00:00 Speaker A
you have an outperform on the name, you’re a fan. Has been choppy, you know, we’re still down more than uh 10% here this year. What do you think uh will maybe investors could be, you know, misunderstanding about about the Microsoft story?
00:19 Speaker B
Choppy Josh is probably an understatement. It’s been a tough year as you know, for software broadly. Microsoft’s got, you know, thrown into that bucket of companies that of course does have application um exposure. Look, I think as we look forward to to earnings, there’re really going to be two areas of focus for investors. Of course, Azure, which we continue to uh expect to post strong numbers. You know, the expect expectation is for call it 38% constant currency growth at what continues to be um significant scale. And I think really the question there is going to hinge on what the supply looks like, right? And and all of our checks suggest that supply remains short, as it does for for the other for the hyperscalers. and that’s really the the gating factor. But I think most importantly, the demand trends remain very strong. And I think the other area of focus is going to be copilot.
01:23 Speaker A
Will I I did see in your note, you raised your 2027 CapX estimate for Microsoft to 180 billion. I I wonder, you know, when when clients ask you, will they say, okay, how confident are you on the just sort of ultimate ROI on all this spend. What do you what do you tell them, Will?
01:46 Speaker B
Right now they’re clearly putting a lot of, you know, capital in the ground. and and I and I think ultimately, the the indicator is the demand um uh trends in the marketplace, you know, remain, you know, quite strong. and you see that manifested in the RPO numbers, you know, effectively the bookings numbers uh they report. And it’s not just Open AI, it’s beyond, you know, Open AI, right? So even their their non- Open AI rev RPO numbers going north of uh, you know, north of 20%. Uh, you know, time will tell, but we think the early indicators um, you know, are are positive and just to keep up with that demand, they’re going to have to continue to spend. So that’s something we do expect.