Microsoft's FY2018Q4 (corresponding to CY18Q2) revenue was US$301 billion, up 17% year on year, higher than expected US$29.2 billion. Net profit of $8.9 billion rose 10% year over year, and non-GAAP EPS was $1.13, higher than Wall Street expectations of $1.08. A total of $5.3 billion was returned this quarter ($3.2 billion in dividends and $2.1 billion in share repurchases). The company is optimistic about its guidance for the next quarter. The median revenue of 27.7 billion is better than market expectations, the smart cloud business of 8.25 billion is better than the forecast of 8.15 billion, the personal computing business of 10.1 billion is better than the forecast of 9.87 billion, and the productivity business of 9.35 billion is in line with the forecast of 9.34 billion yuan. The positive guidance also gave the market optimism and confidence. On Friday, the stock price once rose by more than 3.5% to a record high. 1) The Productivity and Business Processes (Productivity and Business Processes) segment had revenue of US$9.7 billion, up 13% year on year, in line with expectations; LinkedIn's momentum continued to grow 37%; commercial Office 365 rose 38% year over year; individual Office 365 subscribers increased from 30.6 million to 31.4 million; and Dynamics 365 business increased 61% year over year, compared to 65% last quarter. 2) The Intelligent Cloud (Intelligent Cloud) segment's revenue reached 9.6 billion US dollars, up 23% year on year, better than market expectations of 9.1 billion, and Azure, the main business, rose 89% year on year. Although it has continued to grow at a high rate of more than 90% since the end of 15 years due to the high base, it is also better than the market's growth rate of around 80%. 3) The More Personal Computing (More Personal Computing) sector had revenue of US$10.8 billion, up 17% year on year, slightly better than expected; game business surged 39% year on year. Since Xbox's revenue growth from software services increased 36%, mainly due to third-party content contributions, the “razor” model ecosystem was gradually being completed; the 25% increase in Surface should be due to the release of new products in May and a low base. Public clouds tend to be differentiated. Azure relies on overall commercial clouds to stabilize Microsoft's second commercial cloud business (including commercial Office 365, Azure, Dynamics 365, etc.) this quarter, up 53% year on year to 6.9 billion. Given that Azure revenue rose 89% year over year, slightly exceeding market expectations, the market now recognizes that Microsoft's growth will tend to be steady as the base increases to FY19. However, the public cloud pattern continues to concentrate its advantages on leading companies. The Big Five, composed of Amazon, Microsoft, IBM, Google, and Ali, have already gathered about 3/4 of the market share of the industry. According to the latest industry data from Synergy Research, Amazon AWS is the leader in all four major regions of North America, EMEA, Asia Pacific, and Latin America by region in the world, while Microsoft Azure temporarily ranked second in North America, EMEA, and Latin America through 17 years of acceleration. We believe that the public cloud market where giants wrestle is expanding towards service differentiation, and Google emphasizes leading attributes of artificial intelligence such as TensorFlow, TPU, and AutoML. AWS, on the other hand, relies on the first-mover advantage and the Capex scale effect to establish a large and comprehensive scale barrier (Alibaba Cloud is similar in China). However, we are optimistic that Microsoft Azure has hybrid cloud as its core strategy and relies on the commercial cloud Azure Stack+ business Office365+LinkedIn/Dynamics to join forces to impact the cloud computing market. Overall, it is a unique advantage that other platforms do not have. Azure emphasizes the one-stop service of IaaS+PaaS+SaaS under the SPI delivery model to better adapt to the SPI integrity requirements of large-scale enterprises. In addition, Microsoft further emphasized the use of Azure cloud intelligence to infiltrate terminal edge devices, including the full launch of the open source edge computing platform Azure IoT Edge. It is also the second largest public cloud provider to deploy edge device computing after Amazon AWS Greengrass. Transformation has successfully resumed. Compared to traditional software vendors, valuation premiums can be obtained. We believe that Microsoft has been very successful in embracing the “smart cloud and smart end” transformation since 15 years. The market's observation of the company is whether it will encroach on the business of old enterprise customers while transforming the cloud business. After steady growth over the past two fiscal years, it can be seen that Azure has maintained healthy growth in scale and profit margin, and the cloud business has brought substantial incremental impetus to Microsoft. Also, compared with traditional software and cloud computing leaders 2018 PE: Oracle 14x and SAP 22x, and the transformation is weak, and performance growth is moderate; Google 23x has traditional advertising business support+AI premium, Amazon 80x, combined with Bloomberg's unanimous expectations of FY2019 EPS of $4.21 and the company's annual rebate of $21.5 billion, we believe that Microsoft's focus on transformation with cloud computing as the core and steady execution is steady. We believe that Microsoft's valuation can enjoy the acceleration of cloud computing performance from 25x to 30x The valuation premium for PE expansion, and the target price was raised to $125, reaffirming the “buy” rating. Risk warning: cloud computing growth falls short of expectations, decline in PC revenue, etc.