Microsoft Corporation (MSFT) Earnings Call Transcript
August 28, 2025
Earnings Call Speaker Segments
Okay. I think we're live. Awesome. Welcome back, everybody. Once again, I'm Brad Zelnick with the Software Research team here at Deutsche Bank. For this session, we are very pleased to have none other than Microsoft specifically, Vasu Jakkal, do I have that right?
Right.
I always take a little bit of risk in pronouncing a last name, but who is Corporate Vice President of Microsoft Security, which for those that don't realize is the most significant security business of all security businesses worldwide by a significant factor. But format of this presentation is going to be a fireside chat. I've got a bunch of prepared questions that I'm hoping we can get through, and we're going to get a lot smarter on the topic of cybersecurity and why it's so important to Microsoft. So with that, thank you so much for joining us today.
That's a pleasure, Brad, and it's nice to be in Dana Point with you.
Isn't it lovely?
It's beautiful. I might even take up golf now, but this...
[indiscernible] this would be a perfect time and a perfect place. Well, again, thanks so much for being here. Maybe for those that don't know you and are less familiar with Microsoft Security business, can you just take a minute to explain your role at Microsoft and what your mandate is?
Yes, absolutely. So Thank you, everyone, for joining. It's great to be here with you all. I've been at Microsoft now for 5 years, and I'm responsible for our Security business. So I joined really to build a business and I oversee our security portfolio end-to-end globally that involves defining the strategy, working with Charlie, our engineering leader on products and then, of course, all the go-to-market, including business models. And this portfolio is pretty broad. We have 6 product families as part of that, and we really protect end-to-end. So starting with threat detection and security operations, defending against all the attacks coming at organizations. That's our Defender and Sentinel product line. We have Identity. We started with Identity Management, but we have Protection and Governance, that's Entra. And that picture, I think we'll have a picture for you that shows the portfolio. We also have device management and that's Intune. And then finally, given, of course, AI data security has reached a critical point. And we have Purview, which is our data security Protection and Governance family. So those are all of the families within the Microsoft Security portfolio. We also have our generative AI Security Solutions called Security Copilot, which integrates with each of our products and also it can be used stand-alone and that constitutes the Microsoft security platform.
Thank you for that. And I think we do -- there it is.
That's it.
Excellent. A picture is worth a 1,000 words, I think they say. Thank you for that overview. Super helpful. And maybe just at a very high level, with nearly 1.5 million Security customers. That's a massive number. Microsoft clearly has a unique perspective into broader trends and what's going on in the world. What are you seeing in the current environment?
Yes, it's a great question, Brad. So we're seeing 3 challenges, which are -- which every organization is facing right now. The first 1 is the threat landscape. It's at unprecedented levels right now, the speed, the scale and the sophistication. And just to give you an idea, last year, we were seeing 4,000 password attacks per second because Identity continues to be a battleground of security. This year, we're seeing 7,000 password attacks per second. So that's 600 million attacks every single day. So that -- just the scale is a lot. The speed is also -- has also increased. On average, it takes attackers 72 minutes or less to infiltrate an organization. So from when a user clicks to a phishing link to when the actor gets access to your data, sometimes your [ full ] inbox. That's not a whole lot of minutes for a Defender to protect an organization. And then we're seeing the number of attackers has also increased. The cyber crime is a $9.2 trillion anti-economy every year, that's increasing. And just from the number of attackers that we are tracking at Microsoft, last year, we were tracking 300 unique nation-state and financial crime actors. This year, we are tracking 1,500. So that's a 5x increase. So that's challenge #1, is unprecedented levels of the threat landscape. Challenge #2 is data. Data risk and insider risks are increasing. 20% of data breaches are caused by insiders, whether it's intentional or unintentional, doesn't matter, but that's kind of the stat. 80% plus leaders are concerned about data, especially as AI becoming mainstream. And then the third challenge is complexity, fragmentation continues in the security industry. This industry was built by a lot of bolt-on tools. On average, organizations have 40-plus tools, and they have to stitch it together, especially when the security talent doesn't exist. There's more than 4 million jobs, I think 4.7 million was the latest stat, which are unfulfilled in security right now. But they don't have the talent to fit that, and then you have a very complex regulatory environment. This year we, I think, there are 100-plus AI-related regulations. Every day, there are 250-plus regulatory updates. So that's a lot for organizations to deal with. The challenge #1, threat landscape; two, data risk; three complexity. And what we're seeing in terms of trends and solutions now is GenAI. So both using AI for security, like how do you turbocharge defense. That is a super power that we have to leverage. And we're also seeing security for AI. You have to secure all of this AI and then the last 1 is consolidation, simplification and end-to-end protection. So that's what we're seeing aligned to these challenges.
IIt's a lot to keep up with, I don't know when you sleep. By the way, does everybody in the room hear Vasu, okay? I just want to make sure. Okay, cool. Great. Me doing my own AV check. Like I said, a lot to keep up with, and the interesting part about cyber, it seems it's the only adversarial aspect of IT. It's been a perennial game of cat and mouse. And the industry feels more competitive than ever with multiple platforms, all attempting to consolidate across various segments. Can you just help us understand Microsoft -- how Microsoft differentiates itself amidst what is such a noisy landscape out there?
Yes. It's extremely noisy, and I love what you said, it's a cat and mouse game. I feel like for those who like hiking, I feel we are like hiking up Kilimanjaro and someone's actively throwing boulders at us. That's what it feels like in security any single day. But in terms of -- and this is the main reasons Microsoft is in security because we are a software and a platform player, and we are security players. So we have strength across both. And our biggest strength is that of the platform. But the 3 things that make us unique. The first 1 is signals. You cannot defend what you cannot see. Every single day Microsoft processes 84 trillion signals. And just to give you an idea of that magnitude and the growth, when I joined Microsoft 5 years back, we were tracking 8 trillion signals. So that's a 10x investment and increase just in 5 years. These signals help us understand who the attackers are, what are they up to? How are they attacking organizations? And you take that and you marry that with our human threat intelligence of 1,500 threat actors, we do have the largest and deepest threat intelligence in the industry. So that's number one, which is our differentiator. Number two, we talked about the complexity, the fragmentation. Attacks come from everywhere. They're not going to just start with your end point or your identities. We have to like monitor it all. Microsoft has the most comprehensive portfolio. We've been believers in this end-to-end. So you can't just protect your endpoint or identities, you have to look all around. We integrate 50-plus categories today and we bring them to life in that portfolio. So you can have a consolidated solution from Microsoft. The third thing is we make sure that we have best-of-breed solutions in the areas that we are participating. So whether it is Identity, which is where our roots are, its device management, it's data security, it's cloud security, it's endpoint, it's SIEM, SecOps. We have best-of-breed in 19 categories across the industry, the only leader which is best-of-breed in the largest number of categories. And then to stop all of this is GenAI. We were at the leading edge of GenAI in 2023 when ChatGPT and Copilot became mainstream. So we have this deep understanding of what is needed for AI and the AI stack and leveraging that really to understand, well, how do you secure this AI, both using AI for defense so that's Copilot and we were the first to market with a GenAI solution. In fact, our security Copilot is used by more than 1,000 customers and there are some statistics which are showing how they are making a difference, like 30% reduction in mean time to response. And we are securing the GenAI solutions across. So I think those 4 things signals, making sure that we have end-to-end protection with best-of-breed that we have GenAI and that we are continuously building a platform, integrating the ecosystem is what sets us apart.
No doubt, puts Microsoft in a very differentiated position. I want to double-click on AI and I feel like -- we've almost made it 10 minutes and we didn't really spend too much time focusing on, it's [indiscernible].
You think of AI, right?
You've heard o this, right? So yes, it's a multidimensional topic. So 3 related questions. You've touched on this a bit already, but how have you seen the threat landscape change with AI specifically? I don't know if you can further quantify or give us a sense of what the impact has been. How should we think about Microsoft's response to better leverage AI security Copilot, et cetera, [ learn ] a little bit more about that and how we're going to protect AI itself?
Yes. I know it feels it's like water now. It's all around us and we're spinning in it. So from an AI standpoint, the threat actors are really smart. They are going to use every tool which is available to them. And so the types of attacks that we can expect to see and we're seeing is every single dimension that you think of, whether it is identity attacks of phishing attacks, think of them just getting faster and the scale increasing. In phishing, we're seeing social engineering. I'm sure you've seen a lot of the deepfakes on how AI can be used, very convincing. And they have more context now. They can do [ Recon ] very easily. We published a report almost a year back with OpenAI on some of the nation-state related actors and what they're using AI for, and we saw that they're doing a lot of [ Recon ] with it. But using that context, getting smarter, really mimicking humans more with phishing and providing that, they're going to see that. Identity, we talked about identity being the battleground of security, with AI now you can do faster password cracking. I mean how many of us still have passwords? We still live in a password world. So that's going to be challenging. Everything from command and control to make do lateral movements and how they're using AI to just get better intelligence on your organizations and what we're going to see from threat actors. But more than that, I think one of the Other aspects of AI is it introduces new surface areas. So in addition to what we consider existing surface areas, your devices and identities and network, think about prompts, that's a new attack area. Think about LLM models, think about AI-related data. So we are going to start seeing them also leverage those attack surfaces and try to get into organizations through that. So it's using our existing attack surfaces and they're really trying to leverage AI to get smarter and faster and inside the [indiscernible] and leverage the new surface areas to use that as a leverage for them. Now in terms of Brad, you asked, how are we going to protect against that? So you have to think about protecting the entire AI stack. And so foundational security, whether it's modeled, it's the AI stack itself. It's what we call built-in content safety, all of those measures, we have to have that. And then you have to have security measures all around, so you're monitoring and your governing AI while it is being used in organization. So that's how we are using AI and of course, we have to use AI for security because you can't keep up with these attacks by just what we were doing earlier. We have to start using GenAI.
We need AI to fight AI.
You need AI to fight AI, beautifully said.
It makes a lot of sense. Microsoft is obviously continually innovating, once stat that stood out to us, is that 5 of 11 recently released security Copilot agents were developed by partners such as OneTrust and Tanium with 2 names that I remember. But can you tell us why Microsoft's collaborative approach to the ecosystem is so important?
Yes. We've always said that security is a team sport. And if you truly look at what we're all up against is these very smart threat actors who have unlimited resources in many ways. I mean cyber crime is a gig economy itself. So we have to collaborate as an industry, and Microsoft is a big believer that we all have to work together and figure out how to stitch together our solutions so that we can defend end-to-end. We built a platform that's Sentinel, and we have 350 connectors in it. And as agents get developed and they're going to use these platforms, they're going to use the data, we need to make sure that we are enabling everyone to build agents because really, the next frontier is Agentic AI, and we didn't talk a lot about that, but your -- today, we have assisted agents. Tomorrow, these agents are going to -- and you're starting to see them. They're getting very autonomous and you're going to enter at -- what we call frontier organization. So as we think about security, we have to help organizations build these agents. And so we launched our first 11 agents earlier this year, 6 from Microsoft, tackling some of the biggest challenges like phishing and identity and data security that we talked about. And then we have 5 agents, Brad, to your point from the ecosystem. And we're really excited. I mean I think the best part of this is that we are working with the ecosystem. So we have Tanium doing alert triaging agents. We have OneTrust doing privacy agents. We have Aviatrix doing network agents for us. And this just completes the portfolio. So now a customer can get all of it from 1 platform through Copilot and protect themselves. So that's going to be a big focus of ours is getting more partners to develop agents.
Makes sense. It's a team sport. As I think about Microsoft from the very top down, trust and security are completely paramount. And Microsoft has done work around the secure future initiative that's very, very impressive. We saw a stat released a few months ago, Microsoft has dedicated the equivalent of 34,000 engineers working full time for 11 months to this project. I mean, that's bigger than other massive scale companies, let alone a single project. Can you tell us a bit more about this and why it's so important?
So Microsoft started the journey of the Secure Future Initiative years back in 2024. And actually in 2023 fall is when we introduced and then we doubled down. The reason Secure Future Initiative is important is for all the reasons we just talked about. We are in the age of AI. We are in the age of Agentic AI, and the way we have defended organizations even 5 years back is different than how we need to defend organizations going forward. The Secure Future Initiative was born out of the need for defending first Microsoft, learning through that and then protecting our customers and our ecosystem for this age of AI. There were some very challenging attacks related to nation-state actors that we are facing. And we had to rethink about how do we make sure that security is a priority, not just for the security team, but for every single person at Microsoft. And as much as it is an engineering transformation, it is a cultural transformation. And we are hoping that we can use this blueprint to help our customers and to help our ecosystem in general. Secure Future Initiative is based on Zero Trust principle. So that is a I think a lasting framework for the security industry, which starts with verifying explicitly, having least privileged access and assuming breach. And the 3 principles are secured by design. So every line of code that you write has to be secure from the [indiscernible], secure by default, security should be out of box. You should not be bolting it on. And then secure operations all around, if we want to secure that. We have 6 engineering pillars, everything from protecting your network, your identities, your engineering systems, your tenants and production systems, making sure the accelerating response and remediation to making sure we are continuously monitoring and detecting threats. And as you said, we have 34,000 engineers. One of the most important things about Secure Future Initiative is our CEO declared this as the #1 priority. Security is the #1 priority for Microsoft, so above all else, because without security, you cannot have trust. And every single employee at Microsoft now has a security priority. A compensation, it's tied to that. We review our progress with Satya, our CEO every 2 weeks. We send a report every week and of course, with the Board from a governance standpoint. So it's a pretty big initiative. And they're using Secure Future Initiative to really turbo charge our flywheel of defense, this portfolio that you see. So as we learn, we're using all of those things and those investments to make sure that we are building products with those innovations so that we can then protect our customers.
Awesome. That is great. I wanted to turn for a moment to what's happening in security operations. And what's really caught our eye of late is just the innovation that Microsoft is driving within the SOC with Sentinel and especially in the midst of a number of other cyber platforms that are [indiscernible] to displace legacy SIEM solutions out there. Would love to hear how you view the SOC evolving and where the most interesting opportunities are?
Yes. And thank you for saying the kind words about our innovation. It's been a journey for us. And if you look at even the security operations market, it's getting disrupted, like categories are getting disruptive. And by the way, GenAI is going to be a major category disruptor. What we saw early on is SIEM, XDR, like SOAR, UEBA, you have all these like acronyms in the security industry. There are a lot of acronyms. But they're all really trying to do the same thing, which is secure organizations, give them visibility and provide that -- find that needle in the haystack. So what we did was we combined what was extended detection and response. So protecting your e-mail, protecting your endpoint, protecting your cloud apps, protecting your identities all into one. And then we took SIEM, which is your security information event management, and we brought them together. So we were the first ones in the industry to bring XDR and SIEM together. And we are using now that with, of course, with GenAI and AI and machine learning to turbocharge that. We're also integrating security Copilot into that. So we have -- we are seeing like advances in that. And we have just announced a recent data lake, so not only do you have analytics and the hot tier, but you also have cold tier because one of the things we hear from our customers is, it's really expensive to have SIEMs to all of this data. So that's the convergence we have been driving. We are leaders in both SIEM and XDR. So we are best-of-breed in those. And now with GenAI, I think we're going to see a tremendous amount of just innovation and leapfrogging across that. So it's been -- it's been great to see that. And these are very big businesses for us as well, as you know, Brad, like we have shared publicly that just our Sentinel business is $1 billion. And 2 years back, we shared across like our Security business is more than $20 billion in revenue, which is a big number.
It's a big number. And as we talk about the SOC, Sentinel in our conversation with CISO is a foundational element of their strategy. So it's not surprising. I wanted to turn to a different topic. Palo Alto Networks recently announced the acquisition of CyberArk, which I think really shines the light on the importance of identity security. Not that it always wasn't important. But I mean, they're making a call that now is an inflection point. Microsoft already has a very strong presence with Entra. But as competitors expand from their core competencies, how you think about the architectural center of gravity or capabilities around which identity strategies will coalesce.
Yes. And I always believe that an investment by any company in security is a good investment for the security industry because we -- it's challenging for all of us. I feel like we are all on the same side. But also it reinforces our strategy in so many ways because we started with identity. We believe identity is the boundary in this boundaryless world, right? I mean even going back to the pandemic and remote work and all of that, it was identity. And it is the first thing we do as you log in, you log into a system. Our old CISO used to say, attacker don't break in, they log in. So it just kind of reemphasizes how important identity continues to be. And we've been on this identity journey, Brad, like you've been following us for many, many years. We started with identity management, with Entra, we extended to Protection and conditional access, which is really our policy engine at the heart of it. and then, of course, Identity Governance more recently and then [indiscernible]. So we have the entirety of the identity portfolio. It is very critical for our security portfolio, see Entra there. And it's very critical because for Zero Trust because Zero Trust really starts with identity. So this is a big place where we're going to make investments. The other thing I'd say is in the age of Agentic AI, identity, again, becomes that tip of the spear because these agents, these autonomous agents are all going to need their own identity, and we announced just a couple of months back. that we have agent ID. So Entra now can provide agents IDs so that we can now have them and they're doing autonomous work, track them just like we would in humans. So I think expect to see a lot more innovation from us in the identity side.
We look forward to it. So Vasu, we've talked about AI security. We've talked about the SOC. Where else does Microsoft see opportunity within the broader security landscape?
Yes, we covered a lot of ground. I think what we're seeing is that consolidation is going to be continuously a major theme for us. Ultimately, security is going to be about simplification. It is going to be about GenAI. And it's going to be about making sure these key areas like identity, cloud security, endpoint security, network security, apps are secured end-to-end. But more than that, if I were just to step back and look at the security market, it is changing pretty rapidly. It is going to be the foundation of trust for all organizations, especially as we embark on AI, we can't really do AI without security. We just can't. And so I think where we are seeing this going is security, governance, privacy, observability are all coming together in security as a whole and that end-to-end protection matters. You've got to secure AI, you've got to secure end-to-end and you have to secure it using GenAI. So those are the big trends. And we're monitoring the market and hopefully shaping it actively as well.
Makes sense. Perhaps I'd be dramatic or oversimplifying to say that without trusted security, there is no Microsoft.
There is no Microsoft. Microsoft runs on trust and trust cannot happen without security. It's the first thing you need to do because if you live in a house and if you're worried about thiefs coming into your house every single day. I don't think we could cook the meal or watch the television or do all work. That's what security is. Security is the threat actors knocking on your door. And not only that, being in your homes and your kitchen, we don't even know that. So how can we can live our lives? How can we use technology without security? That's a dystopian world, and that's how critical security is it has to come above all else.
But with that said, and since we are here at an investor conference, how does this all drive shareholder value perhaps directly and indirectly?
Yes. I mean it's absolutely -- it's deeply tied to that because if you think about it, security is 1 of the top priorities for all organizations, full stop. It's consistently been in the top 2, top 3. It's the most defensible spend. There's no organization which is going to say, I want to cut Your security spend and put on anything else because what happens if you get attacked? What happens if you get breached and the trust that you lose? How much time? I talked about that $9 trillion number. Just think about the economic impact. We know businesses, which could not come back online due to a breach. So it's that's how critical security is and that's directly tied to share holder value. And then we talked a lot about innovation, that's customer value. When we provide value to our customers, they can do what they're supposed to do and that keeps that whole flywheel of innovation and shareholder value, I think, keeps spinning. So I think security is going to be probably even more critical going forward for GenAI than it was because you cannot do AI without Security.
Vasu, this is a really great session to better understand Microsoft security and how important it is for the overall company. And frankly, for the work that you do, that benefits the entire industry and all of us here. Any final thoughts that you want to leave us with?
The 1 thing I would say is, please, please check out what Microsoft is doing on GenAI security. We have, of course, published some information but this entire portfolio that you're seeing right now is being used to secure AI. We're already securing 2 million apps with Defender. And if you just look at going back to your shareholder values question as well. Our Purview, which is data security, it becomes critical for the AI world, we have 75% of our security attached to Copilot. So there's a lot of work that Microsoft is doing in GenAI and it would be great to get your thoughts on it as well.
Excellent. Well, with that, thank you again for being here.
Thank you, Brad. Thank you. It's been a pleasure.
Read the full transcript via the API
You're viewing the first half of this call. Get the complete Microsoft Corporation transcript - plus 251,000+ transcripts from 12,000+ companies, speaker segments and full-text search - through the EarningsAPI REST API or hosted MCP server.
Get an API key View API docs →For developers and AI pipelines
Programmatic access to Microsoft Corporation earnings transcripts and 251,000+ others is available through the
EarningsAPI REST API and the hosted MCP server.
Quarterly plans from $105 - full transcripts, speaker segments, full-text search,
and the /api/v1/transcripts/recent polling endpoint for ETL pipelines.