[["And in that context, of course, they're lifting and shifting some of the older workloads, but they're modernizing the entire business process flow.", 0], ["It's a number that is incredibly competitive in our industry, and we want to continue to keep it that way.", 0], ["Yeah, for the quarter, so it was a strong quarter.", 1], ["So the number would have been even better.", 0], ["Of course we started in Music with Prime Music, a little bit earlier in that space, and I think that's been a great way for Prime members to enjoy some of that catalog for free, and then as they enjoy that, be able to move into the Amazon Music Unlimited skill.", 1], ["There's a lot of compute that goes behind, things like feed ranking and ads ranking.", 1], ["But we think it's \u2013 we asked the board and the board approved a $9 billion additional authorization.", 0], ["That was our estimate and we believe that was the actual outcome.", 1], ["And we really see it in three ways, right.", 0], ["So payments enable advertisers to pay us.", 0], ["Some of them are around internal debt financing, which is not something that we use, so we don't expect any issue there.", 0], ["We think that the most valuable thing that people do are help build relationships with other people on the platform.", 0], ["And we saw that video and actually didn't take it down and helped get in touch with law enforcement who used that live video to communicate with that person and help save their life.", 0], ["And as a result, we've tripled our fulfillment capacity year-over-year.", 0], ["We will have IaaS services, and you talked about the existence, proof at least from Amazon about what margins at scale can be achieved there.", 0], ["Historically, because the channel fill and the holiday season, our selling volume during the December quarter is generally higher than sell-through.", 0], ["And we see a higher rate of previous iPhone owners that really prefer the four-inch form factor.", 0], ["because that's sold through the same Facebook ad interfaces, but we're seeing really good contribution and good growth there.", 0], ["And one important way we drive selection is through FBA, and so we continue to be very pleased with the progress we're making in FBA.", 1], ["About three-quarters of the 2 million are app developers.", 0], ["So yes, this quarter we launched in Northern Virginia, Maryland, Dallas and Chicago.", 0], ["So that's certainly a thing that we're going to look out at over the long term.", 1], ["We are planning to reaccelerate or accelerate hiring in 2020 and that's really going to be focused on the important priorities of the Company.", 1], ["This is a healthy state.", 0], ["DefShop is an e-commerce fashion brand in Germany.", 0], ["But again, I don't view that as negative performance.", 1], ["So, that's part of what you're seeing.", 1], ["And, we're going to work with the news publishers to make this very valuable and I'm optimistic that we can get there.", 1], ["So before the game, they targeted their 30-second Super Bowl ad that featured Drake to people with NFL and celebrity interests.", 0], ["And so you should take from our filing that we viewed it as we didn't see another way forward.", 1], ["And again, we have a lot of experience at this.", 1], ["But the important thing to keep in mind on this is we don't really \u2013 we don't need to do pre-roll", 1], ["We have many other Services businesses that are doing very well.", 0], ["I also really like what I've seen with the iPhone SE and the fact that it's opening the door to customers that we weren't reaching before and likely convincing some people to upgrade that wanted a smaller form factor but wanted to stay with iPhone, and so they were waiting for the iPhone SE.", 0], ["They used a very broad video to drive brand awareness.", 0], ["They may be one year leases that could actually help the upgrade rate.", 0], ["There might be some sort of a new normal in the economy, but a new normal there is still a good growth rate.", 0], ["And then in terms of does that have any meaningful contribution from areas of innovation, we talked about some of the areas that we're investing in.", 1], ["A modern infrastructure has to both be secure at its very core, and that can result, as you're seeing through that confluence of events, in a very strong PC market with very strong Pro performance", 0], ["And obviously the kind of numbers that we have indicated growth in the revenue means that iPhone would have another stellar quarter.", 1], ["And so that\u2019s what I think Amy\u2019s comments also reflected and that\u2019s what we expect to have happen in the rest of this fiscal year.", 1], ["So the product directive that I've given to all of our teams is to shift from focusing on showing the most meaningful content to people to instead to now encouraging the most meaningful social interaction.", 0], ["And you may have seen that at the beginning of the quarter, sometime in April I believe, we announced a fund, an Advanced Manufacturing Fund, that we're initially placing $1 billion in.", 0], ["When you seeing capable of running flow to create intelligence, that is what we are using impact from our speech and vision work.", 0], ["and so this is the year where we've got our peak requirements in terms of capital.", 1], ["EGM in North America grew 32%, which was higher than the revenue growth rate, and also grew 36% internationally.", 0], ["We then recently came out with ARKit 2.", 0], ["And what we're seeing is accelerating enterprise deployment of Windows 10.", 1], ["And then in terms of local communities, one of the big trends in the world that we've seen is just that participation in all kinds of different physical communities, whether they're sports teams or some religious groups or different kinds of different things, have been declining a lot over the past several decades.", 0], ["In fact, in some ways, it actually includes an acceleration in certain areas.", 1], ["The kind of things we\u2019re able to do with targeting and measurement apply across industries and obviously have to be industry and vertical specific and we\u2019re working hard at that.", 1], ["Tens of thousands of developers are building new skills for Alexa.", 0], ["That 2-point year-over-year increase in the commercial cloud gross margin really, even with the massive growth in Azure over the course of the year, certainly implies the improvement that we expected.", 1], ["It continues to drive better conversion of free trials, higher membership renewal rates for existing subscribers and higher overall engagement.", 0], ["On the switcher side, we really like what we're seeing.", 1], ["I think about it as an encouragement that they want to fill the channel as quickly as they can over the coming quarters with new machines.", 1], ["We are entering into a period where that's going to increasingly be primarily video, and we're seeing huge growth there.", 0], ["We think that our Services business will continue to grow well.", 1], ["The quarter that, or the four week period that you see running through the Amazon P&L this quarter is pretty hard to draw conclusions on other than revenue at this point.", 0], ["The basic story that we've seen within the Facebook app is, over the last few years, the amount of time that people were spending in the app was increasing primarily because people were consuming more public content, like passive video consumption and news.", 0], ["And we've exited the quarter also on iPad and Mac well within the ranges that we want to have.", 0], ["We think there's \u2013 continue to be great opportunities to do that, and how the supply-demand dynamics play out will kind of impact the overall direction of price.", 0], ["One are to the capture and sharing tools that we offer.", 0], ["So E3, E5, and higher penetration of this is what's going to drive ASP growth.", 0], ["Of the usage on the platform, we do think that that is the most valuable usage, but that's why we're going in that direction.", 1], ["And through Q4 [ph] we did everything we could to have the best prices available for customers and in stock in time for the holiday.", 1], ["We would be 800 basis points higher this quarter from the 33% that we've reported if it wasn't for the movement in currencies around the world.", 0], ["But as we can help people reduce friction and close that loop, we think that's a good opportunity for people and for our business.", 1], ["So it is true that the deals are much broader, deeper.", 1], ["It's going to be localized instead for different parts of the world.", 0], ["We tell marketers all over the world that we want to be the best dollar, the best minute, the best euro they spend and it\u2019s up to us to prove that ROI and we\u2019re going to continue to do that.", 1], ["We're seeing a similar trend there.", 1], ["I think that has actually been a core component.", 1], ["because we believe in a world where our own assistant should be available everywhere and so should other assistants be available on our devices versus thinking that the end game here is about speaking, doing one-turn dialogues on one speaker in one home.", 0], ["And that in fact in Q1 caused the market to expand.", 0], ["With the iPhone 7 Plus, we put an incredible amount of innovation into the camera and the overall photo experience, and customers are obviously using that and have discovered that they love it.", 0], ["They see Teams that can not only change what Satya talked about, but also develop culture change in terms of employees being able to be involved and collaborate regardless of the org chart and that is what you're going to see.", 0], ["So really pleased with that.", 1], ["And that means that you have multiple targeting opportunities, multiple opportunities, and even opportunities to see who engages in an ad in one place and then reinvest to continue the conversation with those customers.", 0], ["We see a very big opportunity in front of us.", 0], ["And so the subscription business itself is nearly as broad as the App Store itself is, and so that's the value proposition.", 1], ["We have different competitors in the space today like Snapchat, which shows that people are always building new ideas.", 0], ["And then around facilities, you probably know that we are nearing completion of our new campus here in Cupertino,", 0], ["And we see such engagement on both Facebook and Instagram along with the different targeting and ad formats, we believe we'll be able to have and are already starting to have a relationship with marketers which grow across both platforms.", 0], ["So, we remain solidly in investment mode from a total expense point of view.", 1], ["We'll be more reliant on Stories impression growth in 2019.", 1], ["So, the real question on how and where should the Azure gross margin be is about sort of the ultimate mix of those.", 1], ["So we have three new things that we're driving and a lot of large licensing pieces that are just transitioning into these three motions.", 0], ["And that's where we are building good muscle and we'll continue on that.", 1], ["As I said in Prime, the Prime platform, Prime features for customers, expansion for fulfillment capacity as we build out to support 26% unit growth in Q4, for instance and much greater FBA share, and not to mention all the investments in AWS, we are constantly looking for cost efficiencies and fixing variable productivity.", 0], ["It was the two biggest days we've ever had.", 0], ["We know that the signals we get from especially our commercial customers is that there's a healthy demand for the value that exists in Windows 10.", 1], ["And in February, we will have Chi-Raq, our first original movie that we got to work with Spike Lee on, which won many critical, made many critics' best film list in 2015.", 0], ["It is clear that there is a demand there even much beyond what we thought.", 0], ["But it's important to keep in mind that there are a few different reasons why people share content on Facebook, and that's just one of the use cases, right?", 0], ["The most important thing for us, Steve, is that we want to have a great customer experience.", 1], ["They were insisting on charging royalties for technologies that they had nothing to do with.", 0], ["We also know Prime members who watch video also spend more on Amazon.", 0], ["When we look at our track record over years, I think we've found a good balance between unit grow and gross margins and revenue, and we will continue to do that as we go forward.", 1], ["But what we're basically saying is that there's so much innovation and so many different types of effects that people are creating that we don't want developers to have to build their own separate app and get to a huge scale in order to build some new kind of visual tool.", 0], ["The way we think about it, and Dave said this, is that the amount of uncertainty there is for us and all the other companies in the digital advertising industry is reasonably higher than it's been right now because we're in the process of rolling out GDPR.", 0], ["I do think that we can grow both in units and market share.", 1], ["I would say advertising continues to be a bright spot both from a product standpoint and also financially.", 1], ["So we had a banking, if you will, of some large expansions in the prior two years.", 1], ["So we are building them natively into windows.", 1], ["because we are building devices like the phones as well as this post sale monetization using our consumer cloud services as the two additional levers that we have in order to be able to monetize Windows devices.", 0], ["We think this is perhaps one of the big SaaS opportunities going forward.", 1], ["People often think we focus on cut here, add here.", 0], ["Emerging markets are growing 65%.", 0], ["We're now in 60 cities in the U.S., giving customers delivery in as fast as an hour on thousands of great organic products from Whole Foods.", 0], ["So if I step back on the trailing 12 months though, CapEx, which is predominantly tied to our fulfillment center network, is up 47%.", 0], ["Yes, we know that measurement is so critical, and we really want to measure core business results and focus on becoming the number one growth driver for our clients.", 1], ["And the reason why we're confident that we can get this right is because there have been several elections since the 2016 ones that have had much better results, including the French presidential election, the German elections, the Alabama special election, and the Mexican election about a month ago.", 0], ["And in this particular case, now back to commenting on this one, we're hopeful that over time the restrictions that we're seeing are loosened because innovation really requires freedom to collaborate and communicate, and I know that that is a major focus there.", 1], ["And so I see a lot of the factors moving in the right direction there.", 1], ["We have a very large and growing advertiser base, and that gives us we think a really strong position to get people into new formats.", 1], ["In terms of batteries, we have never done an analysis internally about how many people decided to get a lower-priced battery than buy another phone because it was never about that for us.", 1], ["I mean, we're showing video content, not all the rest of it, but there isn't a concrete difference between what can be a News Feed and what can be here.", 0], ["We think that most users are going to get multiple over-the-top products.", 1], ["I believe the one -- I think really important thing for us is continuing to focus on creating customer value.", 1], ["And that's going to make people's experience better, somebody can just do that online, and it's going to make businesses \u2013 it's going to make the experience of being on Facebook as a business more valuable because you can complete the transactions there.", 0], ["It tends to look a lot like our Office 365 motion.", 0], ["We\u2019re growing the number of stores.", 0], ["But our texting apps today are primarily still texting.", 0], ["I've never seen a product that's gotten to this kind of scale this quickly.", 0], ["And so there's 1,000-plus in the App Store right now.", 0], ["because we are selling everything that we can produce.", 0], ["There are some good tent pole pieces of content that people really love that they come and they check out the product to experience that and then they stay for a lot of the other valuable content that's in there and that might not be talked about as much in the news.", 0], ["We think it was a, Q4 in particular was a great quarter for customers that retail, there is a lot of strength in the retail part of the businesses, the teams here had done a great job, planning, preparing and then executing on the quarter.", 0], ["because the aggregate balance of that category, both sequentially and year over year, is shrinking", 0], ["I think it's a great value to our customers.", 1], ["There's a great example of how companies are modernizing their workforce with things like Microsoft 365.", 0], ["because as you know, we've got a hedging program that protects us from the volatility of currencies in the short term.", 0], ["Part of it's the format.", 0], ["You know, social experience that you're having with someone.", 0], ["So that should help you roughly to think about how much depreciation is at that number.", 1], ["And so to me, the innovative work we're doing is what I would characterize as the future of true distributed computing, which is it will remain distributed.", 1], ["We've also expanded grocery pickup and that's available in 10 cities.", 0], ["And so I think in those segments, we feel fine for Q4.", 1], ["So if we're effective at continuing to do that, then that should benefit pricing growth.", 0], ["Given the rationale on why we do not believe that providing unit sales is particularly relevant for our company at this point, I can reassure you that it is our objective to grow unit sales for every product category that we have.", 1], ["What we've seen in a normal of these markets, we've seen that iPhone sales have been very resilient and that shown in our growth rates.", 1], ["In terms of the range that we use for gross margins, we have a fairly good understanding on where we are with our hedging program, and that allows us to mitigate some of the volatility there.", 0], ["I think the way to think about checkout is kind of in a larger picture of what we\u2019re trying to do in terms of commerce and shopping on our services and apps across the board, which is, we obviously have a lot of consumer engagement in our products and that\u2019s great.", 1], ["For advertising, I would remind you that certain parts of the advertising roll up into other.", 0], ["I would also say that it does tend to be lumpy, and it's why I don't give very specific guidance every single quarter, and it was not at all impacted by LinkedIn.", 0], ["If you look at the sort of the top of our line together, and by that I mean the iPhone X, the 8 and the 8 Plus, they are growing very nicely, as you can probably tell from looking at the ASP and we couldn't be happier with how that's gone.", 1], ["So on a year-over-year basis, just 2016 over 2015 was 340 bps impact from foreign exchange.", 1], ["So, we can help deepen the brand engagement and the customer loyalty through that type of option.", 0], ["On operations, if you look at probably the last 18 months, you're going to see a lot of different pace of increase in both infrastructure costs and capital costs, and the addition of fixed cost heads.", 0], ["Also, I've talked about this before, but I think it's worth mentioning again, because it's easy to lose perspective with some of the things you read every day, is that the middle-class in China was less than 50 million people in 2010, and by 2020, it's projected to be about half a billion.", 0], ["So you remember as part of the adoption beginning in 2018, certainly the advertising services were classified as revenue rather than cost of sales.", 0], ["So, yeah, we'll continue looking at ways to grow that and it's \u2013 the product experience that we have right now is growing quite well so we feel good about it.", 1], ["because we meet them where their realities are today and also the digital transformation needs going forward, so that's one massive advantage we have.", 0], ["Katy, one of the things that we did not get right was the mix between the iPhone 7 and the iPhone 7 Plus.", 1], ["Yeah, I think the only thing I'd add to on that just related to Prime Video, as you may have seen in the announcement earlier today about the renewed agreement for the streaming partnership with Thursday Night Football.", 0], ["We're going to significantly increase our spend in that area.", 0], ["I mean, that was sort of our priority one, two and three.", 1], ["So we continue to put great energy there and try to \u2013 our objective over time is to go in there with all of our different initiatives from retail and everything else.", 1], ["So it's focused on really items that may be hard to get, and Amazon's really trying to become the trusted source for many of these goods.", 0], ["And so there are very different processes with these different verticals in terms of helping them understand their own purchasing data so that we can connect our ads to their ultimate purchases.", 1], ["The primary goal is to increase the quality.", 1], ["We got lot left there, and the AirPods just keep hitting new highs.", 1], ["So the thesis that we have now is that there were different parts of short-term content.", 0], ["So on virtual reality here, I think the big picture is that every 10 to 15 years or so there is a major new computing paradigm, right, whether that's DOS and then Windows and kind of desktop UI and then web browsers and now mobile phones and apps.", 0], ["Well, first of all, we believe customers will choose AWS primarily for three factors, the functionality and pace of innovation that we bring to the table, our partner and customer ecosystem and our experience.", 1], ["Every member of Congress right now has a Facebook presence.", 1], ["And some of the expense for things like data centers or new regions can be a little lumpy, and we've mentioned a couple of new regions we're working on throughout the world.", 0], ["Well, I will point out that this quarter showed a lot of innovation, a lot of new products and features and a lot of investment.", 1], ["Our growth was really broad-based, and we grew across all of our marketer segments this quarter.", 1], ["And I've said a few times, we have there sort of jam-packed with technologies that really set up the smartphone for the next decade.", 0], ["But we think it's the right thing to do.", 1], ["And to its extreme one hour and two hour deliveries as you've seen with Prime now.", 0], ["And of course now we have the Apple Watch.", 0], ["That also not only with Watch, which is continuing to grow quickly, this also opens up opportunities around things \u2013 around doing this around areas like news, which I\u2019ve recently started talking about.", 0], ["We have signed a multiyear partnership with Oprah.", 0], ["We are guiding to $62 billion.", 0], ["So it's a bunch of different factors and I think we're seeing good engagement from a bunch of cohorts in the US, which is good.", 1], ["You can think about the content acquisition that we do there as more along the lines of either marketing or bringing new people into the experience.", 0], ["And 365 has that characteristic and Office has it, EMS has it, and so this quarter actually what we saw, was actually some strength in education was added a good amount seats this quarter as well as good execution across our other segments.", 0], ["And then in these reports, we also talk about and show what percent of the content we handle proactively and identify proactively.", 1], ["We also have inbox ads where we're enabling advertisers to extend their reach to people in Messenger, which is still really early.", 0], ["Overall, again, the way I look at it is, first of all I'm most focused on obviously our organic growth", 1], ["Then there's also the monetization side for creators, which is going to be really important for making it so that we have the content that people want to consume.", 0], ["we mentioned that we're going to be down sequentially.", 1], ["When you think about ads in Messenger, we right now are really focused on consumer growth and engagement", 1], ["In terms of the experience in Europe, some of the provisions could impact the user experience in Europe but we're going to continue to work with policymakers to try to get the balance right.", 1], ["We are working with publishers to try to make the content experience better inside of newsfeed.", 1], ["but mostly because product synergies are showing up, and that's because of the product ethos of LinkedIn around member-first is what we have maintained throughout this integration.", 0], ["Looking forward, you know we don't provide guidance beyond the current quarter, but I think we have a pretty good record over the last several years to make good business decisions, balancing units, revenue and margins.", 1], ["So I don't see that dissipating.", 1], ["Take Hololens, the ability of Hololens to be able to see the world, reconstructed and in that world to be able to superimpose holograms, that is AI applied AI that is working today.", 0], ["And we had some impact from GDPR over the last two quarters.", 0], ["What you've seen this quarter is in fact the biggest in-quarter delta for us all the time is the non-annuity performance.", 0], ["We rolled out Facebook Dating.", 0], ["We have the pedal to the metal on getting to 40 stores mid next year.", 1], ["So, Mark, Asia benefits probably more than any other region around the sort of three factors that I called out in my prepared remarks.", 1], ["And going back to the encryption point from before, we think that there's an opportunity to, when you're going to go message someone over a phone number network, have that primarily go over WhatsApp and be end-to-end encrypted rather than go over SMS where it's unencrypted and less secure.", 1], ["I think we've been able to navigate a difficult foreign exchange environment for a number of years and now, as you know,", 1], ["The ability to have control through our sort centers has allowed us over the last few years to extend our cutoff times from 3:00 p.m. in most cases till midnight.", 0], ["You will see extensions of a lot of the successful shows that we've had so far this year.", 0], ["And certainly, the guide for Q4 continues to imply all those factors.", 1], ["So lots of \u2013 as I said, lots of investment in front of us.", 1], ["And that should be the primary thing that we\u2019re focused on.", 1], ["And on the AWS side, as I said, we have 530 new features so far this year.", 0], ["So I think those are some of the bigger transitions you\u2019ve seen for us in terms of being able to increase the value.", 1], ["Take something like Cosmos DB.", 0], ["So clearly we are migrating some workloads and structurally, some of that helps us", 1], ["It allows us to have much greater density of product storage and a number of other benefits.", 0], ["And we are super excited with the customer reception that we are getting and the feedback we get from large customers so we are thrilled with the business.", 1], ["We'll continue to invest in getting faster and faster shipping methods for our consumers.", 0], ["And right now our focus is on learning from them and innovating with them on how best to meet customer needs over time.", 1], ["I think over time, you'll see more cooperation and working together between AmazonFresh, Prime Now, and Whole Foods as we can explore different ways to serve the customer.", 1], ["We're seeing good interest across virtually everything that we announced at WWDC.", 1], ["We're spreading a lot of the Prime benefits that we see in North America to other countries.", 1], ["They're really good for a brand experience, to roll out a new menu item, their Double Jack burger.", 0], ["So if you think about it in terms of things like post views in News Feed, which drives impression growth that we think this will have less of an impact, and so that's sort of built in to what I had said about the business commentary when I commented on 2018 revenue outlook.", 0], ["So all three of them are in play, while recognizing we had a large business called the Server Licensing business.", 0], ["Yeah, and Justin, in terms of ad load, we've talked about the different factors that go into it, obviously, just in driving the overall business.", 0], ["But for the most part, we continue to grow usage and our expansion of our services with all of our customers.", 1], ["So I think the answer is we're going to try a bunch of things.", 1], ["But we're also investing in things like Messenger and WhatsApp", 1], ["And again, the focus is on making investments in R&D and continuing to run SG&A extremely tightly and in a very disciplined way.", 1], ["And so we think some of the differences will come from that.", 0], ["The IBM partnership, I think, is in its early stages in terms of bearing fruit here, but everything I see I like on it.", 1], ["As Satya said, I do expect both to grow, both the on-premise and the cloud.", 1], ["And when I think about data as the new currency, we have lots of managed seats and a lot of data which all will move to the cloud.", 1], ["because it's so early, but we're going to do that once we get to formats that are working well for businesses and that we feel really good about in the consumer experience.", 0], ["Then after that you can start to introduce organic ways that people can interact with businesses, so that in Facebook is pages, the businesses that people want to interact with, the public figures, the politicians, not necessary ads but organic interactions around not necessarily just your friends and families but more public figures and businesses.", 0], ["And again, on the other subscription services, music especially, it works just so well with our Echo device that we're seeing a lot of growth in that area as we increase the number of Echo devices and customers using the Echo devices.", 1], ["We remain very focused on the consumer experience there.", 1], ["Facebook and Instagram are really one ads ecosystem.", 1], ["Obviously the revenues could have been much higher if we would have expanded the channel, but if you don't need to do that, that's not how we think about the business.", 1], ["And now nearly a $22 billion run rate.", 0], ["We continue to invest heavily.", 0], ["And then finally, in terms of another headwind that is a little less than it was, currency has been affecting us more significantly.", 1], ["And so we're very focused on the convenience factor.", 0], ["One is to the enterprise customer.", 1], ["We\u2019re looking at user engagement on the platform, we also look at the quality of ads.", 0], ["So, to the first question, video is a big opportunity for us.", 1], ["Over time it's an opportunity to maybe slow down the growth, but it's not going to change the dynamics in the near term.", 1], ["That has been traditionally what we've done.", 1], ["On the search experience, and Mark can add anything if he'd like, but on the search experience from a monetization perspective, the vast majority of the searches are for people or posts, and there can be \u2013 there's the potential for there to be commercially relevant content in people's posts, people searches, which is the largest part of searching, is not something that we think is really up the monetizing category.", 0], ["And you've even started to see it this quarter as you're pointing out, Phil.", 0], ["But at the aggregate level, we still remain very focused", 1], ["That continues to be the biggest absolute contributor to what you see there.", 1], ["We have 2 billion messages sent between people and businesses a month, which includes automated messages.", 0], ["And as you can imagine, our share is today in desktops, in emerging in tablets, in 2-in-1 and of course now with Xbox as well, which is you know got great attraction to gaming developers.", 0], ["These are early days for us, but that said, that's probably one of the key numbers to watch as we make progress and execute.", 1], ["We saw that the - we told you the Prime growth, Prime membership growth of 50% in-- excuse me, 51% globally, 47% in the US means that the international Prime programs grew at a faster clip than that.", 0], ["Also, I want to point to a different mix, which is typical of our seasonality as we enter the back-to-school season during Q4.", 0], ["So, I think that shows that when video is done well, it can have a really big impact on companies large and small on our platform.", 1], ["And that demand flows across social content like we're seeing in Stories and Feed to clearly a huge amount of public content.", 0], ["On a sequential basis, we are essentially guiding to some improvement in gross margins.", 1], ["So that's a big brand thing.", 0], ["And our guidance range, by the way, represents a new all-time quarterly revenue record.", 0], ["And we now have AWS I think who is going to be a credible competitor.", 0], ["So in Q4, we made a number of quality changes that were largely around video.", 0], ["So we deliver, really quickly, a couple of ways.", 1], ["And also if you look at our cloud stack, we have application and infrastructure, data and AI, productivity and collaboration, as well as business applications.", 0], ["And so if you take it in reverse order for a minute and look at a new smartphone, smartphone penetration right now around the world at the end of December was 42%.", 0], ["The way we think about this experience is that, qualitatively, I don't know a single person really who wants to call a business to get support or interact with it.", 1], ["If you look at the current results from this quarter, you'll see that our sales and marketing expense grew 51% in the quarter \u2013 one of the \u2013 year-over-year.", 0], ["Yeah, the thing, Heather, the move to the cloud has done for us is expanded the market opportunity that we have had more than ever before.", 1], ["Those margins, as we say frequently, are going to fluctuate quarter-to-quarter and always going to be a net of investments, excuse me, price reductions and cost efficiencies that we drive.", 1], ["There isn't a specific level of conservatism.", 1], ["And if we are, it will make sense to spend more and if we aren't, it won't.", 0], ["In fact, we see significant opportunity for some of our teamwork, collaboration, communications, as well as scheduling software to be very, very relevant for anyone who's on the manufacturing plant or a retail specialist.", 1], ["So that's going be an overall factor in desktop, our ability to grow and maintain the desktop business, so I think that's an underlying factor.", 1], ["And so we're able to attach that to that project.", 1], ["The Microsoft 365 value prop to customers, especially in the second half of the year and particularly in Q4, has three components.", 1], ["And in the past, we've been addressing this issue by having to raise debt as the cash was overseas; the majority of the cash was overseas.", 0], ["In terms of the bots, what we really think about is our businesses and people making useful connections on both sides on Messenger or any platform.", 1], ["Previously, we had done it on a, is tilted more to Q4.", 0], ["So one of the things that we worked on earliest was removing terrorist propaganda.", 0], ["because your experience on Facebook or Instagram is about the quality of what you see, both in terms of the organic posts you see from your friends or public people you're following and the ads as well.", 0], ["And we learned a lot with what is our workload diversity as well as our geo-diversity.", 0], ["So we're going to have to see the length and how quickly people scroll through them to see how many ad opportunities there are and to see how effective those ad opportunities are.", 1], ["And so I think 100% is not the logical answer.", 1], ["It's an inter-company relationship.", 0], ["It is very true that, at this point, we have seen these very large digital transformational efforts and projects that we are partnered with.", 1], ["We think our targeting can be better than any other platform.", 1], ["And there is a path.", 1], ["And so, I think it's sort of the sum of all of those things.", 1], ["I think that there are parts of this that are on a good trajectory and parts where we're a little behind where we would want to be.", 1], ["I think it will come back to the pre-XP business PC refresh.", 1], ["And you already saw that pick up with the cost of revenue growth in Q4.", 0], ["So a good example of this is what I talked about with Watch Party, where now people \u2013 groups of people can get together and can watch videos at the same time and you can interact around that.", 0], ["For the year we'll add 26.", 0], ["I would say that it's primarily driven by growth in Facebook mobile News Feed.", 1], ["Michael, we never go through mix, but I would share with you that the iPhone X orders are very strong for both direct customers and for our channel partners, which as you know, are lots of carriers throughout the world.", 1], ["I tend to think revenue is growing faster than the capital.", 1], ["The overall growth is still being driven predominantly by Facebook.", 0], ["We have some great examples of Audience Networks really improving people's results.", 1], ["With our worldwide share, there's still quite a bit of room in the developed markets as well.", 1], ["Also Mainland China, we had an all-time record for revenue in Mainland China.", 0], ["And then how does that relate to Office 365?", 0], ["And as you said, there's probably additional strength in FBA which has higher fee set than MFN does.", 0], ["So we're trying to make sure that we flesh out the full range of sharing experiences, and we think that has applicability across all the different life stages.", 1], ["So, just in terms of GDPR I kind of address that earlier, we do see that having an impact in Europe that we did see a reacceleration in growth in Europe, as we have lapped the initial implementation of GDPR.", 0], ["You can see it in some of the external commentary as well.", 1], ["So, early results are good.", 1], ["And so, Echo gets new capabilities all the time as Alexa gets better and better.", 0], ["I don't know if that will be many hundreds of millions of people just because of the size of that market, but it's going be very useful for tens of millions of people around the world, maybe a hundred million or more.", 1], ["because when you think about Windows 10, what we've seen over the past couple of years is, you're right, a very strong enterprise deployment cycle and real pull for that product inside enterprises, because of the security value prop of the product itself.", 0], ["So those are a couple factors that hit the international growth area in particularly.", 1], ["It doesn't unwind any depreciation that's already been booked.", 0], ["And having Portal out in the market has been very valuable in terms of seeing how people want to use that and for \u2013 so our teams can have a real target to shoot at and iterate on and continue improving week over week.", 0], ["There were even apps like PAS .", 0], ["And I think, Brent, in terms of there being a date, a very particular date, this is something, to Satya's point, we've been doing in a step function improvement over time for the past couple years, and we'll continue to do it.", 1], ["In terms of the percentage of customers that have upgraded to a 6 and 6 Plus versus that have not upgraded, it's 73%, or meaning that 27% of the installed base of customers prior to the launch of 6 and 6 Plus have now upgraded.", 0], ["We issue a transparency report.", 0], ["And so those have the characteristic you talk about, which is that it really comes from the EA and the recognition is more predictable.", 1], ["That is the most impacted in-quarter by budget changes or macro changes.", 0], ["That dropped to 14% last year.", 0], ["So we're happy with that.", 1], ["So what I would say is, he will continue to see us focus on gross margin improvement and we talked about that.", 0], ["And again, it remains the best deal in retail.", 1], ["So therefore, I feel very good about our data story in Citus, which is the company we just bought for the Postgres capability, is something that we are very excited about.", 1], ["We had a growth year-over-year in our run rate from $24 billion to $33 billion, so 37% growth.", 0], ["And I think that's going to be more and more.", 1], ["So we continue to operate well in China.", 1], ["So it's more than just launching one point security product", 1], ["We're investing in all the things that we talked about related to the platform, continue invest in some emerging geographies, most notably certainly India with the step up given the experience we have.", 1], ["One is for our own learning, given that we're new in the video space in terms of creation.", 0], ["On the enterprise side, the growth remains very exciting for us, and the growth comes in multiple forms.", 1], ["And so we just had a phenomenal quarter on iPad, on the Mac, on Services, on Apple Watch, on iPhone.", 0], ["But for the full quarter the impact was minimal.", 1], ["Now most importantly of all of this is that customer sat is off the charts", 1], ["It's people finding post that their friends or others had posted in News Feed that they saw but then might want to go check out later.", 0], ["The business in China is going really well and we continue to see strong growth there.", 1], ["We pivoted to focus on meaningful social interactions and we've been pleased with the results of that effort broadly, but I think that DAU trends tell the story broadly.", 1], ["And of course we launched the new Kindle Oasis e-reader.", 0], ["And more importantly, it was a great day for customers.", 1], ["We expanded shopping to all -- shopping ads to all advertisers globally Q4, and we began testing checkout and shopping ads.", 0], ["This is one, where I tend to when I think about that 10% number, it really is the same way I think about Office 365.", 0], ["We invested in many of the things Satya just talked about in terms of technical capabilities and our sales force.", 0], ["We had 38% both in the June quarter and in the September quarter.", 0], ["We're building \u2013 we're doubling \u2013 in some cases more \u2013 our engineering teams focused on security.", 0], ["So I don't look at it as a direct trend line.", 1], ["So we're going to continue to offer same day and Prime Now selection in an accelerated basis.", 1], ["I still feel very optimistic about where we can take the product.", 1], ["But, there was also very good execution of adding new workloads, adding new opportunity in Q4, things such as Azure, as an example or Dynamics 365, as an example.", 1], ["I think for a lot of these initiatives, when you look across categories that would offer, many of them are still earlier stage and have been around even from kind of infancy for shorter period of time, a year, a couple of years, in some cases.", 0], ["because one half is pushed, right, going to News Feed and not asking for content but just coming across and discovering it.", 0], ["We have six bookstores right now, and we have announced another six.", 0], ["We'll open five more this quarter to achieve 40, which we had talked about before.", 0], ["Video is just a format that's bid into the auction.", 0], ["So some of these examples I've shared on this call from holiday end to Gymshark are about people using the targeting tools to find the people who are interested in the products and then you can get closer and down the funnel to demand fulfillment.", 1], ["And that really helps the growth rate for the entire Services business.", 1], ["I mean I think so much of what we're focused on is making sure that there's a high degree of relevancy and usefulness for customers when you look at advertisements that you see on the site in particular and how we position those.", 1], ["So we continue to build for high AFN, or Amazon Fulfilled Network demand, including both retail and FBA.", 1], ["In some sense, when you think about some of the commitments being made by some of the biggest brands in the world in terms of what they\u2019re doing, one, it\u2019s very core to their operation; and two, they are running it in the cloud.", 0], ["We're getting more partners on.", 0], ["Wendy's, working with their agency, VML, launched their Jalapeno Fresco Spicy Chicken product and they were trying to reach millennials and spicy food lovers.", 0], ["From a phone, that's a difficult scaling problem.", 0], ["And these are very critical competitive advantages to us.", 0], ["HomePod is an incredible product that is a unbelievable audio experience in a very small form factor with a super digital assistant in Siri that knows an enormous amount of music.", 0], ["If you've seen in the quarter, we added Alexa capabilities to our tablets and Fire TV devices, making them better.", 0], ["They know what they want and what's good and they can tell us that, if we can ask them in a simple enough way and get aggregate data.", 0], ["So the main thing that we're seeing drive this is just improving the quality and the relevance of the ads experience for the people using Facebook, and I think that's going to continue to be the story.", 1], ["And so we\u2019re certainly very focused on things like video calling and voice calling and ways that people can communicate with voice.", 1], ["So we're pleased with the growth and we believe that that delivering the strong quarter we have shows that.", 1], ["If you're bringing something over, your IaaS will be heavy first and then PaaS will grow.", 0], ["Most agents and their knowledge or smarts come from the data access they have.", 0], ["So you actually have -- we do have actually ramped in people who are doing the tagging and classification.", 1], ["So I would sort of remove that as one of the mechanisms you're thinking about on overall OEM demand.", 1], ["So, again, that's very important to us as well and we're very happy with the results.", 1], ["We've already made the call that Azure for Linux is first class.", 1], ["Overall, the core of how I want us to approach expenses is to make sure that we are not limited in our ability to invest in categories where we have unique things to, contribute.", 0], ["But I think we've launched some things that people are excited about and interested in like click-to-Messenger ads.", 1], ["And of course, you combine that with the rest.", 0], ["So I think we are experiencing deceleration from that perspective.", 1], ["And if we do a really great job of that, which we will, then I'm confident that we'll do well.", 1], ["And so we feel that we\u2019ve plenty of opportunity ahead.", 1], ["On the unit growth, we're very happy with the 24% unit growth that we saw in Q4 like you mentioned.", 1], ["We have many customers who tier their storage and compute across a hybrid backplane.", 0], ["Yeah, Shannon, you know that we've always generated significant amount of cash through working capital.", 1], ["And so that and the demographics of the country is why we're putting so much energy there.", 1], ["So we're -- continue to be pursuing the same strategy as we have in North America, adding Prime benefits, adding devices, adding video content, adding AmazonFresh, Prime Now, giving a lot of value to the Prime customers in the international countries as well and also in that numbers.", 1], ["We're building AI to go after more different areas of harmful content and finding fake accounts and other bad actors in the system.", 0], ["So that\u2019s another thing to watch, it\u2019s not only the short-term commitment, but also the long-term commitment that we see.", 1], ["So we have multiple clients who will show an ad, a video ad to everyone in the U.S. for example or to a big cohort of people and then they'll follow up with an ad that target on either Instagram or Facebook to people who engage with that first that then they can follow up with the next team and we are seeing as businesses are increasingly measuring your ad spend in terms of their real ROI for sales that even within our own platforms.", 0], ["And so it seems to us that with that many feature phones being sold, that's a pretty big opportunity.", 1], ["Pricing will take time.", 1], ["But more than that, it's more than kind of leading through excess capacity.", 0], ["It is about really SaaS and infrastructure.", 0], ["And often, TV and Facebook and Instagram can work really well together.", 1], ["So very happy with that.", 1], ["Some of the things we've done more recently over the last few months or so is expanded sponsor brands, placements, some rolled out new campaign reports, so improved campaign manager features.", 0], ["Let me start by saying, the biggest driver in commercial bookings growth this quarter was excellent execution on a large base of renewals.", 1], ["And I think certainly because this got a lot of attention, it's not just Russia at this point.", 1], ["And the reality is these modern workloads in fact lose it all.", 1], ["So that's why the mix of these higher level services especially around data and AI is definitely driving a lot more consumption of our higher level services.", 0], ["I actually think you're continuing to see the impact of those investments growing in time and growing in expertise.", 1], ["We have defect reduction and process improvements are probably something we've always done and worked on, both to lower our cost but also to improve the customer experience and also the seller and vendor experience.", 0], ["Elections are a special case, an extremely important special case of the content and safety issues and security issues that we face.", 0], ["So we've built up a large base of advertiser demand.", 0], ["Now in connection with the new revenue recognition standard, we are reclassifying essentially that amortization from products revenue to services revenue.", 0], ["I think it's really worth emphasizing that what has enabled us to do that is just improving the quality and the relevance of the ads that we have, and that's enabled us to show more of them without harming the user experience at all.", 0], ["And for simplicity, I generally would think about all the delta from Q3.", 0], ["And the ability to earn margin through that is actually more impactful than whether or not you match pricing at the core.", 1], ["So if you spend more time in Stories, they'll be need to be more engaging because there will be fewer ads in there.", 0], ["I think there are, you know every cycle is different for a variety of reasons.", 1], ["So we're very focused on this and making sure that people know what we're doing, so that they can have confidence.", 1], ["And certainly, Europe has led on areas like privacy regulation with GDPR, and is probably further along in thinking about how to think through issues around content regulation and safety as well.", 0], ["So from a balance sheet standpoint, we feel very, very comfortable with the program that we\u2019ve announced today.", 1], ["In the year-ago quarter we increased by 900,000.", 0], ["So when you think about our cloud, you got to think about the low-level infrastructure.", 0], ["The fulfillment center expenses and a lot of our shipping costs are tied to the increase in that FBA percentage and that growth of Amazon Fulfilled units.", 0], ["and we are happy with both growth rates quite frankly.", 1], ["As I mentioned in my opening comments, we're seeing different providers pick up the Apple TV and use it as their box to go to market with their subscription service.", 0], ["I see business-related AR apps as well.", 0], ["So earlier in the year, when we were working on problems like seeing issues when people were going live, there was this really serious issue around people with self-harm and in some cases suicide on Live, and we made an investment in AI tools and in dramatically increasing the staffing of the team that was working on that and brought the amount of time to review those Live videos down through a combination of those things to \u2013 I think it's under 10 minutes now.", 0], ["And then in terms of renewals, they're quite good, which we talked about.", 0], ["And there's other nonheadcount-related expenses that we expect to grow, including marketing and content investments.", 1], ["Advertising also had strong growth.", 0], ["We're going to have great capacity for shipping to our customers.", 1], ["I think the smartphone is still in the early innings of the game.", 1], ["do believe we'll grow this quarter as we put in our guidance that when you start with a number in the low 30s in terms of the percentage of the installed base that\u2019s upgraded that had a phone pre the iPhone 6 and 6 Plus, that number still likely to leave a lot of headroom beyond December.", 0], ["We're certainly going to be seeding content to get the ecosystem going, but that's not about doing big deals.", 0], ["A lot of that is fueled by Prime adoption and we are dropping a lot of it to the bottom line with many of the efficiency projects.", 0], ["And because iPhone has the largest residual rate on it, it acts as a buffer for the customer to buy new one and it lines up with another customer somewhere else that is perfectly fine with having a previously owned iPhone.", 0], ["So you're seeing declining rate on that basis.", 0], ["I also see a market that over a five-year horizon, if you look at the IDC numbers, is projected to grow from 1.3 million in 2014 to over 1.9 billion \u2013 this is billion, rather, billion in 2019.", 0], ["Some of that is not always in the year that we open the region.", 0], ["And lastly, people are changing their business models.", 0], ["And so as we look at that 2 million, there are three main categories of that, and we have actions going on in each of them to further build on that momentum.", 1], ["I think they are both huge opportunities.", 1], ["And for me, that type of performance in double digits for the year, I still feel quite good about.", 0], ["Whether that's first client workers, whether that\u2019s an increasing number of small businesses who finally have access and value that we\u2019re creating for them across things from scheduling all the way to being able to work through minor business process adjustments like Satya has talked about.", 0], ["And we are finally here and we are executing super well.", 0], ["So we're very pleased with the Instagram result, nothing specifically to highlight from a metrics point of view.", 1], ["Despite the demonetization move in India that created lots of economic pressure there last quarter, despite that, we had all-time record revenue results,", 0], ["because we think that this stuff is really important as well, at the same level there.", 0], ["It's growing and it's pervasive.", 0], ["So it's -- we're going to continue seeing the adversaries get more advanced.", 1], ["Yes, a good example of the first-line opportunity was something that you could have seen at NRF this January.", 1], ["Instagram, and we\u2019re pleased with the growth on Instagram.", 1], ["It continues to be improvements in scale, improvements in our infrastructure, improvements in utilization, really strong work across all of our engineering teams here.", 0], ["And that is a very fast number on a increasingly growing base.", 0], ["And actually, we continue to see the growth in the consumer services around the transactions that run through Xbox is also good margin business for us that looks quite different than the hardware profile.", 0], ["They all represent our participation in business applications.", 1], ["And I think everyone is really happy with that so far.", 1], ["How does that relate to Azure Active Directory?", 0], ["We are seeing even interesting use cases of Azure functions, which is completely serverless.", 0], ["and it\u2019s because we really believe in it, and we really believe in this one and what it can do for customers.", 0], ["We've always had our free trial program, but it is a hurdle for many people or there's a hesitancy to put up a full year's payment for a year of Prime.", 0], ["We're continuing to expect a strong mix to the cloud.", 1], ["We also think measurement is going to be important so we're focused on our measurement capabilities, so advertisers understand what outcomes they're driving on our properties.", 0], ["And that's why it will be important to watch kind of how this plays out at the industry level.", 1], ["It's a huge priority for the Indian government and anything that we can do to help there, we think is very good for the world and we're invested in that, and we're happy to support.", 1], ["So we would expect that content investment to continue and ramp.", 0], ["It's a large number.", 0], ["And we're going to be there.", 1], ["And so this is one more really valuable convenient service we can offer for our Prime customers.", 0], ["I could have talked more about CarPlay.", 0], ["But you also, if you interact with it, you're building a relationship with that person or you feel closer to that person, and that is a really important part of what social networking is supposed to do.", 0], ["There have been two other tariffs that have totaled about $50 billion of goods from China that have either been implemented or exiting the comment period in this month.", 0], ["And in Facebook and Instagram, you can interact with a lot of people you know or interested in connecting with them in a number of different ways.", 1], ["And so we're putting a lot of energy there and working with the carriers in that market, and they're investing enormously on the LTE networks.", 1], ["So as we head into Q4, we\u2019ve added what\u2019s just nearly a $1.5 billion penalty in Q4 year-over-year for the cost of shipping, which is essentially transportation costs, the cost of expanding our transportation capacity, things like adding additional poles and shifts in our warehouses, the cost for deploying inventory closer to customers, there\u2019s a lot of tangential costs, by and a way the biggest expenses is on the actual transportation cost.", 0], ["So we're taking it to the sellers, taking the business to the sellers.", 0], ["Where right now some people in WhatsApp use the service in order to message businesses, Messenger is, I think, more people-to-people today.", 0], ["And that's an area where the goal isn't to take down the content, but if we see an area where - if we see something that a person might be thinking about hurting themselves, we now have thousands of people and technical tools that can flag this content to those people to - so we can actually go get first responders to go reach out to people.", 0], ["A lot of what we are still seeing in play is the rapid adoption or the increased adoption of Office 365 E3, which is what I think is driving a lot of the growth, the ASP growth.", 0], ["We think about Azure and our servers as one distributed computing fabric that\u2019s building.", 1], ["This is not a feed-based product, and this is a messaging product.", 0], ["I mean, one of the things that now has increasingly become a number one priority for every CEO is to make sure that the right tools, the right products are in front of their own employees so that they can do their very best work and collaborate.", 0], ["I think the important part in what Satya says is the distinction between really engineering investments that take multiple years of investment and world view on a TAM and holding ourselves accountable to sales and marketing investments.", 1], ["So, again, they're self-reinforcing, the FBA program and also our Prime program.", 0], ["So that's just a basic example of where having human-level perception broadly is going to yield better experiences in a lot of the things that people care about today.", 1], ["It's not something that's going to be on overnight huge business.", 1], ["We hit all-time revenue records for Services and for Mac for the PRC during the quarter.", 1], ["And there's the AirPods have really gone through the roof and the Apple Watch has hit an air pocket and has gone to a whole different level as I'd mentioned earlier with our overall wearables revenue.", 0], ["And so for me, I do tend to think it's a bit more of the macro pressure and budget impacts than it is frankly any other statement or execution.", 0], ["I was very impressed with the number the developers I met last week and of course, the customers in stores are enthusiastically contagious.", 0], ["Of course, we have significant more opportunity in small and medium sized businesses, although we have had good healthy growth there.", 0], ["We'll say we're - it's been very strong.", 1], ["They were able to increase sales by 9% a month.", 0], ["If you look sequentially, also keep in mind that in Q3 when it was up 500 basis points year-over-year, that was lapping the write-down of our Amazon phone [ph] inventory the prior year.", 0], ["But in a lot of markets around the world, we see that ad quality is increasing at a very fast rate, and that makes it so that a lot of times people do ask for the content, which of course creates a very different dynamic.", 0], ["We are getting great efficiency from our external AWS business but also from our own use of AWS services.", 0], ["But also a lot of hiring in our tech areas particularly around AWS and also the Echo, Alexa areas.", 0], ["We're also very excited about India, if you take a look at our results for \u2013 from an operating profit standpoint, you see that it was approximately negative 76 million on a dollar basis.", 1], ["So one of the important points here that I tried to communicate in my comments up front is that connecting with friends and family and having those meaningful interactions is more important than just consuming content.", 1], ["And then on the creative side or on the experience side, in fact we are adding a lot of data and AI capability, which is obviously key to Adobe as an ISV.", 0], ["more than 70% of Ad Break up to 15 seconds in length on Facebook and Audience Network are being viewed to completion.", 0], ["At the same time, we also think that there are going to be many, many good businesses and different other social use cases where there are people doing good work and building different companies that we feel no need to own those things.", 1], ["Look, I think the DAU trends that we're giving really do paint the picture broadly, which is stability in the developed markets, growth for Facebook blue in the developing markets.", 1], ["It was correlated with level, and the fact that we have more male senior engineers was explaining it.", 0], ["We're working on focusing on all of those, on optimizing the relevance of the ads for all of those different potential actions that happen downstream and we're pleased with what we're doing there and the trends that we're seeing there.", 1], ["Facebook is newer, but we're seeing good progress there.", 0], ["We're getting some positive feedback from the market.", 0], ["We have Prime Pantry.", 0], ["There are businesses like for example NVC that are reinventing their business models on top of Azure.", 0], ["If you look at those three tariffs, none of our products were directly affected by the tariffs.", 1], ["The other areas, course, the entire toolchain of what's happening with Visual Studio to continuous integration, to continuous deployment, and that's a place where we have a very, very differentiated solution for developers and developer productivity, which in some sense you can think of as like the Office 365 for developers.", 0], ["We\u2019ve always had a gaming position with console as well as the PC, but going forward, we think that any endpoint can in fact be a great endpoint for high-end games, which is where our structural position is.", 0], ["The customer sat numbers are through the roof.", 0], ["Elsewhere we saw probably better than expected efficiencies in operations, our infrastructure costs, and generally all of our fixed costs.", 0], ["And so I think things look very, very good.", 1], ["T-Mobile wanted to use their Super Bowl campaign to increase their brand awareness and increase their reach.", 0], ["But the interesting thing that happens once you move your initial workload is you build around it.", 0], ["You remember they are optimizing at the end of the day for business results for a given dollar spent not the impression price that we're kind of nominally reporting here.", 0], ["So there's a share of wallet element to it as well over time that we are looking to be more useful to customers all the time.", 0], ["We continue to see people moving over to iOS and it helped with us making the results that Luca announced earlier, including the channel inventory reduction.", 0], ["You're surprised by the speed.", 0], ["And we think that this is going to be the case in all different types of media and with all different audiences that a person would share it with.", 0], ["And, Walter, just quickly, this is one of the areas that we have invested in actually leading into this past fiscal year, FY 2015.", 1], ["We fundamentally think about servers as the extension of the cloud.", 1], ["On the Twitch side, we continue to let Twitch do what Twitch does best.", 1], ["On the Azure side, my comments in fact walked that entire tree so to speak, which is the infrastructure there wherein flat even in the infrastructure side there is no such thing as one generic infrastructure when I look at the diversity of the virtual machines, what\u2019s happening with AI infrastructure with GPU compute.", 0], ["That compares to the previous year where we're increased to 2.1 million.", 0], ["But more -- I think what you'll see more in 2020 is also an -- more effort internationally, more costs internationally.", 1], ["Most of the spend that we are seeing in Q2 is starting in North America.", 0], ["Overall, business process collaborations, communications, these category boundaries are things that I believe are going to change.", 1], ["We launched our automatic placements and expanded it, which converts feed ads into a format that works for Stories and delivers the ads wherever they'll get the best results.", 0], ["There are just a lot of different experience that needs to get built.", 1], ["We have over 100 million Prime eligible items that are available for FREE Two-Day Shipping for Prime members.", 0], ["Selection should be at its highest point, especially for Prime members.", 1], ["And I think that's because we learned that we have to do a lot to help them move.", 1], ["Not only is .NET first class but Linux is first class, Java is first class.", 0], ["So it's a win-win.", 1], ["So I think the first half of the year could be a good test of where our cost structure is, coming off of the investment that leads up to the holiday.", 1], ["In other words, one of the keys in business apps is you can always get into the trap of overspending in sales and marketing and not having long-term leverage at all.", 1], ["They're synchronous.", 0], ["Let me start by saying, first I feel very good about meeting our stated goal of $20 billion in commercial cloud ARR.", 1], ["I think that is strictly a domestic issue in China.", 1], ["so that's why we're maintaining the annual OpEx growth guidance that we have.", 1], ["So, we feel pretty confident that real-time sharing is an increasingly important part of the platform and one we\u2019ll continue to invest in.", 1], ["On the unit side, you did see units move at a rate that's highly correlated with revenue there.", 1], ["I think it was about GDPR and how that's gone relative to expectations.", 1], ["When we think about video ads and what platform they run on, we really believe that over time the dollars will shift with eyeballs, and our goal is to be the best dollar and the best minute people spend measured across channels.", 1], ["It is about the rest of the world doing innovation with technology and Microsoft is uniquely in position to enable that.", 1], ["Mike, as we said, during the September quarter, we set new records for many, many services categories, right, from Apple Music to cloud services to the App Store to AppleCare and Apple Pay really has an exponential trajectory right now.", 0], ["Obviously, we're lapping what's been good performance in 2019 where we've made a lot of product improvements and growing off a large base.", 0], ["When it comes to the data tier, we have real uniqueness.", 0], ["There are 300 million daily actives on Instagram alone,", 0], ["So it's the whole array of Prime offering, Prime Now, Same-Day.", 0], ["Anyhow, we saw significant improvement this year.", 0], ["So as far as the growth is concerned in international, we had some noise in Q3 and Q4, if you'll remember with the timing of the Diwali holiday.", 0], ["And I think today, we would even say it's a more strategic asset than we even maybe thought a year ago in terms of the power of it to add to our graph and our understanding.", 0], ["We think that that is both the most efficient way to run the business, it offers every business in the world the lowest prices that we can potentially offer, and it provides a great free service to people around the world.", 0], ["Again, the great thing about services is there are several services that make up the total that are growing nicely.", 0], ["I mean, we\u2019ve all these components value, that's really that\u2019s been the secret of what customers look and see.", 1], ["That said, the current model that we have for at least getting some of the lighthouse content onto the platform is to pay up front.", 0], ["So Amazon deliveries are a big part of that.", 0], ["So we're very bullish on the fourth quarter.", 1], ["As I said, our servers have become much more competitive because of the same technology investments that we\u2019re making in our cloud.", 1], ["And if you look at the other -- we obviously grew share for iPhone in the quarter, but we also grew share in iPad and Mac during the quarter and wearables were extremely strong there in the quarter.", 0], ["So that just wasn't a thing that we were working on.", 0], ["because it just comes in different forms.", 0], ["I know that Libra is the one that has gotten the most attention recently, but it\u2019s really just one of a set of things everything from Instagram, Shopping which is going to help people connect to brands and emerging creators to Facebook marketplace, which is more consumer-to-consumer paying and buying and selling used goods to things like WhatsApp business, which is more about connecting with small businesses and then across the payment landscape, helping people do payments and existing currencies and also trying some newer approaches that can hopefully bring down the cost of doing payments around the world.", 0], ["If you look at 8 Plus in particular, to provide a little color there, 8 Plus for the period of time that we can measure to date, has gotten off to the fastest start of any Plus model.", 0], ["And on the Windows pricing, which we talked about, we do and always have worked with Windows SKUs as we release new products and add new value.", 1], ["And really that I think what we heard a lot was the value of the security and management continue to add more supported endpoints, offer really tremendous value to customers.", 1], ["Obviously, this resulted in more pronounced ASP growth in Q4 of 2018 and obviously a tougher compare for Q1.", 0], ["So, I think you'll see a lot invention, you're seeing a lot of invention from us in China right now.", 1], ["We have the strongest pipeline that we've ever had and we're really confident about the things in it.", 1], ["So obviously FX has been a significant hit in many ways, of course.", 1], ["We saw sequential improvement from Q4 to Q1.", 0], ["It's a two-sided market which starts with the health (35:02) of membership and member engagement.", 0], ["As you said, we were up 40 basis points sequentially.", 0], ["We now have 18 planes in service for Amazon, and we have announced rights to lease up to 40 planes.", 0], ["And our basic belief is that if we have high quality ads, those create a good consumer experience and we can look at what consumers are doing,", 1], ["So when that happens, you do see because it's a lot of -- almost 100% in quarter recognition, a lot of help at the operating margin line.", 0], ["We've talked about fulfillment centers' initial startup costs include increase in fixed costs but also variable cost as we train workers and also bring in inventory.", 0], ["The third point that I think it's important to keep in mind, and Tim has talked about this, we are launching, in the last six weeks, we've launched an unprecedented number of new products.", 1], ["We actively recruit sellers to sell on our platform, it's because it adds selection.", 1], ["Every server, for example, has things like disaster recovery, backup, and tier-ing with the cloud.", 0], ["So Mark, I can't comment on the derive number, but I can say that FBA continues to grow really well, it\u2019s become a bigger and bigger part of our third party mix over the years", 1], ["We run the business for the long term, not the 90-day clock.", 0], ["That has helped our performance there.", 0], ["That\u2019s why it is approach around platform and reinvention of productivity, I believe is what we can do that for sure we\u2019re going to have incredible competition.", 1], ["Specifically, we're putting more behind that more quickly than we anticipated, and so that's where you're going to see it come up.", 0], ["But the thing that \u2013 the first question that Keith asked is probably more indicative of what's happening, which is every customer is also an ISV.", 1], ["Then we need to do things like what we\u2019re doing with WhatsApp business, which is building up the business ecosystem and that\u2019s just something that our playbook on this but this is a multiyear journey where first we deliver the consumer product experience, then we create organic business experiences and then only as the last step, are we really able to ramp up having business that pay for things that are meaningful for them within that.", 1], ["So it's the investments that we're making in safety and security, it's the content investments we're making to support Watch, and then finally it's the innovation initiatives around our longer term bets like AI, AR, VR and connectivity.", 0], ["Yes, it's a gift to our users, and from a business point of view, we'd like to -- we're really proud of the content.", 1], ["We have 2.5 million advertisers and over 80% of them started on Pages and then started with simplified ad products.", 0], ["because it\u2019s very easy for one first party workload to completely opt if you will the architecture of a cloud.", 0], ["You'd expect to continue to see installed base growth as even some of the items I've talked about have more relevance and continue to make us the value prop higher even in small business, which is where you've seen the user adds.", 0], ["And we finally get to do that with the service offering.", 0], ["Even data warehousing, the scale at which this is another market which we never participated in, in the past, whereas now we are one of the most competitive products when it comes to benchmarking around data warehousing.", 0], ["And so we take the advertiser base, we take the systems we have for targeting and measuring ads, and then we help advertisers move to the new format.", 1], ["So, it is really 606 related, if the way to think about it plus a mix of billings and billing strength.", 1], ["And so that's the main reason in our view that you see a difference.", 1], ["because it's a really compelling way to reach people.", 0], ["That certainly had an impact on Q4 of last year.", 1], ["Even our licenses to the non-knowledge workers were just mostly licenses of the tools we built for knowledge workers.", 0], ["It's worth pointing out here that while Instagram doesn't have Groups, we also really focus on community and interest there, more around discovery and hashtags and explore, being able to really delve into your interests and interact with people who are interested in the same things that you are there, even if they're not your friends.", 1], ["So, I think the first half has been solid from that perspective.", 1], ["The acceleration we saw from Q3 to Q4 was currency for Europe, but Europe continues to grow at a very healthy pace on a constant currency basis,", 0], ["Apple Music was up, subscriptions were up 75% year over year.", 0], ["But I tend to probably focus more on what we can control versus the external environment and how we can best react to that.", 0], ["So we're continually working to improve these efforts and we encourage our community to report anything like this that they see, but that's not data that Facebook is collecting in any way.", 1], ["So we take both roles very seriously around here, investing on the right \u2013 in the right things, seeing results on behalf of customers, and also driving efficiencies.", 1], ["And in some cases, we called that well.", 0], ["So I think we have a long way to go to still fill up.", 1], ["And if you tried out the Toybox demo with the hands, Oculus Touch, what you see is when you\u2019re in virtual reality with another person and you can interact with the environment and use your hands, you can -- it\u2019s not just about where you are and the fact that you can instantaneously teleport to another place, it\u2019s just you can interact with people in all these different ways that would be very difficult in the rest of the world.", 0], ["I think we clearly had a lot of exciting things happen in the last month or two in terms of new announcements in devices out there.", 1], ["So I think we both feel very good about the momentum that's built through the year.", 1], ["so that's the rationale for CarPlay.", 0], ["I do think what we will see in Q3 is we're expecting a little better performance in the Pro side of the market in terms of seeing growth there, and that's probably helping a little bit.", 1], ["When you think about influencer marketing, we definitely see publishers interested in it, brands interested in it.", 0], ["We expect it to increase even further in 2019.", 1], ["That - Amazon business now serves more than 200,000 businesses from small organizations to Fortune 500 companies.", 0], ["In terms of owning content and creating content, we have started with focusing on some original content, as you point out.", 0], ["It's quite impressive to add 15 million subscriptions in 90 days.", 0], ["We have a much broader portfolio than we used to have.", 0], ["On the September quarter, when I look at the sequential increase for iPhone units that we are expecting, I would say that it is, even with the sell-through adjustments that you've talked about, it's still pretty much in line with what we've seen in the past.", 0], ["So, I don\u2019t think that, that is really played out.", 1], ["But at the end of the day, when our systems are mature, there are still going to be trade-offs between important values that we all have something, I mean, on content between free expression and civil discourse and we\u2019re moving hate and things like that.", 1], ["So for example, when GDPR came into effect, we saw a number of people who opted out on allowing us to use context from the apps and websites they visited for ad targeting.", 0], ["I think the smartphone market is very healthy.", 1], ["So that's how I see it.", 1], ["And we're very focused on the opportunity to upsell them to advertising products.", 1], ["I will point out that Q4 is obviously a very large quarter, the largest revenue quarter by far of the year.", 0], ["We certainly expect more favorable cost in the March quarter than we\u2019ve seen in the December quarter.", 1], ["You will actually over time see us be able to continue to add ARPU and growth in those segments.", 0], ["And in-between advertising and commerce, it\u2019s really a continuous spectrum and they\u2019re not two different things, right?", 1], ["I think as you know, we prefer to adjust local pricing at the time of new product launches.", 1], ["It\u2019s among the lowest ratios that we\u2019ve ever had.", 0], ["We have pillars of the business right now with Marketplace, AWS and Prime and we're actively looking for a fourth and fifth pillar.", 0], ["So it's a very clean operational quarter, I would say.", 1], ["It's a little early to discuss that now, but we certainly had a really good test on Prime Day.", 1], ["And so there is a lot more people within the installed base.", 1], ["In addition to those Apple TV is off to a great start.", 0], ["So excited about what we'll be able to continue to bring to customers on that space.", 1], ["In Q4, we adjusted their fiscal calendar to link it up with Amazon's and it added about 5 days of revenue into Q4 of last year.", 0], ["So that's, I think, what is showing up at scale as competitive differentiation and that's what you see in our numbers.", 1], ["And so, this is a really good thing.", 1], ["So we're very pleased with the results of Prime Day, and the impact of Prime Day is factored into this guidance.", 1], ["And obviously, we're going to be in an area where we're sharing revenue with content providers,", 0], ["So this is whether it's in healthcare, whether it's in manufacturing, whether it's in retail, just not knowledge workers, but where you now have messaging solutions, as well as business process workflows integrated.", 0], ["Outside of that, our transactional execution was really precisely as we expected.", 1], ["And so we continue to be really optimistic about it and just would ask folks to look underneath the numbers at the details of them before concluding anything.", 1], ["We have announced additional availability zones and regions worldwide.", 0], ["I would say that the market for us is more than iPhone.", 0], ["There were lots of different services.", 1], ["It is also because of the design point we have around not just Azure but as well as Dynamics 365 and Office 365 and the extensibility of our cloud services across all three of them, and that's really the fundamental reasons why customers choose us.", 0], ["It's a strong double-digit growth, 13% to 17%.", 1], ["That isn't to say there isn't ample opportunity for us to make sure we upgrade customers to the higher-value product and more secure and more manageable offerings we have in the server business.", 0], ["So when you combined all these factors, that is the reason why you see these research and development increases year over year.", 1], ["And then of course, I talked about video and our focus on driving and serving the consumer demand for video, and that's also leading to potentially lower impression growth as well.", 0], ["I was talking about the net impact after the hedges.", 0], ["I would say it's really important to internalize that the News Feed video ecosystem and the Watch video ecosystem are almost completely separate things, right.", 1], ["And particularly when you look at iPhone, what I was mentioning to Gene earlier, I think we've got a couple of things that are affecting not only ASPs, but obviously they also affect margins.", 0], ["So effective May 11, we're going to increase the price of our U.S. annual plan from $99 to $119 for new members.", 1], ["It will bring native apps which are going to be killer to the Watch.", 0], ["Because you think about the number of SaaS -- the number of business applications that were built on SQL Server I feel that that's an architecture that can support both what they want to do on the edge, but as well as on the cloud.", 0], ["These brand stores that we have are easy to create, customize, and we've had great pickup on that from brands, but they can show shoppers who they are and tell their story.", 0], ["But there's not really a price differential you're paying for a video, it's just what are you willing to pay into the system.", 1], ["European growth rate I think was healthy from a revenue point of view.", 1], ["I feel good about our ability to convince people to switch.", 1], ["And I still feel quite good about that, including the signals we're getting in the market.", 1], ["The iPhone obviously had to do extremely well to get a 21% number.", 1], ["On GDPR, the Facebook family of apps already applies the core principles in the framework", 1], ["But I think iPhone has a particularly different kind of cycle to it than the tablet market.", 1], ["And so I think while I do understand that people will ask a lot about that price competition at the lower level, I think what you're seeing is", 1], ["And the thing that I \u2013 what's happening out there in the marketplace is, as things become more digital, there is in fact more need for business process automation.", 1], ["On the product side, we think of actually three things we are trying to do on a continuous basis in Office 365.", 1], ["So the way to measure from the investment side is to see AI when it is infused into everything we do.", 0], ["So the approach we're taking is we are essentially creating, to your point, security value around our products, which allows us to participate in essentially a security market that we never did in the ways that we are", 1], ["We now have a much higher-level managed service.", 0], ["So I think it's both going to be \u2013 AI is both going to be great on showing people content that's really good and helping us enforce the community standards that we have to make sure that everyone has a good and fair experience.", 1], ["And when people do that well together, you see great opportunities.", 1], ["And it's not primarily a monetization product as your question assumes.", 0], ["So Office is no longer limited just to the knowledge workers.", 0], ["On the other hand, as I mentioned before, currencies have weakened against the U.S. dollar, and the impact that we expect at the gross margin level from foreign exchange is a 90 basis points headwind sequentially.", 1], ["So we're working with advertisers of all types and sizes to help them reach our customer base and the goal of driving brand awareness, discovery and better purchase decisions by the customer.", 0], ["And so we're pretty excited about the opportunity we have in our current business, and we're going to work client by client to get the video format of those ads right, get the targeting to be as good and as deep as it can be and make sure we're measuring all the way through to sales.", 1], ["And the value of it hit just \u2013 or was just shy of $10 billion.", 0], ["Now, the more sustainable conversation I think we continue to have on operating margin is our ability to pick the right secular markets in the right secular trends, you see significant revenue growth.", 1], ["We're also happy with the \u2013 especially on the Studios side, the people we've been able to work with, some of the most talented people in the entertainment industry.", 1], ["Moving forward, that's why I say it will be increasing as we move through the year.", 1], ["We're expecting the mix to Azure to continue to grow.", 1], ["And so, these two categories have become really important and really large for us.", 1], ["We have 90 million people tap to reveal product tags and posts every month to learn more about them, and we're putting real investments behind this.", 0], ["We think about it's the coming together of distributed computing where the cloud and the edge work together for not just the old workloads, but most importantly for new workloads.", 1], ["And so it will damper this quarter somewhat.", 0], ["But in terms of where we are in having in terms of actual monetization, incredibly early on that front.", 0], ["Obviously, what we\u2019ve seen during Q1 has been unprecedented movements in currencies.", 0], ["If some transition earning back off the balance sheet, the total cloud is 70%.", 0], ["Yes, we will be, we believe that.", 1], ["We structure all of our motions at this company, from how we engineer to how we do our go-to-markets to how we think about sales engagement to how we do our investments, fundamentally toward that long-term structural transition in the market.", 0], ["We're already experimenting with a couple.", 1], ["because we think we can take people all the way from the top of the funnel, where they can really get a brand awareness or product awareness, and go all the way down to purchase, not necessarily because the purchase is happening on Facebook, but because we can work on the measurement systems to understand how the advertising, both at the top and lower down in the funnel is influencing those purchases.", 0], ["On commercial seats, listen, we're very proud of that big number, growth number.", 0], ["We continue to add Prime members and similar to the flywheel that Brian was just mentioning, that the FBA selection helps us with engaging customers and in particular the Prime program.", 0], ["So we made some deliberate changes to our business model and that is in fact playing out in the marketplace where we now have very competitive full Windows PCs less than $199 going into this holiday season.", 0], ["From the payments side, WhatsApp Payments will be a part of Facebook Pay.", 1], ["So -- and despite that we give AWS customers and actually because of this, AWS customers continue to get access to the latest technologies more quickly than ever before.", 1], ["There was material improvement in gross margin in that segment, and a lot of that was actually due to the higher margins that we have structurally in that software and services revenue from Xbox.", 0], ["And so it's really both of those.", 1], ["What I can tell you is the 3P percent of revenue continues to grow, we are now up to 46% of paid units, which is up 400 basis points year-over-year, and 100 basis points sequentially of Q2.", 1], ["We're pretty excited about what's happening in the Instagram ad space", 1], ["We have to build out all this capacity to serve our community.", 1], ["And we -- I think we're already one of the top dating services, and we expect to continue growing.", 1], ["When currencies move as much as they have been in places like Russia for example, sometimes we need to take mid-cycle action to realign pricing.", 0], ["I would also call out selection growth, that's been a big area of focus for us.", 0], ["So, that's I think the right way to think about that.", 1], ["We're seeing positive signs in terms of how it's encouraging people to interact more.", 0], ["Obviously, those assumptions will possibly change over time as we get more information on how the customers behave.", 1], ["We have greatly improved our selection of one-day in -- particularly in Europe and Japan.", 1], ["And that, if you look at them in the aggregate, we think that it would have a positive impact in replacement cycles.", 1], ["I think the monthly offers are great for flexibility, give people a chance to try new ways.", 1], ["And we think that we're going to be able to partially offset this with the positive leverage.", 1], ["On tech and content, that's going to be a combination of our people cost related to many areas of the website and also the infrastructure cost to run it, at both the Amazon Web Services and also the Amazon site.", 1], ["The other one is of course data.", 1], ["We're now over $30 billion annualized run rate, 42% FX-neutral growth and $2 billion more of revenue this Q1 versus last Q1.", 0], ["We just launched a shopping experience that was just expanded in Q2 to all consumers in an additional 45 countries.", 0], ["The deal closed in September.", 0], ["And what's most important in winning budget is our relative performance in the industry, and we believe we'll continue to do very well on that.", 1], ["And I think what's exciting for us is really the opportunity we have going forward.", 1], ["In other geographies, the way that we win is to get people to upgrade from their current iPhone.", 0], ["So I think that I think was a big highlight.", 1], ["If the connection is useful for marketers, businesses, and useful for people, then it will grow.", 0], ["We are attracting customers that we previously didn't attract.", 0], ["I think of it as the edge of our cloud.", 1], ["You know, as we drive DAU faster than MAU, then that's going to increase that ratio, but we're really focused on driving DAU and time spent per person", 0], ["We like that they pump more energy into Prime and really the whole ecosystem.", 1], ["So there's a lot of uses that we're seeing for Echo.", 1], ["As we said, $163 billion is a large amount and there are even practical considerations around it.", 0], ["And what we're hearing from advertisers all over the world is that they want to continue to grow and invest with us as well.", 0], ["In terms of Europe, one thing to note is that we did pick up currency advantages there.", 1], ["What we see internally is that generally every week and every quarter that goes by, we're getting better and better at this.", 0], ["I think Apple has a huge opportunity in health.", 1], ["And so with that kind of change in the installed base and with the services that we have now and others that we are working on, I think this is just a huge opportunity for us and feel very good about the track that we're on.", 1], ["I think and I believe that the iPad consumer upgrade cycle will eventually occur", 1], ["It's our responsibility, too, to make sure that we understand everything that's going on on our platform.", 0], ["So I would say over time it will become more balanced and probably what you've seen in the short run tended to be more North America focused.", 1], ["And so we're very encouraged about that.", 1], ["And we're a company that believes in testing things and getting feedback from our community before we roll it out broadly.", 1], ["One of the impacts that I\u2019d point to you is it\u2019s also a reallocation of resources around privacy.", 0], ["on Apple TV, we had a solid quarter with existing product.", 1], ["So what we realized was that the model that we had previously didn't fully capture the nuance in how people preferred certain content from friends and family.", 0], ["So you're just seeing effectively one month of it in terms of revenue.", 0], ["There's more inventory that we can open up on Instagram over time", 1], ["We're also very focused on extending measurement partnerships and third-party verification.", 1], ["The best TV ad is 30 seconds, it builds slowly to a story, the product reveal is usually at the very end, the best mobile first ad or ad-on Facebook kind of gets to the main point or gets to the product in the first three seconds, captures your attention much more quickly.", 0], ["We think that there is a great case for not just our business, but also for the user experience on Facebook to have targeting because we think it's a better experience for the people who use Facebook to have targeted ads.", 1], ["So across the board, I feel we have the right mix of IaaS, PaaS, SaaS, and per user SaaS services like Azure Active Directory, which gives us the right mix to be able to even have the right margins long term.", 0], ["It wasn't a full featured social network itself.", 1], ["So, it is a -- it's definitely a business that is big and getting bigger.", 1], ["Worldwide, we've got kind of different puts and takes.", 1], ["We launched month-to-month Prime last year and if you think about how that works, customers are paying $10.99 per month as they go, so there's less that's deferred.", 0], ["On a dollar basis, we continue to grow \u2013 we saw the greatest growth year-over-year and quarter-over-quarter and, again, we continue to invent, now with our price, we continue to innovate on behalf of customers and see great customer response.", 0], ["We're of course working on payments in WhatsApp.", 0], ["In fact, everything that we do across our solution areas are all ingredients to helping our customers achieve digital transformation objectives on, for example, how do they engage their customers.", 1], ["The other important component of that was when people bought a PC as we talked through the year, they often took the chance whether generally in the business segment which impacts in our world commercial licensing as a reporting unit to buy Office and generally on a non-annuity basis.", 0], ["So I tend to think, I'll talk a little bit about 2017, as I always do, come July, give you all more of a shape to that.", 1], ["Those stories include video stories from consumers, and then we have an opportunity to serve ads.", 0], ["The one thing I'd say is when I think about the long-term margin, I actually think of the long-term margin across our cloud.", 1], ["And also, we\u2019re launching the Apple Watch.", 0], ["Otherwise, I think feeling good about Europe.", 1], ["So what we're doing here is we basically are just asking people, if they're familiar with news sources and whether they trust them.", 1], ["And so as I look at that, it screams that there\u2019s significant opportunity there.", 1], ["This last quarter we extended viewability measurement to the Audience Network, added another verification partner, DoubleVerify, for video and display measurement, and introduced our MMM [Marketing Mix Modeling] portal so that we can help people measure across all of the different platforms and compare the effectiveness of their ad spend no matter what their end goal is.", 0], ["We have driven significant process improvement to essentially make it as efficient as one can make it and that\u2019s a continuous process for us.", 1], ["Yeah first, as far as the Office 365 usage itself, I talked about some of the numbers of 60 million monthly active users, the fact that our seats grew 66% year over year.", 0], ["And we're going to do our best to convince them that the Apple TV+ product should be one of them.", 1], ["I do think that India, India is the third largest smartphone market in the world.", 0], ["But I would say, in general, I think it's important to keep in mind that if we look around the world, we do see a lot of positive signs, but we also know that the macroeconomic environment is slowing down in a number of places around the world.", 1], ["They want to be able to instantaneously use and get value very quickly and that's something we've actually seen and a real testament to our ability to add so many customers in every quarter.", 0], ["So the guide certainly implies that continued optimism.", 1], ["So we think the investigatory work we're doing into APIs, into the use, is very important, and we don't expect it to have an impact on revenue.", 1], ["So we're very happy with that.", 1], ["We have the prototype and the developer kit around the higher-end stand-alone coming out as well, and we're doing a number of other things that I think are going to be quite exciting over time as well.", 1], ["So we're looking forward to the, ultimately the impact all this has with customers in terms of their ability to take advantage of our respective value and for them to be able to benefit from it all.", 1], ["And so, we did fairly well.", 1], ["I would love if you're an illustrator or a Photoshop user, you should just check out the dial support that they have in Surface, which just is beautiful.", 0], ["Katy, sequentially from 38.5% that we just reported, typically we have product transition costs during the September quarter.", 0], ["And that's what you see in their sessions growth, engagement growth, their quality member growth.", 0], ["The Dynamics 365 momentum is picking up.", 0], ["Instagram is a follow model, right, so it's \u2013 they're not all bidirectional friendships.", 0], ["And so then as we drive efficiency and our cloud infrastructure, when we for example use to be more out of our network, that's efficiency that we gain across the marginal cost and gross margin that spans everything that we do.", 0], ["So we're happy with the growth, 42% on an FX-neutral basis and again a $30 billion - greater than $30 billion annualized run rate.", 1], ["We've had 60% growth in new customers during the period.", 0], ["They also sort of said things that will matter in this transition to the cloud will be consistency and productivity.", 1], ["So, really as we continue to redefine what Office means from something that people will always associate with Word, Excel and PowerPoint, to things that mean in mobile or video would stream, or collaboration with teams, I think we have opportunity to continue to add those new users, new types of users that we haven\u2019t had access before and the capability even to users we have.", 1], ["And so it tends to be like it's focusing people back on the all up KPI because it's a best representation of where customer commitment and usage of our architected from the beginning hybrid cloud.", 1], ["And the price also for those people that are not buying a device in the period of time that we offer this, the price is very aggressive as well.", 1], ["The premium content part of it, yes, I think the right way to think about this is almost as marketing to help people try out the tab for the first time.", 1], ["Similarly Azure, where we launched a whole set of security offers around how people can encrypt and manage keys", 0], ["And so that's the reason why you see so many iPhones out in the wild right now chasing Pok\u00e9mons.", 0], ["And I haven\u2019t even seen this, but generally, there\u2019s cost breakdowns that come out around our products that are much different than the reality.", 1], ["So that way, all the photos that might be of you and your friends' camera rolls, they can share with you.", 0], ["There's, I think a recognized momentum with Windows 10 if deployment inside of enterprises for its security and management value prop.", 1], ["In general, the way I tend to look at this is the interactions we have with customers and the markets we're in and do we feel like they're expansive.", 1], ["So, we continue to see strong Prime membership growth.", 1], ["It makes the people around the robots that much more productive.", 0], ["There's discounted student plans.", 0], ["And I'm very proud actually of the growth this quarter.", 1], ["and I think that's going to be pretty meaningful over the next few years.", 1], ["We\u2019re very bullish on the product and getting great feedback about the quality of the products we\u2019re shipping.", 1], ["We really believe that at the end of the day what matters the most is all the way through to sales.", 1], ["So we're much more focused on the dollars.", 1], ["And so it just depends year over year, but that's why the commercial is slightly harder to do it on", 1], ["It was strong on a unit basis.", 0], ["But even for the largest, the largest clients we have, we are a very small part of their budget.", 0], ["So for example, currency markets can be very different one year to the next.", 0], ["And so we are seeing increasing usage of that.", 1], ["And you'll see that our headcount grew 13% year-over-year.", 0], ["And so this volatility that we are going to see because of macro and because of budget constraints, especially on Transactional, we will focus on because we expect excellent execution and have accountability to do that in the field.", 0], ["One is Apple Arcade, which is our gaming subscription service, and then of course Apple TV+, which is our video streaming service.", 0], ["Luca mentioned some of this in his comments and we think that continues to be a big opportunity for us.", 1], ["Those two things in the aggregate led the combination of retail and online, just short form that is retail Apple Store let to growth in June trajectory.", 1], ["All have helped our cost structure, so just a little more color on maybe some specifics on the efficiency area.", 1], ["We are already making plans for a smoother Q4 next year.", 0], ["That has certainly been the biggest theme of the last quarter and is the biggest part of the product strategy for Facebook and Instagram and is a big part of the product strategy for Messenger and WhatsApp as well.", 0], ["I mean, you really can't tell the difference, if you look at sort of our daily and weekly numbers.", 0], ["I think one of the other things we feel good about over the long run, not really the short run, is that since we have so many different places where you have Stories formats in Instagram and WhatsApp and Facebook, as volume increases of the opportunity, advertisers get more interested.", 0], ["And in Japan and the UK, six of the top seven were iPhones.", 0], ["We think about the security, identity management, information protection and all that value across all device sockets, so therefore, I feel very, very good about the product investments and the go-to-market investments we are making to really help our shareholders realize that growth potential that's available in what is going to be an increasingly digital world.", 1], ["And I think that broadly paints the right picture in terms of engagement as well.", 1], ["Anyone that has a standards-essential patent has a responsibility to offer it to everyone that would like it under what are called FRAND terms.", 0], ["We just added a lot of new music in our Prime Music program.", 0], ["So SMBs are very core to our business and, with over 80 million SMB pages that are using Facebook on a monthly basis, we know they're core to theirs.", 0], ["These numbers are unbelievable and they're done in an environment where it's not the best of conditions.", 0], ["So we are adding \u2013 having success hiring a lot of people and pointing them at some very important programs and customer-facing efforts.", 1], ["It benefits margin, not just in Azure but across actually the entirety of the cloud.", 0], ["And then add the Beats products that a group of our customers really enjoy as well, and look on the trailing 12 months \u2013 so this is not a forecast \u2013 that business was well into the Fortune 500.", 0], ["But we're happy with the growth there.", 1], ["And we also provide the user a one-payment model for purchasing apps and subscriptions and in-app purchases, et cetera, so that they are not in a position that they have to share their private information across many companies.", 0], ["And we think that that\u2019s just really important to the mission of the company and we\u2019ll increasing engagement and sharing and openness, and all of the things that we care about.", 1], ["And, Mark, we've talked about our strategy on how we go about monetizing the different apps in our portfolio, and we usually talk about it in terms of three phases.", 1], ["We think it's a great opportunity too, and so we're bringing all the things that we brought to bear in other markets that we've eventually done well in, and that's from channel to stores to our ecosystem and so forth.", 1], ["That's the module you want.", 1], ["But we have said investments are going to be lumpy.", 0], ["So that means we have SaaS which is a huge component between O 365 and Dynamics, PaaS which is a huge component of Azure itself.", 1], ["So it's not going to be that everyone is using News Feed, they're going to have -- different people are going to care about different things, whether it's community, or marketplace marketplace for some or dating or news for others.", 0], ["And just unlocking some of the friction that existed in SMS and improving the product a little bit and removing the small fee that was there has just unlocked a huge amount of expression.", 0], ["And I think we'll get there over time, where the performance for Stories ads will converge with what we have seen in feed.", 1], ["And they ran ads \u2013 one group for Facebook News Feed only, one group for Ad Breaks only, and one group for News Feed and Ad Breaks combined.", 0], ["They then retargeted those same people on Facebook.", 0], ["There is going to be very ability the variability is really two things.", 0], ["And so there's just an enormous number of people moving into the middle-class.", 0], ["And there will be something interesting to build.", 1], ["And so we enter the quarter with quite a bit of momentum.", 1], ["So again, usage rates continue to exceed the revenue growth rates.", 1], ["In terms of Facebook versus Instagram, they're obviously both contributing to revenue growth.", 1], ["The second area for us is also the nexus between what's happening in Office 365, Dynamics 365, AppSource.", 0], ["And if you wanted to upload a video, whether it was a longer video like what you'd post to News Feed or a 10-second story like what you'd post in any of the apps, even that might take 30 seconds to upload, so it wasn't a good experience.", 0], ["Amazon Fresh, Prime Now, which offers grocery as one of the components of the selection there for the two-hour or even one-hour delivery capabilities.", 0], ["There's just an expiration base that comes up every quarter.", 0], ["I would point out, I think I mentioned in my comments, that we actually grew in constant currency for Greater China and we grew in Mainland China on a reported basis.", 0], ["In terms of what we saw in Q4, you can probably tell from the ASP we had good success, I would say, through the different iPhones.", 1], ["And the effect of that is that it basically normalizes for \u2013 there are going to be people who read a given news source, who will probably trust it because they read it.", 0], ["If you're trying to tell a brand story, then you want to do a video ad.", 0], ["So we will continue to work on costs.", 1], ["The portfolio of services also has incredible momentum.", 1], ["On the Watch, our June sales were higher than April or May.", 0], ["And maybe more importantly, we continue to innovate in the product and deliver value to the end user, which is really what matters.", 1], ["So you'll see a better perspective on the entire quarter.", 1], ["So I think you're going to see this across all of our apps.", 1], ["Again, this is a place where we\u2019re a very low share player.", 0], ["And so, I suspect you will see a similar pattern on a similar desire by Satya to continue to invest toward growth especially on the commercial side.", 0], ["I do that every day with controlling all my home automation and so on and so forth.", 0], ["Some other things like posts, which helps customers discover products and brands.", 0], ["So one of the things that we are very excited about and have learnt a lot from is the secure productive enterprise offer that we have had now last year and impacted Q4, it really accelerated significantly, and so that has helped us in fact come up with Microsoft 365 at this very strong offering that brings together Office 365, Windows 10, as well as our enterprise mobility and security.", 1], ["I would point you back again to the investments that we made in 2016 and 2017.", 0], ["We set a record in China for revenues.", 0], ["The core idea of Windows 10 is to build a device operating system that spans the gamut from no screens to small screens, to PCs and even large screens.", 0], ["So if you look at just the cost of revenue line where that's getting picked up, we saw cost of revenue grow 66% year-over-year.", 0], ["This quarter is slightly down, but still 46% growth is very strong.", 0], ["We're constantly working to provide the best experience to customers and be as efficient as possible.", 1], ["So the bucket of those together, what we're seeing is many of the workloads and movement to E3 within Microsoft 365 and to E5 continue to have good pull.", 1], ["So we've worked hard on things that will help brand purchasers feel comfortable on the platform and measure their ROI.", 1], ["because so many of the scenarios in this time period, we've seen the growth we expected.", 0], ["Some of them are going to be platforms and some of them are going to be apps and different things on top of platforms that other folks build.", 0], ["So we remain very bullish on the video business, and we're looking forward to a lot of interesting new projects at the back-end of this year and also lined up into next year.", 1], ["And so, that\u2019s one thing that definitely is a market difference for us.", 1], ["We look at all sizes, and we will continue to do so.", 1], ["Also, since we split the line with the launch of iPhone 6 and 6 Plus back in 2014, this is the first cycle that we've ever had where the top of the line iPhone model has also been the most popular.", 0], ["Sales are 4x what they were last year.", 0], ["There's stimulus programs that the government has executed including -- and this happened in early April, VAT being reduced from 16% to 13%, so they've been aggressive in the stimulus side.", 0], ["And as we talked about, as we move through the year, I do expect things to more normalize overall in terms of RPL comparisons.", 1], ["So, Coca-Cola used that in Kenya and Nigeria.", 0], ["So that I think feels very good from a resource allocation and return perspective.", 1], ["And Mark, on the total bookings number, the reason we moved to commercial bookings is it's a far more comparable number to look at period to period.", 1], ["It's pretty much a cost of doing business 12 months a year for us.", 0], ["So for the quarter, we came in at the highest end of our revenue range, $60.5 billion, 26 -- 36% FX-neutral growth and 25% FX-neutral growth, excluding the Whole Foods acquisition.", 0], ["So to your point about margins, I feel that we actually will have software licenses with hybrid rights.", 1], ["So obviously, that's a good way for people to discover interesting pages, interesting businesses around them, so search is one angle there.", 0], ["The demonetization impact has not worked its way through yet.", 0], ["As you mentioned, Oculus Go is coming out.", 0], ["So we continue to see good opportunities to grow time spent, continue to see good opportunities to grow users, and we continue to see good opportunities to grow advertiser demand.", 1], ["There\u2019re certainly people that are watching the whole 30-second video ad with sound, but there are some people that are doing at less, they\u2019re watching shorter formats and they\u2019re watching with sound.", 0], ["And at the same time we're seeing continued pricing growth on feed, and that's true for both Facebook and Instagram.", 0], ["In fact, it's very healthy and we think that it'll continue to be healthy.", 1], ["Again, we have great third party partners as well in the transportation space.", 1], ["And photos I am getting from many users around the world are just incredible that people are taking.", 1], ["I'd say we're still pretty early on in getting this to be widely rolled out.", 1], ["The -- what we're seeing in terms of new adds on the Watch, I think Luca may have mentioned this in his comments is about three-quarters of the Apple Watch buyers are new to Apple Watch.", 0], ["One thing I would add, Phil, to that is an important dynamic that we're seeing in Office 365.", 1], ["Ross, I mean if you remember we\u2019re seeing good impression growth across Instagram Stories, Instagram Feed and Facebook Feed.", 1], ["And in our case the vision also we have for distributed cloud infrastructure is just that, it is distributed.", 0], ["We released more than 200 machine learning features and capabilities in 2018 alone in this area.", 0], ["But I feel very, very good in the growth of that.", 1], ["And so, when you have a dynamic where you\u2019re seeing longer contracts plus you\u2019re able to sell more and new things, and I think different conversations around Microsoft 365, it was a good execution by the team and I think a recognition of the value that we continue to put into that what we believe is our hero -- hero experience.", 1], ["One of the factors is just that the desktop roll-off is just continuing.", 0], ["So products like dynamic product ads, Carousel ads are working really well for us.", 0], ["So in many cases they choose to use especially with the new Dynamics 365 field service module automating field service.", 0], ["And that isn't giving the most voice to the most people.", 0], ["If it will help, I will tell you that, again, we're now over $14 billion run rate.", 0], ["Our business depends upon the amount of ads that we can share and the effectiveness of those ads, which drives up ROI and ultimately the price.", 1], ["So in the first quarter, online stores revenue would have been higher, but for this new standard.", 1], ["The quality is really important to us", 1], ["There's no doubt about that.", 1], ["And of course we\u2019re also spending ahead of some of the products that will generate revenues in the future.", 0], ["The Watch is getting some traction there.", 0], ["We -- that carried into Q3-- was slightly higher in Q3.", 0], ["Again, beginning in the first quarter, we now recognize annual Prime membership revenue straight line over the 12-month period.", 0], ["There have been different experiences that are more focused on specific things.", 0], ["So you can go from text to photo to video, from small groups to larger groups, from your friends to everyone in the world.", 0], ["And I would say there, really, those impacts were purely due to the GDPR impact, not other engagement trends.", 1], ["But from the targeting, we're not forecasting a big impact here.", 0], ["That's really great", 0], ["That goes without saying.", 0], ["I mean, that's always been the first part of the mission of Facebook, is giving people the power to share, to connect, to come together and build communities, but give people the power has always been the primary and first thing that we have focused on.", 0], ["So we are solidifying and increasing our investment in India on all fronts.", 1], ["So we've been investing there.", 0], ["We're bullish on India longer-term and it's early.", 1], ["So there's more to kind of look out for there.", 1], ["So that is the biggest individual contributor but as I mentioned in Q2's results, some of the investments in marketing, the step up in infrastructure spending that should continue.", 1], ["So it's hard to predict what that looks like.", 1], ["But to put it in context, which I think is important, despite that volatility in the Chinese market, they're still up 90% over the last year, and they're up 20% year-to-date, and so these kind of numbers are numbers I think all of us would love.", 0], ["So, we want to make sure we do this in a consultative away with a lot of folks in journalism and in the industry.", 1], ["And we continue to see time spent grow across the platform.", 0], ["So that's what this notion of a graph represents", 0], ["The timeframes of these migrations and so on are a lot more complicated than they perhaps appear on the surface.", 1], ["It's just worth noting that it is up significantly from where we were two years ago.", 0], ["The challenge will always remain at the end of the day for us to make sure that we are bringing together unique offers.", 1], ["It's pretty early days.", 0], ["Instagram, we\u2019re certainly very pleased with the performance of Instagram and it certainly made a contribution this quarter.", 1], ["I would highlight maybe three of these businesses within Services at the App Store set a new all-time record.", 0], ["Starting with the June quarter, typically we see a decline in gross margin going from the March quarter to the June quarter.", 1], ["There are also things that are not necessarily within our control.", 0], ["And so, there was a lot of leverage and a lot of, in a way, there was a lot of pre hiring in 2017 that we digested in 2018, while we still continue, in some areas, especially things like our core retail business and also G&A functions, but then we continue to invest again in the technology tied to AWS sales team to an AWS device area.", 1], ["One of the things that we started always, we always believed in distributed computing, and we've built for that so when we say hybrid, we never thought of it as some kind of a temporary state but we always thought the edge and the cloud was going to be where the application pattern was in fact going to get to.", 1], ["Whether it's in Office 365 or whether you're a salesperson using any application related to sales, you want your professional network there", 0], ["We obviously want that to be better.", 1], ["Video is going really well.", 0], ["So for example, going back a few years, News Feed, right, was \u2013 it's always been, since we rolled it out, a very central part of the product.", 0], ["I think that the tablet market in general, one of the challenges with the tablet market is that the replacement cycle is materially different than in the smartphone market.", 1], ["So, we couldn't be happier with the progress.", 1], ["our focus really is on revenue share.", 1], ["We feel we're doing something very important for the customer.", 1], ["Yeah, I think we've started to show our strategy on the Whole Foods side.", 1], ["And similarly, the work we've done in Facebook and Instagram and Audience Network will help us expand to Messenger.", 0], ["And we've found that that's the reliable signal of content that helps to build common ground that is unlikely to be polarizing, that is unlikely to be false news, and what we're doing is helping to show that a little bit more.", 0], ["And what that means is you bring all the data in its native format.", 1], ["So I would say that's another point of differentiation.", 1], ["That's fantastic to see.", 1], ["The one thing that I would say in terms of making money through Messenger is we're already driving results for businesses by letting them advertise in News Feed to open up threads in Messenger, which is different from the long-term vision that we have here around creating interactions that start in Messenger.", 0], ["The core focus, Keith, for us to start with is to ensure that the innovation roadmap we have is all driving member value.", 1], ["And really, the slight improvement over the midpoint of the guidance range was due to the fact that our revenue was ahead of our expectations, and so we got a bit more leverage out of the increased revenue levels.", 0], ["The monthly program is gaining traction and is an attractive option for a lot of people.", 0], ["So it's clearly working.", 1], ["And we continue to offer the iPhone 5s in the market and it continues to do quite well.", 0], ["And so you're certainly seeing the macro impact in the intelligent cloud segment and the server weakness is there.", 0], ["I think our guide for Q1, given some of the headwinds we expect in terms of support agreements that we talked about in Enterprise Services, continues to expect very healthy double-digit annuity growth, driven fundamentally by Azure in that segment.", 1], ["And so, I feel encouraged both by the technical differentiation, but also the return on the investments we've made here, that lead us to have good amount of confidence that you do see in the guide in Q3.", 0], ["So it's stepped up from 9% to 21%.", 0], ["The first is the expiration base absolutely does matter and that's how we talked about it, and we had a actually very good quarter here in terms of renewals and what I think of as revenue we capture.", 1], ["We've added Apple Music, where we now have more than 50 million paid subscribers and continues to grow very nicely.", 0], ["These relationships, these trade relationships are big and complex, and they clearly do need a level of focus and a level of updating and modernization.", 1]]