The fact is that the hyperscalers are slowly being converted from very high-margin businesses into much lower-margin structures similar to a data center business. There has to be a huge reckoning on valuation at some point.
Which is very bad, because data centers and AI are both relatively competitive, low-margin, undifferentiated businesses. Anthropic sent out a false signal about that because they were the first ones to figure out that the market was for a coding product instead of general intelligence. But now, six months later, every other AI lab is offering similar coding products, and it is back to being a grind.
Remember, high growth alone does not make a great business. There can be an insatiable demand for a product category, but if it is sufficiently competitive, no one makes much money (except from falsely inflated stocks).
So Microsoft is going from being a monopolist with near-monopoly pricing to a business with a huge capex spend on AI, which will never make much money on its own. The only purpose of AI for Microsoft is to keep its software monopoly alive. But the profits in software are being completely eaten by capex and losses in the AI business. It's not the same company going forward.
It's encouraging that revenue growth stayed strong near 18% even as rising capex weighs on free cash flow, showing how much of Microsoft's story now depends on turning AI infrastructure spending into efficient returns rather than just top line growth.
It shouldn't be legal to report unrealized gains for AI investments and circular deals as top line revenue. Not sure how any investor can trust this report.
Ever since Amy hood turned up it’s a shit show. You have a visionary leader in Nadella and then you have this crap CFO. She needs to be fired instead of firing others. A company is about its people its oracle and its vision. This woman is a bean counter intent on putting onshore term gains for long term and is a hindrance to society. Get rid of this POS and you will see Microsoft become what it can be. Total garbage
Well this change in useful life in the latest earnings should tell you that she is now doing account arithmetic to make herself better.
Know a lot of folks at msft who deal with her and every single one says she is awful to work with and a total opposite to Nadella. Unfortunately the board likes her. But she is just moving chess pieces around to figure out this arithmetic nonsense she is pulling.
Increasing the useful life has major impact on accounting due to operating vs capital expenses and therefore given how folks can’t get past headlines it’s a bad sign for msft
I guess when a company already have everything stored on OneDrive, use Teams, Office, etc. Forking a bit more for copilot is the easiest thing to do to show you're using AI 😅
lol i love how the anthropic investment boosted msft earnings
The fact is that the hyperscalers are slowly being converted from very high-margin businesses into much lower-margin structures similar to a data center business. There has to be a huge reckoning on valuation at some point.
I think part of the reckoning already happened. Some of these hyperscalers are trading at way lower valuations than they did before.
Everything will be about ROI, and the speed at which that ROI can be converted imo
Which is very bad, because data centers and AI are both relatively competitive, low-margin, undifferentiated businesses. Anthropic sent out a false signal about that because they were the first ones to figure out that the market was for a coding product instead of general intelligence. But now, six months later, every other AI lab is offering similar coding products, and it is back to being a grind.
Remember, high growth alone does not make a great business. There can be an insatiable demand for a product category, but if it is sufficiently competitive, no one makes much money (except from falsely inflated stocks).
So Microsoft is going from being a monopolist with near-monopoly pricing to a business with a huge capex spend on AI, which will never make much money on its own. The only purpose of AI for Microsoft is to keep its software monopoly alive. But the profits in software are being completely eaten by capex and losses in the AI business. It's not the same company going forward.
It's encouraging that revenue growth stayed strong near 18% even as rising capex weighs on free cash flow, showing how much of Microsoft's story now depends on turning AI infrastructure spending into efficient returns rather than just top line growth.
It shouldn't be legal to report unrealized gains for AI investments and circular deals as top line revenue. Not sure how any investor can trust this report.
It should be interpreted with caution for sure.
These investment work both ways though, so for now that’s fine for me.
As long as they are transparent about it
Ever since Amy hood turned up it’s a shit show. You have a visionary leader in Nadella and then you have this crap CFO. She needs to be fired instead of firing others. A company is about its people its oracle and its vision. This woman is a bean counter intent on putting onshore term gains for long term and is a hindrance to society. Get rid of this POS and you will see Microsoft become what it can be. Total garbage
Well this change in useful life in the latest earnings should tell you that she is now doing account arithmetic to make herself better.
Know a lot of folks at msft who deal with her and every single one says she is awful to work with and a total opposite to Nadella. Unfortunately the board likes her. But she is just moving chess pieces around to figure out this arithmetic nonsense she is pulling.
Increasing the useful life has major impact on accounting due to operating vs capital expenses and therefore given how folks can’t get past headlines it’s a bad sign for msft
I wasn’t aware Amy was this bad? Why do you think she does such a bad job?
Overall, looks like a solid quarter.
Ye certainly, very happy as a MSFT shareholder!
I guess when a company already have everything stored on OneDrive, use Teams, Office, etc. Forking a bit more for copilot is the easiest thing to do to show you're using AI 😅
Ye it is. It’s just not on par with all the other LLMs right now unfortunately. I have a version to use at work, yet never do.
Can confirm I’m not a CoPilot user, but good for them 😂
Neither am I. Some colleagues are though haha