Microsoft Corporation (NASDAQ:MSFT) Bank of America Global Technology Conference Transcript June 7, 2023 10:50 AM ET
Executives
Yusuf Mehdi – Consumer, Chief Marketing Officer and Corporate Vice President
Analysts
Brad Sills – Bank of America
Brad Sills
Good morning. Thanks everybody for joining. I am delighted to be welcoming Microsoft to the conference here on stage. I am Brad Sills, senior analyst covering large cap software including Microsoft. We are very fortunate today to have Yusuf Mehdi, who is Consumer, Chief Marketing Officer and Corporate Vice President. Thank you so much, Yusuf, for joining us.
Yusuf Mehdi
Thanks, Brad.
Brad Sills
Great to have you here.
Yusuf Mehdi
Yeah. Thank you.
Question-and-Answer Session
Q – Brad Sills
So why don’t we just start Yusuf with a little bit of your background and your role at Microsoft as Chief Marketer for the Consumer?
Yusuf Mehdi
Yeah. Great.
Brad Sills
Please.
Yusuf Mehdi
Yeah. It’s great to see everybody. Good morning. Yeah. In Microsoft, the role I play is I run essentially product marketing, product management for most all of the consumer products at the company. This includes Windows, our Surface device portfolio, Microsoft 365 Consumer and then most notably of late, Bing and Edge, and all of our AI — consumer AI efforts.
Brad Sills
Wonderful. And why don’t we just start at high level, when we think of Microsoft, we think of the enterprise. So maybe if you could just touch on kind of the state of the Microsoft brand with the consumer and where are the key focus areas?
Yusuf Mehdi
Sure. As a whole with Microsoft, we are fortunate to have a very strong brand on a worldwide basis. We have great strength in the enterprise, as you know, and that translates over into the consumer space because people, our people as we say. So they use our software at work and at home.
And we have excellence in certain categories of productivity and creativity, where we are well-known and then — and now we are coming in new areas, obviously, with Windows, we have got strength and then with Bing and Edge.
Brad Sills
Wonderful. Great. And we saw the launch of the new Bing early this year and I thought the demo was impressive. I wanted to just get your thoughts on what was the motivation behind that? What are the use cases you are going after with Bing in Search?
Yusuf Mehdi
Sure. Well, the big opportunity that we saw with the launch of the new Bing is that, rough — there are roughly about 10 billion search queries that happen every day and at least half of those by our account go unanswered. So people aren’t getting the answers to the questions they want. These are things like longer travel queries, more sophisticated research.
And so we saw an opportunity to marry the power of AI with Bing and create a new interface to go after that and start to solve some of those problems for customers and we are seeing some good success already early on with that.
Brad Sills
Wonderful. Wonderful. And I would love to get your comments on the OpenAI partnership and the integration there with Bing…
Yusuf Mehdi
Yeah.
Brad Sills
And in general, across Microsoft, if you could.
Yusuf Mehdi
Sure.
Brad Sills
Please?
Yusuf Mehdi
As many of you may know, we have a very tight relationship with OpenAI that dates back now multiple years to about 2019. We have worked together with them to start from the foundation. So we have helped provide the cloud power behind the phenomenal work that they have done in AI through large language models with Azure.
We have built the supercomputer that powers all of that training and the inferencing. These are very high end sophisticated computers. There were special work done for that. We did that work. And then more recently now, with Bing, we have worked together.
We have built a proprietary technology inside of Microsoft that we call, Code in Prometheus. This is a proprietary way that we have to access the large language model to access AI and get the most out of it.
So essentially, think about taking the power of the web index, our understanding of the Internet and of web pages, which is only essentially two companies that really have that kind of power. And we can now more intelligently call, access to AI, refine the answers and get that back.
And we have worked together with OpenAI in a number of ways on that. From ChatGPT, we made an announcement at our developer conference last week that we are now going to enable with them the ability to use search within ChatGPT, just like we have with Bing.
Today with Bing, we have a very differentiated offering, which is you can only access the AI to answer questions, but we can call the Internet. That means we can reference things. It means we have more timely data and so those are real strengths, and that we are continuing to partner with ChatGPT.
And then the final thing is, we announced with them a common plug-in architecture. So as third parties want to not come and right on this new emerging platform, when people write — developers write a plug in a run on Bing and on ChatGPT, and for that matter, all of our Copilots at the company.
Brad Sills
Wonderful. And at the time of that launch for the new Bing, you referred to the next-generation LLM from OpenAI that was coming, that’s more tailored for search. I would love to get any more color on that, please, if you could elaborate.
Yusuf Mehdi
Sure. Yeah. At the time, we were essentially we are running on an early version of GPT-4. So already, it’s recent memories. But we — at the time, GPT-3 was out, we had more advanced results and people were asking, why your results so great. It’s because we had been working on an early version. So that’s what we were referring to. OpenAI confirmed that about a month or so later after they announced it.
Brad Sills
Got it. And what has the result been so far in terms of the relevance of Bing since you have had this integration with OpenAI?
Yusuf Mehdi
Yeah.
Brad Sills
Please?
Yusuf Mehdi
So — yeah, since the — and it’s only been about four and a half months. But since the launch, we have had a bunch of great progress and milestones on that. First off and just from in terms of usage, Bing has now surpassed 100 million daily active users, which, by all accounts of any kind of product in the Internet is a super impressive number.
In the world of the Internet search. It’s not that much. We are still single-digit — a single-digit player, which means we have a lot of upside. But 100 million daily actives is pretty impressive. We have seen our mobile traffic increased 4x and we have seen a lot of pickup now and usage of it.
We have seen new users come. I think back early on we had millions of new users come and tried Bing that hadn’t before. So it’s really, I think, in our minds, started a new day in search and a new round of competition.
Brad Sills
Wonderful. Thank you. And there were some enhancements to the Prometheus model as part of this Bing overhaul earlier this year. Could you elaborate on what Prometheus is and what were some of those changes?
Yusuf Mehdi
Yeah. And Prometheus is a little bit on some of what I was mentioning earlier. It’s our proprietary method for accessing the Bing search index. We have used it effectively to do a couple of things.
One is to get better answers in search. So what will happen is you, let’s say, today, you call an AI in ChatGPT or something else, you get back an answer that gets created from the AI. We are able to check that against the search index to understand, hey, is that really something from there? We can we can use search data to make the answer, help the answer get more relevant and we can footnote it.
The other thing we have done is we have actually used AI in the converse and we have applied it to our search ranker. And for those of you who follow search closely, improvements in search ranking is very tough. It’s 20 years for us in Google. The largest increase, I think, in at least a decade, if not longer, came after we applied the AI sort of techniques to search ranker and so now our results, I would say, rival Google’s results in terms of relevancy.
Brad Sills
Interesting. Okay. Great. And you demoed some new use cases when you rolled out the new Bing. Are there any use cases that have surprised you that you have seen more of that perhaps maybe you didn’t expect and just any commentary you can make on how some of these new use cases for search are coming in with Bing?
Yusuf Mehdi
Sure.
Brad Sills
Yeah.
Yusuf Mehdi
Yeah. A couple of different things. Like we said, first off, I said about half of the queries that we see in search go unanswered and those were things like travel, like more sophisticated travel planning, deeper shopping research, sort of advanced kind of research. Those things we are seeing now in the early data. The people are, in fact, doing better queries.
And so, I think, it’s kind of nuance. So like when you are in search, people might say, flex for foundry bus. When people are in a chat interface, they might say, hey, help me plan a trip to Kenya, two-week trip to Kenya. So it’s different questions, different answers. So we are seeing people do more sophisticated travel analysis and planning as one example.
We have seen a lot of people do much more research, historical discovery of information and content that they hadn’t done before, because it’s — the ease of use is now there. So we have seen some changes in those things.
The big takeaway though is, in the chat, when we see people chat, the vast majority of what they are trying to do is search specific stuff. So if there was a question before we launched about whether the new AI and the new chat would revolutionize search, that has proven out at least in our data.
Brad Sills
Wonderful. Okay. Great. And when you think about the advantages Microsoft has here in search, the data set that you are leveraging, if you could provide a little bit of color as to what that is from your seat? Yeah.
Yusuf Mehdi
Sure. Yeah. The — so we have — I would say, we have a couple of really clear advantages. One is the OpenAI foundation model, it’s very clear, that is by far the best most advanced model that’s out there and we have seen that through various testings. So number one, we are getting to leverage the most advanced AI foundational model.
Second thing is because of our being web index, and like I said, there’s really only two big search web indexes out there, we have a unique opportunity to be able to marry sort of daily crawling, up-to-date information, deep search understanding with the AI. That’s a very unique thing that we can do.
And then, thirdly, we — because we are more of a challenger, if you will, we have smaller share, we are very focused on the new emerging customer needs and we can take more steps to be innovative.
So the user experience that we have done with Chat, what we are doing with search on the search page itself, and then the integration that we are doing with that, like we have announced Windows Copilot.
We have put Bing on the Windows Taskbar. So 0.5 billion people now can get access to one-click access to chat. Those are some unique strengths that we can bring to help people with their searches.
Brad Sills
Wonderful. Thanks, Yusuf. And at the time of the launch, you referenced the convergence of the browser, chat and search. If you could elaborate on that and how you see that direction?
Yusuf Mehdi
Yeah. One the things that we see is most people don’t distinguish between their browser and their search engine. They think of it as one concept, right? And obviously, when you go in — I am sure as you all use the Internet, you go into the URL address part and you type in.
What we are doing is we are doing really deep integration of that search and chat capability in Edge, so that you get what we think of as your Copilot for the web, which means that as you go anywhere on the Internet, not just on bing.com or some other site dotcom.
But anywhere on the web, if all of a sudden, you want to apply AI to the page you are looking at. So for example, you go to a page and you say, hey, tell me what this page is summarized along PDF or tell me the ingredients for this recipe? With one click on Bing, we can now read that page with the power of AI.
And if you want, you can then go outside the Internet and access additional information. So for example, you can say, I read this third quarter report of financial earnings from company X. Give me the key takeaways. Compare their earnings in the last quarter against another company and put it in a table for me. And you can do — you can literally do that all — anywhere on the web on any type of content. That’s an incredible merger and we are very unique in doing that right now.
Brad Sills
Wonderful. Thank you. And what kind of impact have you seen from the new Bing and Edge on search volumes and engagement.
Yusuf Mehdi
Yeah.
Brad Sills
Please?
Yusuf Mehdi
Yeah. So a couple of things, like I said, our daily active users now have surpassed 100 million. We were sort of on that. We were on a path of growth, but that has certainly picked up since we launched the new Bing.
Likewise, our Edge browser has been growing share for the last eight quarters in a row. That’s continued. If anything, we see when people use a new Edge with chat, they spend more minutes on it and they use it even more.
So all of the early signals and this is still early data, but all of the early signals are very positive. In particularly when we see people use chat, we see them search more, we see them come back more frequently and so the early signals are good. And now as we start starting to scale more broadly, we will see how that expands out.
Brad Sills
Great. Thank you. Thank you. And when you think about Microsoft’s Advantage, I mean, we are all — a lot of focus this week on AI and LLMs. What is Microsoft’s Advantage in training LLMs, your own internal LLMs?
Yusuf Mehdi
Yeah. So, again, we use OpenAI a lot for the LLM. So they do a lot of the training. We work with them a bit, as we said, on the Azure Infrastructure, the supercomputers. We do a lot with our responsible AI. So there’s a lot of techniques we have done.
We have an incredible responsible AI at the group at the company across many dimensions from emphasis, to researchers, to scientists, to user experience designers. We collaborate with OpenAI on some of that as well.
Brad Sills
Yeah. Sure.
Yusuf Mehdi
And then, of course, we have the web index and the search index and so a lot of the learnings we have there, we are able to work with OpenAI on the training of the LLMs.
Brad Sills
Great. And if you could comment on some of the challenges when Phase 1 training LLMs, data quality bias, user privacy. How do you see those challenges and how is Microsoft and your partnership with OpenAI, how are you addressing that?
Yusuf Mehdi
Yeah. So both us and OpenAI are really committed to having a super quality offering in the content, in the AI. And so in all of that training, there’s a lot of thought and care that has been put into making sure that quality content is essentially clearly in their content that is a suspicious thing gets ranked appropriately.
Brad Sills
Yeah.
Yusuf Mehdi
And then, again, we do a lot of training to protect against sort of bad actors. We don’t want people to use the AI to cause harm, self-harm and otherwise sort of bias against people. So there’s a lot of work that has been put in between ourselves and OpenAI to make sure we have really an inclusive and equitable solution.
Brad Sills
Wonderful. Great. And how does Bing — how do you approach the balance between personalization and privacy with search through Bing? Yeah.
Yusuf Mehdi
Well, we think privacy is a very personal thing and so for us, privacy is built in by design in all of our products. And we have put that work into the way we design the Surface, how we gather data, how we store data. So all of that is in there. I think, first and foremost, privacy is of the utmost thing for us and so we protect against that. Within that constraint, then we can start to build a real personal experience for people.
Brad Sills
Wonderful. Great. Thank you. And 10 years ago, you had the launch of Cortana. Curious to get your perspective on how Cortana fits in here with ChatGPT and the Microsoft AI portfolio?
Yusuf Mehdi
Yeah. I think Cortana and other sort of like agents were early four runners of different interfaces to try and access content. Where we are today with the new Bing and in partnership with ChatGPT is we have really now a much more advanced powerful system that can, in fact, answer questions or in the case of some of the work we are doing now with even Windows and with Microsoft Edge, can take action on your behalf. And so the tech there is really much, much more advanced and I think is sort of the future where we see things going.
Brad Sills
Great. And maybe we could talk about the Bing image creator, which is powered by OpenAI. What are some of the possible monetization opportunities there?
Yusuf Mehdi
Yeah.
Brad Sills
Please?
Yusuf Mehdi
So, yeah, I think, two different things probably we could take in turn. There is a Bing Image Creator. For those of you who don’t know, Bing Image Creator is a service where you can essentially create images just by typing in words.
So you can say, like, for example, I have used this. I am doing a home remodel design. So I have said, help me design a mid-century modern living room that has brass and wood and whatever. And it will come back with a picture. And then I can say, oh, hey, make that rounded and let’s change the color from black to white and they can do that.
It’s an incredible thing. Since we have launched that, we have had hundreds of millions of people. Image is now created and it’s probably one of the most exciting features that we have seen. So we have put that in chat.
So the ability to iterate. So if you guys haven’t all tried bing.com, go up there now and go into chat in creative mode, although we have just launched in all the modes. And try and say, create an image of XYZ and you can see the power of it. Then — and that’s a great feature.
Then separately, I think, the question you are probably at — after, right, is a couple of broader things. What’s going on with modernization? What are the opportunities there? We — it’s obviously super early days.
Two — I think, a monetization sort of innovation happening in two sort of segments. There is what happens on the classic search page, where in there, we are seeing, as we get more relevant answers, we are able to kind of use traditional search advertising and that’s doing really well. Then there’s the chat interface, where obviously, it’s a different user experience.
It’s cleaner, there’s more chat and so does it make sense to have a lot of answers there with a lot of advertisements? And obviously, one of the things people are liking about chat is that you don’t have all the blue links, that you can get right to the answer you want and then go find.
So we are right now experimenting a lot with our content publisher partners and with advertisers on what is the ad opportunity within the chat window and we are finding good things. So we are finding the ability to, for example, have links to more content.
That’s one thing that’s been very unique with what we have done with Bing, unlike any other services we put citations and footnotes. We are also having richer answers, in some cases, we are testing.
And we are testing the ability to potentially have right ads on the page. And we are flighting all that now. As you can imagine, advertiser demand is very high for this, because they know this is where there’s a lot of action and it’s still very early to say how it will play out.
But my guess is — my sense is a couple of things. One, you will see fewer ads, but they will be much more relevant and they will have a much higher click-through rate. And I think it will be a very disruptive experience to traditional search, which for us is all goodness, because again, we are early and we are happy to engage with a new and improved search experience, but we are in the beginnings of that process.
Brad Sills
Wonderful. Thank you. Thank you, Yusuf. And why don’t we shift gears to Windows and the PC business. What are some of the key focus areas for consumer in the roadmap for Windows?
Yusuf Mehdi
Yeah. Windows broadly?
Brad Sills
Yeah. Please.
Yusuf Mehdi
Yeah. So a couple of different things. So we just start and just kind of give an update on Windows. We are now at an all-time high in terms of Windows usage and engagement. I think we are over 1.4 billion people use it monthly. A huge majority of that uses it daily.
We have seen usage of Windows go up. We have seen use cases since the pandemic go up. The pandemic had many bad things, but one small silver lining is we saw people return to use the PC and they rediscovered the value of the PC.
Previously, all of us live a lot on our phones. People saw that you can use the PC for things like video conferencing, not just for work, but for home use, right, essential to family. Online shopping went up, telemedicine went up, grocery delivery.
And so people — since the pandemic has sort of subsided, people have continued to do those use cases because of that and so that — the value of the PC probably has never been higher and that has been one of the great things that we have seen.
More recently, with Windows 11, we have made great strides to make that much more cloud-powered. And now as we are starting to talk about AI-powered. So a couple of things. On the cloud-powered side, it’s hard to believe that Windows 10 did not require a log, a sign-in.
But imagine using your iPhone and not sign-in in with that an ID, you couldn’t imagine it, right? The phone wouldn’t make any sense. Maybe you would make a phone call, but that would be about it.
But Windows, until Windows 11, about year and a half ago, we didn’t require that. Now that we do, we are seeing the use of Windows changed dramatically. People now and we have a very high log-in, sign-in rate.
Now we can give you a personalized newsfeed. We have widgets now, which is a new platform, for people to do development. That’s much were personalized. People are able to back up their content. They can roam their files.
All these things that you take for granted on your phone, we have brought to the PC and so the value of the PC has gone up quite a bit. So that’s been one thing we have done, much more cloud powered, much more service enabled with Windows.
We are also then, most recently announced, that we are now enabling you to be able to send messages from your phone via either an Android or an iPhone. So if you have always wanted to have your text messages come into your PC, you can now do that. That’s a huge thing that I have always wanted. We still have more work to do, you can’t necessarily do group messages, but you can do the individual messaging.
Brad Sills
That’s great.
Yusuf Mehdi
And then most recently, the AI has now come in and so we announced that build two weeks ago, Windows Copilot. Windows Copilot is essentially powered by Bing. So you got all of the power of the Internet, all the power of the intelligent agent, but now within Windows.
And so just like I referenced with the Edge example, you can use your PC experience and ask questions to about what’s going on, on things on your desktop to take advantage and you can take what we call actions like you can do in Edge.
So now with your Windows, if you have ever sort of said, hey, how do I put this thing in dark mode? You can just pull up Windows Copilot and say, put my PC in dark mode. Put me into focus mode, because I have to work now, and it will arrange your windows dial in your playlist.
And so everyone who didn’t know how to use Windows is not going to be a power user of Windows, because you now have the Windows Copilot that you can just talk to and it will take action on your behalf.
Brad Sills
Wonderful. That’s exciting.
Yusuf Mehdi
Great.
Brad Sills
Thank you for that.
Yusuf Mehdi
I can’t wait for that myself.
Brad Sills
Yeah. And why don’t we — if we could talk about the interplay with Xbox Game Pass and Windows and what’s on the roadmap there for the convergence of those two?
Yusuf Mehdi
Sure.
Brad Sills
Yeah.
Yusuf Mehdi
Yeah. One of the things that’s been great, as we look at our Xbox Business, as we have seen a lot of — obviously, great success on the console and gaming and online gaming. We are seeing a lot of success now with gaming on the PC.
PC has always been a home to, obviously, gaming, it’s the platform for games. But now with Xbox, we are starting to really see some progress there. We brought our Game Pass subscription service that lets you play games across console and PC.
In fact, we almost doubled the total number of countries now that have Game Pass on the PC. We have seen that tick up quite a bit. We have got some great experiences there with an Xbox app on Windows. So you can keep track of your friends, your gamer profile, all of the gamer stats. And so that has all come together. So we are seeing really good progress there on the PC.
Brad Sills
Great. Great. And why don’t we shift to devices, Surface, Tablet, Laptop. Where is the focus on the product line, anything on the roadmap there as well? Yeah. Please?
Yusuf Mehdi
Yeah. So we are really focused on the core of our Surface portfolio, which is primarily the Surface Laptop and Surface Pro, our 2-in-1. The Surface Pro continues to be really an unrivaled and unique product on the marketplace. It’s the only 2-in-1 as we like to talk about it. It is the Tablet that can replace your Laptop.
So you have a full Tablet. You have an incredible screen with pen. We have access to all of Windows on that. That is a big focus for us. We are continuing to improve on that. Performance has gotten better. We have had 5G capabilities on it now. So you can move around and now with Windows 11, you can take advantage of it. It is by far the best devices for mobile professionals and for creatives.
On the Laptop, we have continued to do a lot of work to build more and more powerful Laptops that, again, give you that real incredible computing experience with Windows and so that’s really been the big focus. And yeah, we are — the innovation trend continues. I can’t talk about things that are coming in the future.
Brad Sills
Right.
Yusuf Mehdi
But suffice it to say that if you are a Surface fan, there’s a few Surfaces out there, you are going to want to continue to use it.
Brad Sills
That’s great. Thank you. On the Q3 earnings call, you called out some elevated inventory levels there. If you could elaborate on that, please?
Yusuf Mehdi
Sure.
Brad Sills
Yeah.
Yusuf Mehdi
So what happened, because of the pandemic, there’s been sort of ebbs and flows on a PC purchase and how the PC market’s gone. One of the things that happened is people bought a lot of PCs, I think, in advance of they were thinking of return and so we saw elevated inventory channel levels.
Sell-through is continues — to sell-through has continued sort of steady. But, obviously, what’s happening is we are seeing retailers want to work down the inventory levels and so the way that, that impacts us is, short-term there’s less sell-in, the sell-through continues and it’s working its way through. Yeah.
Brad Sills
Great. Great. I think you are also — you have responsibility for Skype.
Yusuf Mehdi
Yeah.
Brad Sills
Okay. Great. And there’s clearly an investment being made there. Any commentary on where those key investment areas are for Skype and how does that fit into the broader consumer portfolio?
Yusuf Mehdi
Yeah. I think the way to think about it and let me take a step back from that, like…
Brad Sills
Yeah.
Yusuf Mehdi
…in terms of communications, consumer communications.
Brad Sills
Yeah.
Yusuf Mehdi
We really have a couple of different assets. We have Teams that you use a lot for work, but we now have Teams for consumer and that has been growing nicely in terms of monthly active users. It’s still early.
We have Skype, as you referenced, which is something that we have had for traditional that still has a very loyal fan base. And then we have this product called GroupMe. I don’t know if you have GroupMe. But if you have kids, they all use GroupMe because it’s a huge hit in college.
Those three products, we — what we are looking at doing is, increasingly bringing them together on a common platform and architecture, while still respecting the user experience that people love on each of these things, right?
So with GroupMe, people — college kids love the simplicity of it. With Skype, people love the ability to call friends and family from across international lines. And Teams consumer now is really becoming a great place for communities. People come together with communities.
We have brought a lot of the new Bing in AI into those products. So getting to Skype specifically, which you asked about, we have — one of the things we have done with Bing and as we put essentially a chatbot in Skype.
And so if you are talking with your family, for example, and you are planning a night out or a trip, you can call the Bing chatbot and say, hey, Bing tell me great places to travel. And Bing will put that together and drop it in the chat window.
So while you are chatting with your family, you can actually call the chatbot to help you. It’s like having an intelligent assistant or a concierge or a butler help you while you are conversing and we see that expanding as we add to capabilities.
Brad Sills
Okay. Wonderful. And how does Microsoft think about some of the overlap between Skype and Teams or is it truly complementary as you are describing there?
Yusuf Mehdi
Yeah. I think we see it as complementary on the core infrastructure, right?
Brad Sills
Yeah.
Yusuf Mehdi
So the communications, the idea of having one contact list.
Brad Sills
Yeah.
Yusuf Mehdi
We think of the user experience as being unique and distinct for those. And like I said, Teams is focused increasingly more on some communities’ work.
Brad Sills
Yeah.
Yusuf Mehdi
Any groups of people to do that. Skype is more sort of point-to-point family, how much more for international expansion.
Brad Sills
Wonderful. And maybe just a higher level question, when you think about the Microsoft brands, again, a lot of enterprise association. How does that benefit Microsoft and the consumer with Windows, PCs and some of the other offerings you talked about?
Yusuf Mehdi
Yeah. Well, so the — our strength in enterprise and network is that we are the tools and the devices, the software, the devices that people use every day for their work. That becomes a real reason that people then want to come and use it in their home life and so that provides a nice virtuous cycle. And conversely, when we sell our service devices, in particular, that people love, they come and they want to bring those into work.
Brad Sills
Right.
Yusuf Mehdi
I see that — I see it with my kids who are now working and they will have the Laptop that they got from work. I won’t say from where, and then, of course, I will buy them the Surface for their birthday, and they are like, Dad, that’s awesome, like, we will take that into work. Look, we are not allowed to, in some cases, I am not allowed to. We have a…
Brad Sills
Yeah.
Yusuf Mehdi
…something like, gosh, I wish I could use my Surface. And so…
Brad Sills
Yeah.
Yusuf Mehdi
… and then vice versa, I have had people who have a computer at home and then they love the Surface they got at work.
Brad Sills
Yeah.
Yusuf Mehdi
So that flywheel for us of consumer to commercial is a very unique thing. And again, like all of us, we have jobs and we have personal lives. Being able to use a single device, being enable to use a single productivity suite, an email, a browser. That virtuous cycle of work to consumer and back really benefits us in terms of being able to better meet customer needs.
Brad Sills
Got it. Got it. And maybe shifting to Xbox a little bit. The strategy has always been. You can play games from anywhere on any device. It’s less console-centric strategy. If you could just comment on how you see the convergence of the Game Pass with the PC and how that fits in with that overall strategy?
Yusuf Mehdi
Yeah. I mean I think you said it well for — we believe that the future of gaming — right now there’s three different gaming silos. There’s games on your phone, games on your PC and games on the console. Historically, those have been three different worlds, and frankly, three different audiences.
We — our vision for Xbox is that you should be able to play the games you want with the people you want on the devices you want. And so what we have done is we have built much more of a cloud gaming solution that can now work across all those devices.
And so — and we are taking all of the steps, so like I mentioned earlier, having Game Pass give you the ability to play games on the PC and the console. So you buy them once and you can run them across both those platforms. And so we are building that capability, we are bringing the Xbox app out to all those platforms.
Brad Sills
Wonderful. Great. And when you think about Microsoft Studios, what are some of the things you are excited about that you can talk about here that might be coming?
Yusuf Mehdi
Yeah. I mean there’s a lot of great games coming. There’s a big one that’s coming up.
Brad Sills
Yeah.
Yusuf Mehdi
I don’t know how much we have talked about it. So I probably won’t mention it, but it’s coming up shortly. And the team has been playing that game a lot and we are pretty excited about it. I think it’s — it will be sort of a great look forward in terms of what gaming can do.
Brad Sills
Great.
Yusuf Mehdi
As a whole, the Studios team does a really fantastic job building next-generation content. It is the fastest form of growing entertainment and we think that the ability to expand upon that with AI will improve quite a bit.
Brad Sills
Great. And how do you see the convergence of gaming with the metaverse and the enterprise potentially? I think the talent base that you have there, engineering talent, you could see, you could apply a lot of that, you could deploy some of those resources towards the metaverse. So curious to get your perspective on how you see that playing out and where is the talent base for the metaverse within Microsoft? And is there overlap between the gaming franchises in those applications?
Yusuf Mehdi
Yeah. I mean, I think, from a technology perspective, there is — a lot of games, not all games, but a lot of games are about world development, character development. So the techniques in terms of how you do the programming, how you do the design of that software to build, that is applicable in the metaverse. And then, of course, we have all of our own work that we have done in the enterprise space to build sort of digital twins, if you will, and so, yeah, I think, there’s a lot of relevance there.
Brad Sills
Wonderful. We are running short on time here. But any other comments, Yusuf, that you would want to make, any kind of closing comments on kind of the state of the Microsoft consumer brand across multiple franchises?
Yusuf Mehdi
Yeah. I think what I would say is that, one of the things — we have probably been at the best place we have been in our consumer business in a while, because of the — we see the opportunity of AI to really transform everything we have done.
We talked about Windows and how Windows Copilot. It will be the operating system that I think will lead the way with AI and assistance in a way that you haven’t seen before and that’s because some of our competition either doesn’t have that capability in-house or it’s not in their interest to disrupt their own current search model.
The second thing is with Microsoft 365, we didn’t talk a lot about that, but that’s our productivity suite. That’s not just Microsoft Word and PowerPoint and we are going to bring Microsoft 365 Copilot…
Brad Sills
Yeah.
Yusuf Mehdi
… to that so that you can talk to Excel and have it, do things on your behalf. But we are also now using things like Designer, which is I think of it as sort of an equivalent to a Canva, but with more powerful capabilities for design and creatives. We are early in the testing of that, but that’s already — we have already crossed a lot of users on that as well. So we see that coming.
And then with the new Bing and Microsoft Edge, that is really the big thing. That’s the big opportunity. It’s a huge market. It’s a huge TAM. We have first mover, we don’t have any of the innovator’s dilemma and we are excited to meet customer needs and to go out and get some of those things.
So I would say broadly across Windows, our devices, what we are seeing with Microsoft 365, it is super early days in the Internet, super early days with the development of AI and we are quite excited about what we are going to be able to do with it.
Brad Sills
It’s very exciting. Yusuf, thank you so much for joining us at the conference.
Yusuf Mehdi
Thanks very much.
Brad Sills
Great to have you here.
Yusuf Mehdi
Yeah. Thank you.
Brad Sills
Thanks.
Yusuf Mehdi
Thanks. Thanks.
Brad Sills
That was great.
Yusuf Mehdi
Yeah.
Brad Sills
Yeah.
Read the full article here
