Thank you, Satya, and good afternoon, everyone. This quarter, revenue was $56.2 billion, up 8% and 10% in constant currency. Earnings per share was $2.69 and increased 21% and 23% in constant currency. In our largest quarter of the year, results exceeded expectations with focused execution by our sales and partner teams. These execution efforts led to share gains again this quarter in Azure, Dynamics, Security and Edge. In our commercial business, we continued to see healthy renewal strength, which includes our upsell and attach motions, particularly with Microsoft 365 E5. Growth of new business continued to be moderated for products sold outside the Microsoft 365 suite, including stand-alone Office 365, EMS and Windows Commercial products. As expected in Azure, we saw a continuation of the optimization and new workload trends from the prior quarter. In our consumer business, the PC market overall was in line with expectations, although the early timing of back-to-school inventory builds benefited Windows OEM. Advertising spend was slightly lower than anticipated, which impacted search and news advertising and LinkedIn Marketing Solutions. Commercial bookings decreased 2% and 1% in constant currency, in line with expectations against the prior year comparable that was our largest commercial bookings quarter ever. In addition to the healthy execution across our renewal sales motions mentioned earlier, we saw a record number of $10 million-plus contracts for both Azure and Microsoft 365. And the average annualized value for our large, long-term Azure contracts was the highest it's ever been, driven by customer demand for our innovative cloud solutions today as well as interest in AI opportunities ahead. Commercial remaining performance obligation increased 19% and 18% in constant currency to $224 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 13% year-over-year. The remaining portion, which we recognized beyond the next 12 months, increased 22%. And this quarter, our annuity mix increased to 97%. FX impact on total company revenue, segment level revenue and operating expense growth was as expected. FX decreased COGS growth by 1 point, 1 point favorable to expectations. Microsoft Cloud revenue was $30.3 billion and grew 21% and 23% in constant currency, slightly ahead of expectations.
Microsoft Cloud gross margin percentage increased roughly 3 points year-over-year to 72%, also slightly ahead of expectations. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud gross margin percentage increased slightly, driven by improvements in Office 365, partially offset by lower Azure margin and the impact of scaling our AI infrastructure to meet growing demand. Company gross margin dollars increased 11% and 13% in constant currency, including 2 points due to the change in accounting estimate. Gross margin percentage increased year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, driven by improvements in Office 365. Operating expense increased 2%, in line with expectations as savings across the company from our focus on prioritization and efficiency were offset by the charge related to the Irish Data Protection Commission matter.
At a total company level, headcount at the end of June was flat compared to a year ago. Operating income increased 18% and 21% in constant currency, including 4 points due to the change in accounting estimate. Operating margins increased roughly 4 points year-over-year to 43%. Excluding the impact of the change in accounting estimate, operating margins increased roughly 2 points, driven by improved operating leverage through disciplined cost management. Now to our segment results.
Revenue from Productivity and Business Processes was $18.3 billion and grew 10% and 12% in constant currency, ahead of expectations with better-than-expected results in Office Commercial, partially offset by LinkedIn. Office Commercial revenue grew 12% and 14% in constant currency. Office 365 Commercial revenue increased 15% and 17% in constant currency, a bit better than expected with particular strength in E5 upsell renewal noted earlier. Paid Office 365 Commercial seats grew 11% year-over-year with installed base expansion across all workloads and customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings. Office Commercial licensing declined 20% and 18% in constant currency with better-than-expected transactional purchasing.
Office Consumer revenue increased 3% and 6% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 12% to $67 million. LinkedIn revenue increased 5% and 7% in constant currency, driven by growth in Talent Solutions, with some continued bookings impact from the weaker hiring environment in key verticals. Growth was partially offset by a decline in Marketing Solutions due to the lower ad spend noted earlier. Dynamics revenue grew 19% and 21% in constant currency, driven by Dynamics 365, which grew 26% and 28% in constant currency, with continued healthy growth across all workloads.
Segment gross margin dollars increased 14% and 16% in constant currency, and gross margin percentage increased roughly 3 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 1 point, driven by improvements in Office 365. Operating expenses decreased slightly and operating income increased 25% and 29% in constant currency, including 3 points due to the change in accounting estimate. Next, the Intelligent Cloud segment. Revenue was $24 billion, increasing 15% and 17% in constant currency, slightly ahead of expectations. Overall, server products and cloud services revenue increased 17% and 18% in constant currency. Azure and other cloud services revenue grew 26% and 27% in constant currency, including roughly 1 point from AI services, as expected. In our per user business, the Enterprise Mobility and Security installed base grew 11% to over 256 million seats, with impact from the continued growth trends in new business noted earlier. In our on-premises server business, revenue decreased 1% and was relatively unchanged in constant currency, driven by a slight decrease in new annuity contracts, which carry higher in-period revenue recognition. Enterprise Services revenue grew 4% and 5% in constant currency with better-than-expected performance across enterprise support services and industry solutions.
Segment gross margin dollars increased 16% and 17% in constant currency, and gross margin percentage increased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage declined roughly 2 points, driven by sales mix shift to Azure and the lower Azure margin noted earlier. Operating expenses increased 10%. Operating income grew 20% and 22% in constant currency, with roughly 6 points from the change in accounting estimate.
Now to More Personal Computing. Revenue was $13.9 billion, decreasing 4% and 3% in constant currency, above expectations, driven by better-than-expected performance in Windows, partially offset by Gaming. Windows OEM revenue decreased 12% year-over-year, ahead of expectations due to 7 points of benefit from early back-to-school inventory builds, while the overall PC market was as expected. Devices revenue decreased 20% and 18% in constant currency, roughly in line with expectations. Windows commercial products and cloud services revenue increased 2% and 3% in constant currency, ahead of expectations, due to the renewal strength noted earlier, even with the moderated growth of new business and stand-alone offerings. Search and news advertising revenue ex TAC increased 8%, a bit behind expectations due to lower ad spend noted earlier. Higher search volumes, share gains again this quarter for our Edge browser, and the benefit from the Xandr acquisition were partially offset by the impact from third-party partnerships. And in Gaming, revenue increased 1% and 2% in constant currency, lower than expected due to weakness in first-party and third-party content performance. Xbox content and services revenue increased 5% and 6% in constant currency and Xbox hardware revenue declined 13%. Segment gross margin dollars declined 2% and were relatively unchanged in constant currency, and gross margin percentage increased roughly 1 point year-over-year, driven by sales mix shift to higher-margin businesses. Operating expenses declined 9% and 8% in constant currency. Operating income increased 4% and 6% in constant currency. Now back to total company results.
Capital expenditures, including finance leases, were $10.7 billion to support cloud demand, including investments in AI infrastructure. Cash paid for PP&E was $8.9 billion. Cash flow from operations was $28.8 billion, up 17% year-over-year as strong cloud billings and collections were partially offset by a tax payment related to the R&D capitalization provision. Free cash flow was $19.8 billion, up 12% year-over-year. Excluding the impact of this tax payment, cash flow from operations increased 22% and free cash flow increased 19%. This quarter, other income and expense was $473 million, higher than anticipated, driven by net gains on foreign currency remeasurement. Our effective tax rate was approximately 19%. And finally, we returned $9.7 billion to shareholders through share repurchases and dividends, bringing our total cash returned to our shareholders to over $38 billion for the full fiscal year.
Now let's turn to next fiscal year and start with a few reminders. First, the change in accounting estimate for the useful life of server and network equipment resulted in $3.7 billion of depreciation expense shifting from FY '23 to future periods. Our FY '23 operating income and margins benefited from this change in accounting estimate and that will be a headwind to growth in FY '24 as the benefit reduces to $2.1 billion. Next, my outlook commentary for both the full year and next quarter is on a U.S. dollar basis unless specifically noted otherwise. And my outlook does not include any impact from the Activision acquisition, which we continue to work towards closing, subject to obtaining required regulatory approvals. Now for some thoughts on the full year of FY '24. With the weaker U.S. dollar and assuming current rates remain stable, we expect FX to increase full year revenue growth by approximately 1 point with no impact to COGS or operating expense growth. The impact in H1 is expected to be greater than H2. At a total company level, revenue growth from our Commercial business will continue to be driven by the Microsoft Cloud and will again outpace the growth from our Consumer business. Even with strong demand and a leadership position, growth from our AI services will be gradual as Azure AI scales and our copilots reach general availability dates. So for FY '24, the impact will be weighted towards H2. To support our Microsoft Cloud growth and demand for our AI platform, we will accelerate investment in our cloud infrastructure. We expect capital expenditures to increase sequentially each quarter through the year as we scale to meet demand signals. We are committed to driving operating leverage, and therefore, we will manage our total cost growth across COGS and operating expense in line with the demand signals we see as well as revenue growth. Increased capital spend will drive higher COGS growth than in FY '23, and FY '24 operating expense growth will remain low as we prioritize our spend. Therefore, we expect full year operating margins to remain flat year-over-year, even with the headwind from the change in accounting estimate.
And finally, we expect our FY '24 tax rate to be around 19%. Now to the outlook for the first quarter. First, FX. Based on current rates, we expect FX to increase total revenue and operating expense growth by approximately 1 point with no impact to COGS growth. Within the segments, we expect FX to increase revenue growth in Intelligent Cloud by 1 point with no impact to Productivity and Business Processes or More Personal Computing. In Commercial bookings, strong execution across our core annuity sales motions, including our renewal and upsell motions, along with long-term measure commitments should drive healthy growth on a growing expiry base. Microsoft Cloud gross margin percentage should decrease roughly 1 point year-over-year, driven by the accounting estimate change headwind noted earlier. Excluding that impact, Q1 cloud gross margin percentage will be up roughly 1 point, primarily driven by improvements in Azure and Office 365, partially offset by sales mix shift to Azure and the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to increase sequentially on a dollar basis, as noted earlier, driven by investments in our AI infrastructure. Reminder, there can be normal quarterly spend variability in the timing of cloud infrastructure build-out. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 9% and 11% or USD 18 billion to USD 18.3 billion.
In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be roughly 16% in constant currency. In our on-premises business, we expect revenue to decline in the low 20s. In Office Consumer, we expect revenue growth to be in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the low to mid-single digits. Even with share gains in our hiring business, growth will continue to be impacted by the overall markets for recruiting and advertising, especially in the technology industry, where we have significant exposure. And in Dynamics, we expect revenue growth in the mid- to high teens, driven by continued growth in Dynamics 365.
For Intelligent Cloud, we expect revenue to grow between 15% and 16%, or 14% and 15% in constant currency. Revenue should be USD 23.3 billion to USD 23.6 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per user business and from in-period revenue recognition depending on the mix of contracts. In Azure, we expect revenue growth to be 25% to 26% in constant currency, including roughly 2 points from all Azure AI Services. Growth continues to be driven by our Azure consumption business, and we expect the trends from Q4 to continue into Q1. Our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in growth rates, given the size of the installed base. In our on-premises server business, we expect revenue to decline low to mid-single digits against a prior comparable that benefited from annuity purchasing ahead of the SQL Server 2022 launch. And in Enterprise Services, revenue should decline low to mid-single digits year-over-year as growth in Enterprise Support Services will be more than offset by a decline in Industry Solutions. In More Personal Computing, we expect revenue of USD 12.5 billion to USD 12.9 billion. Windows OEM revenue should decline low to mid-teens, including 5 points of negative impact from the earlier back-to-school inventory builds that were pulled into the fourth quarter. Our guide assumes no significant changes to the PC demand environment. In devices, revenue should decline in the mid-30s due to the overall PC market and adjustments we made in our portfolio with an increased focus on our higher-margin premium products. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid- to high single digits. Search and news advertising ex TAC revenue growth should be mid- to high single digits, roughly 5 points higher than overall search and news advertising revenue, driven by continued volume strength supported by Edge browser share gains. Growth will continue to be impacted by the advertising spend environment and third-party partnerships mentioned earlier. We continue to be excited by Bing usage signals and the longer-term opportunity as we invest in AI. And in Gaming, we expect revenue growth in the mid-single digits. We expect Xbox content and services revenue growth in the mid- to high single digits, driven by first-party and third-party content as well as Xbox Game Pass. Now back to company guidance. We expect COGS between USD 16.6 billion to USD 16.8 billion and operating expense of USD 13.5 billion to USD 13.6 billion. Together, total cost growth should be around 6%.
Other income and expense should be roughly $300 million as interest income is expected to more than offset interest expense. Two reminders. This does not include any impact from Activision on interest income and expense, and we are required to recognize mark-to-market gains or losses on our equity portfolio, which can increase quarterly volatility.
We expect our Q1 effective tax rate to be around 19%. And finally, as a reminder for Q1 cash flow, we expect to make a $2.7 billion cash tax payment related to the TCJA transition tax. We do not expect payment related to the R&D capitalization provision in Q1.
In closing, as a company, we delivered on the FY '23 financial commitments we discussed a year ago on revenue and operating margin. A focus on operational excellence allowed us to achieve these targets while we delivered near-term value to customers and prioritized our investments to continue to lead in the future. As we start FY '24, we are excited for the opportunities ahead and remain focused on delivering the 3 key priorities Satya mentioned. We'll maintain our lead as the top commercial cloud by helping customers use the breadth and depth of the Microsoft Cloud. We'll continue to invest in our cloud and AI infrastructure while scaling with growing demand so we can lead the AI platform wave. And finally, we'll align our costs with growth as we are committed to driving operating leverage. With that, let's go to Q&A, Brett.