the iPhone SE had a difficult comp to the year-ago quarter and so, when we changed some of the configurations, memory configurations in the year-ago quarter.", 0], ["So you can look at countries where both services, WhatsApp and Messenger, are growing very quickly like Brazil, for example.", 0], ["So we\u2019ve built that into our Q4 guidance estimate, but we\u2019re very pleased with the customer response to One Day.", 1], ["It's really the transformation from having applications that are silos to becoming more services in the cloud where you can reason about the activity and the data underneath these services to benefit the customers who are using these services.", 0], ["On China, that is a more complex situation.", 0], ["The rest of it is continuing to build out in that location the number of servers and networking equipment required.", 0], ["And the amount that people want to share and communicate is boundless and that's I think partially why we're seeing the growth that we are with so many of these products.", 1], ["And then, finally, we're giving people who use the services more choice around privacy, and that's coming both in terms of impacts that could be ongoing from things like GDPR as well as other product options that we're providing that could have an impact on revenue growth.", 0], ["That does result in a revenue to fall, it will end up in unearned.", 0], ["But in terms of price elasticity, I think it's important to remember that a large number of people pay for the phone by month.", 1], ["So we're seeing higher marketing costs.", 1], ["I'm seeing it sort of everywhere I go now, and so I think we are in the early days, and it'll keep getting better and better, but I'm really happy with where things are at the moment.", 1], ["And they span, quite frankly, all the industries.", 1], ["On top of this, we have the best BI visualization technology.", 0], ["Europe is a broader mix of countries.", 1], ["We saw some growth.", 0], ["Much of our spend is, as you note, on some of the infrastructure to put in place when you pick a location.", 0], ["Because we think that from a business perspective, we will get some of the value just by having the services be more valuable for businesses and the ad prices that they'll bid in the auction.", 1], ["So certainly we see an impact to margins with FX headwind.", 1], ["We don't expect India to be any different.", 1], ["They're very strong.", 0], ["So it's a great, again, part of the flywheel in that, Echo and Alexa make the devices better and it builds engagement, not only with Echo and Alexa, but also with Amazon.", 1], ["That is the largest element that we need to take into account because of our typical seasonality.", 1], ["On the storefront, we're also, as you can see, experimenting with numerous store formats.", 1], ["Right and helping to do our part to fight off news and polarization.", 1], ["Tests are going well, but it's really early days to talk about that being a significant contributor, so we're working to continue to make those products better and continuing those tests, but it's early.", 1], ["Memory on a sequential basis is about 30 basis points favorable for us going into the December quarter.", 0], ["So on CapEx, we are absolutely investing in the infrastructure and 2015 is an investment year, so we are ramping CapEx versus 2014.", 1], ["The first one is the fact that the launch timing of the new iPhones this year is essentially in reverse order versus last year, and that has had an effect on Q4 and will have an effect on Q1.", 1], ["At some point, we're going to be able to just understand the meaning of all the content that hosted that you could potentially see and use that as candidates to potentially improve your experience and make it that you could see way more content that you might be able to today to \u2013 and of course, we'll do that to help encourage more social interaction.", 0], ["And the guidance certainly doesn't imply any type of slowdown in the commercial business.", 1], ["During the quarter, we rolled out a feature called Tatkal which is a studio on wheels that we go to the sellers to help them sign up.", 0], ["So we are really happy with what that's doing for third-party business.", 1], ["We've also put a lot of emphasis on our Services business as well and on making the ecosystem even better.", 0], ["The second is the first-party hardware, where we just had such terrific performance again this Q4.", 0], ["And I think that that means that the major Internet platforms have a responsibility to form partnerships and help to fund this work.", 1], ["And then on top of that whole ecosystem, we then had the opportunity to build what has turned into a News Feed business that we're really proud of, right.", 0], ["So, when you look into \u201819, I am optimistic on both of those fronts, good execution continuing on renewals as well as adding new value, new opportunity.", 1], ["Amazon is trusted source of authentic [ph] international products and that\u2019s really what we're doubling down on now with a Amazon global store on our own site, which gives Chinese customers access to over 1 million Amazon products globally.", 0], ["I think that really plays to an incredible smartphone future there.", 1], ["We obviously have a lot of people in-house who work with the third-parties on that front.", 1], ["So quarter-to-quarter, it will vary.", 1], ["But there are other stimulus programs as well that likely have an effect to the consumer level.", 0], ["If you look at even the thing that we're seeing is in terms of engagement, with the browser or things like Xbox Live with the Store, or new device categories like the 2-in-1, all I think make it much more possible for users to engage with Windows in more mobile formats and in more productivity scenarios", 0], ["We have great people working on not only better efficiency, but also driving cost out of our acquisition prices.", 0], ["And so, when you look at it, each of our categories, iPhone, iPad, Mac, wearables, services, everything improved sequentially.", 0], ["So we will not overspend there in sales and marketing because we do believe the products \u2013 in fact, there is a different way to sell even business process applications because of the cloud, and that's something that we want to take advantage of.", 1], ["It's sold with Microsoft 365.", 0], ["And so we're very much focused on the experience right now.", 1], ["As you're seeing EGM strength across a lot of the categories there, there was no single category we're really calling out, but continue to see good selection growth and good Prime growth as well.", 1], ["It's certainly growing.", 0], ["It's a new feature that allows people to basically take a video and stream it live for the first time when it comes out.", 0], ["And so, as we continue to grow, quickly that is going to help us as we go through the year.", 1], ["The workload that we're furthest along on is obviously exchange.", 0], ["So there\u2019s a lot of granularity that goes into thinking about how revenue will progress that ultimately it\u2019s going to depend on the supply and demand characteristics in that given quarter when we do that and we see that we expect constant currency deceleration.", 1], ["So it certainly takes those into account.", 0], ["And so I do think we are encouraged, as Satya said.", 1], ["So I think we're going to see the deceleration impact all regions.", 1], ["The point that I think I need to make when you think about upgrade rates, clearly, this issue of the strong dollar doesn't help us.", 1], ["And I think if you look at a large base of businesses who use us without paying, the growing base of businesses who do pay us and then the runway we have in services that are 1 billion plus (59:48) that we're really not monetizing, I think a strong focus on ads continues to be the best investment we can make.", 0], ["And that's where I think the opportunity lies.", 1], ["We want to be able to make sure that we compete on all price points and overall grow the volume.", 1], ["We're excited about the potential there, and really the team's focused on just keeping their heads down and continuing to accelerate the pace of innovation to try to continue to grow the functionality gap we think we offer.", 1], ["Video is one of the big drivers of engagement growth on Facebook.", 1], ["Those totaled $9.5 billion in the trailing 12 months, and it was up 7% from the 12-month period ending this quarter last year.", 0], ["We already have 20 plus points of, or 20%-plus of VMs in Azure are Linux, and we'll all increasingly have Linux be a big share of our percentage of what is happening in Azure.", 0], ["And Heather, I would add that when you're using systems to look at content, when you're using AI machine learning systems, it's a real benefit to have actual people looking and tagging that content, classifying it", 1], ["We had very high expectations for Amazon Robotics and its impact on our warehouse cost structure and we have been very pleasantly surprised by the job being done on that by that team.", 0], ["The only real logical way to run the service was to enable people to share what they wanted and then reactively, if people in the community saw something that was offensive or they thought was against the rules, they'd flag it for us.", 0], ["But I think as I said or Tim said during the prepared remarks, we do expect iPhone ASP to improve sequentially as we move into the September quarter", 1], ["In terms of the exclusions, we've been making the Mac Pro in the U.S., we want to continue doing that.", 1], ["We have a strong sense of where things go and we're very agile to shift as we need to.", 1], ["I think we would be a very trusted holiday partner particularly as you get closer to the holiday.", 1], ["Our expense to revenue ratio during the December quarter was that 7.4%.", 0], ["And what we've tried to do is basically figure out the areas that we think are open and are not currently served by the set of products that the industry has built and figure out a way to offer those.", 1], ["Prime is obviously very important as well; we really haven't teased those apart.", 1], ["Those things together, with premium being a component of that, are all lending itself to gross margin improvement.", 1], ["I\u2019ve mentioned briefly in my remarks, Slideshow, the Slideshow product is -- enables a video like experience which phone with lower connection speeds and feature phone by series of photos.", 0], ["So those key factors will continue, we believe, to drive growth next year.", 1], ["And we're open to automated bots being useful.", 0], ["But as I back up from it and look at it more from a macro point of view, the things that makes me very bullish is the 27% number I just quoted, the fact that we are seeing the highest Android switcher rate, the customer satisfaction that we have on the iPhone versus the competition.", 0], ["I think we actually in Q3 as I said met sort of the unfulfilled Q2 demand and Q3, so I don't think of it as a pent up situation heading into Q4 and our guide certainly does not indicate that, that is what we believe will happen.", 1], ["And so we did exceptionally well I think in any way that you look at it.", 1], ["So e-commerce is one of our top categories of advertisers, and we are already driving a lot of product sales through Facebook but importantly, our e-commerce initiatives are really about connecting consumers with marketers so that they can buy from companies.", 1], ["This is one of the other first-time trends I'm seeing where CEOs are more interested in productivity of their front-line workers, and so that's another exciting space.", 0], ["As some people are doing when you begin to combine the watch revenues with the revenues for AirPods, and as you know, this was the first full quarter of shipments for AirPods.", 0], ["Some people will use it significantly for music and others may use it significantly for as a digital assistance; and I think the majority of people will likely use all of it and use all of the functionality of it.", 1], ["And so we think the better we can do at getting the measurement to what actually matters, which is the end behavior marketers are trying to drive, the more people will shift their focus to business metrics, the better it will be for the returns they get and ultimately our business.", 1], ["I think when you look at our business, demand has been one of the key factors driving growth.", 1], ["And India we grew at 93% and this is on top of the Greater China numbers that we've already covered that grew 87% during the quarter against a market of 5%.", 0], ["You also continue to see us invest where we see massive market addressable expansion with sales capacity as well.", 0], ["It's just got a different margin profile.", 0], ["So you obviously have that loss of leverage, but without a doubt the biggest headwind that we got right now is foreign exchange.", 1], ["growth", 1], ["So that\u2019s something that over time you will continue to see improvement in terms of impact on ARPU.", 0], ["That's going to be an ongoing journey throughout the year.", 0], ["We're in the very early stages, some of those ads you're seeing of exploring how to build more of these connections.", 0], ["But really, I think the focus that we have here is how we can best execute no matter what the macro environment turns out to be, focus on our own execution, focus on continue to drive cloud services, focus on continue to drive annuity mix.", 1], ["So, the way we think about it is we want to grow the organic connections, whether they're automated or whether they're personalized, and make sure that that is growing the business of our customers.", 1], ["Of course, we expect this headwind to continue.", 1], ["So obviously these services will help us carry on with the momentum that we had in services.", 1], ["And I think this is going to be a very important part of the video experience as well,", 1], ["That performance certainly has some end of support impact to it as we've talked about before.", 1], ["So, we couldn't be more proud of what our lineup is and we're excited about the great pipeline of both hardware and software and we wouldn't trade our position for anyone's.", 1], ["And so we're really proud of the developer community and the fact that developers are earning a lot more money in writing for iOS than other apps.", 1], ["That's also true of an Olympics; it's true of a World Cup, it's also true of a Super Bowl.", 0], ["Health is important.", 1], ["And some of the services that are more per-user like, like EMS within the Azure frame, you would expect that growth to moderate somewhat more quickly just because it's a per-seat business.", 0], ["The other data point I'll give you that affects our cost structure is our Amazon Fulfilled units, which is the combination of retail plus FBA, grew nearly 40% last year and that compares to our paid unit growth of 24% in Q4.", 0], ["So the net impact for the first quarter to operating income wasn't material.", 1], ["We -- our grocery delivery orders from the combination of Amazon Fresh and Whole Foods Market more than doubled in the fourth quarter year-over-year.", 0], ["Innovation is the core of the company.", 1], ["Those will have a negative impact on margins.", 0], ["Some of the headwinds, I would say, were outbound shipping cost, including the free shipping that we did, but mostly, it was the higher Amazon fulfilled units and the greater use of Amazon logistics.", 0], ["because different industries are strong in different parts of the globe.", 0], ["And they optimized their video for the Facebook and Instagram mobile feeds.", 0], ["Certainly, unit demand was lower, but AFN or Amazon Fulfilled demand were, we\u2019ve combined FBA and retail, remained strong.", 0], ["Gymshark is a fitness clothing brand based in the UK.", 0], ["So we like what we see with that connection and we also have pop-up stores that you may see and also college pick-up points.", 1], ["So we feel like this is the natural evolution of our delivery and we're happy to invest in that service.", 1], ["When you think about the way people have the choice to restrict data use, I think it would affect the product.", 1], ["and so we'll begin to see some really good networks coming on in India.", 1], ["So it's a combination of all those factors that is leading to the deceleration of revenue growth in the second half.", 1], ["So yes, the formulas were, or excuse me, the changing to the pricing formulas were really with that in mind to help the flow and the base utilization in Q4.", 0], ["So it's over a timeframe more than two years is our expectation.", 1], ["The premium services, for example, the way we think about them is in everything related to our data is, and especially the higher level databases, so I'm not talking about raw storage but this is Cosmos DB or Azure DB or any of data services, our IoT services, our AI services are all the premium services.", 1], ["because I think about Windows 10 in its entirety, the Windows ecosystem in its entirety.", 0], ["A recent one is eBay Vivanuncios, which is an online real estate destination working in Latin America and Mexico.", 0], ["So again, the sellers are as important to us as anything for servicing the customers' need for price selection and convenience.", 1], ["My understanding from looking at a bunch of analytics is that the peak of global SMS reached somewhere in the low 20 billion messages per day, and we already have many times more than that.", 0], ["And in between there, what we're seeing is this huge growth of private groups, right, and Groups remains one of the I think least talked about products on Facebook.", 1], ["And your comment on revenue versus operating income versus potentially gross profit, I would say the impact of third-party growth and we're now \u2013 up to 53% of our paid units in the quarter were third-party.", 0], ["What this means is that for customers to purchase an iPhone last quarter and replace the smartphone that 30% of those switched from an android device.", 0], ["And that's sort of our core heritage, and that's something that we want to absolutely focus on.", 1], ["And so from our point of view, the iPhone is doing outstanding.", 1], ["And while the political campaign, obviously, a lot a money is spend in ads.", 0], ["And we'll continue to do so, when we look at our CapEx spend we want to make sure that the data center regions meet the needs of our customers globally across both consumer workloads and enterprise workloads, where real data sovereignty requirements and speed-of-light issues are already relevant.", 0], ["Today there are actually still hundreds of VPN apps on the App Store, including hundreds by developers that are outside China, and so there continues to be VPN apps available.", 1], ["because we think that both are really important parts of the solution here, to go after all different parts of these problems.", 0], ["Video as a whole is making a significant contribution to time spent growth.", 1], ["and so we\u2019re extremely excited about that.", 1], ["So I think that's the mitigating issue that we could see, depending on how GDPR and our broader commitment to providing these same controls worldwide could play out.", 0], ["That means things are always changing.", 1], ["It's early, but we're seeing some positive results with publishers of many different types bringing branded content to Facebook.", 1], ["Yes, I mean I think we have premium services whether it\u2019s an Office 365 or in the SaaS side with a Dynamic 365 and that\u2019s where the SharePoint comment came, but there is a lot more in Office 365 adoption cycle beyond exchange or email.", 1], ["Some of them relate to inversion transactions, so obviously that's not an issue for us.", 0], ["Take an IoT project, translate into a preventive maintenance in Azure and then ends up as fields service and Dynamics, that\u2019s been one pattern and we\u2019ve seen a ton of traction with.", 0], ["So I think that\u2019s largely what dictates our roadmap and making sure that we give ourselves autonomy and availability to look to new areas and stay on the cusp of whether it\u2019s kind of emerging technologies or really just our customer needs or pain points that need to be solved.", 0], ["So we see strong customer demand, not only for the benefits that we associate with Prime, we're seeing better engagement with Prime benefits, especially digital benefits, and that is always good news for eventual sales of other things.", 0], ["And I mean that not just in our OEM business but also across the commercial business for Windows.", 0], ["I think when we look at the bridges for revenue, and obviously units are a key driver of revenue, things like Prime are key in that bridge.", 1], ["We operate in Germany under German law.", 0], ["That's what the Whole Foods team is committed to.", 0], ["But as I said earlier, a unit of sale is less relevant today than it was in the past.", 1], ["I would say it's just a demonstration of the very tight period where we \u2013 we've still added a lot, I mean, $4.6 billion is a lot of capital leases, but the rate of growth over last year is flat.", 0], ["We want customers to get the benefit of the new brand and product discovery, and then we want to let sellers for both emerging and established brands, reach those customers.", 0], ["And developed markets are where we see the most transactional business with Consumer Office that impacts in quarter.", 0], ["That will be obviously our preference.", 1], ["It is a big business for us, not only in North America but also Internationally.", 0], ["And so we can do more than one thing, and so we have other things that we're working on as well.", 1], ["And what you'll see is that basically people use them a little bit differently.", 1], ["We think it's been a great addition to our fulfillment capacity.", 1], ["I think they\u2019ll play out differently in different geographic regions as to which one is larger than the other and well likely -- the mix of those things will change over time as more and more commerce flows across apps and so forth.", 1], ["But what I will tell you is we have experimented with physical stores.", 0], ["We are working very quickly on Prime Now.", 1], ["So, we're very encouraged with EGM growth.", 1], ["But my point from the last call still holds in that, we do expect those growth rates to be higher for all of 2019.", 1], ["So this gives people to share, a place to share that one event and participate in it.", 0], ["We drive a lot of repeat business with things like Prime Pantry and Subscribe and Save and others.", 0], ["So to share one example, Jack In The Box use our Canvas ads, which are very immersive ads.", 0], ["And I think that the rate of CapEx growth, as I said in FY\u201919 will moderate, that happens because of course we\u2019re doing some replacement overall.", 1], ["I find it a very effective way for advertisers to reach interested customers.", 1], ["And building a mobile presence is even harder than a web presence", 1], ["It could be sharing to Groups with Facebook.", 0], ["I talked about in my remarks how we're looking for conversions.", 0], ["Our performance in emerging markets although it\u2019s quite good and our revenue was good our market share is low and the LTE penetration in these markets is quite low.", 1], ["And also and importantly that iPhone sell-through growth on a year-over-year basis will be actually accelerating during the March quarter as compared to the December quarter.", 1], ["For this quarter, we launched new quick replies for customers.", 0], ["We're expecting renewal rates to remain strong as they've been.", 1], ["So we did see a little bit of improvement in terms of growth rate acceleration versus last couple of quarters.", 1], ["Satya mentioned security, identity, compliance, there is a lot of room for us to continue to add value and growth in that area as well.", 1], ["Overall qualitatively, in terms of PaaS adoption of Azure, a lot of it comes with what's happening, for example, in the services we talk about, like IoT.", 0], ["So you're going to see that be lumpy.", 1], ["And we've had a good balance of demand growth and supply growth, and that's led to our good strong financial results and our ability to deliver very strong ROI to advertisers.", 0], ["And so that\u2019s iPad, it\u2019s Mac and those are huge numbers as well.", 0], ["The first one is that, we wanted to double the size of the services business from our fiscal 2016 to 2020.", 1], ["And as I back up and look at this, we have 8,500 apps.", 0], ["So what we want to do is get marketers to use our tools, use the technology we have to do automatic placements, show people things they're interested in, so ads are a good experience, but really help them ring the cash registers so that they know their dollars or their pound or their euro are well spent, and that's what we're pushing to do.", 1], ["The accounting methodology change did affect how Europe sequential growth rate came in, but really stable if you kind of take that aside.", 0], ["I would characterize it as continued investments.", 1], ["I think the upgrade rate is a function of many, many different things, from the size of the installed base, the age of the installed base, the product that is new at the time, the regional distribution, the upgrade plans that are in various markets around the world.", 1], ["And so I think that can move the dial there.", 1], ["While we're on this subject of head count, head count grew 77% year-over-year in the quarter.", 0], ["It's a significant step and it will take us time to achieve.", 1], ["And that I think is really what gives us even the permission to think about streaming.", 1], ["But what is clear to me and clear to Microsoft's engineers is that we have a very clear world view of what is it that we want to get done, and we stay focused on it.", 1], ["Yes, Audience Network is important to us", 1], ["Clearly FX, plays a role around the world, 300 basis points of FX impact during the June quarter.", 0], ["Now that can technically, Ross, be interesting in certain quarters of the year where we have very heavy expirations.", 1], ["Those movements actually and as we help customers transform, it's really the best plan in the face of any uncertainty, which you're clearly asking me about.", 0], ["I mean, in any quarter there can be product mix or ASP differentials which shift the unit growth figure, but if you also remember, we dropped our Super Saver Shipping threshold twice, the early part of last year from $49 to $35; and then down to $25.", 0], ["The basic theory that we have is that there are a small number of services that are going to be ubiquitous utilities that 1 billion or 2 billion or more people are going to want to use.", 0], ["As we've talked about in the last few calls we have even more emphasis on variable and fixed productivity.", 1], ["And of course, at this point in the cycle, we also have higher cost structures because, as I said, we've launched so many new products in the last six weeks.", 1], ["Because in a lot of ways, I think if you take a video of yourself and your family out trick-or-treating, that's more engaging than a photo and a better representation of that than writing it out in text.", 0], ["We're going to continue to give people are personalized experience to be clear about how are using the data and give choices and we realize that this means that some users might opt out of our ads targeting tool.", 0], ["We view that privacy is a fundamental human right and that it's an extremely complex situation if you're a user to understand a lot of the user agreements and so forth.", 1], ["We've needed to add more of our own logistics to supplement our existing partners.", 0], ["It's the test really shows that a lot of people are going to want to use this product.", 0], ["In terms of WeChat, the way that I look at this is because our share \u2013 because iOS share is not nearly a majority of the market in China, the fact that a lot of people use that, it makes the switching opportunity even greater.", 1], ["And I anticipate that will carry over to this quarter too and we are really proud to add another product out there for people wanting noise-cancelling with the AirPod Pro beginning to sell today.", 1], ["And if you look at what was driving that, iPhone 7 Plus, we sold the highest number of Plus models in the first half than ever before, compared to 6s Plus or compared to the 6 Plus.", 0], ["In terms of areas for improvement, I think there's a lot we can do.", 1], ["It doesn't bother me that it's primarily Android business at the moment because that just means there's a lot of opportunity there.", 1], ["We think we have a good track record there.", 1], ["But we are investing across the board.", 0], ["Because what we have come to understand is customers, depending on where they start, how they start, have different mix profiles.", 0], ["I know I'm drifting a bit from North America, but it's all part of the same theme.", 0], ["And we've recently rolled out the business model for this, which is for premium content, we'll give a revenue share on a portion of the views to the content owners.", 1], ["So all of those investments, for example, are available on Azure as Cognitive Services.", 0], ["So we'll figure that over time, but those are certainly both important spaces to be in, visual messaging and kind of interest-based talent showing Stories-type functionality.", 1], ["iPad grew dramatically more than the market.", 1], ["In our case, it's going to be about things that are there in Office 365.", 0], ["First, the recent regulatory initiatives like GDPR and now CCPA have impacted, and we expect they'll continue to impact our ability to use such signals.", 0], ["And what the research that we found shows is that when you're actually engaging with people and having meaningful connections, that's time well spent, and that's the thing that we want to focus on.", 1], ["Clearly, we expect to have continued strong growth from the non-iPhone categories.", 1], ["First, I\u2019d say we are in gaming because of what we believe are going to be the secular changes in the gaming addressable market for us.", 1], ["And things like GDPR and other privacy changes that may happen from us or may happen with regulation could make ads more relevant.", 0], ["I will say we do see a lot of opportunity with Whole Foods.", 0], ["And we feel very confident.", 1], ["So their groups are growing considerably higher than that 14%, but on total, the company grew 14%.", 0], ["And so to me that's all positive news, and but yet we're very, very focused on delivering I think new value to the enterprise customers.", 1], ["In some cases, our revenue growth exceeds our OpEx growth.", 0], ["The market is telling us that.", 0], ["The other one is in terms of the cloud migration there is a variety of different used cases, we see people are using SQL DB, which is essentially PaaS service but it's a complete compatibility of SQL Server, they want to managed services around SQL Server which we have.", 1], ["So we've now been -- we're now a year or so into -- starting to build out a lot of that.", 0], ["For the second year in a row customers selected Amazon India as Amazon's most trusted online shopping brand.", 0], ["Ben just following up on VR and supply constraints, so we have two products.", 1], ["So if you go back 10 years, most of how people communicated and shared was text.", 0], ["We've gone from minus well into the 20s to minus two last quarter.", 0], ["You want to be deeply integrated at a product level.", 0], ["And so the part that looks a little bit more EA-like is the part we've talked about on a per-user basis, right?", 0], ["So within one interface, we're working with one sales rep.", 0], ["One of the challenges that marketers have is keeping up where consumers are.", 0], ["We stuck with that when others perhaps didn't and really put a lot of energy into this and a lot of R&D and are in a very good position today to keep playing out what's next there.", 0], ["And our mobile app install ads help apps of all kinds, not those running on our platform.", 0], ["We also, during that one year, done integrations.", 1], ["So very excited about the devices.", 1], ["The Mac gained share there as well.", 0], ["Also Wearables, Wearables are doing so great at a company level.", 1], ["So we will continue to operate with this combination of external partners and internal capability.", 1], ["because there aren't enough of them and they haven't been rolled out for long enough.", 0], ["It also comes in the form of some of the more comprehensive suites, the E3 and the new E5.", 0], ["This is a long-term direction that we're going to continue making more ranking changes and building more products around, but I think that this is kind of reflected broadly in the numbers that you see on engagement and the growth in daily actives and how people are engaging across the family of apps.", 0], ["The next place where we are very focused on is really the new scenarios and E5 is obviously a big element of it.", 1], ["So - whereas in 2018, we benefited from strong impressions growth on Instagram in both feed and Stories.", 0], ["And so there's many more ways of experiencing games and entertainment and other apps on the store.", 0], ["We also have some early nice results we can share from clients.", 0], ["But what we see on the mainland is definitely much more encouraging.", 1], ["So VR and AR, what can accelerate that?", 0], ["But if you remember, we actually went through a pretty tough period", 1], ["And just generally we continue to expand geographically.", 0], ["For Q2 guidance, we've included approximately $800 million of incremental spend related to this investment.", 0], ["Justin, I would say, as I said, I believe, on the last call, we had more people sign up for Prime in 2018 than any other year before.", 0], ["What thyssenkrupp has done in their Elevator business and other business units by using anything from HoloLens to a front-line worker to how they're fundamentally moving their business model from essentially the margin on the thing to the margin on the service, which has machine learning and AI built into it.", 0], ["And they use Facebook to target people within 25 miles of their fairgrounds age 20 to 51 who have specific interests in concerts, music festivals, and theme parks.", 0], ["And many people in literally every market that we've tried this in, there is a reasonable number of people that want to take and pay for something on installments instead of all at once.", 0], ["In the long run, we expect to see a revenue share model on the platform.", 0], ["That is the consistency between what happens at the edge to the cloud when it comes to data tier becomes even more important as edge scenarios become very, very real.", 0], ["And that cloud revenue number that is the 88% is all up cloud revenues inclusive of Office 365, EMS, and Azure.", 0], ["The TV, and you didn't mention CarPlay, but these are trying to provide our users a seamless experience across all the different things that they do in their lives.", 0], ["We're open to other forms of things being useful.", 0], ["This year, those numbers are 33% in Q1, and 1% in Q2.", 0], ["We see an opportunity to really make the case.", 1], ["You have large advertisers and small advertisers.", 1], ["And that's not the world we're on on mobile.", 0], ["Things like fulfillment capacity, which have been growing over 30% a year in 2016 and 2017, dropped to 15% last year.", 0], ["And now when you think about the scale at which we operate, it is very important for us to make sure that every new breakthrough that happens in the system architecture that can improve efficiencies in what is distributed computing is something that we stay on the forefront of it.", 1], ["So on ad load, it's definitely up from where we were couple of years ago.", 1], ["So that is probably more of a help to Q3 than a discussion of any weakness in Q4.", 0], ["So that's across the board.", 0], ["This could create some speed bumps in the near term.", 0], ["We do think that the advertiser base and the targeting and the measurement we offer once we figure out the format will be a very considerable advantage.", 1], ["So, we don't see that as being a huge issue.", 1], ["So we feel good about new workload growth.", 1], ["So out of this big video thing that's growing very quickly, I think that is the real opportunity and product area that we should be focused on more.", 1], ["And Azure actually falls a couple of patterns.", 1], ["We continue to increase the value of Prime, including speed selection and digital entertainment options.", 1], ["And that's the signal actually we hear back from customers, whether that is Microsoft 365, Dynamics 365 and a new worldview on what business processes and business applications can look like.", 0], ["It's not \u2013 it has nothing do with the display or the Touch ID or a gazillion other innovations that Apple has done.", 0], ["We know customers love it.", 1], ["So at 2 million advertisers in Stories, we're obviously seeing broad adoption and that means you have both.", 0], ["In addition to that, as a part of their increasingly radical steps they were taking to try to hold up that model, they withheld $1 billion in payments that they owed us.", 0], ["We didn't put a lot of new fulfillment center capacity or infrastructure into place at least compared to Q1 of last year.", 0], ["And if you look at emerging markets in general, I think Luca covered some of this, the revenue from emerging markets, just for the March quarter, was up 58% year on year.", 0], ["Man in the High Castle is coming out shortly, as is the second season of Transparent which won Emmys this year.", 0], ["We are honing the businesses that we're in and making them as efficient, as profitable as possible while also investing very pointedly and very wisely, we believe, in things that will enhance customer experience and create lasting businesses for us down the line.", 1], ["We have, as I said earlier, selection expansion, infrastructure investments, fulfillment network and AWS \u2013 excuse me, that's not the international segment \u2013 fulfillment network and digital content.", 0], ["Third, the things that we've done from a pricing and monthly payments point of view and trade-in, getting the trade-in program up and running, all of these things have had moved the dial.", 1], ["I don't think there was anything particularly surprising about the deceleration in the growth in the U.S. and Canada.", 1], ["And that's pretty cool because I don't think there are probably 1 million advertisers who have bought TV ads in that same period of time.", 0], ["We\u2019re looking forward to investing in New York and Northern Virginia and being a good community partner as well as Nashville.", 1], ["I would say that we are still very bullish on our Prime Instant Video, especially our new original content we've created.", 1], ["The other issue is there, the other reason is that we are also doing a lot of conversion of temp workers to full-time workers purposefully.", 0], ["So that is the second wave, probably after the first wave where we talked in previous calls about initial price drops, putting lockers in the stores, selling some of the Whole Foods' products on the Amazon site, and other things.", 0], ["Then on top of that, of course, all this compute means it's being used with data.", 1], ["We ramp slowly, we monitor engagement, sentiment, quality of ads.", 1], ["So, even if I see all the good things and good trends happening that I feel really create a great opportunity for us to sell Microsoft 365, you will see growth rates moderate next year.", 1], ["We're judging our success by, go through all of the categories of harmful content and behavior, whether it's terrorism, or self-harm, or hate speech, or just any different kind of thing that you'd be worried about.", 0], ["Azure Stack is going to completely change what hybrid is and the expectations customers have with hybrid.", 1], ["And WhatsApp is interesting because by virtue of paying, businesses are going to have to be careful about the content they send.", 0], ["And so, as there is more offers out there, I mean the one that is today getting the attention is on the streaming side.", 1], ["We are also continuing to invest in our other grocery initiatives.", 1], ["And I continue to expect that we'll see growth in revenue as those resources both get hired, get up to speed, and add value at accounts.", 1], ["We're looking forward to a great holiday not only for customers but also for sellers.", 1], ["So the combination of the technology advantage and the business model advantage is what I see in the results, whether it's the standalone Azure growth, which is what we expected and it's very strong and the server KPI is even stronger.", 1], ["It's within the range of normal.", 0], ["so that was obviously somewhat of a disappointment.", 1], ["It's building markets.", 0], ["They had a seven times lower cost per video view compared to News Feed alone.", 0], ["And the enterprise adoption of these new devices is also driving the overall excitement around Windows 10 and Windows 10 innovation.", 1], ["It has multiple pictures, multiple screens, words and phrases intermixed in a different way.", 0], ["So those are the ones where we're collecting and remitting.", 1], ["We have 6 million advertisers on Facebook, which means we have a lot of opportunity on Instagram, where we only have 2 million advertisers to grow their engagement with us and their spend.", 0], ["So that's something that we're very excited about building.", 1], ["The thing that Heather we are focused on is how do we make sure that not only do we -- the incremental value that we have today on Windows 8 gets adopted; there are in fact lots of use cases especially around field devices, mobile workforce where we are in fact seeing great adoption of Windows 8.", 0], ["It can be macro-impacted.", 0], ["In MPC, I generally expect he will continue to see improvement through the year just based on the mix of products that we will have over the course of the year, that's not new.", 1], ["That being said, our commercial under balance is seeing good growth I'm proud of our performance this quarter.", 1], ["We think that the best experience for users include apps, and so we want to do everything that we can do to continue building that.", 1], ["Annual rate increases from our transportation partners is a really regular occurrence and we negotiate hard and we'll always work hard internally to get even more efficient on our own shipping method.", 0], ["So there was some carryover from that.", 1], ["We are making important investments in data centers because we want to support our services business.", 0], ["So we show the sponsored products, we're trying to show people things they had maybe wouldn't have seen otherwise in their normal search results.", 0], ["So, ad load is definitely up significantly from where we were a couple of years ago.", 0], ["Ted Cruz and others have done the same and they've gotten large numbers of video views.", 0], ["And if you think about our launch of E5, which is a premium SKU in Office 365, it continues to give us the opportunity to both get more efficient in the infrastructure and to add higher margin products especially at the fast end.", 1], ["So very happy.", 1], ["And what we're doing is following the organic activity that's happening on the Messenger platform.", 0], ["It was 24%.", 0], ["And then, lastly, I would say, advertising continues to be a strong contributor to profitability and had strong results this quarter.", 1], ["We've now expanded to nine cities, three more in the quarter including our first International city in London.", 0], ["And so we were in a situation where the more we innovated with unique features like Touch ID or advanced displays or cameras, just to name a few, the more money Qualcomm would collect for no reason and the more expensive it would be therefore for us to innovate.", 0], ["Orders are coming in from 99% of the pin codes in the country.", 0], ["I am very bullish on the country and the people and our ability to do well there.", 1], ["So I think you do see some interplay there on the impression growth side due to our focus on video.", 1], ["Specifically with regards to Oculus and how that could impact the plan for next year, we're, as Mark said, very bullish about the long-term opportunity for VR and excited about the launch for the Rift next year.", 1], ["So, we have seen growth in FBA, it increases our Prime fast track eligible selection which we like and customers like.", 0], ["I think what's important is our ability to switch it to the services and add more over time that really I focus on.", 1], ["So that\u2019s \u2013 we are well into it so that is not going to be waiting for some future date to release anything that\u2019s new, but we\u2019re well on our way with all of these tools and they\u2019re available today and we\u2019ll of course be iterating continuously.", 1], ["You'll see it's 42%, and in the past, I'd say most of that is driven by operations hiring.", 0], ["It's still very much in the ramping mode, and we're not coming close to satisfying the demand.", 0], ["Eighty percent of those are active on mobile.", 0], ["Yes and I would point to the conference we just finished and some of the demos, and I think the customer demos, in particular, I would say, that will sort of probably give you the best feel for how people look at this in terms of the deployment characteristics.", 1], ["And SMS at its peak we think was around 20 billion messages a day.", 0], ["Fire TV Stick, you may have read in our press release that it has greater than 100,000 customer reviews, the most reviewed product ever, 62,000 or over 62,000 of those reviews are five-star reviews.", 0], ["In other words, I first start by saying let's make sure our best AI capability, whether it's speech, whether it's ultimately even image recognition and dialogue management,", 1], ["I think there is so much more we can do to make ads more relevant on Facebook and so much more we can do to measure results, and I think our future growth will depend on executing on that very well.", 1], ["We had a very successful product ramp.", 0], ["But the way you should think about it is, we are making some great investments for the long-term and that\u2019s really what's reflected in the operating results that you are seeing in terms of \u2013 so it is certainly impacting the operating margins both for North American and International.", 1], ["We don't break out by product,", 0], ["And the excitement around the iPhone 6, iPhone 6 Plus were absolutely phenomenal.", 0], ["And so obviously, the combination of people spending more over time and adding more people that are now actually spending on the stores contributes to this 40% growth that Tim mentioned for the App Store on a year-over-year basis.", 1], ["It's very important to us, and I attribute a good piece of the ability to keep that at a modest growth rate year-over-year to our capital efficiency, and better purchasing across all capital and capital leases quite frankly.", 1], ["Now we have a good start with what is at the high end of the enterprise value, which is E5, some of the value we have.", 0], ["In terms of reporting results, one of the things that we are doing, and it's new and it's in addition to the information that we provide to investors", 1], ["That's kind of our policy, and India is that kind of surprise.", 0], ["The specific sort of high level of deceleration going into Q4, we're signing the specific optimizations that we're lapping in Q4, which were more significant.", 0], ["And what we bring to this is a common ad infrastructure.", 0], ["We wanted to take -- we will see where people's tastes and preferences will take them.", 1], ["And so what that generally will do, will be a headwind to continued gross amount of the improvement even though you'll see individual improvement across all the GM services, and you'll continue to see Azure increase as a percentage of the total revenue.", 1], ["In other cases, like fiscal '19, it was the other way around.", 0], ["you're going to see that show up in a variety of different line items that we don't have it specifically broken out.", 1], ["It's really too early to understand the impact of the ads on consumers", 1], ["And so the growth is actually quite good underneath that and that\u2019s obviously a problem with everyone struggling with it.", 1], ["And so it will be a bit of a drag on Q3, which is taken into account in the guide.", 0], ["Now, I have a distinction between a price question that you sort of asked versus seeing the value of a premium SKU.", 0], ["And so we offer all of those and I don't see us deviating from that approach.", 1], ["Indonesia had a SIM card registration requirement that caused a little bit of a headwind in APAC.", 0], ["We've got a lot of momentum on iPad and Mac because we refreshed the lineups of those products.", 1], ["There are no (46:55) 365 in security, and that's all in, for example, this new suite that we have just announced called E5, the secure lock box.", 0], ["So we think there's a lot of great innovation that has continued to occur for Indian consumers and sellers, and that will continue.", 1], ["AWS maintained a very strong growth rate and continued to deliver for customers.", 0], ["We're very thrilled with the customer response to Prime Video.", 1], ["So we're continuing to invest and we're seeing increased CapEx in 2019, albeit at a much slower growth rate than we had in 2018.", 1], ["On Instagram, we have 25 million Instagram business profiles, of which 2 million are advertisers.", 0], ["On a percentage growth basis, we are lapping some very strong growth in the first half of last year.", 1], ["So, this $1 billion investment will help to enable $10 billion in cumulative Indian exports by 2025.", 0], ["So it's that combination of things going from knowledge workers to first-line going and the ability to reach all sizes of businesses is what's going to continue to help us I think have overall seat growth or socket growth.", 1], ["So I think we have pivoted dollars to invest in that opportunity.", 1], ["So that is something that's growing pretty quickly and that we're really excited about as well.", 1], ["We've talked about time spent per DAU being up double-digit.", 0], ["So there's going to be a variety of contributions to that growth.", 1], ["But there are also elements that are not entirely under our control like foreign exchange.", 1], ["So very pleased with the up-tick.", 1], ["That is going well since we started rolling that out after F8, I think Dave may have mentioned this earlier, but in case you didn\u2019t just to emphasize this point I think part of the \u2013 our strong performance over the first half of this year, a meaningful part of our overperformance compared to what we had expected is because of strength and engagement in the Facebook app over that period.", 1], ["This is a reflection of that, that's a better reflection of the cost value of the program.", 1], ["So when we win, we win together with our vendor partners and also our seller partners.", 1], ["The need for computing is on the secular basis going to increase.", 1], ["So, the largest impact -- favorable impact from that at least from a subscription revenue standpoint would have happened in the subsequent four quarters, less in Q2, more in Q3 through Q2 of this year.", 1], ["I mentioned that we expect the factors that drove the performance in 2015 to continue to drive the performance in 2016.", 0], ["So we think it's a very attractive platform for people to reach people with video messages.", 0], ["Prime provides a unique combination of benefits, and we continue to invest in making this Prime program even more valuable for our members.", 1], ["The way to really think about that number just because of some of the seasonality in our business, Mark, is to think about the year-over-year growth rate of 70%.", 1], ["And you've seen us do this successfully with Office 365.", 0], ["So, each of these factors limits our ability to target and measure the effectiveness of ads on our platform, and that can negatively impact our advertising revenue growth.", 1], ["You see the operating margin for AWS is up to 31% this quarter.", 0], ["All of those things I think, it\u2019s not really about the pace, it is much about the progress and demand and meeting those things as closely as we can and I feel really good about the team's execution.", 0], ["So what we're actually seeing is that a lot of the best or at least from my perspective, TV shows that we see folks like Jimmy Fallon breaking up their show into clips that they can now share to be consumed over social media and on the Internet in three-minute to five-minute or seven-minute segments which are more of what people want when browsing through News Feed.", 0], ["Premium mix, we talked about how many premium services we're now selling.", 0], ["So on the Echo, we like what - how Echo has done.", 1], ["Some of the know-how that we have from Xbox is not just about the Xbox, but it's going to help developers across the board.", 0], ["In terms of expectations, I think we were pleased with what we saw this Q4 and, you know, if you look at what we gave for guidance, we were in the upper half of the range there for revenue.", 1], ["These are one of the fastest-growing ad formats in our family, especially with SMBs in markets like APAC, but really across the board.", 0], ["And we are now seeing even a single customer estate spanning all of these.", 0], ["So to me us going in fact to these new secular growth opportunities while being disruptive to the status quo of anyone who has high margins and very high price monolithic products today is basically our strategy going forward.", 1], ["We clearly are going to have premium first-party portfolio, and you've seen some of the numbers, some of the progress we have made in Surface.", 0], ["Keep in mind that this year had 13 weeks, last year had 14 weeks.", 0], ["So that's the combination of things that we think are going to play out effectively and of course we're in beta right now or previews right now and getting daily feedback across the length and breadth of Windows 10, but overall I am very optimistic of what it means, both as a platform as well as a set of end user features.", 1], ["It's been an incredible benefit running the Company.", 1], ["Part of it's about finding the right format, so it's getting the video units there for the people for whom video ads are going to make sense.", 0], ["So that was a second component of the revenue piece, but the larger component was the XP reversion and again that's not an ASP comment.", 1], ["There's clearly some amount of R&D that are on products that today are in the development phase that have not reached the market, and so that's a part of it.", 0], ["But those are the four reasons that drive the sequential decline.", 1], ["Again, the underlying reason for that capacity build is the strength in paid units and even more so in the units that we're fulfilling driven by our FBA program.", 0], ["It's also true that there's some people that are switching from comparable price points to the iPhone, and that's great too.", 0], ["We've been seeing some great efficiencies in our infrastructure, both internally as Amazon and also as part of AWS.", 0], ["because it takes one of the bigger growth areas we have in Azure, it's IoT but it's not just people connecting sensors and collecting data.", 0], ["But overall, the way we have thought about it is, we want to make sure the Office subscription, both to consumers as well as to enterprise subscribers, is valuable across all their devices", 1], ["And so things like Power BI and Cortana Analytics can help customers transform.", 0], ["I think that's evident in the Q2 results that you've just seen.", 0], ["So very, very little visibility at the time of guidance when we do recall.", 0], ["So in shopping in general, we do see a lot of interest in our apps and shopping.", 0], ["Customer accounts, active customer accounts are up 230% year-over-year and sellers \u2013 number of sellers is up 250% year-over-year.", 0], ["It's really about growing the cloud, growing the hybrid, and then whatever happens in the Transactional business happens.", 1], ["It's a huge margin.", 0], ["In terms of measurement, your question is important because it's not just getting them to use our platforms to connect to consumers.", 0], ["But in general, that business, unlike the quiet upgrades that we see, just because so much of the business is already on annuity, you don't see that type of incremental impact in an in-quarter release.", 0], ["But we do have a huge on-premise base.", 0], ["And a lot of the product innovations and investments I've been talking about on this call feed into quality.", 0], ["Yeah, we're very happy with the results we're seeing, and the backlog that we see, and the new contracts and new customers and the expansion of existing customer business that we see.", 1], ["You may see that -- may have seen we have launched Prime in United Arab Emirates this quarter.", 1], ["Our overall commerce efforts go across not just Instagram but Facebook and all of our properties, and our goal is to make it more convenient and accessible and secure for people and business to browse, discover, buy and sell.", 0], ["On the content side, I will say that one of the factors in the sequential guidance Q2 to Q3 being lower, is two things.", 1], ["And so I don't really think of it in that way.", 1], ["So really excited about the customer response with those devices and those tools so far and looking forward to doing even more.", 1], ["Because we serve a significant number of customers in the Apple Store who want the iPhone when it's new and when it comes out", 0], ["We added technical resources.", 0], ["And price reductions are part of that model.", 1], ["We are the largest community of sports fans in the world; we have 650 million sports fans on our platform.", 0], ["And -- but we're right now we're really focused on getting these four out there.", 1], ["So we're very focused on creative tools.", 1], ["It has connections to the video and kind of live content services that we're building out.", 0], ["And so we've worked on branded content, the ability to tag a sponsor and share posts and insights.", 1], ["They can be places where you can hang out and feel more present with people, where you can connect to different groups in different ways, interact with businesses and do payments and commerce.", 0], ["But the general drivers continues to be Prime and the Prime flywheel.", 1], ["Because even if you have all of the internet connectivity and the products and the legal framework that you need, if you don't feel safe saying what you want to express, then you're probably not going to share it.", 0], ["When I look at the upgrade rate, Steve, what I see is I feel good that it\u2019s a low number because that's low number means that there is 69% of the people that are out there prior to the iPhone 6 and 6 plus that haven't bother to upgrade this year.", 0], ["And you heard my Live Nation example earlier where we are able to connect Facebook ads and our platform directly to ticket sales.", 0], ["Recently, we're looking for well-run companies with highly-differentiated customer experience, and a real sense of customer obsession that matches ours.", 0], ["Our main goal here is to help customers discover new brands and products.", 1], ["because in some sense we've taken a very different approach with this Windows-as-a-service even when it comes to OEM relations and how they're able to co-create the products with us.", 0], ["In addition to all of that, we did under-call the number of iPads that would be in demand for the quarter, and that compounded a shortage issue that we had with one of our suppliers.", 0], ["And so that\u2019s our current plan.", 1], ["As we see it here, we grew from a $30 billion revenue run rate at the end of 2018 to a $40 billion revenue run rate at the end of 2019.", 0], ["Then when they're starting to get to be more units, just like every other major computing platform before that, what we expect is that a large portion of what people do in it will be communication and social behavior, and that's where Facebook really has the DNA and experience to, I think, build the best experiences.", 0], ["A year ago, Q3 was actually a little low.", 0], ["So it's a bit as simple as that in the consumer business in North America and international, we are seeing great acceptance of Prime and usage of Prime benefits.", 0], ["There will be mix differences.", 0], ["It\u2019s also probably worth mentioning that video is within a bunch of our products.", 1], ["So for example for the telecom industry being able to target existing consumers with new consumers with people who are -- their voice plan or data plan\u2019s about to expire.", 0], ["As you probably saw from the press release, we had a good Q4, where we did almost doubled, or double what we did last year.", 0], ["We did and we're encouraged by the customer reaction, even our transactional customers, to the security and management value prop as well as the hybrid nature of our SQL and Windows Server 2016 releases that have taken place this year.", 1], ["But this is all about the core free Two-Day offer morphing into - or evolving into a free One-Day offer.", 1], ["Two out of three smartphone users check their phone as soon as they wake up in the morning.", 0], ["And customers are just branching out to a lot of new products from us.", 0], ["I mean I think, that's right, last time we talked about the 60 million monthly active users for Office 365 and that continues to grow.", 1], ["because the Azure hybrid benefits that exist with Windows Server and SQL Server are really valuable to customers if they want to move to Azure on their own terms, is the single best value proposition to a customer to make a commitment there.", 0], ["And I think overall benefits not only the advertisers, but also the people who use Facebook.", 0], ["And so the way that I think about those products are they're products within the ecosystem itself.", 1], ["And you see in many cases, carriers and retailers having very vibrant programs around trading an iPhone in.", 0], ["It\u2019s today available for enterprises and in the fall you will have the midmarket version of it, which I think is a another very big opportunity because it really helps take what we have learnt in the large enterprises and scale it to where perhaps the need is even more acute and so we are excited about that and at Inspire the partner channel obviously is very excited about it as well.", 1], ["The last question on OpEx, I think over the past couple of years, we've continued to make decisions that said every dollar we spend, are we putting it in the right place for the long term, whether that's reallocating or adding new.", 0], ["We'll always look at opportunities outside.", 1], ["I was really impressed last quarter with our progress in Vietnam and Indonesia and India among others.", 0], ["So they launched a campaign with us in 15 countries globally.", 0], ["That's having an impact.", 0], ["Every customer sometimes just starts with infrastructure as a service and some storage.", 0], ["You can build your cart using Alexa and then check out using the Prime Now app.", 0], ["So here's what we think of.", 0], ["So continued \u2013 it's a mix of operating efficiencies as we grow, and then also continuing to invest on a lot of fronts.", 1], ["We had great reception for the new iPhones that we launched at the end of September.", 0], ["So I feel good about all that, but we have a long way to go.", 1], ["Katy, if you look at the products that we have created and are manufacturing, they're really manufactured everywhere.", 1], ["We believe that because people are sharing interests, because people are themselves their real identity on the Facebook platform, we have a significant advantage just in basic targeting itself.", 0], ["The sales and marketing investment, we\u2019re chasing a large opportunity here and that will be, you know as we say bumpy as we go along, but we are fully confident that that will be a very leveraged cost as we get to scale.", 1], ["Q1 is generally when we see the volume drop off from Q4 obviously, but a lot of the cost remain from the year-over-year build up in cost, particularly in the fulfillment network.", 0], ["And the sophistication of the data aid is growing exponentially, both in terms of the needs of the databases required, the processing that is required close to data.", 1], ["So just to kind of give a sense of the timeframe that we're thinking about this and how we expect this to develop, that's how we're thinking about that.", 1], ["We are furthest ahead in Messenger, but it's still very early days.", 1], ["And typically we're looking at what the demand would be for peak as we figure out what we need;", 0], ["We're excited about all the customers in trial and are already starting to use the value, whether it's security, increasingly analytics, and ultimately voice.", 1], ["So there is no change in model planned on that front.", 1], ["If you remember, we have added over 30% to our fulfillment square footage in 2017, coming off the similar increase in 2016.", 0], ["And then of course we have our iOS business.", 0], ["And we\u2019re really investing in new areas today where we see a long-term opportunity for revenue growth.", 0], ["We have on campus bookstores.", 0], ["In a factory, one thing that is secular is that they're putting lots and lots of more sensors.", 0], ["So I will note, we did a very strong unit growth rate last year in Q2, with 27%, so we're comping against that.", 1], ["At 9% growth and continuing to take share, I feel like our performance in this continues to be a positive outlier to the peer group.", 0], ["That's consistent with the outlook that we had going into the quarter.", 0], ["And so if you were to go out on just the U.S., since that tends to be more of the focus of this call, you look at the U.S. carriers, I think you would find you could buy an iPhone X for $33 a month.", 0], ["We have new ad formats for Instagram.", 0], ["This is typical of our seasonality.", 0], ["So I see that we\u2019re making great progress on the development of it.", 1], ["So, yeah, I would say essentially with that backdrop, we're still very, very encouraged by the demand and the reception from customers on the consumer side.", 1], ["90% of all the enterprises use Active directory and all of them rendezvous with Azure Active Directory irrespective of what applications they have in whichever cloud because that becomes a very key control plane for IT.", 0], ["Because of the performance in Xbox and in Surface, you're right, it is a hardware mix shift a bit.", 0], ["But since the launch of iPhone X, it has been the most popular iPhone every week, every week sales.", 0], ["The first one is the loss of leverage, because of the sequential decline in revenue.", 0], ["And I think when you take those two things, along with what Satya said, being able to balance disciplined focus and execution for us, I think we feel very good about the progress we\u2019ve made.", 1], ["Ultimately, we believe we can increase demand for Stories as we attract more advertisers and bring more effective direct response units to Stories.", 1], ["It does -- from a customer user point of view the trade-in looks like a subsidy, and so it is a way to offset the device cost itself.", 0], ["You'll note that in the first half of the year capital leases were flat year-over-year, although we're up 20% for the full trailing 12 months, in the last 6 months it's been pretty flat as the team has really worked well to plan our data centers run our data centers more efficiently, even to meet again increasing usage at our customers; usage rates are exceeding our growth rate.", 0], ["There is no doubt that we had a unbelievable year last year and the Q2 was particularly really, really strong", 1], ["because marketing spend grows as you can grow sales.", 0], ["So that was another influence in Q2.", 1], ["And you've got customers who really want to move to a modern infrastructure.", 0], ["And as you correctly point out, our growth rate is accelerating.", 1], ["One thing that I would tell you is that we feel very good about the performance of the business right now.", 1], ["And to your question on the per user services, specifically Enterprise Mobility, Keith, it was a bit better than I had anticipated in Q4.", 1], ["because it's viewed as a category that drives growth.", 0], ["Then we have a very common platform both for first party workloads as well as our third party business.", 0], ["So hopefully that's helpful but you are right, it is ARPU driven the performance outside of the 40% growth.", 1], ["So customer adoption in AWS remained strong.", 0], ["And then I would say the additional expense that leads to the acceleration is driven by three factors, not just one factor.", 1], ["We\u2019ll hit 20 soon and we\u2019re doubling that by mid-2016 as Angela has said earlier and Luca said in his prepared comments as well.", 0], ["So we're seeing across the board good improvements to News Feed.", 1], ["We clearly have some value to add there because of the uniqueness of Office and Skype and our services.", 1], ["And it applies to phones, it applies to Surface hardware, it applies to Hololens, and that's how I view it.", 0], ["You're not our product.", 0], ["I even describe it architecturally as the edge of our cloud.", 0], ["These are generational opportunities that what's at play when it comes to the Intelligent Cloud or what's happening in augmented reality.", 1], ["Also, the stock market participation among Chinese household is fairly narrow.", 0], ["So, it's not something -- it's something we've certainly seen in the past with timing of price increases, but it's built into the Q3 guidance that I've given.", 1], ["Yeah, it's pretty early in the days with advertising, but we're very pleased with the team we have and the results.", 1], ["And that just speaks to, I think, what's happening in the economy, which is every company is becoming a digital company, and essentially what used to be COGS and operating expense is all going digital.", 1], ["So if somebody's willing to pay more for a video, it's going to get served before another type of format ad.", 0], ["SQL is an AI product because we have the one database that actually allows you to write Python and R in situ, store procedures right in your database.", 0], ["So in the Facebook app overall after helping people connect with friends and family, helping people connected with communities is the next most important social problem that we believe we can help address and that\u2019s just going to be an area of increasing value in the product.", 1], ["And we're working hard to help advertisers develop the video creative that really works for mobile", 1], ["And that will apply across basically every product that we build at the company.", 1], ["It should also impact our need and our timing of capital.", 1], ["So we're currently working on making it so that that is the highest ROI thing.", 1], ["And that's showing up in the marketplace.", 1], ["And that's because first of all the move to the cloud combines a whole bunch of different categories as well as takes something that you mentioned, which is Linux.", 0], ["I think that's going to be the best experience for customers and also for advertisers.", 1], ["But we're also seeing quite good growth in some of the Consumer businesses, which also are built on our cloud infrastructure, Search, some of our gaming assets, our Xbox Live business going forward.", 0], ["It\u2019s a senior leadership team concept and the leadership environment that I think we're making collective decisions faster.", 1], ["We continue to launch other Prime benefits, Amazon Pantry in Japan and Germany this quarter.", 0], ["The XS and XS Max got off to a really great start and we've only been selling for a few weeks.", 1], ["We are pretty careful and thoughtful about where we increase prices and when and by how much during mid-cycle", 1], ["It\u2019s important to note that it\u2019s not just large brand advertisers that are doing video but all of our market segments.", 1], ["The second piece is of course around empowering your employees.", 0], ["I think there are some promising signs.", 1], ["On that second point, I'd say we're seeing a lot of increased adoption and machine learning services especially Amazon Sage Maker.", 1], ["And SMB looks very similar in some ways.", 0], ["And so our focus with Atlas is helping people really understand the results they get with ads.", 1], ["But we're pleased that the test is active.", 1], ["So it's early, but you're right, we did see some incremental improvement over what we expected.", 1], ["And I think they know that people are doing the research for autos and the purchases they make, which is a very long sales cycle on their mobile phone, and they want us to be part of that.", 0], ["And so I see Tencent as one of our biggest and best developers.", 1], ["So they definitely are margin accretive for us, but most importantly, they add a tremendous amount of value to the customers.", 1], ["But I think in general, because our installed base was up strong double digit once again, there's a lot of factors that are very positive for us.", 1], ["I mentioned two issues that affect us, the one-timer from a year ago that you obviously need to exclude from the compare and the FX that is the reality of our business right now.", 0], ["And one of the ways I talk to people about it is just ask what percentage of the ads do you see in your feed are as good as the very best posts you see from friends.", 0], ["Transitions take time.", 0], ["It's not necessarily common on AmazonFresh.", 1], ["Secondly, the products have been extremely well received there.", 1], ["Bill, we continue to see a higher rate of switchers than we have seen in previous cycles,", 0], ["This is happening in IT.", 0], ["Yes, I mean, one of the things that I talked about in my remarks this time was this power platform.", 0], ["To share one example, a local e-commerce jewelry brand called Lokai started donating 10% of their net profits to charitable partners.", 0], ["But because the smartphones that are working there are low end, primarily because of the network and the economics, the market potential has not been as great there.", 0], ["So, we take the responsibility for that very seriously and are always balancing helpfulness of the advertising and try not to make it disruptive.", 1], ["I mean, there's always a richer way that people want to share and consume thoughts and ideas and I think that immersive 3D content is the obvious next thing after video.", 0], ["Third-party units are now up to 48% of paid units and that's up 400 basis points year-over-year, so that continues to be a factor in gross margin.", 0], ["So we saw a little bit of a rebound there.", 1], ["And so we are - we feel great about doing that.", 1], ["And of course we still have a lot of merchants left in the U.S.", 0], ["For the time frame for this, I think that this is going to be a central focus for the company for the next five years or longer.", 1], ["The other aspect of Office 365 which is important for us is the international element because we really never had very high penetration of our higher-end service SKUs in the international markets.", 0], ["Even on the operations side, we are realizing that even if you keep your financials the same, there is need, and with increasing digitization, there is more operational modules that you need.", 0], ["But at this point, we're in a relatively small list of cities, but it's expanding pretty fast.", 0], ["So it maps where we\u2019ve got good adoption of Instagram globally.", 0], ["They can have a better dialogue with the person and a persistent relationship.", 0], ["So we're not only bringing people who have traditionally worked with us, helping them replat to a completely new model but we're also bringing a lot of new ISVs into the fold as well and that's pretty exciting to see.", 1], ["The layer about that for me is the data state, one of the exciting things is the growth in Azure DB, the growth in Cosmos DB, data warehouse product, the Datalake, so that is a place where we are seeing significant attach.", 0], ["Any growth acceleration or deceleration that you see can be very much tied to the total sales of the customer - that we have the customers in any country.", 1], ["So it's very important to us that we have the right business profile, both for Amazon and for the sellers.", 1], ["but it's broad-based.", 1], ["And the other thing I would point out on the trajectory is that, we're just getting started in international and most of that work is ahead of us although the speed that tick up a bit in Q1 -- excuse me Q2 but -- and will do even more so in Q3 in future quarters.", 1], ["But specific to core Facebook, I think those are some of the drivers that I'd call out.", 1], ["Another area where I'm really excited about this is our ability to keep the community safe, right?", 1], ["This quarter and a little bit last I actually think some of the ARPU increase has been masked by some of the trends in seat growth.", 1], ["But one of the things that the cloud, to your point, makes fundamentally possible is the opportunity for us to quickly iterate the opportunity's billed value and deploy it more quickly to customers", 1], ["And so I think there's some things like that are going on.", 1], ["So we're very happy with the linkage between our digital offerings in the Prime customer base.", 1], ["So we experiment with all these things in terms of some of them make sense to naturally have inside the Facebook app because you're using the same set of friends and network and connections.", 1], ["But I think we\u2019re just on the front end.", 1], ["Once we start to get more of a critical mass, I think you can start to get social applications, which is what we as a company are more interested in over the long term and think have a huge amount of potential in addition to the video and gaming stuff, which I just think is going to be awesome in the next few years as well.", 1], ["And in terms of other health-related things that we have going, we will be continuing to build out our health records connection into the health app, really democratizes the information about people's health, and so they can easily go from doctor to doctor.", 1], ["Just to add one thing that I\u2019d say is sort of -- to Mark\u2019s question, which is in particular on Azure, we have some commodity workloads but we also have many differentiated higher margin workloads especially in the Enterprise Mobility Suite is what I\u2019d call out is a good example of an infrastructure workload completely in the cloud that has got a very different margin structure.", 0], ["And so we think what we offer is the power of the broad reach of TV, but an ability to target much more efficiently.", 1], ["So, yeah, it's still early days and some of those experiments that we're doing, but we're seeing good traction on those things and we like that.", 1], ["So I can't forecast it for you into next year quite yet, but we certainly had productivity add additional cost to Q3 and even into Q4 of this year as we build the additional capacity.", 0], ["In some sense, if you compare it to the TAM of STB versus what we now describe as intelligent cloud, we're operating in a much bigger market.", 0], ["We have an opportunity to turn those businesses into advertisers and marketers, and that's what we've done successfully and we're going to continue to focus on that.", 0], ["That said, we are pleased by what's happened on Facebook for the elections cycle, not just on the paid side but actually on the organic side as well.", 1], ["If we do this right, we think we'll both help advertisers and help Amazon consumers at the same time.", 1], ["Our transactional revenue will have a headwind from XP.", 1], ["And to give you a little additional insight, through the end of the quarter, in fact the Apple Watch sell-through was higher than the comparable launch periods of the original iPhone or the original iPad.", 0], ["In general, I would say our head count growth has skewed towards the R&D side", 1], ["There's definitely dev/test happening.", 0], ["We've done some things like the Prime Original Series All or Nothing; the third season's coming up soon, focused on the Dallas Cowboys.", 0], ["On the auto and insurance verticals, they're both still small which makes them good opportunities to grow.", 1], ["It's still less than 20%.", 0], ["So we are very happy with the - not only the absolute membership levels of the Prime program, but also the engagement.", 1], ["And we now have the ability to be much more dynamic.", 0], ["Prime memberships are included in that line.", 0], ["Those two items impacted the Q4 growth rate negatively by about 300 basis points.", 1], ["And so as you think about 2017, with the continued acceleration of our cloud mix and actually continued momentum in annuity, I would expect to see those same pressures continue to exist", 1], ["So to share one example, Motorola working with Ogilvy and Moto Mento (28:55) launched the Moto Z phone, and they did awareness boosting before they launched, targeting Android users and Verizon subscribers.", 0], ["It\u2019s really followed technological change, if you think back even four years, you can\u2019t really take a video, a lot of videos buffered on your phone.", 0], ["So it's those higher level scenarios that we are seeing in addition to the core infrastructure that supports hybrid that I think is accelerating and that's something that obviously we didn't make the decision last quarter to do that.", 1], ["So again, that's a big part of our model.", 1], ["And that's great, it converts better for the businesses.", 1], ["A perfect example would be an Apple Care agreement that you purchase at the time of the sale of the device.", 0], ["If you ask even our largest clients, our largest clients, if they drew a pie chart of where their consumer spend their time and money and whether they spend their time, we\u2019re still under-indexed.", 0], ["So you've seen us work on dynamic ads, carousel ads, estimated store visits.", 0], ["You can see us continue to invest in things like new application services, higher up the stack, additional technologies that will make integrating with AWS seamless for those companies that have a hybrid IT environment and then continuing to add functionality for data analytics, mobile, Internet of things, machine learning offerings, things like that, that will add greater and greater value for AWS customers.", 0], ["But there is also F1, which is increasing the overall penetration and not to mention the small business segment, and of course all the markets that we participate in with Office 365 where we don't have much of a server business at all.", 1], ["And are they earning the right return?", 0], ["And we guided to 38.5% to 39.5%, which is slightly down versus our performance in Q2.", 1], ["The same goes for things around election interference and more proactively looking for inauthentic behavior.", 0], ["We already have 5 million advertisers on Facebook, 1 million advertisers on Instagram.", 0], ["AI technology was not developed at the time.", 0], ["And so you're just starting to see some of the impact from E5.", 1], ["Some of the fixed costs, frankly, even in COGS, tend to come down as a percentage over time.", 0], ["As you'll remember, we added 26 warehouses last \u2013 fulfillment centers last year, 23 in the second half of the year.", 0], ["So we will try different delivery methods or pick-up points or ways of getting product to customers, but nothing specific to point out on the grocery side right now.", 1], ["Again, it was a very strong operational quarter in Q4, and we've expanded the number of items that shipped free.", 0], ["We're seeing it with Instagram Stories and with Messenger and the initial test that we have with Messenger Day, where that is another interesting format for how you can put videos together.", 0], ["And our goal is to get that to be as high as possible.", 1], ["Then, the way that growth was driven in the prior year.", 0], ["Globally they saved over double what they had saved in Prime Day 2015.", 0], ["The other item was Diwali timing, the Indian holiday which has a very large swing factor on international revenues is, it moved more into the third quarter this year versus -- in 2019 versus 2018.", 0], ["And what -- the experience that we've had in a few of these emerging markets has been positive in that respect and so that's what we think matters the most really.", 1], ["We continue to invest in marketing and advertising.", 0], ["The Man in the High Castle was actually our most-watched pilot, so we're excited about that one as well.", 0], ["because that really makes a really big difference.", 0], ["So what that means in practice is that what we are seeing with our customers that consume our services is that the people that are actually taking advantage of our services over time tend spend more and more on our services.", 0], ["Advertising is the biggest piece of that.", 0], ["Our goal and I think the real opportunity that remains with Office 365 and Microsoft 365 going forward, is our ability to continue to grow the installed base, and to also continue to grow our ARPU.", 1], ["We talked about the growth in Active Directory.", 0], ["There is machine learning in AI.", 0], ["We\u2019re working on interoperability, that people will be able to choose to use between the services.", 0], ["This will bring us up to 21 net FCs for the year by the end of Q3 and that compares with 10 fulfillment centers for the first three quarters of last year on a net basis.", 0], ["They were an early tester for IG Shopping.", 0], ["I think we're going to need many more than 33,000.", 0], ["To the question on the demand signals we're seeing in the U.S. in particular - I think, it is quite early, but as we said the U.S. has been a good market for us and a strong market for us for a good period of time, and it was again in Q2, as we noted.", 1], ["Well, as I said, on revenue we came in at $87.4 billion, which exceeded the high end of our range of $86.5 billion.", 0], ["So there's a lot of moving parts within our headcount number, but there's a very strong investment going on in AWS devices and videos in particular.", 1], ["And of course, that means we have a trusted relationship, which is a competitive advantage in a world where some of our competitors have more complex business models, where in some cases they give them platforms, in other cases where they compete with them or tax them.", 0], ["And that's where I think we have an architectural advantage again with Dynamics 365.", 1], ["This is certainly something that I'm really excited about long term.", 1], ["So this is important and it was an important moment for the company to hear the feedback and to show what we're doing.", 1], ["And I think your interpretation that our focus on being a growth company, even at our scale, is certainly the right interpretation.", 0], ["We are continuing to invest meaningfully in digitizing those say MSMBs micro-small and medium-sized businesses.", 1], ["I grew up in our server business in the past.", 0], ["In retail, it was quite successful.", 1], ["But if there's one message here that I think is actually important to say, it's that we're trying to communicate that the pace of growing the Messenger business, it's a longer-term thing.", 0], ["Secondly, we're going to be focusing on growing engaging new experiences like Stories and promoting those.", 0], ["You also see deep discounts on selected popular products.", 0], ["And of course we're going to further expand that with new SKUs and new categories that are going to become part of Office 365.", 0], ["In terms of how it evolves, I think we're in the first inning on it.", 1], ["And we've taken down a lot of effort by different nation states to harm or interfere in elections that way.", 1], ["But I view India as where China was maybe seven to ten years ago from that point of view, and I think there's a really great opportunity there.", 1], ["So, we are experimenting with a lot of formats.", 1], ["Those were the exact same drivers in the gross margin change that we guided to in Q4, and I would expect stability as we've seen it in our More Personal Computing segment.", 1], ["We had great consumer business strength.", 0], ["There's a lot of competition for customers in the U.S. which I think is the market that you're talking about.", 0], ["It's a fantastic product.", 0], ["For most people, even when they start spending with us, we're a small portion of their budget.", 1], ["And so we're going to bring obviously what we're doing with Azure, Azure networking, all to bear in ensuring that Xbox and xCloud is one of the best workloads for it.", 0], ["So it was 56% on a reported basis but 51% on a constant currency basis, still a healthy growth rate.", 0], ["And we are working hard to work on the data in a privacy protected way to be able to do that.", 1], ["Obviously, a big part of our investment strategy is investing in this next generation of apps and the focus there is on growing the communities around Messenger, WhatsApp and, of course, Instagram.", 0], ["We grew 90%-plus in India.", 0], ["And so there is still a very, very large new to Apple Watch in this regard.", 1], ["We see many customers who would use even our PaaS services and even AWS.", 0], ["And it serves it with a different kind of game, which we think will be great for developers and great for users.", 1], ["I mean, a lot of people still \u2013 we're just very early in rolling out and promoting it.", 0], ["When you go to load a video and it loads quickly, we made it auto-play to load even quicker.", 1], ["We've been in discussions with them, and the discussions are going quite well.", 1], ["In terms of the North American numbers, we're seeing slower growth in our more mature markets.", 0], ["I'm particularly happy about the Volkswagen alliance that we've joined up with them to power their Volkswagen Industrial Cloud.", 0], ["We see increased engagement because of that.", 0], ["So, therefore, I think that the mix will be different by quarter-by-quarter, but increasingly our strategy is in many times to get our customers to get going with what is core storage or core compute, but then they scale into these higher levels of services.", 1], ["And then we've got the FX situation, which I mentioned before, which is worth another 60 bps, 70 bps.", 0], ["There is Prime Now and we're now in more than 25 metropolitan areas for Prime Now.", 0], ["And so while year over year you may not see as much, but you will see more sequential volatility as, frankly, you've seen over the past six quarters, even when we've seen improvements in each of the underlying and underlying services, which tends to be how I focus on it a bit more.", 0], ["From our point of view, this is a service we want to provide our customers.", 1], ["We've added 100 million in the last 12 months alone.", 0], ["It is the extensibility model for every SaaS application out there, including a common data model.", 0], ["There are 50 million businesses that have pages on Facebook.", 0], ["I guess I would point out in the quarter, Liberty Mutual, Snap and Live Nation all starting relationships with us or expanding their current relationship.", 0], ["We're happy with that.", 1], ["What it does is really provide confidence to our committed customers buying on-prem servers that their transition to a hybrid, to cloud over a period of their agreement, is really about their choices, their timelines and their confidence.", 0], ["Overall, Karl, the focus for us is in what I describe as this hyperscale-plus-hybrid approach when you think about the current approach, which is pretty unique to us.", 1], ["Just on the first piece, in terms of just Prime membership and Prime behavior, we continue to see that we're seeing sign-ups from memberships at a strong clip.", 0], ["But the Q4 comparable for on-prem is very big.", 1], ["So I feel very, very good about ultimately having innovation that drives both the consumption of more higher level services and then also making sure that we are available in all parts of the world, where the demand is going to spread to, because we are in the very, very early innings of essentially this new cloud growth, and there's only going to be increasing demand as there's more digitization of every city, every factory, every hospital and so on.", 1], ["And once you have the network, you have plenty of different opportunities.", 1], ["No, I would say, A, we're not expecting diminished returns in any of our businesses or growth rates nor are we restraining the business or constraining the business in any way with our capital.", 1], ["We clearly see first things happening in U.S. and quickly followed by geographies like Germany and the UK.", 0], ["So News Feed is an ongoing work that we're always improving.", 1], ["And we're happy to do so.", 1], ["On WhatsApp, I don't think there's a particular magical number with 1 billion users.", 0], ["So we've made a lot of shift this year, which I've talked a lot about on a bunch of these calls, to encourage more meaningful social interactions instead.", 1], ["We're broad-based against all of our segments of marketers, so brand and direct response, SMBs and developers.", 0], ["So I think the out-of-stock issue is that -- may be getting press or tied more to the increased demand that we're seeing and also selective weather-related restocking issues.", 1], ["But the consumer behavior there is you tend to hold on for a very long period of time before an upgrade.", 0], ["One of those is through Apple TV and you're well familiar with that product.", 0], ["Hadoop is another good example.", 0], ["I feel that we have a formula there that I would like to apply more broadly in terms of growing, just delivering innovation, growing our own economic return for it, stimulating demand, creating categories.", 0], ["And when you look at our track record of what we\u2019ve done over the last several years, you\u2019ve seen that effectively we were returning to our investors essentially about 100% of our free cash flow.", 0], ["So all those three dimensions, there will be variability quarter to quarter in terms of what's happening.", 1], ["In terms of the iPhone itself, even though we sell quite a few phones across the course of a year, our market share globally is low compared to the \u2013 our sales are low compared to the full market of smartphones.", 0], ["Last year, we were at 14% growth.", 0], ["We've created 2 million jobs in the U.S., and we're incredibly proud of that.", 1], ["Our 6 million advertisers come from those pages,", 0], ["And we built Watch.", 0], ["If you look at recent quarters, it was about half of that growth rate on a year-over-year basis.", 0], ["So I think that that's going to be a really big deal for improving the experience of reading news on Facebook and it's something that we've been working on for a while, and I'm very excited about it.", 1], ["And if the ads can be well-targeted, we think we'll be able to see engagement, and we already see that.", 1], ["The graph is based on phone numbers.", 0], ["But it starts with having a good product truth which Windows 10 does deliver on.", 0], ["We\u2019re seeing more of it in Q2 and we'll see it through the remainder of the year.", 0], ["And on all the content and safety and security issues, there's more to do here but I'm proud of the work that we've done to get in front of a lot more of these issues.", 1], ["And so hopefully, that helps give a little context to the number as well as our overall ability to continue to grow the sort of hybrid cloud opportunity high teens.", 0], ["But most importantly, I would go back to the fact that we're getting better on the ad product side of being able to optimize our inventory for the advertisers in a way that will we think drive good pricing in the system for us and good outcomes for the advertisers.", 0], ["In terms of CNB, that's the reference I made in my comments to the lower expiry base.", 0], ["More of that comes in the second half of the year structurally as we complete some of the restructuring efforts and those costs come out of our operating expense run rate.", 0], ["This year, the difference was further magnified, because we shipped iPhone X in November rather than the September quarter.", 0], ["The first exactly with hybrid demand.", 0], ["So, we're certainly hiring to support that.", 1], ["We are funding some feed content to get the ecosystem going, but the focus is on rev share.", 0], ["We've learned from customers.", 0], ["Yes, head count was up 38% year-over-year.", 1], ["I mean, especially on the database side is one place where I would say from a year-over-year worth of progress, whether it's just Azure database by itself.", 0], ["So I hope that gives you a bit of a sense that when you take into account all these factors, we believe that this is a good guidance for the December quarter.", 1], ["It will change quarter-to-quarter.", 1], ["So in Q2, we rolled out Dynamic Ads that were specifically focused on the travel vertical, and I'll share one example.", 0], ["So in the first half of the year, we have a tougher comp, if you will, versus some strong growth in the first-half of last year.", 1], ["That said, the relational database itself remains still a very strong component, but not the only component anymore, in both on-premise and off-premise.", 0], ["We're doing this for a number of reasons.", 1], ["So we have usage growth in Azure which is very, very healthy.", 1], ["And China doesn't possess the level of fiber that some other countries do, and so in order to get the great video performance, et cetera, raising that penetration is really great.", 0], ["I think there's a tendency in this industry to call everything new the next computer platform.", 0], ["Then, as we moved into more photos with Instagram, more videos, a video ad on Facebook or Instagram is a very different thing if they perform well.", 0], ["And so I tend to take that approach as opposed to solving for any one number.", 0], ["So what we're seeing so far is that a bunch of the content that has come onto Watch is good and is working and people watch it.", 0], ["From entertainment to gaming, I've seen what I would call more small business solutions.", 0], ["But to your point, the fact that there is pull already is a very, very good indicator of, and a good sign, and it's even better than what we saw with Windows 7.", 0], ["But I do think that to some degree the last few years and next year are probably going to be the biggest growth in the investment in the security efforts that we'll see.", 1], ["So yeah, we looking forward to a great holiday and that includes working with our shipping partners both in the U.S. and globally.", 1], ["So it's a bit different mechanism than you think about having in our standard EA, where it goes to the balance sheet and gets earned off.", 1], ["And we do report this publicly, going back to your question.", 0], ["And gross margin expanded 130 basis points.", 0], ["If you look at Prime Day, we're thrilled with the results of Prime Day.", 1], ["And then one linchpin that we have between, in fact, our SaaS services, as well as Azure is Azure active trajectory.", 0], ["The trend we saw there, as I said, we're 5% up in a constant currency basis.", 0], ["So a bit of it was mix, but I would say this retail, which has a lower gross margin more because of the revenue treatment was stronger in Q4.", 1], ["So if you think about that being the next major transactional type purchase that was driven a year ago as the first externality, the second was in Windows [DL] [ph] we also saw non-annuity purchases in Windows DL which again is in our commercial licensing segment.", 0], ["If you recall, we were heavily supply constrained throughout the whole of Q1 and so some of that demand moved into Q2.", 0], ["On the elections and political activity and political advertising, we're excited about the elections", 1], ["But we've been running AmazonFresh for seven years, or excuse me, since 2007 in Seattle and what you've seen as we've been testing the model, we've been expanding in North America and more so we've been expanding within the cities that we're in, adding zip codes, adding additional customers.", 0], ["And then also, we're just supporting the global growth of the platform.", 0], ["We think that what we know, that if you look at the Fortune 500 as an example, we\u2019re in essentially all of the Fortune 500 companies.", 0], ["I mean the way that we kind of see the products now is we\u2019ve helped people map out and wire up their networks over the last several years, and now in each of these apps we have opportunities to help people get more value from the networks that they\u2019ve created in some of that is going to be on the social side, especially around creating communities and groups and some of it is going to be more on the economic and opportunity side and there we\u2019re doing a whole lot of projects.", 0], ["Our revenues on Apple Music grew over 50% as I'd mentioned earlier during the quarter, and so some really, really strong results.", 0], ["Our Services business is very broad.", 1], ["The $9 billion that we increased our run rate by was second only to Q4 of last year as far as our history.", 0], ["And so I continue to believe, even though I\u2019ve seen people write that, that I think that theory is not correct, and do not see that.", 1], ["I would say it has helped us by 150 basis points in Q3, and will be a negative headwind of 300 basis points year-over-year in Q4.", 0], ["It's that messaging can be a more transactional medium than feed.", 0], ["We're seeing strong adoption across a number of fronts.", 1], ["They consume your whole attention while you're doing them.", 0], ["And then yes, I do think that there are less impressions when people are consuming video, so that also is a factor as more time is spent on videos.", 1], ["But if we're going to point to one thing in Q1 that's different -- Q2 excuse me, that's different it was obviously the start of the -- and the step up in one-day shipments.", 1], ["One is DAU and MAU are up sequentially and year-over-year on all regions, and with trends that are largely consistent with past quarters.", 0], ["And of course, as you mentioned, we're very excited about the fact that we're going to be launching new services soon.", 1], ["But right now, we're going to remain focused on user experience and the experimentation we're doing.", 1], ["It's by consumption of cloud capacity in many cases.", 0], ["But beyond that, we will look at inorganic means.", 0], ["I think looking more pressured on gross margin just because the amount of Azure in the mix at the rate is growing, we\u2019re still not at that point where a $1 of gross margin in the cloud is equivalent to a $1 on-prem.", 1], ["Although when you\u2019re transitioning any business and all the hard work that we\u2019re doing here to prepare ourselves going forward, I do expect to see some volatility in that number.", 1], ["We expected a step up in 2019.", 1], ["The biggest element and the part of the Services business that is growing very well, we mentioned 35%, is the App Store.", 0], ["She made a pledge when she was elected that she would explain every vote she takes, and she explains every vote she takes on Facebook.", 0], ["So it's a great benefit for sellers, and it only works if it's a great benefit for customers on the other side.", 1], ["Perhaps one of the most unique things about at least our portfolio and our innovation is that we think that it\u2019s the mobility of the individual not the one device.", 1], ["And so I'm not predicting the 90-day clips and so forth, but over long arc of time I really believe that iPad is a great space, a great product and with -- also coupled with the product innovation we\u2019ve got, I think there is a very, very bright future for it.", 1], ["We had double-digit growth on the App Store in every geography.", 0], ["We have a very good track record overtime to reduce those cost structures, but every time we introduce a new product that is a headwind at the beginning of the cycle for gross margin.", 1], ["It's getting smarter and more capable.", 0], ["For example, in FinServ, some very Tier 1 trading applications now using some of our capabilities in service fabric, which is really a PaaS service, which allows you to manage microservices with low latency and high scale, that's a place where we are seeing in fact activity, whether it's game development or trading applications.", 0], ["Just to share one example, American Express working with Digitas, rolled out carousel ads on Instagram that targeted travel-related interest groups for people who are 18 years and older.", 0], ["And so I sort of back up and look at this and I feel fantastic about what the team has done and delivered and I know I never go anywhere without the Watch and it's not because I'm the CEO of Apple.", 1], ["Whether it's investment in ourselves, and the returns you've seen in this quarter in revenue growth, whether it's the acquisitions like LinkedIn that are performing better than we expected.", 0], ["On the engagement of the Prime customers, excuse me PIV customers, we have seen buying habits that look like normal Prime customers or other Prime customers from the group that comes in through the digital pipelines, but we do also see a higher pickup in retention rates and free trial conversions.", 0], ["There are a lot of elements in the gross margin line that we have good control over and there are also elements that we don't control.", 1], ["That's pretty unique again.", 1], ["And then in addition, in Q4, and over the longer term, we do continue to expect to face ad targeting related headwinds and uncertainties.", 1], ["And on one side, we've got better commodity pricing, the environment is better than it was a year ago, but foreign exchange is a negative impact of 120 basis points on a year-over-year basis.", 0], ["We are launching some now and everything we launch new products, we make them better.", 0], ["In terms of payments, we really see payments as primarily a way to enforce the other activities we want to see on Facebook and Instagram.", 1], ["And as a step back, it builds stronger Prime connectivity with our Prime members, at least, the higher membership renewal rates and higher overall engagement.", 0], ["And so, Keith, the way that I think about it and I tried to outline it in my comments is that the significant revenue declines quarter over quarter through the year are a reflection of the focused approach we're going to take in phone", 1], ["In terms of video content, newsfeed is as interesting as the quality of the content in it.", 0], ["There's obviously huge opportunities there for us, and we have extremely low share in that market overall.", 1], ["Our other products category was also stronger, in fact, a bit stronger than even the overall company number.", 0], ["So we launched Prime in Australia; we're rolling devices out.", 0], ["The question on Services, when we look at our Services business, it's obviously growing very well across the board.", 1], ["If we can help people check out and pay for the products and even buy the products, it makes the consumer experience better.", 0], ["And keep in mind that that's down 5% on a comp a year ago that was up 81%.", 0], ["So, all of the content that is on Facebook is eligible to go in the tab.", 1], ["We're creating great opportunity for every developer to write these universal windows application that will run on the desktop as well as on our phone and tablets, as well as on Surface Hub and in fact Hollow Lands runs universal applications.`", 0], ["We do design our products to last as long as possible.", 1], ["When you think about mobile app install ads, those are an important but relatively small part of our revenue.", 1], ["Its offset by the growth in the Prime program itself and the expansion of Prime Benefits or the Prime program globally.", 0], ["So we did front-load a lot of the investment both in fulfillment centers and also infrastructure.", 0], ["And surely even though not everyone comes to Facebook, because they want high quality news , I believe that there are going to be, whether it's 10% or 20% at a floor who I think would really want something like this.", 0], ["Some of them tend to be accretive to the average gross margin for services, also because of the way we account for them.", 1], ["And AWS revenue is on a, just short of a $10 billion run rate at the end of Q4.", 0], ["so search is an area that we've been working on for a while to improve.", 0], ["As you know, we gave our run rate at the end of last quarter at $4.4 billion and the course we\u2019ve said in our numbers have us on that continued trajectory as we hedge for Q1", 0], ["And so that's what that means, and that number is the largest that we've ever recorded since we began measuring it three or so years ago.", 0], ["So the margin improvement on a lot over a period of time is something that we are absolutely going to see, but from quarter to quarter there will be more volatility, but I would ask our investor base to think more about the architecture as well as the financial outlays of what we're building.", 1], ["I think it'll create thousands of jobs over time.", 1], ["They're still, again, great partners, have been and will continue to be for the future, but we see opportunities where we need to add additional capacity and we're filling those voids.", 0], ["That's probably the best manifestation of the virtuous cycle that we see in any of the cloud adoption that we have, right.", 1], ["And so we're all about making sure the experience is great.", 1], ["From an iPhone point of view, as I think Luca covered, our channel inventory decreased from the beginning of the quarter by 200,000 units, and that left us outside of our target range on the low -- outside the low end of the range to be specific.", 0], ["I'm using it every day and love it and I can\u2019t live without it.", 0], ["And so I do think about that being an 18-month investment we've been making.", 1], ["And it turns out that the need for more computing, more storage and more infrastructure server products is much broader than just even the hyper scale public cloud because the one thing that is true is there are more devices in that unit backend.", 0], ["And that's going to be really important for continuing to grow this as well.", 1], ["We're also investing in digital content and additional Prime benefits, fresh location Prime Now.", 1], ["And the goal would be to have something where you can do discovery through the broader town square-like platforms in Instagram and Facebook.", 0], ["And some of what we found is that as we encourage people to use both Facebook and Instagram, engagement on both can increase.", 0], ["And particularly in developed markets, the PC growth was better than we thought.", 0], ["I don't think we have any new status to share on this, but I mean overall we rolled out the tab for -- almost the first year we were really tuning it just to make sure that it would be retentive and very valuable for people.", 1], ["And we're focused on launching new tools that help businesses use Messenger.", 1], ["We're also seeing very broad adoption, including small customers.", 0], ["One of them, for example, is the fact that we are making it easier for customers to pay on the App Store.", 0], ["On the video ad opportunity, we're seeing consumer video exploding on our platform, as Mark has talked about, and that really creates the opportunity for video ads in the feed.", 1], ["The strength of our Services business, you've seen we've grown 24% in September.", 0], ["Last quarter in China, it affected us 1 percentage point.", 0], ["On the content side, we've announced A-Team in the original TV series and we're customizing the content, so it's a really vast selection of local and global movies and TV shows that are available to the Indian public.", 0], ["Obviously, if they are less able to target effectively, they'll get a lower ROI on their advertising campaigns.", 0], ["The low prices, vast selection and convenience continue to resonate with customers.", 1], ["And Sheryl talked about value optimization and that sort of work that we're doing, and so I think we've got continued opportunities with e-commerce going forward.", 0], ["And if you looked at that in constant currency, we actually grew one.", 0], ["And we really want to speak to the needs of the customers more than any product strategy goal we have.", 1], ["But again in your question on enterprise penetration, you know I think the enterprise, we\u2019re making great progress there.", 1], ["And so all the things from a \u2013 all the forcing functions here from the outside all point to dramatic changes speeding up in the content industry, and so we're really happy to be working on some of them, but we're just not ready to talk about it in depth today.", 1], ["We have not seen clear evidence of cannibalization from iPhone 6S or iPhone 6S Plus.", 0], ["The comparable I'll give you is that I won't forecast 2017, but the 20% growth in square footage that we saw in 2015 was followed by 30% square footage increase in 2016.", 0], ["But at the end of the day, we make our decisions from a financial standpoint to try and optimize our revenue and our gross margin dollars, and that we think is the focus that is in the best interest of our investors.", 1], ["It only had about 30 million people using it at the time.", 0], ["Headcount growth was 48% in 2016, 38% if you exclude Whole Foods and Souq acquisitions in 2017.", 0], ["And we built insights to make it so that businesses knew how they were driving business when they used pages for free and could post them to News Feed.", 0], ["So we saw great efficiencies at the higher level of revenue, and we're able to handle it.", 1], ["We've been pretty consistent during the last five years.", 1], ["We\u2019re seeing more and more advertisers move to mobile; they realize that it\u2019s no longer question of whether they need to be on mobile, but it\u2019s really how they\u2019re going to be on mobile, and we think we\u2019ve got the best solution for that and we\u2019re investing to make it even better.", 0], ["And that means that for every ad we show, that ad can be better, better for people, show something they're more interested in.", 0], ["We think there is still a great opportunity to add unique selection to \u2013 for category expansion.", 1], ["So that's another dimension that you see play out as well.", 1], ["As you can complete more payments in WhatsApp and Messenger, you would expect it to be worth more for businesses to bid more there, which is why we're so far focused on making it so that the payments can be free or really as cheap as possible.", 0], ["And I think if there's an opportunity to use the work that we've done with WhatsApp there, rather than doing it in different ways in the different messaging experiences, to have that really just - to have encryption work in a consistent way across the different things that we're doing.", 1], ["And the one that I got much visibility in -- that happened in early April was the VAT reduction from 16% to 13%, so it's a very aggressive move.", 0], ["So I don't think we see a real doomsday scenario here.", 1], ["So, Mark, on the first question, I don't know that we really see a doomsday scenario here.", 1], ["So we're continuing to invest in that work, and we think it's the right thing for the Facebook community in the long run.", 0], ["They\u2019re part of business, and so we\u2019re dealing with them in many ways.", 1], ["So we continue to see good engagement and time spent growth across the Facebook family and on just Facebook, and video is a part of that story.", 1], ["And so as you know, it's the mix of the virtual and the physical world and so it should be a help for humanity, not an isolation kind of thing for humanity.", 0], ["So you're seeing some of those get spread across several different lines in the P&L, so it's not going to be a clean one spot where you're going to find it.", 1], ["One, the PC market was a little bit better than we thought.", 0], ["So a lot of the additional pickup in Q3 was tied to our ramp for the holidays.", 1], ["And so we're getting an incredible amount of feedback there.", 1], ["It's steadily been going up.", 0], ["And as I said in my opening remarks, I think we're going to be a lot better positioned here in Facebook in the next year.", 1], ["It\u2019s also a case of we have a lot of inventory on this.", 0], ["Yes, we had a very good September, Shannon, and the lead of that is sort of the reception of iPhone 11 and 11 Pro and 11 Pro Max, and so we feel really good about how we've gotten started there.", 1], ["On the Windows side just to finish off.", 0], ["So I think that depending on what.", 1], ["90% of those sellers use our logistics and warehouse services, as you mentioned, which has caused us to triple our fulfillment capacity.", 0], ["And one of the big themes that we're talking about here is becoming video first, right, and as people look for richer and richer ways to express themselves just like people in the past just shared a lot of text and photos on Facebook, we think that in the future more of that is going to be video.", 0], ["And so it's very broad-based in terms of type of service and geographic region.", 1], ["Because if you look at our model, if we can convince you to buy an iPhone or an iPad, we'll make a little bit of money.", 0], ["And also this channel inventory reduction that we've talked about, obviously the channel inventory reduction will come from higher-end models, and that is also affecting the sequential trend on ASPs.", 0], ["I mean to put it very concretely, take something like Azure Active Directory.", 1], ["So our focus is making sure we get the right partners on board and consumers have a great experience all the way through.", 1], ["And there are different apps that explore different regions of that space and do a good job with it, and offer ideas that I think the whole market needs to learn from.", 0], ["We took our time to get it right, and we've made it even better with the Series 2 offering.", 0], ["There's really two kind main \u2013 two big factors in that compression there.", 1], ["The Chinese developers are coming on in significant numbers.", 1], ["The majority of our capital expenditures is actually in server equipment, it's new capacity.", 1], ["Of course, there's always going to be some level of cannibalization.", 0], ["I've even said that headquarters or office hiring many times in the past was below the level of revenue growth.", 0], ["We've also lowered prices for customers 49 times since launch", 0], ["We've been working and continue to work very hard on capital productivity.", 1], ["I feel like we're off to a good start and the - most important of everything.", 1], ["And I think people broadly are starting to get that more, which is why things like encryption are so attractive to people and why features around ephemerality or keeping data less permanently are becoming increasingly important.", 1], ["So as our cloud continues to grow, obviously, we are getting where there is more capability in the cloud.", 0], ["We're also opening up more capabilities, which means more formats, like direct response, more ways to buy, like self-serve.", 0], ["It did not.", 0], ["We did begin shipping units in the quarter.", 0], ["With our largest clients, even our large ones, we're not close to 5% of their spend.", 0], ["Some of those are more public as we talk about in terms of our sales and marketing adjustments or Ad campaigns that we run by the commercial cloud.", 0], ["So that's really, that's really valuable.", 1], ["That's definitely something that I'm sure our customers pay attention to.", 1], ["That's partially why I'm excited about doing the VR work", 1], ["Going serverless is something that we in fact advocate.", 0], ["Brian touched on the success that our FDA sellers had with Prime Day, but we see FBA as a tailwind for third-party business in general.", 0], ["So to what I said in my transcript before, 1.5 million SMBs posting videos in one month alone.", 0], ["We also don't have all of our advertisers yet creating story ads.", 0], ["But also recently, one of the things that we've seen is that there are a lot of AR experiences on mobile.", 0], ["And on unit deceleration, I think the unit numbers more and more require some interpretation, because it doesn't include the -- some of our fastest growing areas, the things like, as Dave mentioned, subscription services, AWS, advertising, Whole Foods units are not in that number.", 0], ["There are really, when you think about it, three.", 1], ["So for a while, our strategy has been to just continue building as good tools as we can because no matter how many people we have on the team, we're never going to be able to look at everything.", 1], ["And we did see a bit more strength than I was anticipating in Q4.", 1], ["And the advantage we have with streaming is, we have a massive cloud advantage.", 1], ["The latest study I have seen from Mackenzie indicates if you look back five years China\u2019s middle class had about 50 million people in it.", 0], ["So we're very focused on this.", 1], ["That may not be business motivated.", 1], ["As I mentioned in my comments, our retail and online stores did well overall and in China.", 0], ["I don't really think about there being sort of a cap on that when you think about the mix percentage", 1], ["Another factor is digital content that moves to subscription.", 1], ["So it's an interesting example of how having payments in messaging can increase efficiency for businesses and how in this case that's contributing to our Internet.org and connectivity goals of helping more people access the internet who wouldn't have otherwise been able to.", 0], ["So we feel a responsibility to have policies for our community which limit hate speech and limit things which are going to create just an overwhelmingly uncomfortable environment for people that is going to silence other people's speech in order to make sure that over the long-term we are enabling the most people to be able to express as much as possible as they can.", 1], ["So, we are looking at a 400 basis point impact from foreign exchange for the March quarter.", 1], ["That's a multiyear and a generational transformation.", 0], ["And then on your second question, just around advertising opportunities and around video, you may have seen it not that long ago, IMDB or Internet Movie Database, one of our subsidiaries, launched FreeDive, which is an ad supported free streaming video channel that's available in the US and it enables customers to watch TV shows and movies without purchasing a subscription.", 0], ["That's why there are 45 million SMB pages on Facebook.", 0], ["On your first question about Prime penetration, without getting into any statistics on penetration and by country, I would say we do have other options for, if you'll notice, there's the monthly option, obviously provides more flexibility for people who want to try out Prime before committing to the annual plan.", 1], ["In other words, they put sensors that allow them to actually deliver a very differentiated business model to their customers.", 0], ["And so when you take into account those factors, those are the big elements that drive our guidance range right now.", 1], ["We have three physical stores; Seattle, San Diego, and Portland right now.", 0], ["And we really encourage them to measure their ROI and compare us to other platforms.", 1], ["On the Dynamics 365, we're at the very, very beginning phase of the transition of Dynamics from primarily being on-premise to now being a very modern modular SaaS service.", 1], ["It's no longer just simple vendor relationships, because as they are trying to build their own software capability, they need a trusted partner who's more interested in making sure that they build their own technology capability.", 0], ["That of course is not going to repeat this year.", 1], ["So if you think about our real competitive advantage and differentiation is, we have one programming model, one identity model, security, management.", 1], ["Now looking forward, the response to the iPhone 7 and 7 Plus has been very positive.", 1], ["But if you compare to iPhone 6, you would clearly arrive at the opposite conclusion.", 0], ["But I think one of the things to recognize here is that we're still early with Oculus.", 0], ["But I think the growth potential is phenomenal.", 1], ["There was \u2013 wound up that demand was much stronger to the iPhone 7 Plus than we had predicted.", 0], ["And so in my view, this is a part of the \u2013 they are a core part of the ecosystem.", 1], ["We continue to see improvement from E3 and E5 transitions, saw both again.", 1], ["When we think about bookings growth, I'm not sure -- for me -- break it down into two pieces, which is I think about bookings which were very good this quarter, has two fundamental motions.", 1], ["We've been investing here both in engineering to land the differentiation that Satya just talked about in sales resources and then continuing to invest in technical sales resources that can help our customers be successful in these deployments.", 0], ["So we're certainly looking at a variety of different types of content to look at.", 1], ["Keep in mind, there are some currencies around the world that where we cannot economically hedge and so those currencies are bit excluded from what we're talking about right now.", 0], ["Between those three areas, I think we have a lot of opportunity.", 1], ["If anything, I think our cycle times have significantly come down.", 0], ["So at a fundamental long-term secular basis, we have new growth, new workloads, and that's what we are focused on, and that's a much bigger addressable market than anything our Transactional Server business had in the past.", 1], ["We have the functionality and pace of innovation that others don't.", 1], ["It's an end on to its own, which is, we've always cared about developer and developer productivity and especially at a time like this when there are more developers outside of the tech industry as the world goes digital.", 0], ["The impact without hedges would be higher.", 1], ["In terms of server products and services, I tend to think of it as the all-up growth.", 1], ["Advertising revenue continues to grow very quickly and its year-over-year growth rate is actually faster than the other revenue line item that you see there.", 0], ["One of the things that had been interesting, while we were watching these different services grow, was just how quickly multiple different messaging and communication services were growing at the same time, and it seemed a little bit counter-intuitive at first because it seemed like there should have been more overlap than it actually, now in retrospect looking back, seems like there is.", 0], ["We talked about opening, announcing the region in India so there's expansion there as well.", 0], ["because at the scale at which we operate, the Intelligent Cloud and the intelligent edge infrastructure, which you all track as Azure, you got to remember it's the core platform that's powering everything from our gaming ambitions to what we are doing with Microsoft 365, to what we are doing with Dynamics 365 and of course, our third-party business in Azure.", 0], ["I think we\u2019ll see different paces of people doing things in different countries around the world, but a lot of what we hope that we can \u2013 that we can contribute to this discussion is as much as possible have shared frameworks for how the industry should operate around the world.", 1], ["But when it comes down between dividends and buyback, our view is that for a variety of reasons we see a lot of value in the stock.", 0], ["Heather, let me -- on gross margin, over a long-term period and intelligent cloud, given the expansive TAM and the growth opportunity we see, it will create gross margin pressure over long-term.", 1], ["You have our top verticals correct, and we see a lot of strong growth in those verticals.", 1], ["North America was up 200 basis points sequentially and International was up 800 basis points and half of that you remember we've spoken about the impact of the Japanese consumption tax that was instituted last \u2013 April 1 of 2014", 0], ["And so very happy with the trajectory we're on there and excited to be investing and have the opportunities we do at that point.", 1], ["So if you look at what the initial use cases are going to be around that, I think it's a lot of the stuff that you hear people talking about.", 0], ["And you know, of course we\u2019ve got a very, very strong balance sheet.", 1], ["We thought that helping people interact more was the unique thing that people come to our services for and that it would be good for the community and the business over the long term.", 0], ["So those are important investments from an ROI perspective, but they don't have, obviously, immediate translation into revenue dollars.", 1], ["So I would say we are well equipped to deal with that complexity and the variability of what our customers want us to be helping them with.", 1], ["And then of course, there's some deeper AI research that we're doing that feeds into those applications as well.", 0], ["So sequentially last year, any North America EGM we dropped from 31% to 27%.", 0], ["While I can't get into some of the questions about ad loads and inventory, I would say really what we're focused on right now is driving relevancy, ensuring that we service the most useful ad as possible.", 1], ["I mean we're literally, we're firing on all cylinders.", 1], ["So, it was a big quarter for Whole Foods and Prime.", 1], ["but mostly because we were able to deliver this incremental value.", 0], ["So we're within that period at this moment, and you can see for all of us that travel there so much, with every trip you can see this occurring.", 0], ["Any change of the ability for us and our advertisers to use data can impact our optimization potential at the margin, which could impact our ability to drive price improvements in the long run.", 0], ["We spend billions of dollars a year, as Jeff said, on infrastructure, tools and services, not only to allow sellers to sell, but to help themselves more successfully.", 0], ["On the Instagram question, certainly in the short-run, some of the spend is incremental and some of it isn\u2019t.", 1], ["Just because if you take something like Enterprise Mobility Suite, that gives you an indication of how, for example, we attach to Office 365 essentially an infrastructure service that has SaaS-like margins, or even some of our application services in Azure that attach to Office developer experiences.", 0], ["And in all of our segments, that is transactional business.", 0], ["We have in China currently a set of geopolitical issues that we are working through.", 1], ["And it gives us flexibility, we think the economics will make sense over time.", 1], ["We also recently announced Echo and Alexa are available in India.", 0], ["We're also adding more and more advertising as we roll out devices and Prime Video -- new Prime Video content in particular internationally.", 1], ["And so we view that as a very bullish sign on the future, that there's a lot of headroom left for upgraders.", 1], ["And it also helps us to create jobs and scale local businesses.", 0], ["I think that our iPhone line shows that there's a variety of different customers in a market that is as large as a smartphone market and so we're going to continue to provide different iPhones for folks to meet their needs.", 1], ["We feel that Prime and FBA are \u2013 reinforce each other.", 1], ["But that said on Azure, you're absolutely right.", 1], ["In terms of what we're seeing as opportunities, I mean, we continue to see good growth opportunities for revenue across both Facebook and Instagram, including both feed and Stories.", 1], ["And I think it's also good for overall engagement.", 0], ["And then the other half is pull, right, and going to some experience where you're asking for some type of content and getting to a point where we can do that very well is just going to add a whole new dimension to the service.", 0], ["This quarter we launched Canvas ads, which are very fast-loading, immersive mobile ads.", 1], ["The first one is that of the services that we report, there's a portion, about 85% of all of the services that we report is directly tied to the installed base.", 1], ["So, I would say that on a percentage growth basis again on a dollar basis, it's going very strongly.", 1], ["That means you need to have a platform that has a community around it and monetize as well.", 1], ["They got an eight-point lift in ad recall and a four-point lift in purchase intent among their millennial target.", 0], ["And, I mean, I don't know if there was something that folks could have done to make that happen fast, but I think that was pretty good.", 0], ["But I would say that at least in the near term, the impression growth opportunity is significant on Stories.", 1], ["because it brings people closer to the people who are representing them.", 0], ["That's because today our systems can't actually understand what the content means.", 0], ["I\u2019ve never seen one that is anywhere close to being accurate.", 0], ["And when you think about why that's so critical long term, it's our ability to sell some of the workloads Satya actually referenced that will be in E5 when it launches", 0], ["We're really confident in double-digit growth in that PBP segment with the components of Office 365, Dynamics 365 and LinkedIn.", 0], ["The canonical example for me is someone who collects data, does a prediction, ultimately then has to do something about that prediction, which means some automation like field service.", 1], ["They're both important products clearly, but everybody has their iPhone at home as well and everybody has their Mac at home and everyone has their iPad at home.", 0], ["It's long been used to reach people in a compelling way, and we can do targeting in a way that's really unique.", 0], ["We see this in the broader context of better targeting.", 0], ["We've got the research going that I had mentioned earlier, there will be more of those through time, and obviously we've got things that we're not going to talk about just yet that we're working on.", 1], ["Over time I think you know we\u2019ll look and expect to be able to grow our internal volume using AMZL or Amazon Logistics, but also continue to grow our 3P volumes with carriers, transporters around the world.", 1], ["That said, and it's important to understand this, while we think there's a lot of interest and great opportunity, we're going to be really thoughtful and strategic about how we ramp revenue.", 1], ["So, I think the pace and our accomplishment to share gains remain on a good trend line.", 1], ["And so my belief is that as the inventory plays out, as we make some continued investments in our product pipeline, which we\u2019re doing, that we already have planned and have had planned for some time, between that, the inventory playing out, the enterprise starting to take over, I think still I believe the iPad is an extremely good business over the long term.", 1], ["What I can say, the biggest dynamic going on again is that Amazon fulfilled unit growth of nearly 40%, which was last year and carrying into this year.", 0], ["I mentioned earlier how we're doubling the investment rate in the second half of the year versus last year's second half, and we're tripling the Amazon Originals content.", 0], ["Today, that whole model is that people can post what they want and then a person can flag it, and then our systems will look at it.", 0], ["But I think what is important here is we've been getting better and better at targeting as we optimize for real business results for advertisers, and we're better at converting the signals that we get from those advertisers into finding the right ad spots for them.", 0], ["It just takes the asset from its current status and extends the depreciation period and then new assets will be put into play will extend out for four years instead of three and we'll continue to revisit this.", 1], ["In terms of web services, it\u2019s obviously growing extremely fast.", 1], ["I think everybody's going to own a smartphone, and I think we've proven that we can compete for a fair number of those, as you can see from our results.", 1], ["Cortana Analytics, we never participated in any of the advanced analytics workloads at all in spite of all the success we had in the database business.", 0], ["And specifically the numbers this quarter as reported are 11% increase for Greater China year-over-year but on an average weekly revenue basis, we were up 19%.", 0], ["More focused on producing this kind of content, and making it first class to consume as well, both in private and public context.", 0], ["The reason that we're pursuing this is that Qualcomm's trying to charge Apple a percentage of the total iPhone value.", 1], ["If you look at the other products category and look at the revenue in this category, it would not be an accurate thing to just look at the sequential change or the year over year change and assume that were the total Watch revenue", 1], ["We have plenty of financial flexibility, of course.", 1], ["We talked to coming out of Prime Day, had some good success and happy customers enjoying some of the devices there.", 1], ["because what we hear from SMBs is simple, fast, inexpensive, showing them real return, and we're going to continue to focus on all of those things.", 0], ["So that's a normal trend.", 0], ["So, obviously, the mix of products was very strong.", 1], ["In terms of the opportunities for price, it's really just continuing to focus on making our ads better targeted, more relevant, improving all the different ways in which we can drive better outcomes for our advertisers and sort of meeting them with the results that they care about and delivering those results.", 1], ["And I think that's a lot about what you heard Satya talk about the sales transition we're going through, whether it's how we build products.", 0], ["And we're seeing good early signs", 0], ["We\u2019ll partner with everyone who does payment.", 0], ["So we really differentiate what the core thing is that we're trying to do, which is help people connect with each other and build meaningful relationships.", 1], ["But in terms of the content development, I actually think that that's coming at a reasonable clip.", 0], ["Really, the benefit here is enabling a better experience for people, that when they're interested in a product they can learn more and checkout right there.", 0], ["Those are all opportunities ahead.", 1], ["We think that comparison bodes very well for our growth.", 1], ["The foreign exchange headwind on a sequential basis was 100 basis points.", 0], ["The first was the U.S. imposed a tariff on steel and aluminum.", 0], ["And it's an area that we've been working on for a while.", 1], ["We also have \u2013 we think the best stability to target and make advertising relevant for businesses and people who see ads.", 0], ["We are committed to long-term research, but we're also very focused on having the long term research translated into everyday use products, and that's what you will see from us going forward.", 0], ["We always want to offer somebody the -- not -- we don't design to a certain price point.", 1], ["What I can say is that if you adjust for foreign exchange the operating margin is up slightly both sequentially and year-over-year.", 0], ["And so we\u2019re seeing very \u2013 we\u2019re seeing a lot of interest along a lot of consumer products.", 1], ["And I think, we are optimistic as we look to H2, when we see the signals we're seeing in the market whether it's PCs, server or the cloud demand.", 1], ["So it strikes me as inevitable that that progression will continue.", 1], ["Instagram is growing more quickly and making an increasing contribution to growth.", 0], ["But I would guess that one particularly in the early going will be people that have AirPods today and want to have -- also have a pair for the times that they need noise cancellation", 1], ["So in terms of your question of sort of impact from the first-party piece that's been coming online, many of those states came on over a period of time to get to that 45 total, going back over many years.", 1], ["And a lot of data shows up in relational databases and we have a growth driver there as well.", 0], ["For us in the medium to long run, we believe that we're not competing between Facebook and Instagram.", 1], ["You can use the self-service tool.", 0], ["If you saw our shareholder letter this year, I think Jeff Bezos put it really well.", 0], ["And so, we've invested to make that happen.", 0], ["That's what's really leading us to be able to do these types of partnerships that you referenced.", 1], ["And if you look at our disclosure on our 10-Q, it shows that we have $27 billion in future commitments for AWS, from AWS customers and that\u2019s up 54% year-over-year.", 0], ["Yes, specifically to International, we are seeing expansion to support selection, expansion at fulfillment network increases.", 1], ["And so from that perspective I feel good about leading because that's one of our strategic goals, which is we want to create new categories, foster more demand for the entire ecosystem.", 1], ["And usage growth is actually growing a lot higher than revenue growth.", 0], ["And on each of these, I think that there is work that we can do and that we certainly have a responsibility to really make sure that we perform well on them.", 1], ["Of course, we have an amazing cloud with the SaaS services for IoT, but the edge compute, the ability to run a neural network at the edge, do inferences at the edge is exciting.", 0], ["Both sequentially and year-over-year.", 1], ["They reached 30 million people globally, more than 95% on mobile.", 0], ["3P is now up to 53% of total paid units.", 0], ["Having said all that, we have provided what we believe is very strong guidance for the March quarter.", 1], ["We have decided to make some purchasing decision, given current market conditions, and that should unwind over time.", 1], ["If you look at our revenue, given the last three years, if you look at our net income during the last three years, if you look at our stock price here in the last three years, there's no correlation to the units sold in any given period.", 0], ["So a really strong quarter for our FBA sellers using our FBA services.", 0], ["So our approach varies by country, and if you look, historically we've taken multiple approaches.", 1], ["It's a huge thing and it's a big area that we can develop going forward.", 1], ["And I mean, we're working with folks to enable that but I think that, that would be good for people everywhere to make sure that basically every person who uses an Internet service has the same protections no matter where they live.", 1], ["Those are things that will play out \u2013 AI in the near-term, but the investments in AR and VR are really about building the next generation of computing, and that's got a longer-term return window.", 0], ["Facebook and Instagram are the two most important mobile ad platforms out there.", 1], ["And the way that we really look at the health or underlying demand is look at sell-through.", 0], ["And this has been a theme for our ad strategy and product development for more than a year now, maybe two years, where folks have consistently asked us what we're going to do to increase the amount of ads that we're showing.", 0], ["As we may have mentioned in the past, we feel that Europe and large countries in Europe and Japan are a few years behind the U.S. on a lot of the key Prime metrics, but we also said last year that Prime subscriptions were up 51% year-over-year in 2015, 47% in the U.S. and a higher rate than that internationally.", 0], ["And from a longer-term point of view, out of the 90-day clocks and so forth, we are very bullish on China.", 1], ["If you look at the efficiency or the -- first the cost, they generally fall into a few buckets.", 1], ["These are markets where currencies have weakened over the recent period.", 0], ["And as I mentioned before, in emerging markets, we did extremely well.", 0], ["We think it's an interesting part of the selection offer for Prime and it's, in many ways, something that we can do that others can't,", 1], ["So the biggest change that I think that we're going to see on the consumption in News Feed and in the tab over the next year or two is going to be much more video inventory and content coming in as we work through and make that business model start to really click for a lot of folks.", 0], ["So I wouldn't expect any material impact.", 1], ["But I think, in general, the goal is to have -- and continue to build on that business, but certainly, that would be where the \"volatility\" would show up.", 1], ["2018 is a big year.", 1], ["Let me talk about this in two or even a couple of components,", 1], ["and so we've designed a program that made it simple and easy to do that.", 1], ["So we're watching the developments on that closely.", 1], ["A single table can be extended to the cloud.", 0], ["I mean, our priorities in the space, that's certainly one of them looking for ways to make smarter recommendations, addressing the needs of brands, automating activities, incenting new products and I think in all those regards in those priorities, we think there's some good growth to continue to come both in advertising for on our own properties, but also potentially beyond, over the longer term, so, but even as we look for advertising opportunities on places like Amazon.com, we think there's a lot of opportunity and a lot of experimentation.", 1], ["But if I think about all the tools that I\u2019m using, which is all part of Office 365, today, on a daily basis and multiple times a day I start my day as I talked about in many conferences with Dell which is a tool I love which is in fact something that\u2019s uniquely possible because of the shift to Office 365 where we can take organizational data and breakthrough all the boundaries or, again, in silos inside an organization and have people discover information.", 0], ["We will never underinvest in the business.", 0], ["The speed of light gets in the way.", 0], ["FX on a sequential basis is fairly muted,", 1], ["That's the primary driver.", 1], ["And I think it makes in fact our cloud more attractive to many of them because of that.", 1], ["So the playbook that we're going to run with Messenger and WhatsApp is kind of similar to how we thought about building a business in Facebook and News Feed,", 1], ["We continue to see and saw again installed base growth across all of our customer segments from the enterprise to small business.", 1], ["India revenue for us in Q1 was up 38%.", 1], ["because we know that over time, it may be not just PaaS services in Azure, it could be in fact a Dynamics 365 module.", 0], ["But when I look forward, I'm very excited about doing the same thing for messaging and groups and video.", 1], ["I think \u2013 look, today we're talking about the additional investments we're making in terms of the lighthouse content on the Watch tab, so we are putting a substantial investment behind that.", 0], ["I think it's a testament to what happens with innovative apps and the whole ecosystem and the power of being a developer being able to press a button, so to speak, and offer their product around the world.", 0], ["We started with higher one-day percentage of our shipments in those geographies, but we do have to take steps and are taking steps to increase that.", 1], ["I would say that our business model usually reacts well to high volume as we get a really good leverage on our fixed expenses.", 1], ["That can apply to things like ranking for News Feed and search and ads and all of our systems more broadly.", 0], ["We anticipate it's going to be lower this year as we get some efficiencies off what we've built over the last few years, but I don't have a number for you today.", 1], ["That's just not our vision.", 0], ["At the same time, we're also introducing new SKUs for the front-line worker.", 0], ["Let's take a look at the guidance that we gave, again, we gave as we have in previous quarters, we gave the wide range and from a consolidate segment operating standpoint we gave a 100 to 650, the implied margin at the lower end, the higher end is approximately 50 basis points upwards to 2.9%.", 0], ["And I'm proud of what we've done, and I'm proud and excited for what we can continue to do.", 1], ["There are new workloads that are being born, that require both the cloud and the edge, IoT being a great example of that.", 0], ["We are -- whether they go to the store, the Whole Foods Market store, whether they use Prime Now or Amazon delivery for their groceries.", 0], ["Again, $560 million is included in there, and the majority of that is \u2013 would be included in the North America segment.", 0], ["I'll also say that we generally see a step-up from Q1 to Q2 because we do our employee RCU grants in Q2 of each year.", 1], ["And then the third area is we have about two-thirds or so of our total employee base is in the U.S. despite only a third of our revenues being here, and we'll have some things that we'll say about that later in the year.", 1], ["On Instagram, we are opening up to more advertisers.", 1], ["H2 where we've had really strong revenue growth and a really strong market will I think moderate growth wise, just because the base it was coming off in '17 was just a lot lower.", 0], ["We for example on the mix front, every cycle is slightly different on our product mix, and so that clearly has an impact on gross margins.", 0], ["On payments, the basic strategy that we have is to make it especially in products like Messenger that where the business interaction maybe a bit more transactional, to take all the friction out of making the transactions that you need.", 0], ["And when we look at the impact of foreign exchange on our revenue for the December quarter, we're looking at 200 basis points of headwinds which translates, given our the size of our business, to almost $2 billion of headwind to our revenue.", 0], ["In terms of the Azure growth, most of the Azure growth is really driven by consumption.", 1], ["And on the other axis, you get everything ranging from one-to-one messaging to small group communication, to communicating with all your friends at once, to big interest groups, to completely public.", 0], ["There were people that were just simply moving to the cloud", 0], ["So, it's -- I should say the servers are tech infrastructure assets.", 0], ["These require full integration.", 1], ["And we're not really trying to optimize for any particular number in a given quarter.", 0], ["It might take more thinking, but I don't think we should throw our privacy away.", 1], ["So we think we're in a good zone on the right ad load, and we do think there's opportunities to grow that modestly.", 1], ["But that said, there are three distinct phases.", 1], ["I mean I think overall that the trends reflect a generally what's happening on mobile, but there is still an overlay of a shift from desktop.", 1], ["So I feel good that we're staying on the trajectory that we showed in the projections.", 1], ["It's almost better to put that in your mind as behaving more and having more structures more like Office 365 and behaves quite similarly; tends to have good quarters, when we do good execution on Office 365, and so my comments were more and continue to be around having people understand that sales motion, and that it tends to move in that direction.", 1], ["And the way we track progress is to see how is our annuity growth of our server business, and how is our cloud growth.", 1], ["We thought about Instagram in the context of this new mobile camera space that was complementary.", 0], ["So Messenger is much more focused on being an expressive and rich environment that has lots of different types of content.", 0], ["We think the phone has a lot of legs to it.", 1], ["Can't speculate as to what we'd do in the future, but Prime is a program that's really important for us, and we're working hard every day to continue to build selection there and to continue to make Prime better.", 1], ["And so we\u2019re pleased with the early feedback we are getting from the first disclosure of Windows 10 and as well as some of the successes we are having with Windows 8 adoption in the enterprise.", 1], ["People can go to your profile.", 0], ["So anecdotally, with our early, early adopters, we can see that we believe the increased opportunities here really work, and we have other examples like this.", 1], ["So we're always working within a range.", 1], ["And it's cheaper and easier to build a webpage than it is to build a mobile app and get distribution or downloads.", 0], ["In fact, our own IT Systems, take what we have done with our HR and our financial systems and some of those things as they move to the Cloud, we bring some existing and then add to it.", 0], ["It\u2019s generally over a three-year period and there is other pieces of equipment that have a longer, shorter depreciation life.", 0], ["This is a big part of the product experience that we want to deliver.", 0], ["Our top verticals this time are e-commerce, CPG, retail, and entertainment media.", 0], ["As you probably know, we have a very broad portfolio of Services.", 1], ["Videos had a big contribution there.", 0], ["The impact on short-term is pretty much indistinguishable from the growth that we're seeing in our expansion of our base customers in our existing regions, so we don't see a large step-up from the addition of new regions relative to the large and rapid growth in the business itself.", 1], ["And so therefore, Office 365\u2019s approach resonates even there.", 1], ["And so, the fact that we then -- we\u2019re often seeing extensions take place of prior commitments on Office 365 to again be longer and include the Azure contracts.", 1], ["And I think that's because we have a combination of the creative and the story telling, so the art with the science of the targeting.", 1], ["But over any annual period, the biggest difference will really just be the change in some ways back to how we thought about OEM revenue.", 0], ["So we're really pleased with the performance that we're seeing on the revenue front, certainly on the FX adjusted basis.", 1], ["And so really, this is really 100% the Xbox One X impact in Q2 of the launch on the company gross margin and in particular, the MPC gross margin.", 1], ["Targeting is obviously very important in that.", 1], ["We've also observed some continued declines as we've done this and in the passive consumption of video, specifically.", 0], ["And so the local competition is not new.", 1], ["So as far as the Whole Foods, specifically on the question of what we'll look at as far as expanding that grocery delivery, we're going to use the 10 cities as a test and see how customers respond, just like we always do, and make sure that our deliveries are great for those people, and then we'll announce expansion plans once we digest that, the feedback we get from customers.", 1], ["The impact on NAND and DRAM will continue to be there, and we expect it to be there.", 1], ["It's only one store at this time.", 0], ["We're excited about checkout but I really want to stress how early this is.", 1], ["What happened is we realized that mobile was growing faster than desktop and that people were shifting their usage and that it was the more important thing for people\u2019s consumer experience.", 0], ["Do we expand our footprint, our percentage of the IT budget at a customer?", 0], ["There's the continued investment on the security front.", 0], ["We think it's a great, pairing our associates with Kiva robots to do some of the hauling of products within the warehouse has been a great innovation for us.", 1], ["So the in-quarter revenue and the guidance will look a bit lower due to that, as well as the amortization of intangible expenses, which will also hit.", 1], ["We've seen additional costs creep in, in the name of customer experience in prior years, and this was, in hindsight, probably one of the cleaner Q4s recently.", 0], ["You've seen us do that with Azure.", 0], ["In Q4, we saw better growth in Europe because we've come off of the GDPR - the first two quarters of GDPR.", 0], ["So we are getting very good top-line growth.", 1], ["And that's our job, is to make it so that we build great tools that people \u2013 everyone around the world can share anything that they want with everyone.", 0], ["This is really about every budget that sits not just in IT, but under every functional leader of a company being spent differently and being spent on our technology.", 0], ["So we had that dynamic.", 0], ["But overall, there's a lot of stuff in the space.", 1], ["If you look at some of the most exciting things that are happening in the cloud, is cloud applications that actively require an edge Azure IOT, or Azure Stack are becoming the runtimes of the edge where you do need not only the ability to do compute and storage, but to run the AI inference and the edge.", 0], ["We continue to focus on improving the gross margin of each individual product area, which creates leverage over time.", 1], ["So customers are responding greatly this year.", 0], ["So, at this point I don\u2019t think we\u2019re giving a lot of color around supply chain and that sort of thing.", 1], ["We\u2019re able to grow the revenue in existing contracts, and so that absolutely contributed and has contributed over the past couple of years to what I do believe has been reasonably consistent, commercial bookings strength versus the expiration base.", 1], ["In terms of search, we are showing ads in Marketplace in FB search results.", 1], ["But in a much bigger way, commerce discovering product all the way, through to sales is a big part of what's driving our ads business.", 0], ["So as I mentioned before, running an ad that has a click to Messenger ad that goes into Messenger is just an early example of what's possible.", 0], ["When precisely it begins to grow again I wouldn\u2019t want to predict, but I strongly believe that it will.", 1], ["So I guess what I'm saying is I just expect some of this to land in this year.", 1], ["We opened seven stores there during the quarter.", 0], ["But we also have services that are very successful, that are below the average for the services business.", 0], ["As you've seen from our revenue guidance, and from cost savings, because as you know the commodity environment is fairly favorable right now.", 0], ["And we are of course doing this with groups and there will be opportunities to do this in other places, including with news.", 1], ["And we've already deployed $200 million of that.", 0], ["So that's where we would focus.", 1], ["We have a number of services that are reaching pretty good scale and I think we'll keep on pushing that.", 0], ["Teens remain very \u2013 remain engaged on Facebook.", 0], ["And so I do not envision Apple's having a large enterprise sales force will certainly make \u2013 we continue adding some people more on the engineering side, but I don't envision having a large direct sales force.", 1], ["So in that category, and some of the things that we're investing the most in are as you say the Echo and Alexa devices.", 0], ["And I think that this is the year of Apple Pay.", 1], ["I think the heaviest lifting of the work we do is really helping marketers in different verticals focus on the right metrics, which are the sales metrics,", 1], ["I think it's a combination of things that are - that have turned things around.", 1], ["It's also important to note that commerce is a really important vertical in our ad business.", 1], ["If you think about the IaaS and PaaS numbers, I would expect to be on the higher end of growth rates.", 0], ["Now that may be possible because there's high, high, high engagement in Stories.", 0], ["In terms of the North America revenue growth acceleration, one of the big factors there is really just also that's where you're picking up some of the accounting change from the Instant Articles going from net to gross, so that's contributing to that acceleration.", 0], ["It makes Prime stronger and then that's a self-reinforcing where Prime then \u2013 the Prime success attract mores sellers.", 0], ["They ran video ads across IG - Instagram Stories, Instagram feed and Facebook, targeted to Canadian women aged 25 to 54, and they were measuring all the way through to sales and they saw almost a 7%, so 6.9% lift in store sales.", 0], ["Thirdly, the markets, sort of the emerging markets broader than BRIC, but including all of emerging, when I look at our share in these markets and the LTE penetration, I see huge opportunities.", 0], ["We also know that there may be a DAU impact for implications on European usage.", 0], ["We are well on pace to achieve that, and we feel very, very confident about the future and the opportunities that we have in the services space.", 1], ["But to your specific questions it shows up today in the on-prem number is where you can see most of the strength of that value and over time as it gets used and consumed it will show lot more in the Azure ACR number.", 1], ["yes, our guidance on total cost is all-inclusive,", 1], ["And you can imagine that today, we consider putting things in your News Feed that you're connected to in some way, right, that are from a friend or a page that you're following or that one of your friends likes.", 0], ["Our consumer service isn't active there, but it actually is already one of the biggest advertising markets that we have.", 0], ["We have worked on some voice products on Portal; that\u2019s an important way that people interact.", 0], ["The Mac also had an unbelievable quarter in China, and I\u2019m particularly very happy with this, that Mac unit sales were up 31%.", 0], ["Yeah, just one thing that's structurally I think, that we think a lot about and we're very disciplined about is our capital allows us to build all of the cloud services from Office 365 to EMS to Dynamics to Azure.", 0], ["What I can tell you is we have seen great efficiency on the cost side, the cost to generate the capacity for AWS.", 1], ["We're constantly learning about what our community wants, and we will constantly be trying to incorporate new information and signals into the models to help value all of the content in the system as accurately as possible.", 0], ["The -- in dollar terms as opposed to percentages, we had a larger dollar increase in revenue both year-over-year and quarter-over-quarter.", 0], ["We also collect much less overall than others do.", 1], ["And we're making progress across verticals, across our large customers.", 1], ["And from an upgrade point of view as I mentioned in my comments, we compare favorably, slightly better than the upgrade cycle that we saw on the iPhone 5s.", 0], ["And so if you think about all of those components, which actually were very similar to Q2 in terms of their strength, you see them again in Q3.", 0], ["The bandwidth issue has also been an issue, but as you point out, it is being addressed and between the large carriers there with Bharti and now Jio investing the way they are, the service in India is materially better than it was just 12 months ago.", 0], ["I think we look at all of our investments with an eye towards trying to maximize long-term free cash flow at strong returns on invested capital.", 1], ["One of the things that I think we need to look out for, that the intelligence community has warned us about is some of the goal of some of these nation-state actors is not necessarily to interfere directly, but to just sow doubt about the legitimacy of an election.", 1], ["I talked about some of our global rollouts in the past quarter.", 0], ["But we're increasingly seeing the open source workloads, the Linux workloads, the Oracle workloads, the SAPs and what have you.", 0], ["We want customers to be able to see new brands and have easier time discovering products that they're looking for.", 1], ["We have in fact pockets of good growth in China with our cloud doing fairly well, but at the same time we're grounded that in the fact that we need more work to do and we're working through them and then as and when they will work out, we will let you know.", 0], ["And so I think our tools are the simplest, but I think we still need to do better", 1], ["One is an architectural technology advantage around hybrid, right.", 1], ["We grew across the board with large companies too, but SMBs were really important for this.", 0], ["And we really believe that this will be the bottom and we can start growing from there over time.", 0], ["If we look at even in the United States, which is a very advanced market, I think it's something like 35% of SMBs don't have a web presence of any kind.", 0], ["But we certainly value our relationships with USPS, FedEx, UPS and other global carriers.", 1], ["And if we can grow demand faster than we grow supply, then we're going to see that play through in price.", 0], ["The movement between the two are important.", 1], ["But we also continue to invest, particularly in Alexa and our device area.", 1], ["But because of the scale at which it's operating, that's why you still see that server KPI remain at that high level even as the base grows.", 0], ["So we need to get to that in messaging.", 1], ["One of the things that's really important in this is helping marketers understand that they need to optimize those video ads.", 1], ["I think the data architecture that underlies what's happening in the enterprise underneath applications is going through a dramatic change.", 1], ["They purchased similarly, was bought with a PC, was bought one time, it was infrequent, with an inability, as Satya said, to add workloads.", 0], ["The other efficiencies that we're seeing are network efficiencies, especially as we add things like sort centers.", 1], ["The first is build an experience and get it to scale, to build a community that can get to hundreds of millions or 1 billion people or more.", 0], ["We\u2019re looking at our investment.", 0], ["So we think that ads is a great business model that is aligned with our mission.", 1], ["So I'd say overall not a big change in the gap there and overall the impression growth is really the story for Stories and will remain the story we think for the near future.", 1], ["We're working very hard to make sure that it's very easy for customers to buy the things they want to buy and access, a lot of the features they\u2019ve grown accustomed to on the website.", 0], ["And that's broad-based growth across the globe,", 0], ["We believe both Facebook and Instagram have this combination of an ability to do great creative with the best targeting in a most sophisticated measurement which shows businesses how we help them move products off shelves.", 0], ["But overall, where -- a big focus for us is making sure that individuals and small businesses have access to the same kind of tools that historically only larger companies have had access to.", 1], ["And I think I've said this before.", 1], ["So the combination of these two things obviously had an impact on ASPs.", 1], ["We love the \u2013 customers love the content and we like the results we see, particularly around Prime free trial conversion and renewal rates for subscribers who use and take advantage of Prime.", 1], ["I think we did really well there.", 1], ["I even look at the growth of virtual machine instances on Azure.", 0], ["So to share an example, Garmin launched the Fenix 3 Sapphire watch, and they did it with videos ads on Facebook that worked without sound.", 0], ["When you have that, I think we're going get to a point where things like TVs, you no longer need a physical TV.", 1], ["So innovation and investment will continue and can be lumpy.", 1], ["And so I actually feel quite good with that outperformance and our ability to see that outperformance fall to the bottom line through stronger executional gross margin percentage, particularly in that segment.", 1], ["We are very encouraged with the growth of the Prime program, and we're hopeful for the Prime Video that we launched in the fall.", 1], ["And so lots of positive things, and you know, as you probably heard me say before, I\u2019ve never seen as many people coming into the middle class as they are in China.", 1], ["And so I'm optimistic that the countries, the U.S. and China and the U.S. and Europe and so forth, can work these things out and work for the benefit of everyone.", 1], ["But if you look at Boeing or you look at any of the other examples that I talk about when it comes to the cloud, our servers never did what these customers are now doing in our cloud.", 0], ["The new price will apply to renewals starting on June 16.", 1], ["And no specific categories we're calling out as a driver for gross margin because, again, we're much more focused on the profit dollars.", 1], ["So, the integration you spoke of are the right ones we want.", 1], ["And so we've spent quite a bit of time on that, as you might guess.", 1], ["So there, the most important thing that we need to do is get the basics right and make sure that we are providing, hands down, without any question in anyone\u2019s mind, the clear best service in those areas.", 1], ["So now as the technology on the network level improves to support that, what we're seeing is the ability to serve what is a large amount of demand for what's a very engaging type of content.", 0], ["This has to do with wanting to provide customers a very simple way to upgrade.", 1], ["One of the things I would point out is that from a pricing perspective, there are headwinds that we might face on targeting, given the overall privacy landscape in 2019.", 0], ["That's one example.", 1], ["I wouldn't want to comment on that, but we do have a really great pipeline here.", 1], ["But on the other hand, from our perspective, we're not a company that's traditionally done hardware or built operating systems or these kind of products.", 0], ["I think people love Apple products and we are going to do our best to serve the market.", 1], ["A lot ties into our Prime Music offering.", 0], ["So we're pretty confident that this is going to keep on growing.", 1], ["And you can see in that example, even in your own feed, the opportunities we have to improve, finding the right ad and giving it to the right person at the right time, which drives businesses all around the world and drives our business as well.", 1], ["And we feel relatively confident going into these elections.", 1], ["There is clearly a macro impact, especially on the transactional business.", 1], ["They are moving a significant number of them to the cloud, and in fact replatting to be even multitenant and cloud native.", 0], ["So we'll continue to do that.", 1], ["But when we look at a country-specific level, there were a lot of countries, I would say the majority of the countries, where iPhone units grew strong double digits, starting here in the United States, where for example, the fact that annual upgrade programs are becoming more and more popular is proving to be a positive for us.", 0], ["We've seen good demand inside commercial entities for and when they make those upgrades to buy Windows PCs and often Surface devices, in that choice, I think it's benefited our OEM partners and us.", 0], ["And there's also India, as I mentioned, we continue to invest in India.", 0], ["So, for example, you can buy now in one interface on Facebook, Instagram and Audience Network.", 0], ["So I think that this is going to be a really big opportunity.", 1], ["That's how we sell it externally even.", 0], ["We continue to work on the customer experience and making sure we're really delivering a quality experience for shoppers.", 0], ["And it's \u2013 this is one of the things that I think will create a lot of value for people discovering and interacting with businesses.", 1], ["So a lot of hard work going on there.", 1], ["I think broadly with advertising, so much of this is about having -- developing great relationships with these advertisers, because I think they appreciate the fidelity we can provide around shopping outcomes.", 1], ["And you see the growth that we talked about across all of this.", 0], ["And since then, we've built the playbook out that has included building AI tools to identify thousands of fake accounts and groups and pages that violate the policies.", 1], ["because if you look at our size versus the number of projects we have going, it's much smaller compared to most.", 0], ["So we feel very good about the gross margins that we\u2019ve generated in the March quarter, and we feel very good about the guidance that we provided, given the severity of the impact.", 1], ["It may be getting there a little slower than the starting point in the U.S. but we see it really showing up in customer engagement and customer purchases.", 0], ["I also look at the first time iPhone buyers and we're still seeing very, very large numbers in the countries that you would want to see those in, like China and Russia and Brazil and so forth.", 0], ["So overwhelmingly, the thing that drives us are to embark on services that help that and become a part of the ecosystem.", 0], ["It's also helpful on Instagram where we're also seeing the benefit of ranking changes.", 1], ["We're doing this because is the right thing for our community.", 0], ["We mentioned simply one that didn\u2019t exist I think Brendan when we first started having this conversation, which was our EMS suite and I look and say, those opportunities as well as the creativity of our people I think gives me more confidence if not less in the structural integrity of the lifetime value of a customer argument.", 1], ["Video is obviously super important so having the ability to do \u2013 work on video across the web has been really great.", 0], ["because we built our services around transparency and control, and we're building on this to ensure that we comply in May of next year.", 0], ["Prior to 2018, we recognized this revenue over the 12-month period with more revenue allocated to the fourth quarter each year.", 0], ["So we got to there on Watch, it's growing well and that is -- so we're kind of still now focused on continuing to make it better and continuing to grow it.", 1], ["So we do every year we'll continue to monitor the growth there.", 1], ["We're staffing earlier in those locations, we're in good shape for the holidays and ready to go.", 1], ["And what they did was just beautiful pictures but also targeting very specifically to women with specific interest, such as things like weddings and babies, and they saw a 6.4 times return on ad spend.", 0], ["As you mentioned in your second point, we've already launched an app accelerator center.", 0], ["So that's the main thread of the AI work we're doing is trying to understand conversational and linguistic context and computer vision, photographic and video signals to understand what's going on there.", 1], ["At this point, some of the partnerships we have with customers are of that same magnitude.", 0], ["when you look at it from a purchase value standpoint, actually in the December quarter, we grew 24%, and for the fiscal 2015, we grew at 23%.", 0], ["And so for today, Apple Pay is very much about a great feature for our customers so that they can pay in a very simple, private, and secure way.", 1], ["When they were using a combination of Facebook, Instagram, and the Audience Network, they saw 57% lower cost per install with placement optimization and 59% more volume versus running on Facebook alone, which led to 6% incremental revenue.", 0], ["And so, Jennifer, listen, I kind of think about this as we\u2019ve a incredibly strong footprint inside existing enterprises today, that footprint and you can see it in our results.", 1], ["We have a great slate of new Amazon Originals coming out later this year, both in the U.S. and internationally.", 0], ["And so I think, we remain confident that double-digit target that we have for that KPI and is it really, I don't think sort of a comparability challenge per se, but that\u2019s why we try to keep it at that high level to not get too tied to one or the other, given we know the TAM expansion that\u2019s possible, we know we can grow within it.", 1], ["Well, ultimately, I'll step back and say one of the main things we look out on Prime Video is customer usage patterns and in 2016 we had a doubling of Prime hours for video, music and reading.", 0], ["So the gross margin rate of these services is clearly significantly dilutive to the overall Services margin.", 1], ["And I would add, in addition to the number of regions which Satya is talking about, it's also the capacity inside a region.", 1], ["It was acceleration further from the previous quarter.", 0], ["And when Japan is better, it's why you also see the interesting relationship in constant currency.", 0], ["So on GDPR, I think fundamentally we believe we can continue to build a great ads business while protecting the privacy of the people who use Facebook.", 1], ["And that's where I think we will be very differentiated.", 0], ["It's very early, but we're seeing good results.", 0], ["I would just add that we did see that premium mix go up in Office 365 on the commercial side as you were noting.", 0], ["So more basically, on AWS, very happy with the response from customers.", 1], ["We are going to be getting some benefits from commodities in general and memory in particular.", 1], ["It's an approach that we've executed in other hardware segments that I feel is a proven model for us.", 0], ["We see that tied to the Prime growth and the adoption of Prime and success of that program.", 1], ["There's a huge number of people that will move into the middle class.", 0], ["As you know, our newest products this year have a higher ASP than they had in the past.", 0], ["And then you go to Office 365.", 0], ["We have more advertisers using the ability to target their ads to the right person.", 0], ["People really like this in WhatsApp.", 0], ["In calendar 2017, we've acquired 19 companies.", 0], ["They built this camera where you can see/talk and you can see and talk and toss dog treats to your dog when you're not at home.", 0], ["It's the unique value that people expect from Facebook.", 0], ["One was expanding the different types of content that people could share in Messenger.", 0], ["So that gives us some degree of confidence there in addition to our own execution on other things.", 0], ["And we have launched Prime in India, China and Mexico.", 0], ["Because of some of those, again, mostly the year-over-year accounting days, true up issue, it's showing up as negative 3% in physical stores.", 0], ["They can share video, they can take video.", 0], ["So when you look at that for the three months ended, around 34%, 35% for (04:05) and, historically, what we've seen with unearned revenue is a big and leading contributor (04:12) signing up, paying $99 upfront and having that (04:18).", 0], ["International growth, your comment about slowing down, I think there's a slowdown versus Q3, if that was your point.", 0], ["The installed base is growing.", 0], ["And so it\u2019s an incredible market.", 1], ["That compares with last year in Q2 when we saw 22% unit growth, so we're 600 basis points faster growth in Q2 this year than last year and that 22% last year turned into 26% in Q4.", 0], ["But I do think that's probably the best way to think about the curve over the course of the year.", 1], ["I mean they -- what I'm reacting to is the high unit growth relative to good growth in revenue, but unit growth grew faster.", 1], ["So you actually see that revert in Q2, although our free cash flow growth of 8% in the quarter was actually very good, and I do feel good about that, but I want to make sure you don't miss understand the root cause that makes the number a bit of an anomaly.", 1], ["I'll also point out that we rolled out the global Prime Video offer in the second half of last \u2013 or, excuse me, in Q4.", 0], ["We've seen it across our premium services as well as core compute.", 0], ["We continue to invest in initiatives and projects ahead of revenue.", 0], ["We didn't break it out by segment, but we said that Prime Day contributed 200 basis points to our Q3 run rate, revenue growth rate.", 0], ["So that's a fully loaded number.", 1], ["So that is essentially what we're seeing, and we're certainly pleased with the customer response to those offers globally", 1], ["One of the areas of in fact real breakout growth in differentiation as being in Power BI, PowerApps and Flow.", 0], ["2018 is going to be an incredibly important year on this.", 1], ["So that's a really good example of how you can take targeting and the ability to target across Audience Network, Facebook and Instagram and drive people all the way down the funnel.", 1], ["We'd like as many people as possible to view it.", 1], ["I see it in Sales Navigator and Dynamics.", 0], ["And so they think we owe some amount, we think we owe a different amount, and there hasn't been a meeting of the minds there.", 0], ["And so that leads why I always tend to say, I don't focus as much on the mix per se.", 1], ["Instagram is growing quicker on a percentage basis, but it's much smaller.", 0], ["So yeah, the capitalization's relatively small in terms of, other than in the building itself.", 1], ["So those are all the areas.", 0], ["Now it is becoming increasingly possible, both because we can build the AI tools, but couple that with being able to hire thousands and thousands of people to do faster review of the content and look at something proactively.", 0], ["And where the developed markets the first-time buyer rates are down other than places like Japan perhaps, the emerging markets, we haven't even gotten started yet, really.", 0], ["There are -- it touches on a number of different parts of our business in terms of how we recognize revenue in terms of any aggregate, the impacts to our expectations for the revenue guidance for the first quarter.", 1], ["So we're continuing to work on some of the items we've been talking about for a couple of quarters now.", 1], ["So conversion tracking is increasingly used, and we work with our marketers to use it even more, and we're also really excited about conversion list because that's the first product we've had which scientifically measures the additional business you get from Facebook ads.", 0], ["We'll see more cost in Q3.", 1], ["So in some sense, this one has always been about being able to serve customers especially in an increasing digitization work, right, which is the need for more business process automation is increasing.", 1], ["What we\u2019re seeing is that users are generating a lot of really high quality content, often pretty short form that people are really happy to consume.", 0], ["It's not going to have a material impact on revenue in 2016,", 1], ["So on the sales and marketing expenses, Mark, I think you're going to see that be lumpy.", 1], ["That being said, we \u2013 as I mentioned last quarter, we're spending time on making sure that we get productivity.", 0], ["And I also just think that going forward, we're going to be investing in these things at a much higher level because we realize that this is important, not only for our community and this company, but it's part of our responsibility to society overall.", 1], ["The overall number, even if you take a couple points off that 28% is a very good performance, that I believe to Satya's point, is the impact you've seen of the very aligned technology road map on the architecture plus a business model that matches it.", 0], ["So a lot of what we're trying to do is not just about taking the content down,", 1], ["But we are taking multiple approaches on payments where things like what we're doing with Payments in WhatsApp or Facebook Pay overall are built on top of traditional payment infrastructure, whereas the longer-term work that we proposed around Libra that's now being handled by the independent Libra Foundation where we're working on a wallet that will work with Libra.", 1], ["And what that encompasses is both the Office 365 value proposition, but also our management and security value proposition with EMS as well as Advanced Threat Protection and Windows value that shows up in that Windows commercial services KPI.", 0], ["It also does show, as you point out, that AR can be really great.", 1], ["But we clearly are seeing very rapid growth and adoption of our Azure cloud.", 1], ["But even if tens or hundreds of millions of people use them, then we're adding unique value that other folks might not be able to build, and we're making the app more valuable.", 1], ["We do have a large project going and are making a big investment in this.", 1], ["And it's important to call it out because of course it's a one-off.", 1], ["And so, I think what you're seeing us do is really focus on services that meet those businesses multi-user accounts, improving approval workflow tools and just more recently, we introduced Amazon Business for Business Prime Shipping, which we think will be a great way for businesses to use multiuser \u2013 business customers have multiuser accounts, and that's in the U.S. and Germany.", 1], ["Across the \u2013 commerce and payments are an area that I'm quite focused on and optimistic about across all of our different services.", 1], ["One is things like the Azure Hybrid Benefits as well as the higher-level services that create I think uniqueness both as well as good margins long term.", 1], ["First, there's the Prime platform and all the features that I just mentioned, including the fulfillment, adding more fulfillment resources to handle higher and higher retail volumes and very strong FBA program as well.", 0], ["It's just that the experience is designed to deliver on that promise of, you want to watch videos, you want to keep up with the content that you watch episodically week-over-week, this is going to the place where you go to do that.", 0], ["On seller services, I would say it was just a very strong quarter if that's what you're referring to 31% growth in revenue.", 1], ["You are right that we had seven price cuts in Q4, essentially timed for December 1, so about 1/3 of the impact was seen in Q4.", 0], ["And so as I look at all of these things, we feel really great about how we did.", 1], ["So while we'll continue to concurrently drive growth and customer offering and Prime benefits, we certainly do take costs seriously and we will continue to work on operational efficiencies.", 1], ["We still believe we have an opportunity to grow impressions at a modest space year-over-year across the platform.", 1], ["It\u2019s the richest way for me to visualize what\u2019s happening at Microsoft in real time.", 1], ["So it is a little bit higher due to that program.", 1], ["because we have this hedging program as the dollar has weakened a bit in recent months, although during the last week it's actually started to turn the other way again, we've got the hedging program that works both ways.", 0], ["Azure Container service cuts across both containers running on Windows, running across Linux.", 0], ["So what we're saying is just continued strong usage both by existing customers and signing new customers for \u2013 see increased pace of enterprise migrations as customers are having success with AWS and increasingly trying new services.", 1], ["If you look at it, each of the geos, the minimum was at 25%.", 0], ["We have to work client by client.", 0], ["I think it's very disruptive in the market place because it brings a very different value proposition.", 1], ["That's all going really well and that's a big focus of our investment.", 1], ["And each of those are significant, so it's really the combination of those three factors that's driving the expense growth acceleration.", 1], ["So it's not just about old workloads and service providers and essentially hybrid computing as we understand it.", 0], ["Instagram specifically where we launched checkout, 130 million Instagram accounts are tapping to reveal products or learn more about products in posts every month.", 0], ["So we'll look at all those options, but for now I really think that Video Home is going to be a great experience, and I'm excited to roll that out.", 1], ["I think that there's this myth that we design News Feed in order to just optimize for time or for likes or comments or some signals like that.", 1], ["That said, I think we will do what is necessary to make sure that our products and services that are on Azure or elsewhere, our tooling, which are already many open source projects on GitHub, we do a good job of earning that developer trust and developer adoption.", 1], ["And we're the only provider still who can do this in a hybrid way.", 0], ["So there are differences in sales cycles.", 0], ["Usage rates are strong, but we also have a number of projects underway that seek to increase our efficiency of our data centers.", 1], ["Not sure on the Internet of Things, but it's very exciting for devices standpoint.", 0], ["So that's what you're seeing increasingly as the synergy.", 0], ["I think a thing to think about is the investments will ebb and flow over time, but our focus on cost reductions and improvement on customer experience will be constant.", 1], ["So, we're very happy with the progress of the revenue and our adoption and acceptance by customers.", 1], ["And what they saw for season pass ticket sales for 2017 was a 50% increase compared to 2016, and they attribute that to Facebook.", 0], ["That's in contrast to what we worry is too passive consumption of an experience in News Feed today where people just happen to often see a video and maybe they'll watch it for a few minutes, but may not interactive around as much in News Feed.", 0], ["It's interesting to note that upgraders both for the quarter and actually for the full fiscal year to-date was our highest ever, and so that we felt very good about.", 1], ["And if you take China out, it's even stronger.", 1], ["I'll just remind you that the units \u2013 those do not count in our unit totals nor do the units from Whole Foods Market.", 1], ["And on mobile phones.", 0], ["And in it what is fundamentally fragmented mark, this is not a business application never was and never will be a winner-take-all.", 1], ["So Prime membership and selection continues to drive growth and you'll see that in our unit growth numbers.", 0], ["And in general, when we look at our process to innovate our products, typically when we launch a new product, that product tends to have a higher cost structure than the product it replaces.", 0], ["When it comes to the cloud itself, we have a PaaS service with SQL, which is very unique in terms of SQL Azure.", 0], ["I was in Berlin last week and saw it being used in a historical educational kind of sense.", 0], ["And so, I think it's a set of all of these things and we certainly feel a lot better than we did 90 days ago.", 1], ["In our fulfillment center world, we had grown square footage for our fulfillment center and shipping areas by over 30% the last two years, 2016 and 2017.", 0], ["And we've always viewed that part of our role was to sort of make things as simple as possible for the user and provide them a level of privacy and security.", 1], ["And so every other gross margin trend across IC, across PBP and across the rest of the MPC portfolio exhibits the exact same fundamental drivers and improvement.", 0], ["You will see volatility in the bookings number for the reasons we've laid out before, the changing expiry base, but also large contracts and commitments done by Azure.", 1], ["So there is going to be an increasing emphasis in the concept of lifetime value that we can deliver to customers.", 1], ["China, I continue to believe is a phenomenal country with lots of opportunity from a market point of view, but also lots of opportunity from a app developer point of view.", 1], ["I think being able to handle that through messaging is going to be a great experience.", 1], ["So again, we're very happy with both the Prime adoption of the - or the recognition of the Prime benefits by - at Whole Foods, and also the purchases.", 1], ["I think, Steve, we've been in a competitive position.", 1], ["We like what we see so far with our Amazon Logistics capability.", 1], ["Our revenue growth during Q1 would have been four percentage points higher on a constant currency basis.", 1], ["As we had talked about before, we're continuing to expand the indirect channel as well.", 1], ["So we're doing a lot around commerce and payments", 1], ["and so we are accepting more and more payment methods around the world.", 1], ["In rolling out things like Live, we've had this infrastructure that we've been building out for a decade all around the world, and that allowed us to build a product like Live where someone has to stream something live from their phone to potentially hundreds of thousands of people around the world.", 0], ["I think it's become \u2013 every year it becomes more important to people's lives and there are more things people are doing with it.", 0], ["So they get to touch and try our eReaders, tablets, Fire TV and Echo.", 0], ["We're working on a lot of different things that make it so that people can get value from interacting with businesses.", 0], ["That is servicing \u2013 accelerating usage in our largest AWS services as well as geographic expansion.", 1], ["Quarter to quarter and year to year, we just have different amounts of contracts expiring.", 0], ["So all-up, we have multiple pieces.", 1], ["But we have a wide variety of different partners beyond Cognizant who work with us.", 1], ["The first phase is what I will describe as the upgrade phase.", 0], ["We know that messaging is going to be increasingly important, that\u2019s why we went out and hired David Marcus who is one of the best product leaders in the field to Messenger and why we bought WhatsApp, which the leading messaging product worldwide.", 1], ["So between January 1 and October 7 of this year, over 68 million people on Facebook in the U.S. made over 1 billion interactions about the campaign alone, and every candidate and every member of Congress is on Facebook now.", 0], ["We think that targeting end measurement are significant competitive advantages for us.", 1], ["Commodity markets may be very different from one year to the other.", 0], ["Those choices have been made, but at the same time, now they have a choice around database, and so we think that that's a very good incremental opportunity for us.", 0], ["However, we've taken what we've learned from last quarter, and we did see a number of encouraging signs.", 1], ["I am actually going to cover in commercial segments as one", 1], ["And that strategy, I think, is bearing out and we'll continue to apply it to all of the things that we do.", 1], ["So that's one.", 0], ["I was there right after the launch in October.", 0], ["Amazon Books stores, Amazon Go, and the opportunity that that technology presents.", 0], ["So we have a pretty broad spectrum of use cases.", 0], ["I think that there's a misunderstanding probably particularly in the Western world about China's economy, which contributes to the confusion.", 0], ["So for example, one of the comments I made in my remarks was, for example, SharePoint with PowerApps and Flow.", 0], ["Our primary investments during the last few years have been in the R&D space, because obviously we want to continue to innovate, improve the user experience differentiate our products.", 1], ["And you see that even in the way customers use it.", 0], ["And of course, the answer to that is we do believe that, but it certainly comes over a period of time and run through our annuity base over that pace.", 1], ["And on that front, they're both doing great.", 0], ["Then things like what we are doing to even go to non-knowledge worker audiences in retail or in manufacturing with some of the things that we're doing with staff scheduling for example.", 0], ["But then we have to make it easy.", 1], ["The guidance we gave and our annuity positions in terms of renewals and where we saw them were exactly, frankly, what we expected with the small exception of the geos that I called out", 0], ["And so I'm a big believer that the two countries together can both win and grow the pie, not just allocate it differently.", 1], ["It's creeping up to the early part of November through the holiday season.", 0], ["We now have over 2 million apps in the App Store and are more focused these days on discovery and other things to bring more great apps to the service because there are so many out there.", 0], ["We want to make it so that features that get built across Instagram or Facebook or WhatsApp and when people engage on those, it can also make your experience better across the other apps in the family, too.", 1], ["So on desktop, for example, it's easier to type, so we saw more text posts.", 0], ["So some parts of this will not land this year, but I expect a lot of this will start to land this year around this vision of building the private social platform.", 1], ["In fact, I'm very excited about some of the new workloads.", 1], ["We have a very good track record of taking those cost structures and over the life cycle of the product, we are able to bring them down.", 1], ["I think Stories is another example of this.", 0], ["When you think about, you are right, it is a big number, and I feel very good about it, and for the year on a pure basis it was $15 billion of commercial cloud revenue.", 0], ["And starting in April, we've introduced other SKUs that have more value in them at lower processing specs.", 0], ["In terms of integrating them, no, we're not going to do that.", 1], ["We don't think the changes help in those dimensions for both the customers in India and also the sellers.", 1], ["The number of paying accounts continues to grow very strongly, and that's very, very important to us for the App Store business.", 1], ["The developer tools around ARKit and AR in general that I went through earlier, lots of interest there, lots of interest from the Watch App Store, to the Catalyst that will be released with macOS Catalina, which allows developers quickly to port a iOS app to the Mac.", 0], ["We are seeing strong traction in that front as well.", 1], ["If not the best, we are continually driving up efficiency and lowering costs and we see that in our bottom line.", 1], ["But I like where we are.", 1], ["I think on the Facebook app, I just say the DAU trend paints the picture broadly for Facebook.", 1], ["And then that phone is then redistributed to someone else.", 0], ["On the second half of your question, I tend to think you're right.", 1], ["Now what we will talk about in more detail is that the quarter-to-quarter results in any given year will be a little bit more volatile.", 0], ["So I would expect us to have the biggest change in our margin structure to happen in 2019 and for it to moderate from there.", 1], ["What I can say about India is when we see a positive surprise we double down on it.", 0], ["But, yes, we are investing more in general in sales and marketing over time,", 0], ["Yeah, and in terms of voice calling, no, we're not going to charge for it just like we're not going to charge for messaging.", 1], ["Now one of the things that we see is that the way that we are sharing is always changing, and some of this is because of underlying technical transition.", 1], ["The other revenue growth that you see does include some non-advertising things as well.", 0], ["And that's probably frankly been true a little bit longer than we talked about technically in terms of what goes off and what comes on given we've now got, as Satya said, 60 million users and more than that in terms of seats sold.", 0], ["So we do need to build out more one-day capacity along with our transportation partners, but we're moving quickly and we've got a good head start.", 1], ["So there's no \u2013 I don't think we ever are going to declare that we are done making changes.", 0], ["So we look that that and we ask the question of hey, if 100 million people are in those very meaningful groups today, can we get that to be 1 billion people over next several years?", 1], ["On Brazil, just briefly, yeah we did recently expand and add an electronics category there in Brazil.", 0], ["In fact as I said, a lot of the Azure use case, I think you referenced this, have been non-zero-sum", 1], ["And we're going to focus a lot more on helping people share videos of their moments in their lives.", 1], ["So we have - we're currently working on evolving our Prime free Two-Day Shipping program to be a free One-Day Shipping program.", 1], ["And then just on your second question around advertising, if you look at the other revenue, the growth rate decelerated some.", 0], ["Having said that, I think we\u2019re in a good position and by sometime in late June, we currently anticipate being in a position that we could begin to sell the Apple Watch in additional countries.", 1], ["We've been investing quite openly in a lot of areas and continue to do so.", 0], ["So that's another place where something like Cosmos DB which is very unique in capability in the marketplace is definitely another service that's got real traction.", 0], ["If you look ahead five years, it will have ten times that number in it.", 0], ["So, yes, I do think that price is a factor.", 1], ["We have 500 million people watching video a day.", 0], ["So you know there\u2019s a lot of factors at play there on the enterprise business, but we are having great success and we\u2019re adding a lot of sales force or sales representatives, especially for the enterprise market.", 1], ["In this quarter we decreased by 700,000.", 0], ["On Qualcomm, I just want to make it very, very clear that we are accruing.", 0], ["I see a lot of similarities to where China was several years ago.", 0], ["We've launched Whole Foods products on our Amazon website, and we're -- the technical work continues to make Prime the Whole Foods customer rewards program and we expect to have more on that later in the year.", 0], ["In general, for the full fiscal year, we'll be right at or a little below where I thought we would have been, and so that's why the full-year perspective that growth will slow is still on track.", 1], ["It had a measurable impact on our run rate, our growth rate last year particularly Q2.", 0], ["But the places where we are more likely to go and put our OpEx in the coming quarters, in the coming years are going to be about revenue that's going to show up for multiple years out.", 0], ["So our improvement and continued improvement in our commercial cloud gross margin portfolio, I think this is a key criteria of that.", 1], ["So on all those measures, we really like what we're seeing and we like the investments that we're making to make that News Feed experience even better.", 1], ["So there will be differences quarter to quarter.", 0], ["And I would also add, Keith, the LinkedIn team has really done a tremendous job.", 1], ["I think that we can grow profit dollars, and I think that we can do that in the OpEx guidance I gave you for 2017, as we continue to pivot to that opportunity.", 0], ["On consumption, there are innovations that we've had like auto play in feed, but what's the next version of that, that makes it so that people can have an even more native and default video experience when they're in News Feed, as well as private areas like Messenger and WhatsApp.", 0], ["Those are hard questions that at some level, we\u2019re always going to do the best that we can, but we think that having a more democratic process for setting with some of those norms are would be helpful.", 1], ["Sometimes they have local latency concerns or security issues that require them to run things in their country, so that helps.", 0], ["We saw some lower productivity as we were expanding rather quickly, both local capacity in the off-season also in our delivery networks.", 0], ["The Wearables have done extremely well.", 1], ["As the stock market increased in Q1, a lot of these companies also went up.", 0], ["What I think is important, I think the active devices are hugely important and that's the reason that we released the number two years ago, and the reason that we\u2019re releasing that again today.", 1], ["Fourth quarter is a holiday quarter, so our top verticals were ecommerce, CPG and retail.", 0], ["I do think to your point that the monetization paths are going to be somewhat different, reflecting the differences in product philosophy.", 1], ["The vast, vast majority, virtually all of Messenger users, are using News Feed as well.", 0], ["This is one way to do it.", 0], ["And then on the other hand, we also need to improve the infrastructure to deliver the best videos to people and do that quickly.", 0], ["It\u2019s - my view is that it\u2019s sort of a transitional kind of thing and we invest for the long term, so we are continuing to invest for Apple\u2019s future.", 1], ["The FBA program is a key pillar of our Prime offering.", 1], ["We are working very hard to expand our one-day capacity, add carriers, add delivery partners at our own AMZL capability and have our partners expand their capabilities as well.", 0], ["So on the first axis, you get everything ranging from text to links, to photos, to videos, to immersive 360 videos and virtual reality content and this progression.", 0], ["If you'll remember, we grew head count 48% in 2016 and 38% last year, if you adjust for Whole Foods.", 0], ["If I had to point to what's really leading us to tighten the range, it's really the first factor which is the safety and security investments", 1], ["We have been -- for our servers and we had been depreciating them over three years.", 0], ["One is there's this continued progression of people getting richer and richer ways to share what's on their minds.", 1], ["And I think it's an important component of our M 365 value, but it's really not outsized.", 1], ["Phase one is really growing the user base and engagement.", 0], ["A lot of people every day in Facebook today are already messaging pages and businesses directly, and the businesses respond.", 0], ["So that nearly 40% growth in Amazon fulfilled units last year, and the continuation of the strong growth higher than the paid unit growth that we see in 2017 is resulting in a lot of fulfillment center capacity.", 0], ["And one of the good things about bots that we've seen is that it can decrease the amount of time that you have to wait before you get a reply back from interacting with a message.", 1], ["So, we worked with publishers to upload more news articles natively to Facebook and we\u2019re seeing great engagement from that.", 1], ["It's growing very, very fast Mike.", 1], ["And so I think generally this has been, at least as we see it, maybe it's not true for other businesses, that this worry is probably overstated.", 0], ["What really matters is you see an ad and you buy a product.", 0], ["because we have this very broad reach on both platforms plus the ability to target very specifically.", 0], ["But I would say that the nature of the types of video content deals that we're doing will make them more likely to show up after 2017.", 0], ["Customers continue to respond very well to the low prices.", 1], ["I think the 15% is comparable to the 30%-plus that I mentioned in 2016 and 2017.", 1], ["The focus really for our messaging products is to continue to drive user growth and continue to build great products that are fast, useful, engaging and fun.", 1], ["I think we are applying our resources to opportunities when we see them.", 1], ["So our forecasts are based on supply and demand and how we see the different product launches playing into that different optimizations that we make.", 1], ["So that's kind of the big thing.", 1], ["So to me, that's why Azure is pretty strategic for us, not just for the attachment of high-level services in what is defined as Azure, but the all-up digital transformation opportunity.", 1], ["The smartphone has not done as well in India in general.", 1], ["End of support obviously we've got SQL in July and then Windows in January.", 0], ["And what we're starting to see is that people are using Facebook, Instagram and Audience Network to drive their objective in a cohesive way.", 0], ["And I expect piloting to start and deployments to start in the second half of the fiscal year.", 1], ["The gross margin is not the primary metric we use to measure the business.", 1], ["And that's what we're investing in.", 1], ["It comes in the form of just the EAs renewing more to Office 365.", 0], ["But it really was more in Windows.", 0], ["That being said, we\u2019ve a lot as you saw this quarter room to grow gross margin dollars, in that even within that frame going into FY\u201919.", 1], ["I think the power of what we're able to do really goes to the targeting.", 1], ["That cloud-led conversation and making a plan for customers to best change and transform their own business certainly is a far more in-depth one than on occasion is required by long-time Transactional purchasers, especially in Office, as an example, because what we're talking about now is really pivoting your business for the long term.", 0], ["We know that when people are using more of the opportunities to reach consumers, their returns often go up.", 1], ["In some cases, we\u2019re making adjustments to get in line with demand.", 0], ["because it's solving a measurement problem which is that the current systems for serving and measuring ads are really flawed.", 0], ["And as Brian mentioned, some of the upcoming programming should be pretty good in the fall.", 0], ["So you remember last quarter, I made the point that 2018 saw lower growth in some of our key cost areas.", 1], ["So when you say killer apps, the killer apps are how are customers able to reimagine how they think about customer engagement, how they think about employee empowerment or the operational efficiency, or how they can change the products and the business models and the products.", 1], ["You have to consider the constant currency growth rates.", 0], ["I mean, we could handle that if we needed to, we're a big company.", 1], ["So when we think about the Intelligent Cloud and the Intelligent Edge, and then bring that to the Azure business, you can see it at each layer.", 0], ["And then, obviously impression growth is driven by the users' time spent in ad load.", 0], ["The first is just the evolution of the regulatory landscape, and here I would point to regulations like GDPR.", 1], ["One interesting example recently that I touched on earlier is between Messenger and WhatsApp, we're around 60 billion messages a day.", 0], ["And as I look geographically, where we've been doing really good in the emerging markets, our share is still not high in any of them, and so there's a lot of headroom there as well, as there is in most developed markets as well", 0], ["And I think it's important to note that the regulatory and platform changes will have a disproportionate impact on the ability of small businesses to use ads to grow and thrive.", 1], ["We need to improve in each one of the elements, but all-up we need to improve because we think that increased opportunity is what's unique about our approach.", 1], ["Then within that installed base, of course we want to make sure that there are more people that are so interested in our services that in addition to transacting on those services on a free basis, they also are interested in paying for those services.", 1], ["We think that is a good strategy rather than invasive things that take away from the shopping experience.", 1], ["because the amount is very large.", 0], ["And we're nearly tripling our number of new Amazon Original shows \u2013 TV shows and movies compared with the second half of last year.", 0], ["As a reminder, the two biggest impacts of purchase accounting, one is it does impact the deferred revenue.", 0], ["I would say that improvements in machine learning are the most important technological trends in the industry now by far.", 1], ["Now the second point is that it builds on the rest of the cloud investment.", 1], ["So that's part of what we saw, very strong operating efficiencies as we hit essentially the highest end of our revenue guidance.", 0], ["The cat food category is big and they want brand awareness.", 0], ["That includes building products around Facebook and Instagram and continuing to improve those but also in new developing areas like AR/VR.", 0], ["Also, where the iPhone 7 Plus did well, we didn't perform as well on some of the previous generation iPhones.", 0], ["Almost half the people in India are below 25.", 0], ["And as people really use our Custom Audiences, our targeting tools, the quality of the ads improve and the returns improve.", 0], ["The primary driver in terms of billings is how I tend to think about that, has been pretty consistent.", 1], ["And all of these products and all of the underlying targeting like custom audiences are designed to help people meet different objectives and we're trying to be really clear on that", 0], ["And I think we'll expect to see progress on that over the course of the year.", 1], ["We're also seeing opportunities around Instagram Explore going into 2020.", 1], ["And that I think is a big social issue that is eroding the social fabric of the whole society, not just our country, but around the world.", 0], ["And we support them with their hybrid computing needs and their AI needs.", 1], ["I mean, overall, a lot of our transformation, whether it's on the engineering side or on the marketing side or on the sales side, have all been driven by the opportunity we see with the broad platform capabilities we have across all of our commercial clouds, whether it's Azure or Dynamics 365 or Microsoft 365.", 1], ["And if you look back three years sort of how this EA expiry base works, our performance this quarter was really strong compared to three years ago", 0], ["One of the things I feel very good about our position is how do you really build a long-term profitable business; that's front and center to me.", 1], ["So we're excited about there.", 1], ["As far as the upgrade momentum, the fact that we crossed 200 million active devices, we feel very, very good about that.", 1], ["And again, I don't think you're going to see the same impact going forward.", 1], ["The next big use case that we've really been working on for a couple of years now and I think is going to \u2013 is starting to roll out and is growing quickly is people finding content on Facebook.", 1], ["And those are slow interactions.", 0], ["So we're in the very early innings of E5, but the value proposition and the TAM or the total addressable market of those three scenarios is huge, and so we remain very excited about it.", 1], ["There is clearly \u2013 and in fact, as our products have become competitive there\u2019s been this mix shift.", 0], ["so were super excited about India.", 1], ["We protect the consumer product and the consumer engagement.", 0], ["We've opened a developer, accelerator there, which we're very happy with some of the things coming out of there.", 0], ["The fact that you may see competition where there may be less differentiation, the real differentiation is where you've always been able to achieve margin and margin expansion, which is in the completeness of the solution or its delivery, the completeness of the business process change or not.", 1], ["And then on the logistics question, stepping back, the reason we add logistics capability and transportation capability is so we can serve our customers faster and faster delivery speeds and we've needed to add more of our own capacity to supplement our carriers and our partners.", 1], ["because we know that over time that creates the monetization opportunity.", 0], ["It also seems like that from a rollout point of view there's a -- you will see these plans offered in a significant way in the United States already, but in fact these plans are being offered in some derivation in over dozen countries in the world.", 0], ["And so this allows us to focus on maximizing subscribers, particularly in the early going.", 0], ["To step back again on that, our general philosophy is we want to find things - businesses that customers love, that can grow to be large, will provide strong financial returns, and are durable that can last for decades.", 1], ["They need to be natively social than a video ad that runs on TV.", 0], ["You're not going to send a lot of things people don't want to see if you're paying for them.", 0], ["And we also see a point out that you know increasingly what we\u2019re doing is renegotiating or negotiating incremental price decreases for customers who then commit to us long term.", 1], ["It's really the flywheel of Prime is definitely working.", 1], ["But we're very committed to it and believe that \u2013 it's already a big business and believe over time it will be even larger.", 1], ["We are at an annualized run rate above $26 billion and that was about $18 billion this time last year.", 0], ["And as I believe I already mentioned, we like what we see.", 1], ["And so we see all of those as very encouraging signs.", 1], ["So we anticipate doing that in Q2 this year as well.", 1], ["And so these whole communities have formed, which was somewhat surprising to us honestly, because we hadn't developed that product specifically for buying and selling.", 0], ["But I suspect that any time there are large numbers of customers that have a phone that's in that two year kind of range that it tends to be a sweet spot, and I think you probably will see a lot of people trying to recruit those customers.", 1], ["That's been a contributing factor to MAU growth.", 0], ["And we're just seeing that people like to engage with that a lot more.", 0], ["And I think over the years, we made very good trade-offs and our gross margins have been quite stable over time.", 1], ["It was a record for us, so we see a lot of opportunity in these markets.", 1], ["We want to make them better all the time, and that typically requires additional cost and so the cost structures of our products, new products, tend to be higher than the products that they replace.", 0], ["And these are modules that there isn't an installed base of those anywhere, no competition even exist.", 0], ["Again I want to point out to the 20% year-over-year growth.", 1], ["And what happens is that from Facebook or Instagram Feed or from Facebook, Instagram or Messenger Stories, you can click-to-message a business on Messenger or WhatsApp.", 0], ["Video ads are really exciting.", 1], ["And it's good to see that kind of growth at that kind of scale now with $8 billion.", 0], ["We've talked about the drivers of supply being growth in DAU, growth in time spent per DAU and ad load, and obviously, we've given stats around rough stats around \u2013 we've given specific stats around DAU.", 0], ["Last year, we added regions in the UK and Canada.", 0], ["And then you can complete the transactions and follow up with businesses individually and have an ongoing relationship through Messenger and WhatsApp.", 0], ["And IDC\u2019s estimate of the market for last quarter is a 16%, so we grew two and a half times.", 0], ["It is very, very important I think for investors to understand that what's happened during the last two years", 1], ["And we're continuing to see strong growth across all those sectors.", 0], ["So in summary, our guidance for iPhone; we got double digit year-over-year growth and acceleration of sell-through growth on a year-over-year basis.", 1], ["We do see growth in the other verticals as well.", 1], ["It was minimal in Q1's results.", 0], ["So that's, I think, one of a number of factors.", 1], ["It\u2019s certainly a competitive market that we see and we\u2019ve seen for really a number of years.", 1], ["We continued to hire a lot of software engineers.", 1], ["And we actually prioritized making the mobile experience good before putting ad there.", 0], ["In terms of integration, all the apps are already very integrated today.", 1], ["Really, we're still evaluating the situation in India.", 1], ["The growth in Prime has been fairly consistent over the last recent quarters in Prime memberships, and as I said, we had the largest new sign-ups on Prime Day for the Prime program.", 0], ["So I myself, in fact one of the things that Amy and I do, is when we think about our CapEx, we think about all these layers together.", 1], ["We also think the ROI is very high here.", 1], ["We never had that kind of a management footprint.", 0], ["That's why we are working with Alexa, we would welcome it on our devices,", 1], ["And we also had a very, very strong quarter in Japan in the March quarter a year ago, which was driven by very significant carrier promotional activities, and a pull forward of sales into the March quarter in anticipation of a consumption tax increase that took place on April 1, and again that is not going to repeat.", 0], ["We try to make it more stable through the hedging program.", 1], ["And the second is having a business partnership with news publishers that I think can be sustainable over the long term.", 1], ["First, we're improving our Android experiences, and we've talked about the impact that Facebook Lite has had on that, just making easier registration processes, just making Android \u2013 our lightweight Android app easier to use.", 0], ["There was some on-prem strength this quarter, it does show-up in bookings, it doesn\u2019t show up in unearned and it does show up in the P&L, we had a good quarter there.", 1], ["This is the fourth consecutive quarter that we've had double digit growth in Greater China.", 0], ["So it\u2019s still early and what we\u2019re focused on really at this point is relevancy, making sure that the ads are relevant to our customers, helpful to our customers, and to do that, we use machine learning and that\u2019s helping us to drive better, better and better relevancy.", 1], ["We wanted to make sure that we have competitive Windows ecosystem participation across all the price points.", 0], ["And during the quarter tactically the emerging markets had a bit of a rebound.", 1], ["And my broader concern is that if that doesn\u2019t get put in place, then frustration with the industry, I think, will continue to grow.", 1], ["We\u2019re testing it in a handful of countries to start just to make sure that we have the UI and interaction simple enough that people could express more of what they wanted without getting in their way, it is adding a little bit of complexity to something that is very simple, say just a one tap like button.", 0], ["And so we think the mix shift to Stories is a big opportunity for us and it's going to take time to continue to get advertisers in, but we're very happy with demand to date.", 1], ["I would say I talked about sort of the reasons the three big reasons why customers choose our cloud in our cloud infrastructure in particular.", 1], ["We\u2019re super confident about the pipeline of products and services that we have, and therefore, we believe that there is great value in our stock.", 1], ["Although we've had Prime Day in most of those countries, it's really starting to gain more and more traction there.", 0], ["But we need to keep into account the fact that these positives are going to be partially offset by the cost structures of the new products that we are launching now and we've launched already a few during the September quarter and that will have an impact on our December quarter results.", 1], ["You may recall we've been in Brazil for a number of years now, initially launched with really a Kindle and e-books offering without the sort of physical categories and, more recently, added physical books again, a third-party marketplace offering.", 0], ["We have a great group of carriers that we use globally and you know who they are.", 1], ["We obviously support that with all of our servers.", 0], ["And so, when I look at the businesses that we've built and the businesses we're investing in and do I feel like this needs for tech intensity that Satya talked about, that will ultimately drive the desire and need for customers to adopt technology, we're in the right places.", 1], ["In spite of that, it was an all-time record revenue.", 0], ["We sold more units than we thought we would and so that was a part of that.", 0], ["It's not just what people think of as direct response advertisers.", 0], ["The first one's just pure revenue scale.", 1], ["And I think, in fact unlike any other time other than Windows, we've not had this kind of platform effect.", 1], ["Karl, thanks for asking that question; it gives me a chance to reiterate how many of those components are bit one-time in nature.", 1], ["And so when it's annuity based there is really no opportunity to see it as upside in Q4 from an end of support frame.", 1], ["Well, one of the things that I\u2019ve been focused on is trying to help develop global frameworks where possible, but the challenge of course, with that is that except in a limited number of cases, regulation typically isn\u2019t global; it\u2019s national.", 0], ["On the CapEx guidance, this is really just about better visibility on how spend will come through.", 1], ["The big shift that we are making when it comes to phones is to not think about phones in isolation.", 1], ["Frankly, our display business has been quite good.", 0], ["And we went through this process of integrating that and making sure that it\u2019s integrated with all these system well.", 0], ["So that aggregate portfolio is what helps us move up the margin curve.", 1], ["On your comment or question on transportation, we do continue to expand our Amazon logistics and delivery capability and it also matches up with our faster ship speed that we're seeing for Prime members as well.", 1], ["So that's one way that I think that this will be valuable.", 1], ["But across all of the different types of content issues of people trying to spread hate or incite violence.", 0], ["And people in our community, they don't know the difference about whether that content is coming from Facebook or a different place.", 0], ["And so, you will see us \u2013 with Windows 10, so you'll see us continue to do these integrations that add value again to both the Microsoft 365 and Dynamics users, as well as LinkedIn members.", 0], ["And then rest of world, we saw some countries come back online like Ethiopia came back online.", 0], ["Over time, we would expect that ad load growth will be a less significant factor driving overall revenue growth, but we remain confident that we've got opportunities to continue to grow supply through the continued growth in people and engagement on Facebook as well as on our other apps such as Instagram.", 0], ["And then on your question of marketing, yes, the marketing percent of revenue was up 110 basis points year-over-year.", 0], ["EMF continues to be I think of incredible value to customers.", 1], ["So really, it\u2019s the compounding of those three issues that are creating headwinds that we think are going to impact us, as we get later in the year and into 2020.", 1], ["If you back out exchange that\u2019s approximately breakeven, included in there we certainly have a sizeable step up in investment in India.", 0], ["And, again, that's a big part of what we're trying to do to drive the overall ads growth story, as well as providing a good experience for users with the ads that they're seeing.", 1], ["So we ran a bunch of qualitative studies and talked to a bunch of people and incorporated those signals into the model, and that has had the result that the people in our community who gave us that feedback and who we worked with on this, what we had expected in terms of both increasing the quality of the content that people see, and therefore also enabling people to share more with their friends and the people that they want.", 0], ["We have a lot to do there, we think it\u2019s a great opportunity for us.", 1], ["So, you'll notice on the top line guidance of $31 billion to $33.5 billion or 22% to 32% growth incorporates the Prime Day results and I can talk more about that later.", 0], ["And we have the business model that aligns with them and their interests and the trust.", 0], ["because if we can connect, people seeing ads on Facebook to what they buy, in stores or in other ways, that's how you close the loop and that's why we put so much investment and hopefully so much innovation behind measurement.", 0], ["So we're very happy with the results in video.", 1], ["It was very lumpy this time with 18 warehouses in one quarter and another five in the first three weeks of the next quarter.", 0], ["We want to make sure we get the safety implications of that right.", 0], ["So, I\u2019m actually hoping that going into this next fiscal year, we do a much better job and customers do a much better job, but they don\u2019t benefit because the advantage Azure has because of the hybrid used benefits across the entire workload are pretty phenomenal, and we had a good set of sessions at our partner meetings this week just really making sure that everybody understand those benefits.", 1], ["I think the overall adoption cycle of Windows 10 in the enterprise is perhaps the best that we have seen in the enterprise for any new release of Windows, and primarily driven by security and manageability of the new Windows, and that's what's been the driver.", 1], ["So there's a lot of foundational work that needs to get done there.", 1], ["The second point that needs to be kept in mind, it is a fact of life and we dealt with it for a number of years now, is the fact that when I look at currencies around the world, virtually every foreign currency has depreciated against the U.S. dollar in the last 12 months.", 1], ["So if you adjust for those, with the Whole Foods growth year-over-year on an apples-to-apples basis was approximately 6%.", 0], ["And again, I don't think it's necessarily consistent with better price, better selection and better convenience for the Indian customer.", 1], ["And I will think general what we see, especially as contract gets larger, for us the opportunity under Tier 1 workloads for us to really see TAM growth.", 1], ["Just to recap the framework that we have here, the strategy is there are three phases for that.", 1], ["We expect the enterprise deployment to start in earnest the beginning of next calendar year or the second half of this fiscal year.", 1], ["So I think we're still seeing good growth in Europe on the revenue front, and a lot of the similar dynamics playing out in Europe as in the rest of the world where you see good impression growth opportunity, especially in areas like Instagram and Stories contributing to overall ability to drive revenue growth.", 0], ["I think Samsung shipping 5 million Gear VRs.", 0], ["To give you a perspective in of some detail, our business in India in Q4 was flat.", 0], ["In fact you should think of Azure as the common fabric of all our applications.", 0], ["So there is, in that sense, a cannibalistic effect of sorts that happens there.", 1], ["We added, of course, we have over 100 million items that customers would get within two days, but there's now over 3 million that will be delivered within one day or faster in 10,000 cities in town.", 0], ["We believe that iPhone will grow in Q1 and we base that on what we are seeing from a switcher point of view, we recorded the highest rate on record for Android switches last quarter at 30%.", 1], ["I mean, we have Facebook Marketplace is probably the most advanced and hundreds of millions of people use that to buy and sell things.", 0], ["People are just coming out of the 30-day trial period in the last few days or week or so.", 0], ["And then the second factor is just we're seeing proposed changes from the mobile platforms that are more oriented towards privacy which could affect targeting and measurement and make that more difficult.", 0], ["The small business number I talked about, the 50,000 per month additional customers that we're adding to Office 365.", 0], ["Our growth rates are good, really good by most people's expectations, maybe not mine as much.", 1], ["We're excited about this kind of thing but this is as early as anything could be.", 1], ["So we\u2019re certainly seeing good growth in places where Instagram is strong, including the U.S., so that\u2019s been good to see.", 0], ["The ops team did a great job handling record volumes in Q4 and also incorporating all the new capacity we had opened in 2017.", 0], ["But we were able to get this in a lot of different merchants and I give them a lot of credit for that.", 1], ["Our overall long term under imbalance has been impacted by the Windows 10 deferral over the past.", 0], ["And that's where we have a lot of work to do.", 1], ["And at some point we will probably want to work on that,", 1], ["There\u2019s a foreign exchange element, and I mentioned before the negative impact on a sequential basis about 40 basis points.", 0], ["I think we've taken our experience on how to help advertisers migrate to the right places and been able to do that even more quickly in new formats like Stories.", 1], ["So on the first, we announced that we have over 2 million advertisers who are buying ads on Facebook.", 0], ["And so that is the approach that we\u2019re going to be taking.", 1], ["Yes, I think the best way to think about it is, we certainly have an advertising part of our North American consume segments.", 0], ["We're really encouraged with what we are seeing, both on the customer side and the seller side.", 1], ["On CapEx, we still expect to be within the range of $7 billion to $7.5 billion, and we're investing aggressively in our data center footprint to support the global growth that we see.", 0], ["So we always do that.", 1], ["As far as competitive set is concerned, we -- again, we think that we have -- start with a very big lead in this space because of our many years of investment not only in capacity, but also in services and features that we provide to customers.", 1], ["It's not a simple thing that you can apply a set formula to or one variable or a couple of variable formula in my opinion.", 1], ["So the way we think about our overall investment, I think of this as a systems investment", 1], ["We have a very good business in SQL Server, we have perhaps the most competitive SQL Server product ever in SQL 2014, which is growing nicely.", 0], ["So we're looking for a good balance here, as we said.", 1], ["And so as we are able to grow the services business, that should provide a positive, a tailwind.", 1], ["On the category mix question, you know, obviously category mix does play a role in the gross margin.", 1], ["It's not just about EA attach although it absolutely can be one of the motions.", 1], ["In the past quarter we expanded further internationally to Germany, Spain and France, so it's a global program, again, offering free two-hour delivery on tens of thousands of items.", 0], ["And teaching people here is what a Facebook ad looks like was a new format people had to understand.", 0], ["And given that, we want to have these leading indicators showing up in our dashboard not are static reports and Power BI is this rich canvas for us to be able to, one, visualize data as well as ask natural language questions.", 0], ["The business continues to perform very well, driven off the strength of our mobile News Feed apps business, and really consistent with the trend we've seen in the last several quarters, we would expect that year-over-year ads growth rate to decline modestly in Q3 and Q4, and it's really", 1], ["And so I think, or at least the way that I see these, is each one of the emerging markets has a bit of a different story, and I don't see it as some sort of issue that is common between those for the most part.", 1], ["I think our partners have done a terrific job on that as well.", 0], ["We have significant content from the U.S. market.", 0], ["And so both of those are all happening in parallel.", 1], ["And then finally, we are rolling out our own product changes such as the recent launch of OSA that's our user control on what data stored on Facebook activity.", 0], ["So one of the pieces of criticism that I think we get that I think is fair is we're much better able to enforce our nudity policies, for example, than we are hate speech.", 1], ["And just if you're looking on a non-FX adjusted basis, the foreign exchange exposure, which I mentioned was $730 million or 250 basis points expected in this guidance.", 0], ["On wages, of course, we did raise wages and starting November 1 just under 400,000 employees, both full-time and part-time in the U.S. and UK will be getting a substantial wage increase.", 0], ["We still say it takes up to three years or three peaks to get to kind of network efficiency for a new particular facility, and that's about the same although the whole network gets sufficient over time.", 0], ["And so, when we think about the format of Messenger, we think about the direct correspondence between a person, either an existing or a potential client or with a business, and we think there are many times in kind of a life cycle of interacting with a business where that's a very attractive opportunity.", 1], ["So, we are going to start depreciating them on a four year basis.", 1], ["We're excited to bring the UEFA Champions League Soccer and College Basketball to Facebook, and we're going to continue to experiment with developing many different forms of content for Facebook.", 1], ["I don\u2019t -- easier way frankly to think about that Keith is our Q4 gross margin and our Q1 gross margin.", 1], ["Amazon business, yes, in April you may remember we launched it as a marketplace with specific features and benefits for businesses.", 0], ["So I think the systems are much more robust.", 1], ["But in terms of the business, the more important piece is how people can interact with businesses through Messenger.", 1], ["And the other one is the fact that our existing hedges expire.", 0], ["we see huge changes in customer behavior taking place now.", 1], ["They'll then bid differently into the auction.", 0], ["And you heard on this call me give a few examples of where we're already able to connect what happens in terms of ads with real sales of real products.", 0], ["So I don't think it's a philosophical shift.", 1], ["And I think when you look at the value, I think we feel good about the opportunity to continue to move these users including new first-line or frontline users that we've not had access before.", 1], ["But in addition to that, I must say there are two other things that are increasingly becoming fairly relevant in the adoption cycle, which is moving to both Office 365 and Windows 10 and getting essentially to this new frontier for productivity, which is an always up-to-date operating system, which is secure, and an always up-to-date Office experience that is a SaaS service.", 1], ["We did make some changes to our structure to stay in compliance with all regulations.", 0], ["So we will continue to invest there.", 1], ["If you go up to the Azure marketplace today, you'll see that.", 0], ["And our perspective on that is it's a combination of the Hong Kong dollar being pegged to the U.S. dollar, and therefore it carries the burden of the strength of the U.S. dollar.", 0], ["We certainly have additional delivery capability of our own.", 0], ["It can be product-launch related.", 0], ["And to your specific question, Mark, before every launch we tend to have a tightening in the channel as they prepare and run reasonably lean.", 1], ["We've done many things we're the only cloud provider for example that operates in China.", 0], ["So, I won't go beyond Q2 at this point, but again, we're very happy with the customer reception we had in Q1 and then the income that, that drove.", 1], ["We do realize it's a period of investment and we're in different stages of growth in different countries.", 1], ["I look at my own usage of one note in Surface.", 0], ["And so by very high, I mean that if you look in some of the developed market like the U.S., Japan, the UK, you would find that 50% of the people are buying an iPad for the first time.", 0], ["You know it\u2019s going to be hard on revenue growth, it\u2019s going to fluctuate quarter-to-quarter, it\u2019s hard to predict the pace of some of the sales cycles and the enterprise migrations that companies are willing to make or some are faster than others and some have other work to do before they can migrate.", 0], ["We just passed our Fifth Year Anniversary \u2013 celebrated our Fifth Year Anniversary, as the most visited site in India.", 0], ["That's something we can put in News Feed in Instagram and Messenger and it both grows the ecosystem and creates a new opportunity for interaction.", 0], ["so there's a great opportunity here.", 1], ["because every time we put an ad in newsfeed, if it\u2019s a video ad, it\u2019s taking a place of an ad with another format.", 0], ["And we were able to see that this quarter across all the core workloads in Office.", 0], ["So, there's always learnings that we have that's why we say it's still day one here.", 1], ["And so there is a real benefit right now to being an early adopter, the pricing is very attractive.", 0], ["And there's a number of transportation costs also related to the startup of a new fulfillment center, both inbound and outbound.", 0], ["So over time we may not have to ramp it as much, but I don't foresee any time in the near future that AI is going to make it to that if the cost comes down.", 1], ["That doesn't mean that the computers will be thinking or be generally better, but that is useful for a number of things.", 1], ["On the customer side \u2013 excuse me, active customer accounts are up 230% year-over-year.", 0], ["First of all, I don\u2019t think that of the comparison between Azure and AWS is the true north for me.", 1], ["So reuse of code, reuse of data, so you would use some amount if iOS infrastructure and then past consumption.", 0], ["And as I mentioned, 98 of our top 100 advertisers in Facebook are now advertising on Instagram.", 0], ["It's not our entire selection, it's tens of thousands of items that they may need on a daily basis.", 0], ["We've been running an experiment with mobile financial services in Messenger, and one of the things that we found in the Philippines, for example, is that people can buy access to data plans through Messenger.", 0], ["We then work on helping them use our ad products and upsell them to our paid ad products as well, and we announced this quarter that we hit 3 million active advertisers on Facebook and 200,000 on Instagram.", 0], ["In other words, we have now increasing past services that we are going to reinforce on Azure and attract more game developers", 0], ["So really that's a big part of the focus.", 1], ["So, I don\u2019t really think of that as being negative, and you saw the exact same behavior and dynamics.", 1], ["I think the Maersk example I walked you through is probably a good one, where it may start with some commodity workload on Azure or it may start with Office 365, but then it will end up with HoloLens and someone using Dynamics 365 for increased automation.", 0], ["Now over the next period, especially in H1, we continue to see -- expect to see very good hybrid percentage and execution, which help to offset some of that.", 1], ["The biggest focus \u2013 the biggest impact of the focus on meaningful interactions as Mark mentioned will be in areas like passive video, where from a business perspective, we monetize less on a time spent basis.", 1], ["So there's a big space here in terms of helping people have real connections and interactions around video.", 0], ["You can also have Siri call for you, you can send messages, you can get a Uber car or a Lyft car.", 0], ["I\u2019m a big believer in the ability for iPad to play in a major way in enterprise.", 1], ["And so our internal goal was to be able to beat the thousand level, and we thought it would be great if we were able to do that by a little bit.", 1], ["And then there is the hybrid choices, where if somebody's building a smart factory, they're now looking and saying, what is the server I deploy in the factory to manage the millions of sensors that are there across the factory.", 0], ["because 90% -- more than 90% of Instagram users are following a business.", 0], ["Again Mark this goes back to a little bit of understanding I guess how we think about both X as well as OpEx in terms of our cloud.", 0], ["Advertising was also a key contributor as we're continuing to make more value -- the offering's more valuable, both to customers and advertisers alike, and that was particularly strong in North America, although not in the North America segment.", 1], ["Our growth this quarter was very broad-based across all of the regions", 1], ["But on the shopping product itself, it is still very early days and we're working to improve the product and it's quite small.", 1], ["So we'd ask for some patience on this to do this correctly, and the game plan will be more similar to what we did in Facebook with News Feed.", 1], ["Really, Karl, what can drive that in addition to the overall gross margin improvement we talk about in the cloud, it's also really the strength we see in our Windows business.", 1], ["So that's looking great.", 1], ["And now it was more than 100 million people doing this, I think we\u2019ve really proven as part of that hypothesis, that this is something that people are going to want to go do.", 0], ["because it takes \u2013 it makes the ads more relevant.", 0], ["And so, we did see a bit of growth that we were excited to see frankly on a segment where we\u2019ve been working hard to make additional progress and add value.", 1], ["With respect to 5G, I think most people would tell you, we're in sort of the extremely early innings of it.", 1], ["So I would say the biggest impact in the margin that you're seeing in Q2 is really around the 71% increase in assets acquired under capital leases.", 0], ["We\u2019ve now made payments to developers in Greater China of almost $5 billion over half of which was in the last 12 months.", 0], ["It's starting to pivot to consumed.", 1], ["I think it's a strong economy there.", 1], ["So I think that that's a thing that we take seriously, whether it's connectivity and making sure that people actually all around the world get to enjoy and benefit from the opportunities that the Internet has or the improvements that come from AI, or eventually upgrading the computing platforms that we all get to use.", 1], ["So, it's a great success.", 1], ["And so those points of sale pretty much, the overwhelming majority of the low numbers of sales were not there until the last two weeks of the quarter.", 0], ["The ops team did a fantastic job here, not only in being able to expand one-day selection and delivery capacity, but also preparing for and handling some very high volumes on Prime Day earlier in the month.", 1], ["And so, with that right, it lets them easily transition between Windows or SQL to those same benefits in Azure with a small uplift in price.", 0], ["So we have a very rich story and this is not even talking about some of the other end-user BI capabilities like Power BI.", 0], ["We're committed to doing that because I think that this is important for our mission.", 1], ["And keep in mind that we have a good history of bunch of people buy one Apple product, they have a great experience.", 0], ["That's a trend that's not new for us.", 0], ["And I do feel like in that area, we could invest in Office 365 some of the new E5 capabilities and look forward to adding sales capacity to take advantage of that.", 0], ["I think it's accurate to save those type of markets.", 1], ["We continue to provide the same metrics that we were providing before.", 1], ["And I think it's a great opportunity for us both from a creation point of view and an ownership point of view.", 0], ["We sold Office on-premise or Office perpetual clients.", 0], ["We had a price decrease in Q3, and that was our 52nd since we started this business.", 0], ["So we're very happy with the growth in the business, the momentum that we're seeing with enterprise customers.", 1], ["You should think about in the next couple of quarters.", 1], ["We think this is huge and so great for the user experience.", 1], ["The way I view this is, the vast majority of our products are kind of made everywhere.", 1], ["Sitting underneath that is this very large 120 million dollar-monthly active users in commercial.", 0], ["Instagram ad load in feed is at the same level as Facebook, so that would be \u2013 that's certainly been helpful in our recent quarters.", 0], ["You're right that Quest is growing and doing quite well.", 1], ["So those are some of things that we're working on and we think there \u2013 we still have a lot of opportunity there moving forward.", 1], ["As you know, as I think we talked about before, we started manufacturing the iPhone SE there six, nine months ago so.", 0], ["And as you said, we started to experience some level of cost pressure on the memory side, particularly on NAND and DRAM.", 0], ["So, we will continue to invest and think that we have a good path forward.", 1], ["It helps with again Prime Now and AmazonFresh and a lot of initiatives that we'll see, which again we mentioned the Prime Now is tied in with Whole Foods, now in 10 cities.", 0], ["and that's why we're working to actively expand those partnerships.", 0], ["But the 100 basis points that I quoted includes the mitigating impact of the hedging program.", 1], ["And so, in order to have that local compute in some of these factories with millions of sensors, you may in fact need Azure Stack.", 0], ["For the first time, what you see across Microsoft is really one platform which spans all of these businesses and all of the margin structures that are there represented in it.", 1], ["But just to put that in perspective and compare it to the development of previous computing platforms like phones and computers, I think the first smartphones came out in 2003, and in the first year, I think BlackBerry and Palm Treo were the initial smartphones that came out.", 0], ["Consumed revenue is actually a great leading indicator for what we expect our Azure growth going forward to be.", 0], ["The currency weakness has been part of our challenge there, as you can tell from just looking at the currency trends, but I view these as speed bumps along a very long journey, though.", 1], ["But that\u2019s about $100 million impact that we would not have seen before that.", 0], ["We talked about that in both Mark's comments and my comments and we're continuing to ramp that investment.", 0], ["And on Whole Foods, yes, I believe the total is 465 stores or thereabouts.", 0], ["It is not only investing, but also working on efficiencies, adding new products and features for customers.", 0], ["And again, in Q2, we'll start to lap this.", 1], ["They can consume video very easily on a phone.", 0], ["I think, we have opportunities, Amit, in both the growth of the installed base as Luca mentioned in his comments, we continue to grow across every category, hit new highs in the last quarter and we hit new highs in all of our top 20 markets.", 1], ["As you know very well, in addition, our product ranges for all the major product categories have become wider over time and therefore, a unit of sale is less relevant for us at this point compared to the past, because we got this much wider sales price dispersion, so unit of sale per se becomes less relevant.", 0], ["So what you've seen, for example in fiscal 2016, you've seen investments in R&D growing at 25% and then our SG&A expenses to be about flat.", 0], ["Now, on the flip side, I try to be very careful in my remarks to be clear that this is one of those situations where the community growth that we're seeing is outpacing the progress that we've made so far on developing the ads in that space.", 0], ["And so when Japan is strong, it tends to be a very high margin landing down to the bottom line.", 0], ["The iPhone Xs Max which was new was $100 more than the Xs.", 0], ["but I think it will be something you will see step up after 2017.", 1], ["And so you will see a little bit of volatility in this number as those contracts and the type of contracts start to land.", 1], ["So I think that building groups is - it obviously cannot replace people getting together in person, and a lot of the most successful groups are successful", 1], ["So I think those headwinds are still real and out there and that factors into our outlook as well.", 1], ["So those would be the places where we are fairly differentiated, and that's what you see us gaining both for enterprise customers and ISVs.", 1], ["but our penetration is low,", 0], ["The program will be global.", 1], ["On a year-over-year basis, I think you have to look at two things.", 1], ["And it includes a lot of the transparency work around advertising in general, but also the political and issue ads archive and verifying all advertisers who are trying to run political and issue ads.", 0], ["So for example, HBO used our video retargeting mobile app install ads on Facebook to drive downloads at HBO now, and Facebook is now the number one channel driving subscribers.", 0], ["A lot of small businesses want to set up storefronts.", 0], ["We don't have enough women going into computer science,", 0], ["We are looking at, in some cases, at the potential to increase prices in certain markets.", 0], ["You can take a video and upload it without having to take five minutes to do that,", 0], ["The population of India is incredibly young.", 0], ["We see more impact of this hybrid, private, as well as public cloud all being complementary.", 0], ["It is already the third largest smartphone market in the world.", 0], ["We had a great Reinvent Conference in the quarter.", 0], ["So News Feed at the core is proving to be just a great experience for users.", 0], ["So, on the op margin side, although there was improvement year-over-year and, yeah, you're right, it is still on FX-neutral basic \u2013 basis negative.", 0], ["So we are paying some that's been comprehended.", 1], ["And so I'm not very surprised that some people are falling out of it.", 1], ["It's just where you see volatility in-quarter has always been in the transactional side of our business.", 0], ["That's what starts in a week's time, and that is a more retail execution and upgrade.", 0], ["And we really believed that, and call it five years, or whatever the period of time that it takes to get there, I think most of what people consume online is going to be video.", 0], ["And I'd just add that the seat growth as well as the ARPU growth, one of the things even in spite of the success we may have achieved in the past, we never were that successful in penetrating with all of our workloads when it comes to small business and definitely across the globe.", 0], ["I mean, I think what you're fundamentally seeing in that overall KPI is what I think are two major advantages we have.", 1], ["You can think about it as a two-dimensional grid where one axis is the richness of the content that people want to share, then other axis is the size of the audience, or intimacy of how people want to share.", 0], ["because it's not something that we particularly like to do.", 0], ["We are inventing things in India that do not exist in other parts of the country \u2013 excuse me, parts of the world.", 0], ["We continue to innovate on the products to make them more effective and make this a great gateway for businesses to come onto Facebook and come into mobile and spend.", 1], ["CCPA, I think is still a work in progress.", 1], ["But independent of that, yes, you're right; Prime membership continues to grow.", 1], ["But we also expect revenue growth in gross margin growth to come out of that investment.", 1], ["And that's what's I think the killer opportunity, not any one technology, but the entire flow.", 1], ["I think the team is executing well there, so I think you've got a variety of factors.", 1], ["As we look out, we do expect that beyond 2018 - sorry, beyond 2019, we'll have expense growth more in line with revenue growth.", 1], ["We're investing aggressively, whether it's on the field side or on the CapEx side to attract more customers and more workloads per customer.", 0], ["At the same time, on the market side, we have emerging markets where we have low penetration.", 1], ["It's not necessarily in the overall geo footprint build out.", 1], ["Its probably is worth adding that, although prices are factor, the primary factor for customers choosing with AWS is really around their ability to move quickly and to be nimble and agile", 0], ["The starting point for our expectation would be, the usage growth would be very \u2013 that our growth in infrastructure costs would start with the growth in usage, which has been exceeding the revenue growth rate.", 1], ["The multitude of launches that we had in reinvent was great for all sizes of customers, really, both large and small; both companies starting \u2013 just getting their start with AWS, but also companies that have been engaged with AWS for many years.", 1], ["Of course, I use Word, PowerPoint, Excel, Outlook, on a daily basis.", 0], ["And they create different dynamics in the system, and I think that's an important thing to understand.", 1], ["The government stimulus, this came in terms of a VAT reduction, a very bold one.", 0], ["We've had some great success in 2014 and 2015.", 0], ["You're not wearing VR out in public.", 0], ["But VR is still very much in the development stage.", 0], ["On ad load, we have a lot of experience rolling out ads into feed-based products and we monitor it very carefully and we're going to continue to monitor really carefully.", 1], ["So that's proven to be a, I think, a good skill for folks to be able to enjoy in addition to a really kind of rich and growing Amazon skill set.", 1], ["But in all of these different ways, voice and how people interact with each other and eventually building products that allow people to interface with our products through that, we\u2019re quite focused on this.", 1], ["The reverse of that is also true, is that somebody got the iPhone and then decided I really want something to coach me in fitness and to curate some of the communications and so forth like the watch does so well and so it's not always a linear path.", 1], ["And then in Q4, last time on this call I mentioned that we estimated Q4 would be $1.5 billion penalty.", 0], ["As long as it's in stock, as long as it's priced competitively.", 0], ["There is a certain tranche that we can dial up quickly, and we've started to do that and you'll see that very quickly in Q2.", 1], ["You see it this quarter.", 0], ["So we're super excited to have the platform and to continue to invest in it.", 1], ["In its own right, we think of Office as perhaps one of the most strategic developer assets we have and with the Microsoft Graph API and what we see as activity around it, we think about the platform effects of that as also being very key.", 0], ["So, we're continuing to hire and hire across a number of locations.", 1], ["So we see the combination and they're not all happening coincident, but there is time lag in it but therefore that\u2019s one of the reasons why we want to be very aggressive in getting the workloads on to Azure both storage and compute; and even in the storage and compute, we now have premium offerings for higher SLA, for higher performance, higher VM sizes and then on top of that, we have these managed services which have a different margin profile.", 0], ["And we also open up to new customers when we add these regions.", 0], ["And in the case of AT&T we were the only public cloud in there.", 0], ["But I can't tell you just yet what that timeframe is going to look like, but I think we're well-positioned over the long-term because we're leading in Stories in basically every country.", 1], ["But I think we\u2019re off to a good start.", 1], ["I do think that the assets that we have in this area are huge and I do think that it's probably something that the investment community would want to and should focus more on.", 1], ["So that\u2019s why utilization of that entire infrastructure is how we think about even total return on invested capital for our cloud business.", 1], ["On the flip side, currency devalued by 5%, and so that's not an insignificant headwind.", 0], ["There will always be somebody who chooses to purchase on a one-time basis, or there's a logic to it", 0], ["First, the top-line growth was \u2013 continued to be strong coming out of Q4.", 1], ["Our goal is to give marketers the highest return they can and over time to capture the amount of budget that's equivalent to the percentage of media time we capture and we're not there.", 0], ["I even referenced in my remarks how in healthcare people are using those to build bots and skills and agents.", 0], ["We're getting a lot of positive customer feedback.", 0], ["And we live in a mobile society.", 0], ["I think it's the direction that we should be going in with more things in the future.", 1], ["Wearables has very, very strong momentum.", 1], ["And we see a lot of that online and that's a pretty big issue from everything from bullying to terrorism, there are lots of reasons why people might otherwise have the tools to share what they would want but feel silenced.", 0], ["You don't know how much to pay.", 0], ["And so all these things, all these things together are all about the user experience and making people's daily lives better.", 1], ["Those are going to be the drivers.", 1], ["So we try lots of things for fulfillment.", 1], ["And we think that from a user point of view, as the smartphone itself becomes more and more essential to people's daily lives, which is a part of what I had talked about before, a part of bringing it into the home in a bigger way and in the car and at work and so forth, we think people will put more and more focus on what they're buying and the thing that Apple does best, which is provide this killer experience.", 0], ["And they do some really great work around standards-essential patents, but it's one small part of what an iPhone is.", 1], ["This is about $1.1 billion of negative foreign exchange on a year-over-year basis.", 0], ["But we feel good about how we're doing.", 1], ["You're right, we've got an extra few days.", 0], ["And then, Anthony, just real quick, this is Dave, on your question around media and probably more particularly the video strategy and what we're investing in, I mean, we are continuing to invest meaningfully in digital video.", 1], ["because if you look at what we do, is we spend our capital only to really fuel the growth or to service the growth of usage across Office 365 and Azure, and you see that increasing", 0], ["And I think the way we've seen this in the field is -- and our sales organization has been not unlike some of these Dynamics transactions or the Power platform transactions that require a fundamental understanding of business process and the changes you're trying to implement.", 1], ["So one example is a lot of people, hundreds of millions of people, are using Marketplace on Facebook now, and a lot of people are using that in countries where WhatsApp is the primary messaging app that they use.", 0], ["We're seeing strong usage growth that outpaces revenue growth as usual increased pace of enterprise migrations.", 1], ["On your first question about iPhone, I think the most important thing, Gene, as you know for us, will always be the product and the experience.", 1], ["So yes, continue to see growth in programs for both sellers -- for our sellers and delivery partners.", 1], ["And so it's really too early to tell what the conversion rate will be.", 0], ["As you know, we typically have what we call product transition costs during the September quarter, and this year we also have about 30 bps of headwind from foreign exchange again because the dollar has appreciated recently.", 0], ["We're judging our success by how proactive can we get, so what percent of the stuff that we're taking down are we identifying before other people identify it for us.", 0], ["For us, this is an important investment and it's very strategic.", 1], ["because there's some volatility in the ins and outs based on seasonality.", 0], ["Think of it almost like an Office business.", 0], ["So the fact that we were able to grow in that low expiry base is actually very good structural performance.", 0], ["First, video content and marketing associated with that is nearly doubling year-over-year in the second half of the year.", 0], ["Secondly, we're continuing to make big investments in innovation.", 1], ["But to your second question I\u2019ll even say the following which is that, I think that there is clearly difference in GM between the per user and consumption.", 1], ["And so if you look on a year-over-year basis, which is primarily what we look at from a unit point of view because it would have the seasonality embedded in that, we grew sell-through on a year-over-year basis.", 1], ["So I do feel good about how we're doing, but it needs to do a lot more obviously and we're very excited about the roadmap of things that we have ahead.", 1], ["And so we'll see how this area goes, but it is still an area of great interest.", 1], ["So that's where we book the gain on warrants that we have with \u2013 on investments.", 0], ["I think that Whole Foods really gives us a vast headstart on that and a great base.", 1], ["We're really glad to see that and that creates a great base of Echo and Alexa fans out there.", 1], ["And I'm told we had several hundred people waiting at the store in Sydney and I'm getting similar reports from across that region.", 0], ["I'm actually excited about our ERP business.", 0], ["That said, we're really excited about the opportunity I talked about, increasing the entertainment and media vertical and brand marketers, particularly.", 1], ["There are situations where the commodities markets are in good shape.", 0], ["We had a meaningful step up in North America in Q2 and it was accelerating through the quarter.", 0], ["We think there is a big opportunity over the long run here", 1], ["Because those of a long-term contracts relationships we want to have with our customers be it consumer, be it small business or large customers.", 0], ["I would also say that, although it's smaller internationally the impact of advertising is starting to show up more and more internationally.", 0], ["And the pilots, the place which in the second half is going to be a huge focus for us is the enterprise deployment, and that's where I think there's real excitement", 1], ["And our ability to blend them into interesting products that solve customer solutions, which may not even be priced as the component parts, is I think how we think about, especially in our solution areas that Satya talks about, how we talk about delivering it to a customer.", 1], ["And then I'd say across all of our apps, we're seeing strong adoption of Stories and, on WhatsApp Status products around the world, and that continues to provide another way for people to connect and share.", 1], ["If you're looking to see how we see demand, obviously this quarter in Q4, we felt very good about cloud demand across all three services, but in particular with Azure.", 1], ["The biggest difference on an annual basis with the adoption of ASC 606 will really just be the change from Windows OEM.", 1], ["Messenger today has 1 billion organic interactions between businesses and consumers each month.", 0], ["It helps us identify content that might be offensive or graphic that might violate the policies of Facebook so we can flag that and review that better.", 0], ["And therefore over time the community feels less comfortable sharing that kind of content on Facebook.", 1], ["That's perhaps the biggest shift", 1], ["So, we're building global scale in that business in both content and marketing.", 1], ["And that's what we are building towards.", 1], ["And then there are transactions, like for example, App Store sales, where a portion of the transaction does not get recognized by Apple, but it goes to the developer.", 0], ["So when you think about the shopping experience or the checkout experience on Instagram, these are still very early days, and we're working hard to improve the product and expand to more businesses.", 1], ["You know that we don't get into specific product from a unit standpoint giving guidance, and so we feel very confident about the trajectory for the company and for iPhone going forward.", 1], ["So, Anthony, I can just take the first part of that at least, which is \u2013 look, our focus is on kick-starting the ecosystem here for the video tab that Mark talked about.", 0], ["In terms of the next leg of this, given the momentum that we're seeing across the board, we feel great about our current services, but obviously we're also thrilled about our pipeline that have some new services in it as well.", 1], ["Then you can start thinking about Messenger and some of the other platforms we have.", 0], ["Yes, I think that's a fair interpretation of my commentary both last year and this, which really speaks to consistency.", 1], ["In terms of monetizing time spent, it\u2019s certainly the case that consumers have shifted to mobile and businesses need to catch up.", 1], ["But when you're running an operation and serving people at this scale, I think you have a responsibility to invest in all these things that are downstream that could help shape and improve people's lives, because I don't think that there are that many other folks in the world who will.", 0], ["And so you can bet that we're pulling that string.", 1], ["AI tools over time will be able to do a better job of flagging things for the set of people who are in the Community Ops teams that we can prioritize what we look at.", 1], ["We had especially strong growth in APAC and the U.S. and Canada, so that was part of the growth.", 0], ["So we will always be evolving that, part of that involves changing fee structures, sometimes, adding new fees or subtracting old ones, part of it involves raising or lowering fees that sellers pay.", 1], ["We like our position in it.", 1], ["I mean that is absolutely the fact, case, that is we are seeing a much faster adoption cycle, obviously starting with the consumer side but even the 8 million business PCs that are already running Windows 10 before we have started in fact the push on enterprise.", 1], ["So over the very long run, I think we remain very optimistic about the growth opportunities we have.", 1], ["CapEx, as I mentioned, grew quite a bit in 2014 and grew even more to over $9 billion across all of our capital expenditures and capital leases in 2015.", 0], ["But we're also making investments to support the core growth of the business.", 0], ["and we think we're making good progress there,", 1], ["So in terms of news and different kinds of content, I know this has traditionally been something that we've delivered a really good experience for in terms of people being able to share the content that they want, being able to get access to the content that they want, different recommendations from friends, and we've a lot more coming there,", 0], ["And then streaming is just a natural sequence of it.", 0], ["And I'm really happy to do this.", 1], ["And so that's the reason it's chockfull of incredible innovation.", 1], ["And the fact that so much video is being consumed on our platform gives us room for an ads business to grow", 1], ["We're also seeing a higher stock-based compensation expense.", 1], ["We had some \u2013we think some pre-buys in Q1 and we're overlapping that in Q1 of this year.", 0], ["So in terms of the deceleration, we continue to expect deceleration into 2020, but it would be, we believe, more moderated and the reasons for that, that we expect the deceleration.", 1], ["We are excited to have acquired the Sizmek ad server and then Sizmek's dynamic creative optimization or DCO.", 1], ["So that's really our strategy with LinkedIn as the professional network meeting the professional cloud.", 1], ["The entire impact in that KPI, I actually feel very good about that number", 1], ["We're continuing to expect strong annuity growth.", 1], ["And we continue to feel that there are opportunities to execute on those and to continue to grow inventory in that way.", 1], ["And we've spent a lot of time on this call talking about putting video first.", 1], ["And a lot of what we're trying to do is enable a number of those things through Facebook, while also building unique world-class services to enable people to share all the things they care about with all the different sets of people that they care about.", 0], ["We're seeing investment, we're investing in the audience network and we think it's important", 1], ["So, we think of those in really three components.", 1], ["We\u2019re really excited to get into customers\u2019 hands, so more to come there.", 1], ["Really one thing to kind of think about here is that improving the quality and the relevance of the ads has enabled us to show more of them and without harming the experience, and our focus really remains on the experience.", 0], ["Minecraft on mobile we just launched in fact in the last quarter in China.", 0], ["You know that we increased iPhone channel inventory by 3.3 million units a year ago.", 0], ["We've had a lot of adoption of our new services.", 0], ["And so those two issues, which really the main one is really the first one and the second one was a symptom of it, are in our views the main issue.", 1], ["Our approach to monetization anywhere is always very cautious and we are very - moving very slowly on Messenger, where we remain primarily focused on consumer growth and engagement.", 1], ["because we're still in the early innings of the cloud transition.", 0], ["And so some of the tools we've rolled out that I talked about where we can take your Facebook pictures and your posts and make it a story, that makes that process faster.", 0], ["Obviously iPod is a part of that, but there are other things in there, accessories and so forth, that are shrinking.", 0], ["And we think that we need to build up a lot of different muscles in order to be competitive and be able to succeed in that space and to be able to shape that space.", 0], ["I would say on the positive, we expect to benefit from leverage.", 1], ["So we use all these things to make assumptions around what the take rate is going to be.", 1], ["So that flywheel is working.", 0], ["Some actually roll up to EGM and media, as well.", 0], ["So that will have a small impact on revenue growth.", 1], ["You can see from the March guidance that we\u2019ve given, that we are incredibly bullish about iPhone going forward.", 1], ["We are seeing adoption in the building of new front ends, back ends for new front ends, so essentially using Azure as the cloud back end for their mobile apps across Android, iOS, and Windows as well as their web.", 0], ["Because there are really important safety and content issues in messaging and if we don\u2019t have the ability to see the content, we need to make sure we have different tools in place to handle that.", 0], ["We will come down on the side of the customer.", 1], ["because we got a lot of customers that are wanting to get one.", 0], ["But we're focused on continuing to invest heavily in the business across our near, mid and long-term opportunities and we see a bunch of great opportunities to invest there.", 1], ["They ran a video ad campaign across Facebook and Instagram Stories and they targeted people with dog-related interests and used Custom Audiences to exclude people who had already purchased their product.", 0], ["I think what you're asking is specifically for a transactional component when the old transactional component has gone.", 1], ["so I'm excited about that.", 1], ["We think about it in the combination of Office 365, Dynamics, EMS, because really it's one cloud infrastructure first of all from a capital perspective that sort of serves all of these and there's a virtuous cycle between all of these for our customers as well.", 0], ["And the research there is very clear that when people are using the Internet, and including our services, to interact with other people, that's associated with all the positive elements of well-being that you'd expect: feeling more connected, feeling less lonely, feeling happier, and long-term measures of health but when you're simply using the Internet to passively consume content that isn't necessarily associated with positive improvements to well-being.", 0], ["But I would say in terms of sustainability are quarter to quarter, Satya is right.", 1], ["And so we're happy with all the partners we have and continue to work with them to provide the best experience possible.", 1], ["There are two broad sets of improvements that I think we need to make.", 1], ["We aren't seeing a cause for concern.", 0], ["But overall, continuing to see the renewals we've seen, continue to see the cloud growth we've seen, I'm not sure I think of it as a fundamental trajectory change outside of that component we discussed.", 0], ["So that's where if you think about the thing that Amy and I focus a lot on is the capital efficiency end-to-end in that context versus getting caught up in even the capital efficiency as measured by any one of these individual pieces, because we think that's what Microsoft's uniqueness long term lies.", 1], ["People are constantly moving from home to work and to other things that they may be doing.", 0], ["That's where we have pretty unparalleled value, which is we have Visual Studio Online and some of the tools I talked about, so you can generate these apps at a low cost of ownership, manage them, secure them, and deploy them to our phone endpoints, and then of course, management and security.", 0], ["We also are very happy with the switcher rate that we saw, our highest ever recorded.", 0], ["The opportunity for us across what the cloud makes possible for our commercial business and this moment in time that I am a believer in of where companies are going to change their businesses to rely more deeply on technology than they ever have.", 1], ["So that clearly is having an impact in APAC and India was our strongest growth market.", 1], ["I mean there are a lot of communities that can get that -- people who really care about gaming.", 0], ["And in the last year, we just added more focus and we put more selling capacity around it, more marketing capacity, and now for the mainstream that's across Microsoft", 1], ["And just to add quickly, I mean, Stories on Facebook is growing quickly.", 0], ["We want to make it so that the infrastructure that these services are built on is the most secure and most reliable and fastest and most widely available of any of the major messaging platforms out there, we think that that\u2019s the foundation to build a successful private platform on.", 0], ["And it turns out that we have ISVs in many cases driving new applications on top of Azure.", 0], ["As you know, we just started shipping those in late June, but we're very excited about the potential and the addition of the video screen and the messaging capability and video capability.", 0], ["We also do a lot of qualitative surveys to see what people, what makes \u2013 what people write in that they want to see from us, what people tell us is the most important thing that they saw in Facebook today or saw anywhere in the world today and what they would've wanted to have seen on Facebook.", 0], ["We will raise debt both in the U.S. and outside of the United States.", 0], ["And then as you might imagine, that provides an interesting environment for us to add on some of the products actually that Satya mentioned very directly in his comments such as EMS or Enterprise Mobility Suite.", 0], ["And so it's very large and to the best of our knowledge, we've shipped more assistant enabled devices than probably anyone out there.", 0], ["When you have Skype translate when two people are talking two different languages and are able to automatically translate without between languages, it's using a deep neural net pens bring together speech synthesis, speech recognition and machine translation with Skype data, that is fairly magical.", 0], ["So those are the two trends we're seeing.", 1], ["So that\u2019s probably the biggest difference that we see between India and China.", 1], ["And so I feel really good about where we are, and you can hopefully tell with the strong guidance that we provided, that we\u2019re very bullish on the current quarter as well.", 1], ["And the value as we continue to see in SQL next year I do think there is some opportunity for customers to realize the real value from these hybrid benefits.", 1], ["I feel really great about it.", 1], ["On TV, we are definitely seeing people continue to advertise on TV and use us as a complement.", 0], ["In fact, if you take Walgreens Boots Alliance, it was Microsoft 365 as well as Azure.", 0], ["We hit 200,000 for Instagram, and often the platforms really work together.", 0], ["So each of the geos did extremely well and we set records from the App Store to the Apple Music to iCloud to Apple Pay and more.", 1], ["But with a strong technological foundation supporting all of these different use cases, the Facebook app has always supported people using all of them.", 0], ["So we're going to experiment with multiple ways of reaching the customer, wherever they happen to be.", 1], ["We also rolled out ads in Marketplace, which are available in 94 markets, which means advertisers can extend their News Feed ads to Marketplace.", 1], ["But what Mark alluded to was video is where people \u2013 as networks improve and devices improve and our products improve, video is the most engaging experience that we can offer.", 0], ["Messaging, I think, is going to be pretty similar, right?", 1], ["So during the quarter, we had this combination of starting with no iPhone SE units in channel inventory, so we had to do an at least a partial channel fill that obviously had an impact on ASPs.", 0], ["Overall what we have seen is the public cloud or cloud infrastructure makes it much more possible for businesses of all sizes and developers of all sizes to get at infrastructure with much less friction than ever before.", 0], ["Sure, I'll start Mark and having grown up essentially in our infrastructure business at Microsoft, I would say that compared to even the previous eras where we did well in the client server era, in face of tough competition and in this era again in the face of a different set of competitors, we are doing well and we are doing well much better than we did in the previous era because we are seeing these tier 1 workloads which we never saw in the past.", 1], ["The ops team has done a great job getting us to a position where we are in and I think that\u2019s going to be a great additional service for customers in Q4.", 1], ["And we traditionally see a step-up in stock-based compensation expense in Q2, and we're seeing the same thing this year.", 1], ["If you're a large company or a small company, you can buy Facebook.", 0], ["And I think the best proxy for you really beyond any numbers we talk about in terms of monthly active is our capital,", 1], ["There's a lot of movement of tech head count.", 1], ["The ramp for iPhone X is going well, especially considering that iPhone X is the most advanced iPhone we've ever created and it has lots of new technologies in it.", 1], ["To grow on a base that big, that kind of rate, you really need pretty strong performance across the board.", 1], ["So just to put numbers on that, the year-over-year in the U.S. or in North America was 32% growth, which was up from 28% in Q4.", 0], ["We've seen similar types of attempts from Iran, China and some places, others as well.", 0], ["At this point, both of those are very large buckets of investments, which Satya and I as well as the whole senior leadership team spend the majority of our time picking markets and making sure we execute in them.", 0], ["Mark, as I talked a bit about, we've seen a mix shift as we have moved Office 365 and Azure to our premium service and to premium SKUs within our cloud environment, that is one of the drivers that helps improve margin growth.", 1], ["Now, one of the things that I think is going to be interesting, and in some cases a little frustrating, is that AI tools lend themselves towards identifying certain content a lot more easily than others.", 1], ["We did see a big jump in head count in year-over-year.", 0], ["One of the challenges in retail and in many other industries is what's that messaging tool that has actually got the security framework that they expect of any other enterprise tool as opposed to using one of these consumer messaging tools, which then all the liability is with the enterprise.", 1], ["And that includes the Facebook mobile app, where we saw good year-over-year growth in time spent per DAU", 0], ["And so all in all, there were quite a few things going on there.", 1], ["So we're in the middle of the journey here.", 1], ["If you look at the gross margin, it dropped from 86% to 84%.", 0], ["And then finally, the last point that we've taken into account is what Tim's talked about in terms of some level of uncertainty at the macroeconomic level in some emerging markets where clearly consumer confidence is not as high as it was 12 months ago.", 1], ["What we're also seeing as we look at people that start paying on our stores, we see a pretty common trend over time.", 1], ["We don't have that rolled out in WhatsApp.", 0], ["On the first, when we think about Instagram, we think we have a great opportunity;", 1], ["I think specifically on the advertising side and the opportunity with that, we are continuing to see some increased adoption.", 1], ["On SMBs, I think it's one of the most compelling opportunities we have for Facebook", 1], ["Yeah, and on video, we're excited about people sharing all different kinds of content on Facebook.", 1], ["It also really takes people further down the funnel from seeing an ad to having a direct connection with businesses, which consumers like and businesses like.", 0], ["And that drives a lot of the higher level services, in particular our data services as well as our AI services when AI services are essentially compute, but what happens is all this compute then requires storage and data, and that\u2019s another place where we see increasing acceleration.", 1], ["And as I\u2019ve mentioned before, Kantar reported that the top five selling smartphones in urban China were all iPhones.", 0], ["But it is easier and free to start a Facebook page until you see broad adoption.", 0], ["We continued to hire a lot of sales reps and it's tied directly to our major investment areas of AWS, Prime Video and devices.", 1], ["so no one vertical drives our business.", 1], ["And so as a result, as we reduce inventories of these newest products, the overall ASPs for iPhone in Q2 will naturally decline sequentially by a higher percentage than we have experienced historically.", 1], ["We're very committed to China as a market.", 0], ["We've got multiple categories in the Services business, so it's difficult to talk about ARPU in general.", 1], ["And then that\u2019s all just on Azure.", 0], ["A lot of what we do even in Windows, mostly people don't recognize it, but one of the most important services we run is Windows Update as a cloud service.", 1], ["I think moving more towards end-to-end encryption and improving security there is the right direction to go in.", 1], ["I don\u2019t show much joy, but I am happy.", 1], ["In some cases, that resulted in us raising prices and those markets are not growing the way we would like to see.", 1], ["because there is an inescapable mutuality between the U.S. and China that sort of serves as a magnet to bring both countries together, that each country can only prosper if the other does and of course the world needs both U.S. and China to prosper for the world to do well.", 0], ["Let me be clear on this, that people do not want false news or hate speech or bullying or any of the bad content that we're talking about.", 0], ["They had 56% more website visitors and a 64% increase in sales for tagged products.", 0], ["And you may have also noticed that we lowered prices for the third major round of price cuts, since we joined forces with Whole Foods in the summer of 2017.", 0], ["So I think that's exciting.", 1], ["So, it's an important part of the flywheel and so it's the traffic and the customers, especially the Prime customers that come to the site, are really the ones that we can use to help them select items and use advertising to help make their decisions more informed when they're picking products.", 1], ["But as I've said before, my view is there will be a day in the future that we look back, and Apple's greatest contribution will be to people's health.", 1], ["And we hope again as we build this capacity to more and more regions and more and more ZIP codes and adding more and more selection that everyone will see the same thing that we see already in major cities.", 1], ["This is several years, so more than two but less than many.", 1], ["We're continuing to be very excited about the opportunities we have to innovate with the Whole Foods and Amazon teams together.", 1], ["And so, I would sort of expect to begin seeing this somewhere around a year from now.", 1], ["I mean there's \u2013 if you think about the overall web, there's a lot of public content that's out there that any web search engine can go index and provide.", 0], ["But we're very happy with the year-over-year improvement.", 1], ["There's some risk and more watching closely.", 0], ["As I look at the number, my point from bringing it up is that there\u2019s a lot of people that haven\u2019t upgraded to a 6 and 6 plus.", 0], ["We've got a negative cash conversion cycle and we plan to continue to have that.", 1], ["We are adding new technologies, new features, and therefore the cost structures go up.", 0], ["They have an increased opportunity to grow, and that's why we think our growth to-date continues to be broad-based.", 1], ["because we essentially created for SaaS applications and infrastructure applications a way to distribute their applications through us and our channel.", 0], ["And we strongly believe we're in the right, and I'm sure they believe that they are.", 1], ["One thing to keep in mind as we look at this guidance range is the fact that we also contemplated the comparison to the launch of the iPad Pro, a year ago for iPad as well as the new MacBook Air that was launched during the December quarter last year", 0], ["And so by everything I can see, we did extremely well.", 1], ["That basically takes some of that really good targeting and extends that into a much bigger audience, and then we can get more impressions at better value because we're really connecting that with end results that the advertisers value.", 0], ["So we are trying to incentivize that behavior.", 1], ["And we're working hard with advertisers to help them see that.", 1], ["A lot of good work went into Prime Day, a lot of benefit for customers, a lot of benefit for our selling partners, the small business merchants as well.", 0], ["So yes, I would say, you're faced with the -- you see it every time you go to our site.", 1], ["That was 70% cloud minus 8% on prem.", 0], ["So a lot of categories are selling a lot.", 0], ["And we think that if we get the experience right, that revenues and profits will be a result of getting that right.", 0], ["Xbox has the key gaming community and the monetization capabilities.", 1], ["We have been working on this for a long time whether it is the product and the approach we have taken from IaaS to PaaS to SaaS, even the diversity of our SaaS offerings, and also how we think about going to market.", 0], ["But it still has a negative impact in the March quarter.", 0], ["And so we've got lots in front of us and we're very excited about getting these out there.", 1], ["We've made a lot of progress in the last couple of years on content overall.", 0], ["We believe that it's resonating with customers.", 1], ["I think China is a fantastic geography with an incredible unprecedented level of opportunity there.", 1], ["On this sports answer, sports is one of the ways that people get together on Facebook and build community.", 0], ["So we definitely appreciate the pragmatic and forward-looking approach on this topic with the UK and we're going to continue to work with regulators and policy makers in many countries, including the U.S.", 1], ["We've accelerated for the last two quarters.", 0], ["We are going to put the time in to make this work rather than look for any short-run specific return.", 0], ["And on the stock-based compensation, you'll recall beginning in Q1 this year, we began allocating stock-based compensation and other operating expense to our North America, international and AWS segments.", 0], ["But certainly from an FX point of view, FX headwinds have a dampening effect on margins.", 0], ["Again, keep in mind the strong dollar doesn't help us on that front.", 0], ["And you can see that in the results with Mainland China being up 100% year-on-year, despite not having a full quarter of sales since we launched in the second half of October.", 0], ["And I think you can look at the results on the iPhone and see that in action.", 0], ["It's not only with the App Store but there's several categories that are growing very well for us.", 0], ["And so I am a huge, huge believer in AR.", 1], ["So we will continue to invest in video content.", 0], ["But it's a very important core sell motion and more importantly building trust on both sides of that equation.", 1], ["because I'm a big believer in this because I think we have something unique to add.", 0], ["So if you look at the success of our devices, we are seeing tablets where we sold twice the volume in Q1 year-over-year.", 0], ["Very little shows up in unearned, and that's the distinction that we're starting to see in many of these Azure contracts.", 0], ["The other thing that I am also sort of excited about when it comes to Office 365 is for the first time, we're opening up Office 365 not just as a end-user and a enterprise tool in the service, but as a developer platform", 1], ["Heath, we do allocate some Prime to account for the video.", 1], ["But you know, I would keep in mind that the functionality of the product that we\u2019re making is absolutely incredible, the power of it.", 1], ["So that's what I would focus on.", 1], ["It was negative 8%.", 0], ["So for Groups, the main thing that we're focused on is making it so that connecting with communities of people that you're interested in is going to be as central to the experience as connecting with friends and family.", 1], ["And we gained share in the market for the Mac as well.", 0], ["They are, in fact, doing things in advanced analytics and using machine learning, and that's a place where we have some very unique capabilities.", 0], ["So it had a partial impact on the quarter.", 1], ["So to the extent that we can eradicate that from the platform, that will create a better product, which will also create a stronger long-term community and better business as well.", 1], ["We began to make changes around a number of different quality initiatives in the fourth quarter, so that affected metrics that we've talked about including both the time spent and the DAU.", 0], ["And just as big as the number of sellers, the sellers, the number of sellers has grown more than 250% year-over-year, 90% of those sellers are using our logistics and warehouse services.", 0], ["A larger portion of the content is public content.", 0], ["And so I have really no intention of messing with that in terms of capital expenditures in the short and next six months for sure.", 1], ["So I actually think in a lot of ways though the more interesting question is not in the near-term what we're going to do to develop ways to consume long form content, but what traditional media and content producers who have traditionally produced short and long form content are going to do to chunk their stuff up better so that way it can be more easily consumed by this big community online.", 1], ["What we like about our ability to participate in transportation is that a lot of times, we can do it at the same cost or better and we like the cost profile of the two.", 1], ["So for example, advertisers can now buy Stories across Facebook, Instagram and Messenger all at once.", 0], ["And I think the answer largely is the same as I've given on previous calls, which is the U.S. and Canada segment is really a pure-play developed market, which is U.S. and Canada is the 2 countries in that segment.", 1], ["So I think the directionality of sustainability is correct and I think the variability can certainly occur from any of the reasons Satya talked about.", 1], ["But at the same time, I think that if you ask anyone, at least in our campus whether we deeply get what it means to reinvent productivity I believe do we get deeply how to take the various constituents from end users IT and developers and harmonize their interest in unique ways so that enterprises can adopt solutions, we get that deeply.", 1], ["And so I'd say that was largely within the range of expectations that we saw and it is having an impact and the people who are opting out are seeing less relevant ads.", 1], ["Beyond the very good news on sales, we're more excited about how the product is positioned for the long term because we're starting a new category.", 0], ["And we have a tremendous process and infrastructure around achieving that.", 1], ["The way I tend to think about it is, with any service you want the gross margin itself to improve, and that includes in the Azure services components themselves.", 1], ["I do think here the opportunity is also ARPU-based actually here in terms of continuing to see margin improvement is continuing raise the dollars per user that we realize to continue to see that grow.", 0], ["So we're happy with that and we think that reflects that people are getting value from the search experience, which a lot of the growth comes from people searching for posts and content in the system, not just looking up people and pages in the system.", 1], ["I do think over the long term you're right.", 1], ["because we have such a broad base of usage,", 0], ["I'll lump it in with capital expenditures, but in the first two quarters, Q1 of last year, it was 82% growth year-over-year in capital expenditures, Q2 was 67%.", 0], ["There are a lot of folks who are business motivated but who primarily post content in order to promote something or gain distribution for something.", 0], ["We will continue to invest in FCs.", 1], ["Yeah, I wouldn't call it pressure, Walter, just how I think about it.", 1], ["We'll be investing to kick-start the ecosystem with content, so derisking it for some of our content partners to start off with,", 0], ["We do see it; sometimes it is higher than other quarters.", 0], ["And if you look at it at a little narrower regional level, Western Europe grew 30% versus a market of 7%, so four times market.", 0], ["If you go to Whole Foods store or Whole Foods Market 365 store, you see a lot of yellow stickers for 10% discounts of hundreds of sale items.", 0], ["And in addition to Facebook, they're using Instagram, Messenger and WhatsApp", 0], ["The elements I just talked about of investment, further investment in one-day shipping is directly going to be a cost that we bear and it's also going to be a direct benefit to sellers as well as the Prime eligible selection in our warehouses.", 1], ["We are providing a fairly wide range from a revenue standpoint, so obviously that also has an impact on potential channel inventory levels.", 1], ["That 12% or 14% in the server product and services KPI is a very good number.", 0], ["We do have a bit of lumpiness in our expirations.", 1], ["But of course we understand that this is something of interest and when we believe that providing qualitative commentary on unit sales offers additional relevant information to investors, we will do so.", 1], ["And now we're ready to do that mainstream across what has been traditionally known as CRM and ERP without in fact us thinking and talking about those suites", 1], ["So Facebook gives you the ability to share with all of your friends and publicly if you want and with groups.", 1], ["And we're pleased with that.", 1], ["And so we think that in the aggregate that they may reduce upgrade cycles and also the iPhone that has been sold to someone else hits the price point that we're not hitting today largely which could help further fuel the services revenue which we did quite well on last quarter.", 1], ["But we were able to correct that due to the high sales without having additional handling and transportation cost that you would normally see the reconfigure inventory locations.", 0], ["Because we think it's a very unique product.", 0], ["I think if we're going to pay $19 billion for a company, we should have pretty high expectations for how it's going to do.", 0], ["And so we focus quite a bit on adding additional value even to the existing licensing levels and increasing intensity of usage.", 0], ["So there are places in Instagram like Fashion or like Shopping that have very high signal, and that gives us I think a very strong opportunity there.", 1], ["We think that people are really going to like that.", 1], ["They worked with one of our FMPs, StitcherAds, and they created custom audiences who viewed specific itineraries by date.", 0], ["So in fact, that's one of the reasons why we have been very optimistic about some of our new data capabilities because we have the attach capability go out even in the install base of Dynamics.", 0], ["And if anything, we're finding new opportunities to invest in.", 0], ["And so when you talk about other competitors, it's not particularly relevant to us right now", 1], ["In terms of buying and selling things, a lot of people want to buy and sell used goods.", 0], ["On the upgrade cycle and what we're seeing, it's not remarkably different.", 1], ["As we see devices roll out to other countries, same thing.", 0], ["But in general, if I step back, our investments in national are twofold.", 1], ["I mean, when we even make our CapEx decisions, which is one of the drivers of margin, we think of first of all, first party equals third party.", 0], ["The Transactional business is much more volatile", 1], ["And all of the other metrics, although important and we're working hard, are proxy metrics, and those metrics are going through a platform shift that we need to work on.", 1], ["So every customer who starts off consuming Azure is also turning what is their IP in most cases into an ISV solution, which ultimately will even participate in AppSource.", 0], ["IoT Central is a good example of that when you have many, many connected devices, you need a control plane for many of those devices, so that you contain the complexity of your app deployment, security management.", 0], ["So that's, of course, a mix of strength in the U.S. and also strength in some of the newer markets that we've launched or introduced the Prime program in.", 1], ["We still think we\u2019re early in investing in the business.", 1], ["Next, in terms of how we thought about that impacting capital return, as you know, I think we've been and executed a significant capital return program over the past couple years, including accelerating the buyback program that I think I feel very good about at the corporate level in terms of the value it's created.", 1], ["Obviously, we believe we've got the best advertising products out there in terms of being able to deliver measurable business results to clients.", 1], ["And so really focused on the consumer experience there and figuring out over time.", 1], ["This is the first quarter where we\u2019ve actually seen the balance tip in terms of recognized revenue to online versus perpetual.", 0], ["And so we're really happy about the engagement of reinvent and the participation in that conference as well as the engagement of the new services that we've launched in Q4 and all of 2016, really.", 1], ["So if you look at what we're doing, the length and breadth of our ambition as well our delivery today, everything from what SQL itself is doing, we have now all in-memory workloads for OLTP, BI, data warehousing built in.", 0], ["I spoke to this a little earlier because from day one we have this vision of how we want to build for the future distributed computing would include our hyper scale cloud service which is Azure an impact Azure is built on Hyper-V and we always said that we were going to build our server as the edge of our hyper scale cloud and so that's what Windows Server 2016 represents, that\u2019s what SQL Server 2016 represents and so we have this unique capabilities like be able to stretch even a single table in a database in SQL 2016 all the way to the cloud for having infinite table capacity and then having your apps and queries work.", 1], ["We are continuing to constantly review our metrics.", 0], ["And we think that it is the right way to build a service that connects everyone around the world.", 1], ["We're seeing a lot of interest, especially with retail and auto advertisers.", 0], ["One of the things we often talk about is, we sell Microsoft 365.", 1], ["And we also have the specific Watch place, where we\u2019re looking at original content.", 0], ["Overall, I would say even in this last year, even just a broader spread of E3 has driven a lot of the growth.", 1], ["So those are the puts and takes for June and we're very happy to see gross margin sequentially flat for June.", 1], ["With Watch, a lot of what we're trying to do is make it so the video content that's on Facebook and some of the content that we're acquiring through original programming that people can come together with their friends to watch that content through things like Watch Party and engage and build community that way.", 0], ["We are in discussions on a number of things, including retail stores, and fully intend to invest significantly in the country and believe it's a great place to be.", 1], ["We hit 3 million advertisers for Facebook.", 0], ["Our opportunity, the TAM, really the once-in-a-lifetime opportunity is really the technical transition and digital transformation that's occurring now.", 0], ["And we saw the largest absolute number of switchers outside of Greater China in the same period that we've ever seen.", 0], ["So that\u2019s all the rich services where we are seeing significant customer action.", 0], ["I think getting that ramp will take a while because Stories is a new format, and we definitely see that it takes a while for advertisers to adopt new formats.", 0], ["We look at it as our job is to grow our products regardless of the price, which means that we need to convince in some cases people to move from one price band to the other.", 1], ["We all run off of common infrastructure.", 0], ["She targeted young audiences in Brazil who are interested in fashion, decoration, movies, and architecture.", 0], ["Without those, without that head count, the base Amazon grew 47%, which is still up from 42% in Q2.", 0], ["So in other words, we can in fact have these modules get deployed in commercial customers even on top of existing business applications.", 0], ["So we like those combined, and we are working very hard to match that with capacity in an efficient manner.", 1], ["And E5 value proposition across all three of the areas, whether it's cloud voice or analytics or security are all three massive areas for us.", 1], ["I think that's going to be a much better experience that people really enjoy and like.", 1], ["We're going to keep the brands, right, from all the apps.", 1], ["We've had great teams working on advertising for a while now.", 0], ["And so some of that weakness frankly is in the non-annuity and very transactional business, which happened to impact Windows Server a bit more than other workloads.", 0], ["Certainly, regulation is always an area of focus that we work hard to make sure that we are explaining our business clearly and making sure regulators know the steps we take to protect privacy as well as making sure that we're in compliance.", 0], ["But I would say that we are going to continue to invest in fulfillment centers as long as our AFN growth rate maintains high, and we certainly want to keep that high and growing.", 1], ["We expect a lot of improvement again next year on each of those service lines.", 0], ["And so everywhere I look, I feel really good about how we're doing in China.", 1], ["It's just having that experience readily available in your pocket is tremendous, and we just see that being helpful across the business as it relates to mobile engagement.", 0], ["And that's another big driver of some of that growth across our enterprise customers.", 1], ["Our trailing 12-month growth in that number is 21% after Q2.", 0], ["If there's other things, obviously, we continue to add selection and we have again lots of engagement points of customers through Prime Benefits and video and devices that certainly contribute to our revenue run rate in our retention of Prime members.", 1], ["So everyone is very sharp on their pricing and is very eager to lock up long-term commitments from AWS customers.", 0], ["And just as we did that in mobile, now we're very focused on doing that in the new things that people are doing, and Stories is a big part of that, Messaging will be further out, but as important as well.", 1], ["We improved as we thought we would from the previous quarters a little more than I thought we would.", 1], ["And again, when we're talking about the unit deceleration, a lot of the fastest growing areas, things like subscription services, AWS and advertising are not caught in that metric.", 1], ["We're really committed to making sure that we nail the safety parts of that before fully rolling it out across Messenger and Instagram as well.", 0], ["So a click-to-Messenger ad takes advantage of having both of those platforms so that businesses can deepen their relationship with the consumer.", 0], ["And that's the three factors that I cited, the regulatory landscape, potential platform changes and then the adoption of our own products like OFA that we're just rolling out now.", 0], ["We added about another 400,000 items to that store this quarter and continue to focus on using our global network of vendors to be able to get those products to customers.", 0], ["The mission is fundamentally deeply important to people, but that has to be coupled with good thorough execution of each of the available opportunities.", 0], ["What it means to us as a company of course is that, we have additional flexibility right now from the access to the foreign cash.", 1], ["If you look at China, we grew from an iPhone point of view, Greater China, we grew 87% the market grew for.", 0], ["For sellers, it means they sell more.", 0], ["And clearly, we will want to continue to offer new services over time, so there are a number of vectors that allow us to continue to grow the business over time.", 1], ["One is we're starting to put some ads into the product just to see the basic parameters around how that performs, how people like the ads or don't, how they work for businesses, and just try to get an understanding of that.", 0], ["So FBA, Easy Ship and some of those programs are important to us.", 1], ["If you look at what we are doing with SQL, we will have the ability for any customer of SQL to stretch even a single table from between their on-premise to the cloud.", 0], ["So we're really pleased with that.", 1], ["So to the extent that video can serve as a touchstone for building community and helping facilitate interaction, then that's the thing that we feel like we can uniquely do.", 0], ["So there's many puts and takes.", 1], ["And we definitely do see in this family of app strategy that there's so many new ways that people want to share content, and so many different types of sets of people that people want to share with, right, ranging from one person at a time and that would be messaging or small group sharing or sharing with interest-based communities or sharing with all your friends at once or sharing with public.", 0], ["because of our focus on user experience, and so I like that.", 0], ["As far as new customers and new Prime members, we're not disclosing that, but suffice to say that it was a great day for both existing Prime members and also new customers who were trying us out for the first time.", 1], ["It's entirely due to the shift to the cloud, both in our Productivity and Business Process segment as well as the Intelligent Cloud segment.", 0], ["I think have you to look at our ad tech investments very holistically from Atlas to LiveRail to the Audience Network.", 0], ["There are differences in migration patterns that will make any quarter-to-quarter movements lumpy, as I said.", 0], ["Qualcomm has not made such an offer to Apple.", 0], ["Looking forward, we continue to feel like there are good opportunities to grow the business.", 1], ["Now the biggest trend that we see in consumer behavior is definitely video.", 1], ["So, we're not really optimizing the business on time spent, but rather the kind of quality of conversations and connections.", 0], ["We also see usage numbers that are off the charts, so far above competition it\u2019s not even in the same planet.", 0], ["But I think the potential is real and big and growing.", 1], ["So in Q1 of last year, we put in too much channel inventory and had been resetting the channel inventory over the few quarters that came beyond it or came after it.", 0], ["And so we spent a lot of time looking at the data to make sure that customer behavior and feedback is telling us that it's useful and helpful and customers making those purchase decisions.", 0], ["So that's usually the way we make the atomic parts available as well as these essentially SaaS services or PaaS services.", 1], ["Our own data would look better than that.", 0], ["But to your point, Raimo, I think what has happened is the change, even in the financial services, the segments that you all represent, the kinds of workloads now that are moving to the cloud has qualitatively changed.", 1], ["In many cases, it's Dynamics 365.", 0], ["When that happens, it's almost like you\u2019re adding new products and new value and a lot of that gets recognized faster in-quarter when you see that happen.", 1], ["So you will only increasingly see us deliver more design wins there.", 1], ["So we rolled out what we believe is a good experience in Ireland.", 1], ["On the video question, we're basically focused primarily on video on our own site and service, and video tends to be pretty short form content right now on Facebook because it's playing in News Feed.", 1], ["So when I first announced that we were going to be moving our private communication services to all be end-to-end encrypted, I was very clear that we\u2019re planning on taking at least a year to go consult with experts and governments and law enforcements around the world to make sure that we have the right safety systems in place to make sure that we handle this really well, right?", 0], ["The way to think about that how is I look at \u2013 well, the way I would generally say it is you look at each of the KPIs we give.", 1], ["Gaming will be huge.", 1], ["So this is just a big opportunity, and one of the areas that I'm quite excited about.", 1], ["And I think we, as many other companies, are really trying to absorb what this all means.", 1], ["Yes, I wouldn't want to get into announcing things on the call, but obviously, we're always working on new things.", 1], ["So even to the extent that we may not even see specific attacks, but if there's a big meme that there is widespread interference, that has the same effect in terms of kind of sowing doubt about things.", 0], ["The apps will always continue to have their own identity and brand now because they -- people use them for somewhat different things, and that's really important.", 1], ["There are 18 million small businesses on Facebook in Europe, and I had a chance to meet a lot of them on my trip.", 0], ["And that -- for the smartphone market, that we are able to provide though several different price points for our customers.", 1], ["Six months or so after that we came out with 1.5.", 0], ["So most of that will happen in the next three quarters, and we have that built into the Q2 guidance.", 1], ["So the carousel ads, they're not just that they're showing multiple products, it's that they're showing products that are more specifically directed at the person.", 0], ["So I think when you look at the factors going forward, I would say we've got the currency impact, we've got some of the impacts around privacy and the like, but we continue to get good advertiser feedback on ROI.", 1], ["So one of the things advertisers are trying to do when they're in feed and ultimately when they're in Stories is drive to transactions and real engagement, one-on-one with a consumer is often part of that.", 0], ["This year they'll be fully in Q4.", 0], ["There are also a number of cases that we see where people tell us that they want to be able to message across the different services.", 0], ["The -- of course the proportion of one-day shipments is higher in international to begin with in a lot of our countries.", 0], ["I think about the Microsoft Cloud because even the way we do capital, the way we measure utilization is all with the complete unit, which is of course all of Office 365 runs on Azure, Azure AD powers all of our Cloud,", 0], ["because, frankly, we haven't to date been a hardware company or an operating system company.", 0], ["And then the workloads that they want to put, which are Tier 1 workloads in Azure.", 0], ["and the format is pretty exciting from a sales point of view", 1], ["And so I actually think between those two items, it's the biggest impact that we've seen in the quarter, and I expect to see it again next quarter, given I don't think the macro or IT spend environment should change in any way between these two quarters.", 1], ["In terms of the revenue impact, no one vertical drives our business.", 1], ["It wasn't as fast.", 0], ["And I just think the team is doing a really good work on all of these, and I'm really proud of them.", 1], ["But Teams is -- transcends all that.", 0], ["And I do think that's important, Keith, in terms of the innovation and the value.", 1], ["We have this common data model.", 0], ["And we'll continue to do that because I think there are significant new opportunities for us to go after, and that will require us to reallocate aggressively, and that to me is core.", 0], ["because a lot of people want to share increasingly messages privately one on one or with very small groups.", 0], ["It's still early days and we're very focused on quality and it's worth noting that not all of the revenue from video is incremental,", 1], ["That's a product that has done very well.", 0], ["We continue to make progress with monetization.", 1], ["And our execution this quarter was quite good.", 1], ["In other cases, it will be able to help people accomplish their goals with different businesses more easily.", 1], ["Obviously, that inventory was required", 1], ["And I think those experiences and the interaction between them, we're even in earlier days there, but I think we have a lot of opportunity to explore there.", 1], ["So, on the apps question, the ones that have done the best are things that augment core Facebook functionality for large subsets of the community.", 1], ["Once again the ops team has really done yeoman\u2019s work here to create this capacity for us and they continue to unlock additional capacity daily.", 0], ["So there's a number of countries that we saw strong signals from that perspective.", 0], ["So that\u2019s \u2013 it\u2019s generally going well overall and we\u2019re very optimistic about communities in particular going forward is one of the drivers of that.", 1], ["So a lot of data points there, but the bottom line is that there's a large step up in the amount of fulfillment capacity in Q2 \u2013 excuse me, Q3 versus Q2.", 1], ["We're excited by what we see in the e-commerce vertical and we're going to continue to invest in growing that vertical as part of our ads business.", 1], ["We've seen this in News Feed too.", 0], ["And as I've always said that there is -- hybrid computing is important for workloads that are more in the characteristic -- can be characterized as lift, shift and modernize, so that's one motion.", 0], ["We look to increase the leverage of our fixed assets, particularly our fulfillment centers and the throughput of the fulfillment centers, and just generally getting inventory closer to customers as we add and expand warehouses in the sort centers that we added primarily last year.", 0], ["And we have proven operational capability and security expertise that's highly valued to the AWS customer base.", 1], ["We've got a few things going there that we've talked about.", 0], ["So some different puts and takes, but overall, still seeing regional growth across all regions with the exception of the U.S./Canada being flat.", 1], ["And now we have 1,900 third-party skills for the Alexa, including new skills from Kayak, Lyft, NBC, Honeywell and more.", 0], ["And today, we're able to offer all three of those different iPhone options.", 1], ["And just the tone I think has changed significantly and I have long thought that it was in both countries, best interests to get to an agreement that may be initially doesn't solve everything but solves some things that each party may want and get to a better place than where we're at and I'm hopeful that that's where we're headed", 1], ["And what you've seen in consumer side, which it was an important point.", 0], ["That's become a sizeable business.", 1], ["That I think is where the world is going to go to, where distributed computing will remain distributers.", 0], ["And some of the customers have talked about it in their recent set of conferences, from our Partner Conference to our Ignite Conference.", 0], ["So that includes our privacy, safety and security investments.", 1], ["So I'm confident about where we're going to be there.", 1], ["Then again all the work we have done through the supply chain.", 0], ["So overall to your specific question on Azure, the growth will moderate as the numbers become big, and they've already become very big.", 1], ["Keep in mind that we did have a - although the year-over-year increase in capital expenditures and capital leases was not as great as we saw in 2013 to 2014, we did spend over $9 billion on those, on capital expenditures and capital lease obligations, up from prior year was, excuse me\u2026", 0], ["And the product and services KPI on prem and server was also quite good when we think about the balance and what that represents for hybrid demand.", 1], ["And then, be able to return capital.", 0], ["Yes, let me make clear, we are really excited and looking forward to a great holiday season.", 1], ["So for example, some of the cognitive capabilities that are there in Azure first come because of our first-party AI investments, whether it's been speech or vision or anything else.", 0], ["We do think that there will be some modest impact, and I don't want to overplay these factors, but you've got a couple of things going on.", 1], ["There is some level of overlap, but the total number of subscribers is very, very large, obviously less than 165 million.", 0], ["So that\u2019s a \u2013 certainly a big area for investment.", 1], ["We have actually more monetization opportunities.", 1], ["Boeing's agreement is one such agreement in terms of embedding a premium service at a premium gross margin.", 0], ["We continue to see growth in time spent per DAU across the Facebook family of apps and Facebook, and we're bringing more data centers online and the like towards that growth.", 0], ["People bought more devices than on any other day.", 0], ["And this is a place where I feel that we are in it terrific position frankly to respond to data sovereignty demands, changes politically and our ability to execute that to provide what our customers demand in terms of security and manageability and location.", 0], ["But the growth was down 2% on a dollar basis, up 14% on local currency basis.", 0], ["We're increasingly seeing that resonate, not just in small business and some of the high-tech industry as it has been in the past, but now even in the regulated parts of the enterprise.", 0], ["I hate to use that word again, but could be lumpy over time.", 1], ["It's still growing very strongly.", 0], ["So, on the Brazil side \u2013 this is Phil \u2013 we've had the Kindle Store in Brazil for a while.", 1], ["We're not expecting a material impact from these rate changes in 2019.", 1], ["Azure has many of those same attributes at the higher end of the complexity and digital transformation Satya's talking about.", 0], ["As we pivot from our phone business to some of our higher margin product.", 0], ["Because right now, given the secular trend to move to the cloud across all of the regulated industries across the globe, we think it's wiser for us and our investors long term to be able to meet them where they are.", 0], ["But we're happy with where we are now.", 1], ["And whether product is a retail offering or third-party offering is not that important to us.", 0], ["In terms of our ability to continue to grow the advertising business, it's about working to develop the best products we can to enable advertisers to achieve their end business results.", 1], ["Instagram can be more interest-based in some places than Facebook.", 0], ["One of the places I think it often resonates the most is with Windows 10 and inside that value.", 1], ["And so what we're really focused on is driving better ROI for our advertisers.", 1], ["And obviously, we're going to be benefiting from the leverage, which is typical of our seasonality in the December quarter.", 1], ["It's getting the dynamic products ads in front of people for people who are going to find those ads interesting and engaging.", 0], ["So of our more than 7 million advertisers, we already have 3 million advertising across Facebook, Instagram and Messenger Stories.", 0], ["In areas like terrorism, for Al Qaeda and ISIS related content, now 99% of the content that we take down in the category our systems flag proactively before anyone sees it.", 0], ["A lot of it is the top-line growth, but it's also a lot of the efficiency we're seeing, particularly on the fulfillment and marketing lines, which for the whole company were flat year-over-year on a percent of revenue basis.", 0], ["You get more relevant ads.", 0], ["The vast majority of that is in operations where we are adding people for our new FCs and call centers.", 0], ["And so it's an incredible market.", 0], ["In addition, we've been investing significantly in CapEx, and those investments are starting to flow through the P&L in terms of depreciation.", 0], ["So, yes, the short answer is that we're much more confident that we're going to get this right for the elections in the 2018, which include the U.S. midterms, but also the elections in Brazil and upcoming elections in early-2019 in India and the EU.", 1], ["And then only once you have that ramped up to a good scale, can you really start dialing up advertising having that feel good and be a good part of your experience with good content because all those public figures and businesses are already participating in the platform at scale.", 0], ["And we\u2019re seeing politicians at all level really take advantage of that targeting.", 1], ["What we're seeing in pages and marketers on Facebook is they want to both get awareness and drive all the way down to generating transactions,", 0], ["And if you use this app, our face recognition can look at the photos that you take and suggest that you might want to share photos that you took with a friend in them with that person", 0], ["And a great team to work with who has a lot of history and a lot of \u2013 they probably have 10 years to 20 years of learnings that we don't have and wouldn't have.", 0], ["Our focus with our marketing partners is their business results.", 1], ["On the market side, we've seen iPhone X, as I had mentioned before, as being the top selling smartphone during the quarter.", 0], ["So this is across the whole family of apps.", 0], ["As I've talked in other quarters, it's a number that's excludes AWS subscription services, advertising and Whole Foods, which are some of the fastest growing areas and we also have \u2013 are actively selling subscription services like Kindle Unlimited and Amazon Music Unlimited, which can cannibalize unit sales.", 0], ["and so the fact that we have so much room to grow is exciting for us.", 1], ["The overall economy is certainly also quite good, and the installed base had actually gotten older.", 0], ["And that's where a lot of the transformation we have done internally is helping us accelerate our Cloud business.", 0], ["It's included growing the security and content review teams to 20,000 people to be able to handle the volume of work that we need to do.", 0], ["I also talked about the 70 million monthly active users of Office.", 0], ["And so, while this really is \u2013 the majority of this spend is servers.", 1], ["They're free, they're easy to set up, and they already know how to do them because almost all of them are already Facebook users in the first place.", 0], ["I mean it reduces our growth rate.", 0], ["That I think the future which is distributed computing going back to what needs to be truly distributed, even driven server-less even versus this thing about let's just have one-time migration to something new.", 1], ["These are contracts that unless it is used and deployed and a customer gets value from, it does not land into the P&L.", 0], ["In terms of our installed base, which is something very important for us as it is one of the key drivers of services, our active installed base on iPhone grew double digits over last year during the quarter and so we're thrilled with that and you can see that carrying through to the services line and the growth that we had there.", 1], ["We have a very slow rollout in Messenger.", 0], ["As far as Q2 is concerned, we were very encouraged by the revenue and unit growth acceleration, particularly in North America.", 1], ["And so therefore that's why we want to ensure that everything we do and the number one priority for Nat and team at GitHub will be all about maintaining that GitHub community, the ethos around developers at the core.", 1], ["On engagement, John, I think we're obviously focused across a number of different dimensions to drive engagement.", 1], ["But there is certainly expenditures when we open up new regions.", 0], ["And so we continue to work on that, but not much new to add right now.", 1], ["So that was generally very good financially.", 1], ["The second is platform changes as it relates to operating systems and a more of a focus on privacy from the operating systems and the impact that that can have on measurements and also on targeting.", 0], ["It's too early to see any direct impact, but I think it's part of the innovation that you'll see from us as we continue to roll out different ways that marketers can use our tools, different ways they can pay, different results they can target.", 1], ["The only transactional weakness I felt in the quarter at all was what we covered, which was the OEM impact from the chip supply, which was about 1.5 points of growth on MPC, and the Office Consumer impact, which was secondary impact of the PC environment plus some execution challenges we had that I feel really good that we've gotten to the root of and will get handled in H2.", 1], ["But in the long run we\u2019re going to have a combination both of our own capacity, certainly fueled by helps with third party carriers, large carriers that we\u2019ve used in the past.", 0], ["So when I think about even the capital allocation per quarter we very carefully look at what is our current utilization forecast, and what our demand forecast is.", 0], ["And if anything comes up in M&A which allows us to pursue our strategic vision that we will need to even allocate more to on an OpEx basis, post-acquisition we will look at that.", 0], ["So right now, we're working through some next issues in both cities.", 0], ["So that's the network effect that we see when it comes to the PaaS services.", 0], ["And if you think about that, it\u2019s the Windows commercial, it\u2019s Office 365 commercial and EMS.", 1], ["And given the current capital structure that we have, we decided that until now we return about 100% of the free cash flow to investors.", 0], ["And so we\u2019re working hard to remedy that.", 0], ["And we're extremely happy to partner with the UK government to advance the safe use of drones for small parcel delivery.", 1], ["On messaging, we are so really focused on this.", 1], ["As I talked about earlier, that\u2019s one factor customers save a lot of money, but the primary motivator is really around the innovation that AWS enables and the ability for developers to move really quickly.", 1], ["Let me start by saying we really do think about and talk about our cloud as containing all of the components, from the IaaS layer to the platform layer to the SaaS layer.", 1], ["Celebrity Cruises used these Dynamic Ads for travel on both Facebook and Instagram to increase their online bookings.", 0], ["That's something you're going to deploy, whether that's EMS, is the best example.", 0], ["And there's a pretty clear roadmap of stuff that we're going to do over the next couple of years that I'm quite excited about to add some more dimensions to the video experience on Facebook.", 0], ["Also, the mix of products that we sell into the market tends to change over time, and that also has an impact on the overall gross margin for the company.", 0], ["And this is something that Kevin Turner, myself and Amy and all of our leadership team is very focused on.", 0], ["And so that -- when you have that kind of first time buyer rates, you don\u2019t have a saturated market.", 0], ["And also that the current iPhone line up experienced the highest Android switcher rate in any of the last three launches in the three previous years.", 0], ["And click to Messenger ads on Facebook are actually very promising as well because advertisers want to see a return for the money they spend.", 0], ["So we're really happy that our growth has been really strong across our verticals, and that continues to be the case.", 1], ["And we're also in the early days of sponsored messages, which enable businesses to reengage people once a conversation has started.", 0], ["Yeah, Shannon, we feel great about the results on iPhone, up 20%, and if you look for the cycle, by the cycle, I mean Q1, Q2 and Q3, we've had on an average weekly basis, growth in units of sort of mid single digit and ASP growth of double digit.", 1], ["And it also follows the well-being research that we've done that suggests that when people use the Internet for interacting with people and building relationships, that is correlated with all of the positive measures of well-being that you just expect like longer term health and happiness, feeling more connected and less lonely, whereas just passively consuming content is not necessarily positive on those dimensions.", 0], ["Visa with SocialCode and BBDO created 10-second videos with text overlays showing people making digital payments.", 0], ["And so what you can then see, relating to the second half your question, is that we are taking some of those savings and investing them back into the business in some of these key growth areas we've seen.", 1], ["But generally speaking, I see positive vectors there, not negative, in the aggregate.", 1], ["I expect that to continue, although you will have volatility because what's interesting about that specific metric is, it has a little bit more 606 impact than we\u2019ve felt it's an on-prem product.", 1], ["so that's really exciting.", 1], ["At the same time, we're also seeing a lot of open source ISVs also be part of the Azure marketplace.", 0], ["On mobile, it's easier to take videos, so we see more videos.", 0], ["And then purchasers are happy to continue to add SKUs and add and move up the scale.", 0], ["On gross margin, I would - first I'll caution you and say, we would encourage you to look at free cash flow, which was \u2013 grew at minimum of $4 billion on each of the metrics that we point out and our profit which was up 88% year-over-year.", 0], ["On the MAU front, we're seeing very strong overall growth in terms of the 240 million-plus MAUs that we added.", 1], ["One of the factors that's contributed to ad load over time is the quality of the ads.", 0], ["So the fact that we came in at the high end of the range, volume was high, especially in North America, and a lot of times in Q4 and other quarters actually, we see better efficiencies when the warehouses were busy.", 0], ["And that's the new experience, which if you come to Facebook and you specifically want to watch some different kinds of videos or you want to see what videos a recent page that you follow has posted or the Presidential debate is on and you want to find a good place to go online to get that, you can go to Video Home and see that.", 0], ["So we are continuing to look at where we're investing head count.", 1], ["And as decisions get made and proposals clarified, we'll share more about what that means for us.", 0], ["There is the lift, shift, and modernize motion as well, as well as a new need for the edge of the cloud.", 1], ["But I'm very optimistic about the future because I see so many signs that are positive.", 1], ["But my own personal view of China is that it's a great market, and we are certainly looking far beyond 90 days and feel very bullish on the opportunity and the environment there.", 1], ["Yeah, and also it sort of comes in interesting ways because one of the things IT, as you know, it\u2019s not about sort of replacing what you have, it\u2019s always augmenting what you have.", 1], ["And one of the numbers that I did put in my script was that 20% growth in what we call software and services, that's perhaps a leading indicator of where we think the opportunity lies.", 0], ["Obviously, that was also a negative.", 0], ["I would say the way we think about our capital efficiency and I in fact added that even to my commentary this time, which is we're building this intelligent cloud, intelligent edge platform to span everything, not only the Azure business but also the future of game streaming to what we are doing at Microsoft 365 or Dynamics 365.", 0], ["And so there was less external hiring in the first half of this year.", 0], ["I would point out that only a small fraction of the installed base has upgraded.", 0], ["Japan as a geography for us is a high transactional market.", 0], ["It's a good flywheel and we added active sellers in FBA grew 70% year-over-year in 2016.", 0], ["We were surprised somewhat that through all of this period of time that the iPhone X winds up at the most selling, most popular for every week of the time since the launch.", 0], ["And collecting that through deferred revenue and then letting customers use that over time is very helpful.", 1], ["So the selection is also increasing Prime eligible selection is up over 25 million items, launching Video there and also continuing to add other Prime benefits such as Prime Music will be coming soon, Amazon Family is there, as I said, Prime Video, and we had our first Prime Day in India.", 0], ["We didn\u2019t see anything in Q4 that indicated broad-based macro weakness beyond of course the impact that FX was having, which was pretty significant.", 1], ["We\u2019ve sold 25 million Apple TVs now which at the sake of repeating myself, it\u2019s something that we continue to look at and work on and find a way that we can make even greater contribution than what we\u2019re doing.", 0], ["So, I think that\u2019s the color I can give on ad loads.", 1], ["But until there are millions of units out in the market, I don't expect that to be a big industry for folks to be investing a huge amount in 2016.", 0], ["And when we do that we need to make the adequate investments in marketing and advertising to raise the awareness of the new products and new services and that is what you're seeing for example in the guidance that we provided for the first quarter as we\u2019re launching new services right now, and so we're making investments both in engineering and in advertising to support the new launches", 0], ["They're all using AI today.", 0], ["I would say, we're going to be using all of the available levers that we have right now, both AMZL and also third-party carriers, and we'll just see how it develops going forward.", 1], ["There they're really two key dynamics, the first is the return to the XP levels that we saw prior to the XP refresh.", 1], ["And in both of the cases, hybrid benefits actually help with -- our business model is basically differentiated in supporting the architectural need and the flexibility needs.", 0], ["We will update you.", 1], ["It\u2019s actually a big architectural shift from thinking purely as a migration to some public cloud to really thinking of this as a real future distributed computing infrastructure and applications, but I quite frankly feel very, very good about leading and so in that context our server license revenue will fluctuate based on what the macro is and these transitions and mix shifts, but from a forward-looking perspective, I want us to be very, very clear that we anticipate the edge to be actually one of the more exciting parts of what\u2019s happening with our infrastructure.", 1], ["So that was one of our first forays in the live format that \u2013 one of the first forays in the live format where we had live ads and kind of, we're not only learning the technology, but learning to \u2013 learning that business.", 1], ["And those are the things that really give us the ability to have good margin structure for our cloud efforts.", 1], ["We've certainly rolled those out.", 0], ["It is pretty standard in fact, as Satya talked about, in terms of the dynamic", 0], ["They don't require a big network effect or a lot of people having the technology or a large installed base.", 0], ["We also hit the high-end of the revenue range, which is always good from an efficiency standpoint and the drop-through on the higher end of the revenue.", 1], ["But I would say the biggest impact so far, both on the top line lift and also the bottom line cost is in the U.S.", 1], ["First, you build a great consumer experience that helps people share in a new way that\u2019s really important.", 0], ["So, that continues to drive a lot of IaaS growth for us as people are sort of looking basically to lift and shift a lot of their current data center workloads.", 1], ["But to mention just one which shows the point, a couple named Linda and Marius started a company called iELM.", 0], ["Let me just start at the highest of levels, because for us again, and in this last quarter, some of the innovation that we launched I think is also pretty key as you look forward to what it means for Office and Office growth.", 1], ["It builds better customer loyalty both to that brand and also to Amazon.", 0], ["That work continues and the team has done a really nice job.", 0], ["I think we are optimistic as we head into FY 2018 for the installed base growth possible in particular for some of these midmarket offerings that we\u2019re quite proud off The ARPU growth that you saw and have seen in the past couple of quarters continues to primarily, Phil, be related still to the E1 to E3 transition.", 1], ["It will then land as billings and ultimately in our P&L as GAAP revenue in-quarter off the balance sheet.", 0], ["Those investments are in the billions of dollars per year.", 0], ["And in the scheme of things, our business is pretty large there.", 1], ["We\u2019re also working beyond India, in a number of other countries and hope to have this rolled out to a large percentage of the people who use WhatsApp within the next year.", 1]]
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