Earnings Release FY23 Q1

Intelligent Cloud

Revenue increased $3.4 billion or 20%.

• Server products and cloud services revenue increased $3.3 billion or 22% driven by Azure and other cloud services. Azure and other cloud services revenue grew 35% driven by growth in our consumption-based services. Server products revenue was relatively unchanged.

• Enterprise Services revenue increased $85 million or 5% driven by growth in Enterprise Support Services.

Operating income increased $1.3 billion or 17%.

• Gross margin increased $2.4 billion or 20% driven by growth in Azure and other cloud services and the change in accounting estimate. Gross margin percentage decreased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage decreased 3 points driven by sales mix shift to Azure and other cloud services and lower margins in Azure and other cloud services, primarily due to higher energy costs.

• Operating expenses increased $1.1 billion or 25% driven by investments in Azure and Nuance.

Revenue, gross margin, and operating income included an unfavorable foreign currency impact of 6%, 6%, and 8%, respectively. Operating expenses included a favorable foreign currency impact of 3%.

IMPORTANT NOTICE TO USERS (summary only, click here for full text of notice); All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings. We do not endorse third-party information. All information speaks as of the last fiscal quarter or year for which we have filed a Form 10-K or 10-Q, or for historical information the date or period expressly indicated in or with such information. We undertake no duty to update the information. Forward-looking statements are subject to risks and uncertainties described in our Forms 10-Q and 10-K.