Microsoft CEO Satya Nadella’s letter to shareholders: We were founded in 1975 with a belief …

Fiscal year 2024 was a pivotal yr for Microsoft. We entered our fiftieth yr as an organization and the second yr of the AI platform shift. With these milestones, I’ve discovered myself reflecting on how Microsoft has remained a consequential firm decade after decade in an trade with no franchise worth. And I notice that it’s as a result of—time and time once more, when tech paradigms have shifted—now we have seized the chance to reinvent ourselves to remain related to our clients, our companions, and our staff. And that’s what we’re doing once more as we speak.

Microsoft has been a platform and instruments firm from the beginning. We had been based in 1975 with a perception in creating know-how that may allow others to create their very own. And, practically 50 years later, this perception stays on the coronary heart of our mission to empower each particular person and each group on the planet to attain extra.

This yr, we moved from speaking about AI to serving to our clients translate it into actual outcomes—one particular person, one group, one establishment, and one nation at a time. Now we have made exceptional progress on this entrance throughout each trade. For instance:

· Coles is producing 1.6 billion each day AI predictions throughout 850 Australian shops, making certain each shopper finds what they want.

· Unilever is performing 1000’s of simulations with AI within the time it could take to run tens of laboratory experiments, because it accelerates its product improvement.

· Builders at Itaú, Brazil’s largest personal financial institution, are coding extra effectively utilizing our AI pair programmer, GitHub Copilot.

· Khan Academy is making tutoring extra accessible for college students and serving to lecturers plan extra artistic classes, utilizing our small language mannequin Phi.

· Aquafarmers in Indonesia are enhancing their yields, because of an app constructed with the Azure OpenAI Service, in addition to Azure IoT.

· In Kenya, road distributors now have entry to credit score for the primary time, because of M-Kopa, a social enterprise utilizing Azure ML to do its forecasting.

· And enterprise clients and their staff all over the world, from Amgen and Disney, to Finastra and Vodafone, are utilizing Microsoft 365 Copilot to develop into extra artistic and productive.

Financially, the yr was additionally marked by document efficiency. We delivered over $245 billion in annual income, up 16 % year-over-year, and over $109 billion in working earnings, up 24 %.

Going ahead, we’re targeted on three priorities: First, prioritizing fundamentals, with safety above all else. We launched the Safe Future Initiative (SFI) this yr, bringing collectively each a part of our group to advance cybersecurity safety. Second, driving reliable AI innovation throughout our complete portfolio whereas persevering with to scale our cloud enterprise. And, lastly, managing our price construction dynamically to generate sturdy, long-term working leverage. All three priorities are essential to our means to proceed thriving as an organization as we elevate the bar on our operational excellence, with a concentrate on steady enchancment throughout every little thing we do.

AGE OF AI
If we return 70 years to the start of recent computing, our trade has had two goals: First, can computer systems perceive us as an alternative of us having to know computer systems? And second, as we digitize extra of the world—together with individuals, locations, and issues—can computer systems assist us cause, plan, and act extra successfully utilizing all that data? Over the previous yr, now we have had breakthroughs on each fronts.

The core underlying drive behind these breakthroughs is scaling legal guidelines. Identical to Moore’s Regulation drove the data revolution, the scaling legal guidelines of deep neural networks (DNN) and transformers are driving as we speak’s AI revolution. Up till the DNN inflection level, progress in compute was maintaining with Moore’s Regulation—doubling each two years. However now we have now began to see progress in AI efficiency double roughly each six months.

There are three capabilities coming collectively due to these scaling legal guidelines. First, now we have a brand new pure consumer interface that’s multimodal. It helps speech, photographs, and movies—each as enter and output. Now we have reminiscence that retains necessary context, recalling each our private information and knowledge throughout gadgets, apps, and the net. And, lastly, now we have new reasoning and planning capabilities that assist us perceive advanced context, full end-to-end duties on our behalf, and cut back our cognitive load.

This new world is being outlined by a wealthy tapestry of AI brokers, which may take motion on our behalf, together with private brokers throughout work and life, enterprise course of brokers, and cross-organizational ones. These brokers will have the ability to work in live performance as a brand new enter to assist make small companies extra productive, make multinationals extra aggressive, make the general public sector extra environment friendly, and enhance well being and training outcomes broadly.

Microsoft has constructed three main platforms to assist our clients maximize their alternative on this rising agentic period: Copilot, which you’ll be able to consider as the brand new UI for AI—the human interface for this agentic world; the Copilot stack, which brings collectively infrastructure, knowledge, and app providers to assist clients construct their very own copilots and brokers for their very own enterprise processes; and a brand new class of Copilot gadgets which can be purpose-built for this new period, together with the Copilot+ PCs we launched this yr.

OUR OPPORTUNITY
The innovation now we have pushed over the previous yr issues provided that we translate it into enduring worth for our clients. That’s why, throughout our tech stack, we’re targeted on serving to individuals and organizations notice the advantages of AI.

Infrastructure
This yr, we expanded our cloud and AI capability, saying new investments throughout 5 continents. These are long-term belongings to drive new progress for the following decade and past, and guarantee communities all over the world have entry to the compute they should drive financial progress on this new period.

Our cloud now additionally gives prime efficiency for AI coaching and inference and probably the most numerous choice of AI accelerators, together with the newest from AMD and NVIDIA, in addition to our personal first-party silicon, Azure Maia, which we launched final November.

Extra broadly, we continued to see sustained income progress from migrations as clients flip to Azure. Azure Arc helps clients streamline their transition, as they safe, develop, and function workloads with Azure providers anyplace. Now we have 36,000 Arc clients, up 90 % year-over-year. And we stay the hyperscale cloud of alternative for SAP and Oracle workloads.

Knowledge & AI
AI fashions at the moment are key constructing blocks for each utility. And with Azure AI, we’re constructing out the app server for the AI age, offering entry to probably the most numerous choice of fashions to satisfy clients’ distinctive price, latency, and design issues. We provide main frontier fashions, because of our strategic partnership with OpenAI. With Phi-3, which we introduced in April, we provide a household of highly effective, small language fashions. And, with Fashions as a service, we offer API entry to third-party fashions, together with the newest from Cohere, Meta, and Mistral. In complete, now we have over 60,000 Azure AI clients, up practically 60 % year-over-year. This yr, we additionally introduced a partnership with G42, which can run its AI functions and providers on our cloud, as we collaborate to convey our newest AI applied sciences to the United Arab Emirates and different nations.

AI doesn’t get created with out knowledge. On the knowledge layer, we’re essentially rethinking what it means to be an analytics database or an operational knowledge retailer on this planet of AI. Our Microsoft Clever Knowledge Platform offers clients with the broadest capabilities spanning databases, analytics, enterprise intelligence, and governance—together with seamless integration with all our AI providers. And Microsoft Cloth, our AI-powered, next-generation knowledge platform we made typically obtainable this yr, now has over 14,000 paid clients who can go from knowledge, to insights, to motion—all inside the identical unified SaaS resolution.

Digital & app innovation
From GitHub to Visible Studio, now we have probably the most complete developer instruments. GitHub Copilot had a breakout yr, because it turned commonplace difficulty for builders in each trade. We now have greater than 1.8 million paid subscribers and over 77,000 enterprise clients, up 180 % year-over-year. They’re realizing productiveness positive factors of as much as 55 % whereas staying of their move and bringing the enjoyment again to coding. This yr, we additionally launched Copilot Workspace, a Copilot-native developer surroundings, which helps any developer go from concept, to code, to software program—all in pure language.

We’re additionally integrating generative AI throughout Energy Platform, enabling anybody to make use of pure language to create apps, automate workflows, or construct an internet site. In complete, we now have 48 million month-to-month lively customers of Energy Platform, up 40 % year-over-year.

Fashionable work
Microsoft 365 Copilot is changing into a each day behavior for information staff, reworking their work, workflow, and work artifacts. Adoption has been quicker than some other new Microsoft 365 suite. And staff at practically 60 % of the Fortune 500 now use Copilot to finish duties quicker, maintain simpler conferences, and automate enterprise workflows and processes. In reality, inner and exterior research present as a lot as a 70 % enchancment in productiveness utilizing generative AI for particular work duties. And early Microsoft 365 Copilot customers had been 29 % quicker in a collection of common duties like looking, writing, and summarizing.

And we’re going additional, bringing the Internet plus Work plus Pages collectively as the brand new AI design system for information work. With Pages, which we simply introduced final month, you may take any data from the net or your work and switch it right into a multiplayer, AI-powered canvas. You’ll be able to ideate with AI after which simply share what you create for collaboration with different individuals.

And with Copilot Studio, clients can lengthen Copilot with brokers and construct their very own brokers that proactively reply to knowledge and occasions from their very own first- and third-party enterprise knowledge. To this point, 50,000 organizations have used it. And, simply this week, we introduced new capabilities that may make it doable for purchasers to construct autonomous brokers utilizing Copilot Studio.

Microsoft Groups stays important to how tons of of thousands and thousands of individuals meet, name, chat, collaborate, and do enterprise. This yr, we rolled out to all clients a brand new model that’s as much as two occasions quicker whereas utilizing 50 % much less reminiscence. And Teams Premium surpassed 3 million seats, up practically 400 % year-over-year, as organizations selected it for superior options like end-to-end encryption and real-time translation.

Enterprise functions
We’re utilizing this AI second to redefine our position in enterprise functions, too. Dynamics 365 as soon as once more took share, as organizations use our AI-powered apps to remodel their advertising and marketing, gross sales, service, finance, and provide chain features.

And we’re increasing our complete addressable market by integrating Copilot into third-party methods as effectively. Our new Dynamics 365 Contact Middle infuses generative AI all through the contact middle workflow in a buyer’s current CRM.

We’re additionally extending Copilot to particular industries, together with healthcare. With DAX Copilot, greater than 400 healthcare organizations are growing doctor productiveness and lowering burnout. On common, clinicians save greater than 5 minutes per affected person encounter. And 77 % say it additionally improves documentation high quality.

Safety
As I discussed earlier, safety underpins each layer of our tech stack. We’re doubling down on our Safe Future Initiative, as we implement our ideas of safe by design, safe by default, and safe operations. And we’re targeted on making steady progress throughout the six pillars of the initiative: defend tenants and isolate manufacturing methods; defend identities and secrets and techniques; defend networks; defend engineering methods; monitor and detect threats; and speed up response and remediation. As a part of this dedication, all Microsoft staff now have safety as a “core precedence,” holding every one in every of us accountable for constructing safe services and products.

We’re constantly making use of what we’re studying and translating it into safety innovation for our clients. An incredible instance is Copilot for Safety, which we made typically obtainable this yr. It brings collectively LLMs with domain-specific abilities knowledgeable by our risk intelligence and 78 trillion each day safety alerts to offer safety groups with actionable insights.

Gadgets & creativity
This yr, we launched a wholly new class of Windows PCs engineered to unleash the facility of distributed AI throughout the cloud and edge. Copilot+ PCs are the quickest, most AI-ready Home windows PCs ever constructed. They embody a brand new system structure designed to ship best-in-class efficiency and breakthrough AI experiences. And we’re working throughout our complete ecosystem to convey these to life, together with with AMD, Intel, and Qualcomm, together with our OEM companions.

Skilled social community
LinkedIn continues to see accelerated member progress and document engagement. We surpassed 1 billion members for the primary time this yr, as we mix our distinctive knowledge with this new era of AI to remodel how individuals be taught, promote, and get employed. LinkedIn Advertising and marketing Options continues to be a pacesetter in B2B digital promoting, serving to corporations ship the best message, to the best viewers, on a secure and trusted platform. And with regards to our subscription companies, Premium signups elevated 51 %, and we’re including much more worth to our members and clients with new AI instruments and skilling alternatives.

Search, adverts, and information
With Copilot, we’re taking the primary steps towards creating an AI companion, one which’s at all times by your facet, serving to you’re feeling smarter and extra supported via pure conversations. The refreshed Copilot app we launched earlier this month delivers a extra intuitive design with extra digestible, speedy, and fluent solutions. It now adapts to you with a heat tone and a definite type, offering not solely data however encouragement, suggestions, and recommendation as you navigate life’s on a regular basis challenges—regardless of how huge or small. And we’re including superior capabilities like Voice and Imaginative and prescient that make it each extra helpful and extra pure.

We additionally proceed to use generative AI to pioneer new approaches to how individuals search and browse. Microsoft Bing and Edge each took share once more this yr. And we launched Copilot Professional, offering entry to the newest fashions for fast solutions and higher-quality picture creation, and entry to Copilot for Microsoft 365 Private and Household subscribers.

Hundreds of reports and leisure publishers belief us to achieve new audiences with Microsoft Begin. And we’re additionally serving to advertisers improve their ROI. Copilot in Microsoft Advert Platform helps entrepreneurs create campaigns and troubleshoot utilizing pure language.

Gaming
We’re bringing nice video games to extra individuals on extra gadgets. With our acquisition of Activision Blizzard King, which closed October 2023, we’ve added tons of of thousands and thousands of gamers to our ecosystem. We now have 20 franchises which have generated over $1 billion in lifetime income—from Sweet Crush, Diablo, and Halo, to Warcraft, Elder Scrolls, and Gears of Warfare. And with Xbox cloud gaming, we proceed to innovate to supply gamers extra methods to expertise the video games they love—the place, when, and the way they need. Lastly, we introduced 4 of our fan-favorite titles to Nintendo Swap and Sony PlayStation for the primary time, as we proceed to increase our content material to new platforms.

OUR MISSION
Though now we have made excellent progress over the previous yr, we can’t take our permission to innovate—not to mention function—without any consideration. It’s one thing we should earn.

We at all times say Microsoft will do effectively provided that the world round us does effectively. And that’s why we’re targeted on 4 enduring commitments. They maintain us grounded, serving as a information as we make selections, pushing us to ask essential questions to make sure the know-how we create advantages everybody on the planet, in addition to the planet itself.

How can we increase alternative?
We’re democratizing entry to AI and the talents wanted to harness its potential, making certain that each particular person, group, and neighborhood can profit from the alternatives AI brings.

This yr, we partnered with 375,000 nonprofits globally, offering $4.7 billion in donated and discounted know-how—to assist them construct capability, drive efficiencies, innovate, and improve their influence as they tackle the world’s best challenges. Along with our companions, we additionally made important strides in skilling. Now we have educated and authorized 14.1 million individuals throughout 202 nations in digital abilities as of June 2024. Over 80 % of the learners had been from teams furthest from alternative within the digital economic system.

And our work doesn’t cease there. We should do extra to speed up the equitable adoption of AI and slender the digital divide. That’s why we’ve launched new AI skilling initiatives in partnership with governments, academic establishments, trade, and civil society—to assist thousands and thousands of individuals be taught to make use of generative AI, develop AI instruments, and lead AI adoption. This consists of individuals from underserved communities, with a concentrate on younger individuals, girls, rural communities, and the World South, in addition to staff of social influence organizations.

How can we earn belief?
We acknowledge that belief is earned, not given. And we stay dedicated to incomes belief day-after-day, spanning cybersecurity, reliable AI, privateness, and digital security.

Our Safe Future Initiative advances how we design, construct, check, and function our know-how to make sure we ship options that meet the best doable commonplace of safety. Our first SFI Progress Report highlights updates spanning tradition, governance, know-how, and operations, however we acknowledge that our work on safety isn’t full. We should and can do extra. Our promise is to repeatedly be taught, enhance, and adapt to the evolving wants of an more and more advanced safety panorama.

We’re targeted on constructing AI that’s reliable, that means that it’s safe, secure, and personal. Our accountable AI practices, grounded in our foundational AI ideas, assist guarantee we do that from the start. And we’re constructing on this dedication by introducing new product capabilities throughout our tech stack, making certain that each our clients and builders are safeguarded at each degree. Finally, these commitments and capabilities are key to fulfilling our mission. The world is seeking to us to assist defend and defend them, and we take that duty critically. In Might, we printed our first AI Transparency Report, which outlines how we construct generative functions responsibly and assist our clients. We additionally launched Targets and Governance: Targets and Classes for AI, which attracts classes from different globally ruled applied sciences like civil aviation and nuclear energy. By our Accelerating Basis Fashions Analysis program, we’ve made grants to tons of of tasks in AI security and alignment analysis, AI-driven scientific discovery, and helpful functions of AI. And we launched our World Views Accountable AI Fellowship program, designed to middle the voices of AI specialists from the World South and allow us to higher perceive AI’s influence on creating nations. As we drive AI innovation, we proceed to reply to a altering privateness panorama. We offer instruments to assist our clients defend their privateness and management their knowledge, and now we have printed a number of sources outlining our strategy to privateness and AI for our client, industrial, and public sector clients.

Lastly, we proceed our work to create secure experiences on-line and defend clients from unlawful and dangerous content material and conduct. To bolster our efforts to forestall youngster sexual exploitation and abuse dangers, now we have made new commitments to security by design in our AI providers, joined the Tech Coalition’s Lantern Program, and proposed concrete actions that US policymakers can take to guard the general public via regulatory and coverage measures.

How can we defend basic rights?
We’re dedicated to defending basic rights—extending the advantages of know-how whereas mitigating its potential harms. For us, this implies selling accountable enterprise practices, increasing connectivity and accessibility, defending democracy, and advancing a good and inclusive society.

Over the previous yr, as regulators more and more required better transparency and course of consistency throughout company provide chains and human rights efforts, we ensured compliance with reporting and due diligence directives. Going ahead, we’ll proceed to respect international human rights and legal guidelines and take steps to mitigate the influence of our operations and our know-how on the individuals in our price chain.

As we construct and deploy extra AI options, connectivity and accessibility are foundational. Since 2017, we’ve prolonged entry to inexpensive high-speed web to over 100 million individuals, together with practically 40 million in Africa. And we stay targeted on constructing inclusive, accessible AI that empowers individuals throughout the spectrum of incapacity.

Greater than 4 billion individuals will vote this yr of their respective elections, making it the most important election yr in historical past. On the Munich Safety Convention in February, we got here along with others throughout the tech sector and pledged to assist forestall misleading AI content material from interfering with international elections. As a part of this pledge, now we have labored to empower campaigns, candidates, election officers, and voters to know the dangers of misleading AI in elections and to take steps to guard themselves and democracies. To this point, we’ve performed deepfake trainings in over 20 nations. And our corresponding public consciousness marketing campaign has reached over 355 million individuals.

Lastly, we continued investing in each strategic nationwide partnerships and community-based tasks that leverage knowledge and insights to allow modifications that advance racial fairness and equity within the legal authorized system.

How can we advance sustainability?
Lastly, we’re on a journey to construct a extra sustainable future, from addressing our personal environmental footprint to empowering our clients and the world with the know-how wanted to satisfy the local weather problem. Over the previous yr, now we have seen how AI can catalyze environmental progress in exceptional methods—from growing the capability of transmission traces to ship renewable energy, to the invention of latest supplies to assist power manufacturing and storage, to empowering the workforce with sustainability abilities.

However we additionally acknowledge the useful resource depth of the infrastructure wanted to yield these advantages, which is why we’re advancing the sustainability of AI, from design to development to operations, all whereas working to enhance the effectivity of those applied sciences. We’re additionally investing in innovation via Microsoft’s Local weather Innovation Fund and our AI for Good Lab, advancing analysis and advocating for insurance policies that may drive international influence.

In our newest Environmental Sustainability Report, we shared progress towards our 2030 commitments. We’re on monitor in a number of areas. The place we’re not but on monitor, we’re mobilizing to speed up our progress towards changing into carbon detrimental, water constructive, and nil waste, in addition to to guard and protect ecosystems.

In terms of our carbon footprint, we proceed to assist clear electrical energy infrastructure via long-term investments to convey extra energy onto the grids the place we function. Since setting our carbon detrimental goal, now we have contracted over 34 gigawatts of renewable power, together with tasks in 24 nations.

In our efforts to develop into water constructive, we offered greater than 1.5 million individuals with entry to scrub water and sanitation, reaching our water entry goal.

Our journey to zero waste consists of lowering waste at our campuses and datacenters and advancing circularity for cloud {hardware}, packaging, and gadgets. Our most up-to-date report confirmed we had a reuse and recycle price of 89.4 % for servers and parts throughout all cloud {hardware}.

Lastly, AI provides new alternative for ecosystem and biodiversity administration with options like AI-assisted bioacoustics. And we’re increasing collaboration with native communities to construct and function datacenters in ways in which deal with native challenges and create better advantages. This work is guided by our Sustainability Requirements for brand spanking new development and our Datacenter Neighborhood Pledge.

Be taught extra about our progress and learnings as we pursue our commitments in our annual Affect Abstract.

OUR CULTURE
Simply as our tradition has been essential in getting us so far, it will likely be essential to our success going ahead. At Microsoft, we consider our tradition as being each enter and output. To pursue new ideas, we want new functionality. To construct new functionality, we want a tradition that enables us to develop that functionality lengthy earlier than it’s typical knowledge. For us, which means continually exercising our progress mindset and confronting our mounted mindset—every one in every of us, day-after-day. It’s the solely approach we’ll succeed.

Our progress mindset tradition helps us in our steady pursuit of excessive efficiency. It doesn’t matter what we stated about our tradition 10 years in the past and even final yr if we aren’t working towards it as we speak—by anticipating the unmet and unarticulated wants of shoppers; by working collectively as One Microsoft to ship the very best end-to-end options and providers; and by actively searching for variety and embracing inclusion—to make sure our workforce represents the planet we serve and the merchandise we construct at all times meet our clients’ wants. In our newest Range & Inclusion Report, we share the methods our longstanding dedication to variety and inclusion endures, and what we’re studying as we proceed to rent, develop, and develop a worldwide workforce that greatest helps one another and our clients. That is how we thrive—as people, as groups, and as a company. And, after we thrive, we may help our clients and the world thrive too.

Giving additionally stays core to our tradition. This yr, greater than 106,000 staff gave $250 million (together with firm match) to almost 35,000 nonprofits in 111 nations. And our staff volunteered over 1 million hours to causes they care about. I’m deeply grateful for my colleagues’ dedication to creating a distinction. Collectively, we will proceed to empower everybody all over the world.

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In closing, this can be a consequential time for our firm, our trade, and the world. Finally, our mission requires that we translate know-how into empowerment for everybody, into real-world influence. On the finish of the day, that’s what actually issues.

Almost two years later, I can’t cease occupied with the Indian farmer I met in January 2023. He was capable of apply for advanced authorities farm subsidies utilizing simply his voice, because of an app constructed with GPT 3.5. It was exceptional. A frontier mannequin developed on the West Coast of the US simply months earlier was getting used to straight enhance the lives of rural farmers on the opposite facet of the globe.

That price of diffusion was in contrast to something I had seen in my profession. And the tempo has solely elevated. Earlier this yr, I used to be in Thailand, the place I met builders utilizing Phi-3 to optimize their operations simply days after the small language mannequin was launched.

To me, that represents the true democratization of experience. The place the web period put data at our fingertips, AI is placing experience at our fingertips. Affect like that is why we’re on this trade, and it’s what provides all of us at Microsoft deep that means in our work.

It’s why we’re investing in our fundamentals, in our individuals, and in continued innovation—in order that we may help others obtain extra for the long run.

It isn’t an exaggeration to say that what every of us does proper now with the distinctive alternative now we have been given will form the long run. And I sit up for seeing how all of us use Microsoft as a platform to make a distinction—one buyer, one neighborhood, one nation at a time.