© provided via The Motley fool Microsoft (MSFT) Q3 2021 profits name Transcript
Microsoft (NASDAQ: MSFT)
Q3 2021 income call
Apr 27, 2021, 5:30 p.m. ET
Contents:
prepared Remarks Questions and answers call individuals prepared Remarks:
Operator
CONSTELLATION brands, INC.
Greetings, and welcome to the Microsoft fiscal-year 2021 third-quarter revenue conference call. [Operator instructions] And as a reminder, this convention is being recorded. it's now my pleasure to introduce your host, Brett Iversen, frequent manager, investor family members. thank you.
You may additionally begin.
Brett Iversen -- ordinary manager, Investor relations
decent afternoon, and thanks for joining us nowadays. On the name with me are Satya Nadella, chief government officer; Amy Hood, chief economic officer; Alice Jolla, chief accounting officer; and Keith Dolliver, deputy widespread assistance. On the Microsoft Investor members of the family site, that you can find our income press release and fiscal abstract slide deck, which is supposed to supplement our prepared remarks all the way through present day call and provides a reconciliation of alterations between GAAP and non-GAAP monetary measures. unless otherwise specified, we will discuss with non-GAAP metrics on the name.
The non-GAAP financial measures provided should still not be considered as an alternative choice to or superior to the measures of monetary efficiency prepared in accordance with GAAP. they're covered as further clarifying objects to aid traders in further knowing the business's third-quarter performance apart from the have an impact on these items and routine have on the economic results. All growth comparisons we make on the call today relate to the corresponding duration of ultimate 12 months unless in any other case noted. we will also supply increase prices in regular forex when attainable as a framework for assessing how our underlying corporations carried out, except the effect of international foreign money price fluctuations.
backed:
10 shares we like stronger than Microsoft
When investing geniuses David and Tom Gardner have a stock tip, it pays to pay attention. in any case, the e-newsletter they have run for over a decade, Motley fool inventory consultant, has tripled the market.*
David and Tom simply printed what they agree with are the ten ultimate shares for traders to purchase right now... and Microsoft wasn't considered one of them! that is right -- they feel these 10 stocks are even improved buys.
See the 10 shares
*inventory advisor returns as of February 24, 2021
this text is a transcript of this conference call produced for The Motley idiot. while we try for our foolish optimal, there could be error, omissions, or inaccuracies in this transcript. as with all our articles, The Motley idiot does not expect any accountability in your use of this content, and we strongly motivate you to do your own research, together with listening to the name yourself and studying the business's SEC filings. Please see our phrases and stipulations for extra particulars, together with our obligatory Capitalized Disclaimers of legal responsibility.
Teresa Kersten, an worker of LinkedIn, a Microsoft subsidiary, is a member of The Motley fool's board of administrators. The Motley idiot owns shares of and recommends Microsoft. The Motley idiot has a disclosure policy.
where growth quotes are the equal in consistent foreign money, we are going to discuss with the growth rate simplest. we are able to put up our prepared remarks to our web page instantly following the call except the finished transcript is purchasable. contemporary call is being webcast are living and recorded. in case you ask a query, it may be covered in our live transmission, in the transcript, and in any future use of the recording.
you can replay the name and think about the transcript on the Microsoft Investor relations website. all through this call, we can be making ahead-looking statements, that are predictions, projections, or other statements about future hobbies. These statements are in line with latest expectations and assumptions that are discipline to hazards and uncertainties. genuine outcomes may materially fluctuate because of components mentioned in contemporary salary press unlock, in the comments made right through this conference name, and in the possibility elements portion of our kind 10-k, types 10-Q, and other reports and filings with the Securities and exchange fee.
We don't undertake any duty to replace any forward-looking statement. And with that, i could flip the name over to Satya.
Satya Nadella -- Chief government Officer
thanks, Brett. It turned into a listing quarter powered by our persevered power of our industrial cloud. Over a year into the pandemic, digital adoption curves aren't slowing down. in reality, they're accelerating and it's simply the beginning.
Digital technology will be the groundwork for resilience and growth over the next decade. we are innovating and constructing the cloud stack to speed up the digital ability of every organization on this planet. Now, i could spotlight our transforming into probability and momentum, starting with Azure. because the world's COGS turn into greater digital, computing will become more ubiquitous and decentralized.
we're constructing Azure to tackle corporations' needs in a multi-cloud, multi-facet world. we now have more statistics middle regions than any other provider, including new regions in China, Indonesia, Malaysia, in addition to u.s.. Azure has always been hybrid by way of design, and we're accelerating our innovation to meet valued clientele the place they are. Azure Arc extends the Azure control aircraft throughout on-premise, multi-cloud, and the aspect and going additional with Arc-enabled laptop researching and Arc-enabled Kubernetes.
organizations like Fujitsu and KPMG are using Arc to simplify hybrid management and run Azure statistics services anyplace. Our differentiation throughout the cloud and the area is driving deeper and greater strategic partnerships with leading companies in each industry from complete and Repsol and power to Kaiser Permanente in healthcare and Amadeus in go back and forth. Now, to records and analytics. Core to the competitiveness of each business going ahead should be their capacity to show information into predictive and analytical power.
The subsequent-generation analytics carrier, Azure Synapse speeds up time to perception by means of bringing collectively records integration, business information warehousing, and big records analytics into one unified carrier. No different provider offers the limitless scale, rate performance, and deep integrations of Synapse. With Spark integration, for example, groups can deal with big-scale information processing workloads. With Azure machine studying, they could build advanced AI models.
With energy BI, anybody in the organization can access insights. we are seeing adoption from heaps of customers, including AB InBev, Dentsu, and Swiss Re. Queries carried out using Synapse have extended one hundred and five% over the remaining quarter on my own. we are leading in hyper-scale SQL and non-SQL databases to assist the increasing quantity, diversity, and pace of records.
purchasers proceed to opt for Azure for their relational database workloads with SQL Server on Azure VMs burn up 129% yr over year. And Cosmos DB is the database of option for cloud-native app construction at any scale. Transaction volume elevated a hundred and seventy% yr over 12 months. Now, on to builders.
As every corporation appears to construct its personal digital potential, they will deserve to modernize current apps, construct new apps, and have a typical approach of doing each. We present the most regular equipment to assist builders unexpectedly develop from thought to code and code to cloud. visual Studio has more than 25 million monthly lively users and GitHub is home to practically 65 million builders. over the last 365 days, the variety of month-to-month active businesses using GitHub multiplied 70%.
in fact, some of the most groundbreaking technological achievements of the previous 12 months, together with essential COVID-19 vaccine trials, as neatly because the first powered flight on Mars had been handiest feasible on account of the contributions of the open-supply communities on GitHub. on the PaaS layer, we are innovating to help builders infuse AI into the options they construct. tremendous-scale AI models have become systems, and we've seen dramatic advances in research and construction via OpenAI whose models are trained and hosted completely on Azure. GPT-3 is producing four.5 billion phrases per day on commonplace with a whole lot of apps in creation throughout a variety of industries.
With Azure Cognitive capabilities, companies can construct functions that see, hear, talk, search, have in mind and accelerate choice-making. New capabilities permit developers to add semantic search to their apps and help companies like AT&T, Duolingo, and modern build custom neural voices for their products. And we're doing -- going further with Azure Percept, a complete platform from silicon to provider, which simplifies the method of establishing, practicing, and deploying AI on the edge. because the digital and physical worlds converge, the metaverse made from digital twins, simulated environments and mixed fact is emerging as a firstclass platform.
we are main and seeing traction across public and personal sector. Bentley systems is constructing a digital twin of the metropolis of Dublin to reimagine city planning, used our Azure Digital Twins, as well as Azure IoT. PepsiCo is simulating its manufacturing processes to enrich product consistency using our self sustaining techniques platform. And from Airbus and Toyota to L'Oreal and Intel valued clientele in each business are transcending space and addressing complicated challenges using blended fact.
The U.S. military, as an instance, will use HoloLens primarily based headset augmented with our cloud features. the brand new Microsoft Mesh builds on this momentum, allowing for holographic interactions with real presence in a natural way on any equipment. we've already viewed early adoption by Accenture, which is the usage of mesh to construct immersive digital workplace experiences.
power Platform is fitting the next-technology company method automation and productiveness suite for area specialists in all functions. we've taken a different strategy to what's an expansive and excessive-boom TAM, bringing collectively robotic manner automation, low-code, no-code tools, digital agents, and business intelligence. the usage of energy platform and area -- any domain experts can automate a workflow, create an app, build a virtual agent or analyze records hastily driving productiveness good points across the corporation via wise automation. similar to workplace-revolutionized productiveness positive aspects for talents workers, energy Platform will do the equal for domain experts.
All up, power Platform is getting used by using well-nigh sixteen million month-to-month energetic users, up 97% 12 months over year. earnings increased 84% 12 months over year. Telstra, T-cell, Toyota North the usa, and Unilever have all built facilities of excellence for energy Platform with hundreds of people who are using these low-code, no-code tools to construct apps and workflows for every little thing from COVID-19 screening to product first-rate handle. In robotic process automation, Coca-Cola saved months of construction time with the aid of integrating power Automate with legacy systems to automate cargo verification, payroll processing, and an awful lot extra.
And in analytics, Daimler chose vigour BI to surface insights across the firm whereas keeping the maximum ranges of protection. Now on to enterprise applications. Dynamics 365 had a breakthrough quarter as agencies flip to intelligent business purposes to adapt and grow. earnings multiplied 45% as we proceed to take share from competition.
we are including capabilities throughout Dynamics 365 to tackle company's most urgent challenges. New integrations with groups make it elementary to meet, chat, call and collaborate directly inside Dynamics 365. a new Dynamics 365 clever Order management helps companies guide omnichannel achievement. we're seeing multiplied adoption of Dynamics 365 throughout each industry from ABN AMRO in financial functions to BMW in car.
more generally throughout the Microsoft Cloud, we are main with business and pass-business solutions and increasing our investments to help businesses use our finished tech stack together with industry-selected customizations to enrich time to value, boost agility, and reduce fees. This quarter, we delivered new industry clouds for financial services, manufacturing, and nonprofits, building on the momentum of current clouds for healthcare and retail. And our pending acquisition of Nuance will convey our options without delay into the medical professional-patient loop, which is imperative to healthcare start. Now, on to LinkedIn.
We as soon as again saw listing engagement as LinkedIn's 756 million contributors use the network to connect, learn, create content material, and discover jobs. Conversations elevated 43%, content share changed into up 29%, and the hours on LinkedIn elevated with the aid of eighty%. we're assisting creators use LinkedIn to extend their economic possibility, hundreds of knowledgeable instructors are monetizing their content on LinkedIn researching. Freelancers can now appeal to shoppers with dedicated pages.
And with the creator mode, members can build a following and engaged communities. In a world facing a growing expertise gap, we're helping employers create comments loops between potential, studying, credentials, and jobs. 60% of the Fortune 500 use LinkedIn discovering to ability and upskill their employees. Nationwide assurance, for example, is using LinkedIn gaining knowledge of to deliver customized curriculum to 26,000 acquaintances.
And new tools compile lessons with advantage assessments, helping companies like BlackRock, gap, and TaskRabbit source job candidates in line with proven proficiencies. companies continue to show to LinkedIn because the relied on way to reach authorities able to do enterprise. LinkedIn marketing options salary changed into up greater than 60% year over year. over the past twelve months, income has surpassed $3 billion and is turning out to be practically three instances faster than the B2B digital advertising market.
Now, on to Microsoft 365 and teams. Hybrid work will require a brand new working model. that's why we developed teams as the organizing layer for all of the method people work, be taught, and collaborate. teams now has over one hundred forty five million every day energetic users, almost double the quantity a yr ago.
In markets the place personnel have back to the place of work, together with Australia, China, New Zealand, South Korea, and Taiwan, we have considered utilization continue to develop. And the number of corporations with more than 1,000 users, integrating their third-celebration and line of company purposes with groups has improved pretty much three times yr over 12 months. We're accelerating our innovation, adding more than 300 points during the last 12 months, together with more than 100 new capabilities up to now in 2021. New inclusive meeting event for hybrid work, including customized gallery views, allow anyone to be viewed, heard, and participate, whether they're at home, in a gathering room, at an workplace, or on a manufacturing unit ground.
And valued clientele like GM and Sanofi are the use of teams for unified communications, together with for voice. groups is extending beyond communications, growing an entirely new category of modern collaborative applications as businesses use power Platform to build customized apps, bots, and workflows inside teams. American airlines, as an instance, highlighted of their income call, the cost mark downs, it be riding by using a power app within groups to support their frontline laborers manage crucial records operations. teams is remodeling now not best inner collaboration but agencies how they do business.
We brought guide for shared workspaces with americans outdoor the company, and we are seeing groups used for every thing from digital retail showrooms and private browsing to interactive webinars. We delivered Microsoft Viva this quarter, developing a brand new market category for worker journey. Viva brings together advantage, discovering, communique, and insights in an integrated experience without delay inside groups and Microsoft 365. businesses like Coca-Cola and Unilever will use Viva to aid their employees thrive in a brand new period of hybrid work.
All up Microsoft 365 clients generated greater than 38 billion collaboration minutes in a single day this quarter. workplace 365 now has basically 300 million paid seats. And organizations throughout the private and public sector like the metropolis of Helsinki, Bausch health, Stryker are more and more settling on our premium choices for advanced protection, compliance, voice, and analytics. people are turning to windows PCs more than ever to dwell connected, productive, and secure.
windows 10 now has more than 1.3 billion month-to-month energetic instruments, and Microsoft 365 client surpassed 50 million subscribers for the primary time. Now, on to security. The risk panorama has under no circumstances been greater complicated or challenging and safety has never been more crucial to our customers. here is riding elevated demand for our end-to-conclusion capabilities across identity, protection, compliance, and administration backed by using cloud-scale AI and human potential encompassing all clouds and all structures.
What differentiates us and drives client cost is the interconnection between id, endpoint, apps, cloud, records, and infrastructure across our cloud-native XDR and SIEM. All suggested by way of our operational protection posture, which analyzes more than 8 trillion indicators day to day. Our method enables businesses to adopt a 0-have faith architecture whereas also cutting back the complexity, can charge, and possibility created through stitching collectively point solutions. this is why more than four hundred,000 customers use our choices, together with many of the world's most based businesses like Boston Consulting neighborhood, HCA Healthcare, Lowe's, and UBS.
And signal is using Azure exclusive Computing to offer protection to the statistics and use for its tens of millions of valued clientele. we're going further to aid protect businesses. we are delivering on our ambition to dispose of passwords introducing password-less sign-in to Azure advert. Our Azure ad paid customer base has greater than doubled 12 months over year to over 300,000, new capabilities in Microsoft 365 Defender aid corporations better take into account, avoid and mitigate lively threats.
Defender has blocked 30 billion threats on e-mail and essentially 7 billion on endpoints during the last one year by myself. And our compliance supervisor now presents more than 300 out-of-the-container assessments for laws similar to GDPR. Now, on to gaming. We're increasing our possibility as we assist both game enthusiasts and creators play, join and construct across communities on any machine.
individuals are turning to Xbox more than ever to play and chat with chums, and we noticed list engagement this quarter, led by using the electricity on and off console. With game pass, we're redefining how video games are dispensed, performed, and considered. just ultimate week, we brought cloud gaming by means of the browser expanding our attain across workstation and mobile. content material is the flywheel at the back of the features boom.
And upon the closing of our acquisition of ZeniMax Media this quarter, we made 20 of the realm's most iconic and liked video games obtainable by way of online game pass with extra to come. As video games evolve into metaverse economies, we're constructing new equipment to help anyone promote creations on our platform. Minecraft is virtually a hundred and forty million monthly active clients, up 30% 12 months over 12 months, making it probably the most leading structures in the creator economic system. Creators have generated over $350 million from more than 1 billion downloads of mods, add-ons, and different experiences in Minecraft.
this is not counting and including recreation backyard of our market. we're additionally seeing a brilliant marketplace emerge in Flight Simulator with partners now capable of sell content material without delay inside the video game. In closing, we're innovating throughout the complete tech stack as we differentiate and lead in areas that can be important to the success of each customer going ahead. i'm optimistic about our chance forward.
With that, i'll hand it over to Amy, who will cowl our financial outcomes in element and share our outlook, and that i appear forward to rejoining you for questions.
Amy Hood -- Chief monetary Officer
thanks, Satya, and first rate afternoon, everybody. My feedback nowadays replicate the influence of the ZeniMax acquisition for approximately three weeks this quarter, as well as our outlook. There isn't any have an effect on from the Nuance acquisition it truly is expected to nearby the conclusion of the calendar year. Our third-quarter revenue become $41.7 billion, up 19% and 16% in consistent forex, and salary per share turned into $1.95 and increased 39% and 34% in consistent foreign money when adjusted for the tax advantage regarding the fresh India Supreme court choice on withholding taxes.
Many tendencies throughout industries, consumer segments, and geographical markets persevered to enhance, which, coupled with effective execution by means of our revenue and associate teams, drove a different quarter of double-digit accurate and backside-line growth. In our commercial business, accelerating digital transformation enabled by using our exciting Microsoft Cloud value, drove healthy demand for our hybrid and cloud offerings. robust Azure consumption, multiplied platform commitments, and better usage of teams, vigor Platform, and our protection offerings were key beneficiaries. within our small and medium enterprise client phase, persevered growth in cloud deciding to buy tendencies greater than offset transactional licensing weak spot.
And in LinkedIn's skill options business, annual contracts and job postings more suitable with the job market. In our customer company, windows OEM and Microsoft 365 buyer subscriptions benefited from a plenty improved-than-expected laptop market regardless of enormous ongoing constraints in the supply chain. growth within the promoting market again benefited our Search and LinkedIn organizations. And in gaming, we proceed to see listing engagement and strong monetization across our platform, in addition to demand that drastically exceeded provide for Xbox collection X and S consoles.
moving to our overall results. business bookings growth become forward of expectations, increasing 39% and 38% in consistent currency on a growing to be expiration base and low prior-yr related. growth become pushed by means of consistent execution throughout our core annuity sales motions and an increase within the number of bigger long-term Azure contracts. due to this fact, commercial final performance duty increased 31% and 32% in constant foreign money to $117 billion, with a roughly equivalent cut up between the salary that might be diagnosed inside and the element beyond the next twelve months.
And our annuity combine improved 2 points yr over yr to 94%. industrial cloud earnings additionally more desirable than anticipated, grew 33% and 29% in constant forex to $17.7 billion. commercial cloud gross margin percentage extended three features year over yr to 70%, driven by means of the change in accounting estimate for the helpful life of server and network gadget belongings. except this affect, commercial cloud gross margin percentage was up a little with growth in Azure gross margin, normally offset by using earnings combine shift to Azure.
With a weaker U.S. dollar, FX elevated revenue increase by way of approximately three facets, about 1 factor more favorable than anticipated. FX multiplied COGS and working price increase by way of about 2 aspects, each in keeping with expectations. Gross margin dollars elevated 19% and sixteen% in regular foreign money.
Gross margin percent become sixty nine%, incredibly unchanged year over yr with roughly 1 element of favorable have an effect on from the alternate in accounting estimate cited previous. except this impact, company gross margin percent became down, pushed by amazing profits growth in cloud and gaming that resulted in income combine shift. operating fee increased 5% and 3% in steady currency, decrease than expected, essentially driven with the aid of investments that shifted to future quarters. average, company headcount grew once again this quarter, up 12% 12 months over year, reflecting our focused investments across key areas like cloud engineering, income, and consumer deployment.
12 months-over-year growth in operating rate includes roughly 2 points of affect from continued COVID-linked savings. operating income multiplied 31% and 27% in steady currency, and operating margins extended 4 features yr over yr to forty one%, including very nearly 2 aspects of favorable affect from the exchange in accounting estimate and roughly 1 point of favorable influence from COVID-connected discounts. Now, to our section outcomes. profits from productivity and enterprise procedures changed into $13.6 billion and grew 15% and 12% in steady forex, essentially pushed by way of office 365 and LinkedIn.
office business profits grew 14% and 10% in consistent foreign money. workplace 365 commercial revenue grew 22% and 19% in steady foreign money, once more, driven by way of put in base enlargement throughout all workloads and customer segments, as well as greater ARPU. Demand for our excessive-price safety, compliance, and voice choices drove mighty momentum in E5 once more this quarter. Paid workplace 365 business seats grew 15% 12 months over year to almost $300 million, with acceleration to the cloud in our small and medium business segment and a recovery in growth in our first-line worker choices.
The accelerated cloud adoption negatively impacted workplace industrial licensing, which declined 25% and 27% in constant forex, a little bit below expectations. In workplace buyer, income grew 5% and 2% in regular foreign money, a bit below expectations primarily due to transactional weak point in Japan. Microsoft 365 purchaser subscriptions grew to $50.2 million, up 27% year over 12 months. Dynamics revenue grew 26% and 22% in steady foreign money, more advantageous than expected, pushed through Dynamics 365 earnings growth accelerating to forty five% and forty% in steady currency, with specific energy in power apps in our finance and operations providing.
LinkedIn income elevated 25% and 23% in regular forex, ahead of expectations. Our advertising solutions enterprise accelerated again this quarter to 64% profits increase. phase gross margin dollars improved 15% and 12% in constant forex, and gross margin percentage was surprisingly unchanged year over yr with pretty much 2 elements of favorable impact from the trade in accounting estimate. working fee accelerated 4% and 2% in regular currency, and working earnings extended 26% and 20% in constant currency, including 4 features as a result of the exchange in accounting estimate.
subsequent, the clever cloud section. income become $15.1 billion, forward of expectations, increasing 23% and 20% in steady foreign money. Server items and cloud capabilities income expanded 26% and 23% in consistent forex, ahead of expectations. Azure salary grew 50% and forty six% in steady forex, better than anticipated, driven via continued power in our consumption-primarily based company.
And in our per-user enterprise, growth in our business mobility and safety installed base accelerated again this quarter, up 30% to over 174 million seats. And on a powerful prior-year related, that benefited from the conclusion of support for home windows Server 2008, our on-premise's server business multiplied three% and was enormously unchanged in constant foreign money, with effective annuity performance, pushed by way of persisted consumer alternative for our hybrid and top rate choices. enterprise functions earnings grew 10% and eight% in constant foreign money with stronger-than-anticipated performance in Microsoft Consulting functions. section gross margin dollars increased 27% to 24% in consistent currency.
Gross margin percent elevated 2 points yr over year with roughly 2 features of favorable have an impact on from the change in accounting estimate. operating fee multiplied 12% and 10% in consistent forex and operating earnings grew forty one% and 36% in constant currency with roughly 7 points of favorable influence from the trade in accounting estimate. Now, to greater own computing. income became $13 billion, expanding 19% and sixteen% in consistent foreign money with better-than-anticipated performance in gaming, windows OEM, and Search.
In windows, the more advantageous laptop market resulted in universal OEM profits increase of 10%, driven by using endured customer demand. OEM non-professional profits grew forty four% and OEM pro profits declined 2% on a prior-12 months similar that covered the conclusion of aid for windows 7. windows commercial products and cloud features grew 10% and 7% in steady foreign money with a lessen-than-anticipated mix of in-quarter focus from multiyear agreements. In surface, profits grew 12% and 7% in steady foreign money, reduce than expected basically because of execution challenges in the commercial phase.
Search revenue ex TAC multiplied 17% and 14% in regular currency, benefiting from the more desirable promoting market stated earlier. And in gaming, earnings improved 50% and forty eight% in steady foreign money. Xbox hardware income grew 232% and 223% in constant currency, pushed via our new consoles. Xbox content and services revenue, which now includes ZeniMax grew 34% and 32% in steady foreign money with stronger-than-expected efficiency of first-birthday party titles, in particular Minecraft.
section gross margin bucks accelerated 14% and eleven% in steady forex. Gross margin percentage diminished 2 elements year over 12 months, driven with the aid of sales combine shift to gaming. operating price diminished three% and four% in consistent foreign money and working profits grew 27% and 22% in regular forex. Now, lower back to total company consequences.
Capital fees, including finance leases, had been $6 billion, according to expectations, pushed through ongoing investment to support transforming into global demand from elevated client utilization of our cloud capabilities. cash paid for PP&E turned into $5.1 billion. cash move from operations become $22.2 billion and expanded 27% yr over 12 months, pushed through strong cloud billings and collections. Free money circulate changed into $17.1 billion, up 24%.
other profits and expense was $188 million, better than expected, basically pushed by means of internet features on investments. As a reminder, we are required to recognize mark-to-market features or losses on our equity portfolio. Our non-GAAP positive tax rate become about 14%. and eventually, we lower back $10 billion to shareholders via share repurchases and dividends.
Now, let's move to the outlook. As a reminder, in this autumn, we start to see increase fees that reflect the primary full quarter have an impact on of COVID-19 a 12 months in the past, both throughout income and operating prices. final year, across home windows OEM, Gaming, and surface, we saw surges in purchasing and utilization in an effort to negatively have an effect on q4 boom costs. In our Search and LinkedIn agencies, q4 increase prices can be positively impacted given the advertising and job markets a 12 months ago.
And in our transactional company, the slowdown in deciding to buy in office and Server last year will improvement this autumn growth prices, specially in our small and medium company section. subsequent, in our greatest quarter of the 12 months, we predict the accelerating developments Satya mentioned, our differentiated market place, and continued solid execution to outcomes in an extra mighty quarter. growth in commercial bookings may still once again be match however impacted by means of a declining expiry base. As always, an increasing mix of higher long-time period Azure contracts, which are more unpredictable in their timing can drive quarterly volatility in bookings.
business cloud gross margin percent should raise roughly 4 elements 12 months over yr with lower than 2 features from the change in accounting estimate. As a reminder, the favorable influence continues to diminish over time. aside from the accounting trade, this fall gross margin percent will additionally benefit a bit of from investments we made a 12 months ago to support extended utilization needs in far off work situations. long run, business cloud gross margin percentage will continue to be impacted by using earnings combine shift to Azure, expanded usage of our productivity and collab solutions, and ongoing strategic investments to help our clients' success.
In capital expenses, we are expecting a sequential enhance on a greenback basis as we continue to make investments to fulfill growing global demand for our cloud services. Now, to FX. according to existing rates, we predict FX to increase complete business productiveness and enterprise techniques and clever cloud profits increase through approximately three elements, extra personal computing profits and complete operating cost increase by way of approximately 2 elements, and COGS boom via approximately 1 element. subsequent, to our segment assistance.
In productiveness and business tactics, we expect income between $13.eight billion and $14.05 billion. In workplace industrial, income increase will once more be pushed through workplace 365 with match seat increase and upsell chance to E5. In our on-premises enterprise, we predict salary to say no within the excessive teenagers, according to the ongoing customer shift to the cloud. In workplace consumer, we expect mid- to high young adults earnings growth, driven by using continued momentum in Microsoft 365 purchaser subscriptions in opposition t the low prior-yr similar impacted by means of the transactional deciding to buy weakness stated previous.
In LinkedIn, we are expecting revenue increase within the mid-30% range, pushed through persevered robust engagement on the platform and enhancements within the advertising and job markets. And in Dynamics, persisted momentum in Dynamics 365 will pressure earnings increase comparable to remaining quarter. For intelligent cloud, we predict salary between $sixteen.2 billion and $sixteen.forty five billion. In Azure, revenue will again be pushed with the aid of robust increase in our consumption-primarily based business.
And our per-person enterprise should proceed to improvement from Microsoft 365 suite momentum, though we predict some moderation in increase rates given the measurement of the put in base. In our on-premises server company, we expect salary growth in the mid-single digits, pushed by using endured demand for our hybrid and premium annuity choices towards a low prior-yr related and the transactional deciding to buy noted previous. And in enterprise functions, revenue boom should be roughly in response to closing quarter. in additional very own computing, we are expecting profits between $13.6 billion and $14 billion.
In windows, average salary should develop mid-single digits driven by windows commercial products and cloud functions boom and persisted demand for PCs, partially offset by using ongoing provide chain influences and the comparable stated previous. In surface on a robust prior-yr related, we are expecting profits to decline in the mid-teenagers as we work in the course of the provide chain and executing challenges stated prior. In Search ex TAC, we expect earnings boom within the mid-40s driven via improvements in the advertising market. In Gaming, we predict profits growth in the mid- to high single digits.
large demand for the Xbox series X and S will continue to be restrained with the aid of give. And on the effective prior-yr similar, we are expecting Xbox content material and services salary to say no within the mid- to excessive single digits. Now, lower back to company guidance. We are expecting COGS of $13.7 billion to $13.9 billion and operating rate of $13.1 billion to $13.2 billion.
As a reminder, in working fee in this fall, we will improvement from continued COVID-related reductions, as well as the prior-yr comparable, which covered roughly four elements of have an effect on from a $450 million can charge concerning the realignment of our retail save strategy. In other revenue and price, interest income and price should still offset each and every different. and finally, we are expecting our this fall advantageous tax cost to be about 16%. Now, i'd like to share some closing options as we seem to be to subsequent fiscal yr.
usual, we have performed neatly via three quarters of our fiscal year in a difficult atmosphere, and we fully are expecting a powerful q4 to put the foundation for FY '22. we will, of path, continue to focus on offering powerful income growth in the brief time period. however even more importantly, this year has bolstered the important value of investing boldly to capture the tremendous list of opportunities forward of us. Excellence in every day execution, coupled with a thoughtful imaginative and prescient for the future that creates value, as well as probability for our customers globally will result in long-time period income and profit increase.
With that, Brett, let's go to Q&A.
Brett Iversen -- well-known manager, Investor family members
Thanks, Amy. we'll now flow to Q&A. Out of respect for others on the name, we request that members please only ask one question. Operator, can you please repeat the guidance?
Questions & answers:
Operator
fully. [Operator instructions] Our first query comes from the line of Keith Weiss with Morgan Stanley. Please proceed together with your query.
Keith Weiss -- Morgan Stanley -- Analyst
miraculous. thank you, guys, for taking the query. And remarkable quarter. I bet this is a question each for Satya and Amy.
We're seeing these in reality notable commercial bookings outcomes come via, 39% growth in the existing quarter. And Satya, you will have been talking to us a whole lot about these extra strategic deals and the acceleration of digital transformation. can you supply us a little little bit of color of what comes in these more strategic offers? How does it exchange the dynamics of what forms of options americans are the usage of for Microsoft, the scope of kind of how deeply you might be moving into these valued clientele, and kind of how an awful lot of the IT budget you might be getting? after which might be consult with us a bit bit concerning the time body for which this comes into revenues. What should our expectation be in the event you get one of these massive strategic deals? How long does it take to in fact ramp up this consumer onto the broader Microsoft platform?
Satya Nadella -- Chief government Officer
thank you, Keith, for the question. I think we think very good, both, i'd say, of consumption and utilization nowadays, as well as, as you mentioned, the bookings as a result of each of these at any given element in time is what we analyze. The typical strategy to the Microsoft Cloud, in case you seem at the breadth of what any customer may be doing with us, they could be doing hybrid cloud infrastructure with us. They may well be for the primary time, doing Tier 1 workloads on the cloud with us, correct, no matter if it's in core financials or in retail or in healthcare.
also, they could be deploying their centers of excellence round vigour Platform. And vigour Platform sits on the intersection of relatively plenty Dynamics, Azure, and groups, as an instance. and naturally, we're seeing the boom of teams, and groups as I've always maintained isn't just about one factor. it's not about simply conferences or it be now not about simply chat.
but most importantly, it's a platform that drives, really, line of company and company utility termination inside of a collaboration workflow. And so it truly is what we're seeing. and then the other aspect i'd say that we are now seeing is additionally that business-level differentiation of the all-up Microsoft cloud. So even if it be in retail, whether it be in healthcare, or in fiscal services, we consider that we now can bring the energy of the complete cloud collectively in a tons greater strategic way.
Amy Hood -- Chief financial Officer
and perhaps simply to build on what Satya become announcing, Keith, if you think about bookings or the closing performance duty, what I are inclined to think of is in the event you hear these phrases, I feel often we pivot toward these Azure contracts we talk an awful lot about as a result of they invent some volatility. however really, the groundwork for these lengthy-time period strategic contracts is the Microsoft Cloud holistically. So what you are going to see is not only office 365, but the suite of Microsoft 365. you'll see bigger-stage additions of protection or compliance workloads.
you're going to see Dynamics 365 as a pillar with vigour Platform because they may be spanning end-to-conclusion industry options to mix it returned to what Satya is announcing. so that you see it add an excellent bookings number, which is essentially about do you renew what's up for renewal, do you add workloads, do you add users, and do you -- and does it have a part of an Azure commitment. All of these issues collectively are what creates this exchange. And in case you examine closing performance responsibility, you see there an excellent bit of it it truly is going to be diagnosed within the next twelve months and a further equally balanced component it is past that.
So or not it's now not all long run. This transition occurs directly, usage builds, it be both per user, it's additionally for workload and it be consumptive based. So it be in reality a greater holistic view that i would have people take as adversarial to thinking about an Azure contract as lengthy-dated.
Keith Weiss -- Morgan Stanley -- Analyst
thank you, guys.
Brett Iversen -- frequent manager, Investor family members
thanks, Keith. Operator, subsequent query, please.
Operator
thanks. The next query is from the line of Brent Thill with Jefferies. Please proceed together with your query.
Brent Thill -- Jefferies -- Analyst
Thanks. Satya, on healthcare, if you could just frame your aspirations, long term, the place you'd want to be in this business? And in case you might simply comment on the place you nevertheless suppose the bottom placing fruit is, because it pertains to the chance set, especially building on the Nuance acquisition.
Satya Nadella -- Chief executive Officer
certain, Brent. Thanks for the query. after I seem on the business cloud alternatives, we consider of healthcare is a really vital chance for us and an immense and expansive addressable market. in case you feel about as a percent of GDP, definitely, healthcare is significant.
And essentially, after I believe concerning the company market, in selected, digital tech is going to play a big role for each company to do the issues that they care the most about, which is enhance the patient effects and cut back cost and cut back the burden on the physicians. So it truly is where the Nuance acquisition is an excellent fit for us. we have been partnered with them. It additionally enhances our platform method, Brent.
What we now have all the time accomplished has gone into an industry with a platform and an ecosystem strategy. for instance, with Nuance, they've accomplished a fantastic job of taking what's perhaps essentially the most defining expertise of our times, which is AI, and making use of it to healthcare, which is essentially the most vital utility space. and that they've carried out that once again through in reality partnering, partnering deeply with EMR programs and the relaxation of the healthcare ecosystem, sooner or later to improvement the suppliers. And so we're in fact anticipating that acquisition closing, and we're already partnered with them in our cloud.
but this allows for us to take that and combine greater deeply with what we're doing with groups and some of our AI capabilities even more deeply, and we suppose we can add a major volume of cost, both to our companions within the healthcare ecosystem, in addition to, most importantly, to the providers.
Brent Thill -- Jefferies -- Analyst
thank you.
Brett Iversen -- regular supervisor, Investor relations
Thanks, Brent. Operator, next question, please.
Operator
thanks. Our subsequent query is from Mark Moerdler with Bernstein analysis. Please proceed together with your question.
Mark Moerdler -- Sanford C. Bernstein -- Analyst
thank you very much, and once more, congratulations on the quarter and the way smartly the company is executing. i might like to change apparatus a little bit and drill in just a little on the Dynamics 365 business. Frankly, had been this a part of every other company or even a stand-by myself company, it would be such a middle of enthusiasm with the aid of investors given how fast it be grown. Satya, if you happen to observed Dynamics 365 is taking share from rivals, are you talking about ERP or CRM or is it both? Or is it whatever distinct? And what are the important thing drivers of that strength and increase? and the way sustainable do you agree with it really is? thanks.
Satya Nadella -- Chief government Officer
Thanks so tons for the question, Mark. And, first off, we're very, very enthusiastic about what's occurring once more with Dynamics 365. And if you ask where is the share coming and where is the growth coming? it be coming from all those categories. but the most enjoyable aspect is, as somebody desires to deploy even an omnichannel answer, for instance, in an international where what's physical and what's digital deserve to come collectively not like anything else earlier than because the pandemic is bringing about such structural exchange.
You want both that federated stock administration disbursed stock management equipment I referenced in my remarks, and also you want the client insights product it truly is probably one of the most quickest-becoming modules, which is that 360-degree view on customers and consumer engagement, after which including the deliver chain. So base line is that every customer is looking to digitize and produce together the statistics silos, in fact, silos of CRM and ERP programs. and that's doubtless one of the vital entertaining things we have observed is or not it's now not about replacing even an latest ERP or an existing CRM, it's not purchasing Dynamics and assisting them bridge even one of the most disparate CRM and ERP systems they might also have. So we do see this as a tremendous possibility because the world modernizes and places in a complete next-era, more proactive versus reactive business methods, and that is the reason what Dynamics has been architected for.
So I feel like popping out of this pandemic and the structure and all of the challenging work that crew has finished over the multiple years now positions us very well.
Mark Moerdler -- Sanford C. Bernstein -- Analyst
thanks. I much appreciate it.
Brett Iversen -- prevalent supervisor, Investor members of the family
Thanks, Mark. Operator, next question, please.
Operator
thank you. The next query is from Karl Keirstead with UBS. Please proceed with your query.
Karl Keirstead -- UBS -- Analyst
Thanks. query for Amy on opex. Amy, the opex boom has been extraordinarily low the last a few quarters. The growth expense seems like or not it's going to inch up a bit bit within the June quarter.
but you outlined the investments are transferring to future quarters. You doubtless do not are looking to provide too lots on fiscal '22. but i am just wondering no matter if we should extrapolate that into considering that opex increase in fiscal '22 should get back to the pre-COVID ranges of plus 10%. And if you don't are looking to be that certain, perhaps you might simply aid us define some of the variables we should still keep in mind as we mannequin that line merchandise publish-COVID restoration in fiscal '22? thank you.
Amy Hood -- Chief monetary Officer
Thanks, Karl. and i do think in q4, and it be why I notably referred to as out the four features of influence from a year ago because it does delivery to get to a more normalized expense in q4. and i say that because our headcount growth, which I stated previous, has been 12%. And so normal, you could possibly are expecting opex increase to at the least marry your headcount boom over any length of time, and we've got certainly benefited in the course of the yr from COVID-linked discounts.
we will continue to have that in q4. And as we get to '22, i'd expect to see rather less of that as individuals get again to the workplace at some stage and resume any other usual stages of exercise. And so I do believe you're heading in the right course on that. And pay attention, I feel that type of boom with the type of possibility we're seeing, the variety of TAM expansive alternatives in reality Satya went through in his feedback, where we consider like we have now received a unique position and possibility to take share.
I believe pretty confident in being in a position to actually land that opex growth quantity.
Karl Keirstead -- UBS -- Analyst
acquired it. thank you, Amy.
Brett Iversen -- customary supervisor, Investor members of the family
Thanks, Karl.
Satya Nadella -- Chief government Officer
I imply, I feel simply to add to it, Amy, I think i'm hoping in your entire models, you've got new rows, at least once we believe about it from even just remaining year to this yr, we're in many extra new categories and in these classes with significant differentiation. So when we believe about opex, it be not about including opex to the stuff that we had during the past. there may be leverage there. in fact, it be opex going into new TAMs.
Brett Iversen -- time-honored manager, Investor family members
Operator, subsequent question, please.
Operator
absolutely. Our subsequent question comes from the line of Kirk Materne with Evercore ISI. Please proceed with your query.
Kirk Materne -- Evercore ISI -- Analyst
yes. Thanks very a good deal and congrats on the quarter. Satya, i was wondering if you may just speak a bit bit more about Viva. I are aware of it's early days on that.
but just the kind of comments you are getting on that product? and how do you see that kind of fitting in? There appear to be some great adjacencies with Dynamics, with workplace 365. So i was simply kind of curious in case you might provide us a little little bit of a hand on how it's going and sort of your excitement level about it over the subsequent quarter, next couple of years? Thanks.
Satya Nadella -- Chief govt Officer
thank you so a good deal for the question. it's plenty. it be very a whole lot an outstanding instance of what i used to be saying when it comes to creating a brand new class, correct. after I look lower back multiple years now, we began speaking about vigour Platform.
And as I observed, even in my script today, we now have a full suite of equipment that practically created this subsequent-era enterprise process automation and productivity suite in energy Platform that set scale and growing to be at scale. in a similar fashion, we suppose of the event cloud as a distinct cloud chance for us. It brings collectively even today, what have been disparate equipment, whether or not it's the talents mining and management techniques in an business, connecting it to learnings and sooner or later the worker adventure and conversation system. So it certainly is a very huge adjacencies to what we're doing with Microsoft 365 and office 365, in specific, teams.
but also, to your aspect, connects up with line of enterprise systems, HRM programs, and all of the other issues we do in Dynamics, in addition to different third-birthday celebration SaaS applications. So it be very early days. And so we'll take the equal method we have taken, whether it be in safety, whether it be in vigor Platform, no matter if or not it's Dynamics and many other places the place you've gotten viewed us develop sizeable new agencies practically as part of Microsoft Cloud. but we're very excited about what this opportunity represents.
Kirk Materne -- Evercore ISI -- Analyst
thanks.
Brett Iversen -- conventional manager, Investor members of the family
Thanks, Kirk. Operator, subsequent question, please.
Operator
absolutely. Our subsequent query comes from the line of Kash Rangan with Goldman Sachs. Please proceed with your question.
Kash Rangan -- Goldman Sachs -- Analyst
hi. thanks very a good deal. Congratulations on the quarter. Satya, i know you have observed that you are expecting tech as a percent of GDP, to tune about 5% or roughly double over the next 10 years or so.
How may still we feel about Microsoft's share in that context? Is it going to be constant? Or do you see that increasing? And if it is going to expand, what are the important thing items and markets with a view to pressure your relative share increase as you outperform tech and as tech outperforms GDP? thank you so plenty.
Satya Nadella -- Chief government Officer
Thanks, Kash, for the query. I feel that firstly, we're large believers in two things. One is we should be aggressive in each and every layer, and then the coming together of each and every layer right into a cohesive, coherent structure of the whole stack or the Microsoft cloud creates that differentiation. And in an effort to define what we consider is going to be expanding share for us as tech itself as a percent of GDP doubles.
So in case you look at it -- even if it's on the hybrid infrastructure or the multi-cloud, multi-side world, which, I believe, is going to be the area 10 years from now, we are very well positioned. we've led in it, we currently lead in it, and we plan to continue that. When it comes to records, when I study even what we have now been capable of do with Synapse even in the just ultimate year and what that may do each on the cloud and the part. When it involves AI, what we are doing with OpenAI and our cognitive capabilities or what we're doing with vigor Platform.
Developer SaaS, one of the crucial unique things, again, that I consider is the subsequent 10 years is going to be about developers and the digital potential in each enterprise, and we are the leaders there. in the event you think about VS Code, in addition to GitHub. after which, of direction, all the issues that we're doing with Microsoft 365 and Dynamics on the trade facet. So ultimately, we don't take anything else as a right.
however that pointed out, we're well-placed for what is expansive TAM and with competitive differentiation both within the particular person layers of the stack, as well because the cohesiveness of the stack itself.
Kash Rangan -- Goldman Sachs -- Analyst
acquired it. thanks so lots. That just appears like a share gain story. thanks so tons.
admire it.
Brett Iversen -- well-known manager, Investor family members
Thanks, Kash. Operator, subsequent question, please.
Operator
Our next question comes from Gregg Moskowitz with Mizuho. Please proceed together with your question.
Gregg Moskowitz -- Mizuho Securities -- Analyst
good enough. Thanks very a lot for taking the query. Satya, to your prepared remarks, you spoke about an increase in verticalization of Azure. will we double-click on on that a bit of more? How tons incremental opportunity do you see in industries like financials, like manufacturing? And are there other verticals that may additionally make experience to greater actively pursue over time as well?
Satya Nadella -- Chief executive Officer
thanks for the query. We fully suppose that in the end, valued clientele are looking to enhance their time to price, decrease cost, and improve agility. So being able to customise these workflows, to come up with industry schemers because should you believe about multiplied digitization and workflow automation, it does take that next degree of schematization of what is perhaps these days now not digital inside an business. And so, for this reason, what we do through stitching together, coming collectively of even Microsoft 365, teams, energy Platform with definite workflows with facts internal of Azure, in addition to Dynamics, that completely improves the capacity for any client in anyone of these industries to enhance their time to cost.
So, sure, it is going to both support us with adoption quotes increase, the velocity with which it increases and it also differentiates us. And we are going to continue to look. And one of the vital other issues that we're doing, this is now not just one trade at a time, it be additionally the pass-industry workflows. So we fully accept as true with that that we already talk about not simply any person part of our cloud, we discuss only 1 factor, it be known as the Microsoft Cloud.
And now we're increasingly talking about Microsoft Cloud by means of business and go-trade.
Gregg Moskowitz -- Mizuho Securities -- Analyst
Very positive. thanks.
Brett Iversen -- time-honored manager, Investor relations
Thanks, Greg. Operator, we've time for one ultimate query.
Operator
Our final question will come from the road of Raimo Lenschow with Barclays. Please proceed with your question.
Raimo Lenschow -- Barclays investment financial institution -- Analyst
howdy, thanks for squeezing — thanks for squeezing me in. i wanted to ask about safety and what we see in terms of changes of the trade and the way Microsoft is form of fit in there where, certainly, within the ultimate quarter, that was sort of a huge theme. are you able to speak a little bit about what you see when it comes to clients realizing the broadened offering from Microsoft and the way the cloud is taking part in a changing function there? thanks.
Satya Nadella -- Chief govt Officer
No. thank you for the question. most likely, protection is a brilliant vital topic for each client, each board, every executive group. And the basic strategy we've is how do we make sure that every customer has carried out a 0-have faith structure.
however it truly is the identify of the video game, which is how can Microsoft through our participation in the protection trade, speed up nearly the cyber protection of the whole digital sector and past. And as a way to me, what we have finished is taken a gorgeous interesting strategy of bringing identification, endpoint utility, infrastructure all together with XDR and SIEM, which is cloud-native. it really is fairly entertaining because we in reality don't let the SIEMs get in the way. we are going to make sure that any client who's capable of form of deploy these techniques together has most protection in-depth, but additionally the mixture records to be in a position to notice and respond to any intrusion as a result of it really is variety of the important thing posture.
after which you couple that with our operational protection posture for those who're processing eight trillion events and the use of that to at all times assist our consumers is expanding to your aspect, the cloud adoption fee. So in case you analyze one of the most challenges like the HAFNIUM, cloud was not impacted. And once we did sort of lots of work to make certain that the patches have been out even for servers that had been out of assist for diverse years. however at the equal time, any business that changed into -- had moved already to the cloud had none of these concerns.
So, therefore, I believe we're going to see expanded cloud adoption. We're going to peer multiplied utilization of end-to-conclusion security suites like what we present. And most importantly, first rate hygiene and outstanding operational protection posture all the time with zero-have confidence architecture.
Raimo Lenschow -- Barclays investment financial institution -- Analyst
thank you.
Brett Iversen -- widely wide-spread manager, Investor family members
Thanks, Raimo. That wraps up the Q&A portion of state-of-the-art salary call. thank you for becoming a member of us nowadays, and we look forward to talking with all of you quickly.
Amy Hood -- Chief fiscal Officer
thank you all.
Satya Nadella -- Chief executive Officer
thank you.
Operator
[Operator signoff]
duration: 60 minutes
call participants:
Brett Iversen -- conventional manager, Investor family members
Satya Nadella -- Chief executive Officer
Amy Hood -- Chief monetary Officer
Keith Weiss -- Morgan Stanley -- Analyst
Brent Thill -- Jefferies -- Analyst
Mark Moerdler -- Sanford C. Bernstein -- Analyst
Karl Keirstead -- UBS -- Analyst
Kirk Materne -- Evercore ISI -- Analyst
Kash Rangan -- Goldman Sachs -- Analyst
Gregg Moskowitz -- Mizuho Securities -- Analyst
Raimo Lenschow -- Barclays investment financial institution -- Analyst
greater MSFT analysis
All revenue name transcripts
related hyperlinks
© Alice Chase elegance Subscription packing containers 2021 Glossybox 
© Alice Chase Alice Chase 
© Alice Chase Alice Chase 
© Alice Chase Alice Chase 
© Alice Chase Alice Chase 
© provided by The i Insignia, orders, decorations and medals are a method of a country asserting thanks (image: PA) 
© supplied by means of The i The insignia are sewn in region on the cushions with fishing wire (photograph: Getty images) 
© provided by means of The i Philip's chosen insignia contains medals and decorations conferred on him by the united kingdom and Commonwealth international locations (photo: AP) 
© provided with the aid of The i Prince Philip's funeral may be a vastly stripped-down experience (photo: PA) 