00:00 Speaker A
You have excellent performance by name, you are a fan. It’s still down more than 10% this year. What do you think investors might misunderstand about the Microsoft story?
00:19 Speaker B
Choppy Josh is probably an understatement. As you know, this year has been a tough year for software in general. Microsoft is naturally thrown in among the companies publishing applications. As we look forward to earnings, I think there are really two areas for investors to focus on. Of course, we expect Azure to continue posting strong numbers. As you know, the expected forecast continues to be very large, 38% growth excluding currency effects. And really, I think the question comes down to what the supply looks like. And all our research suggests that supply remains short, as is the case with hyperscalers. That’s exactly the gate element. But I think the most important thing is that demand trends continue to be very strong. I think another area of focus will be the co-pilot.
01:23 Speaker A
In your memo, you raised Microsoft’s 2027 CapX estimate to 180 billion. When will your client ask you, “How confident are you about the ultimate ROI for all this spending?” Will, what do you say to them?
01:46 Speaker B
They’re obviously putting a lot of capital into the ground right now. And I think ultimately the indicator is market demand, which is still a very strong trend. It shows in their RPO numbers, the actual number of bookings they report. And it’s not just Open AI, it’s more than Open AI. So even non-Open AI rev RPO numbers are over 20%. Time will tell, but early indicators are good and we believe we need to continue spending to meet that demand. That’s what we expect.
