“Our customer demand continues to exceed our supply.”

In context

“ing business. Operating margins increased year over year to 47% ahead of expectations. As a reminder, we still account for investment in OpenAI under the equity method. And as a result of OpenAI's recapitalization, we now record gains or losses based on our share of the change in their net assets on their balance sheet as opposed to our share of their operating profit or losses from their income statement. Therefore, we recorded a gain which drove other income and expense to $10 billion in our GAAP results. When adjusted for the OpenAI impact, other income and expense was slightly negative and lower than expected driven by net losses on investments. Capital expenditures were $37.5 billion in this quarter, roughly two-thirds of our CapEx, was on short-lived assets, primarily GPUs and CPUs. Our customer demand continues to exceed our supply. Therefore, we must balance the need to have our incoming supply better meet growing Azure demand with expanding first-party AI usage across services like Microsoft 365 Copilot and GitHub Copilot, increasing allocations to R and D teams to accelerate product innovation, and continued replacement of end-of-life server and networking equipment. The remaining spend was for long-lived assets that will support monetization for the next fifteen years and beyond. This quarter, total finance leases were $6.7 billion and were primarily for large data center sites. And cash paid for PP and E was $29.9 billion. Cash flow from operations was $35.8 billion, up 60% driven by strong cloud billings and collections. And free cash flow was $5.9 billion and decreased sequentially, reflecting the higher cash”