00:00 Speaker A <\/p>\n
All these AI investments, are they making money? Did Microsoft answer that? <\/p>\n
00:02 Danny <\/p>\n
It seems like for now they did. Uh, you know, year to date before earnings, they were in the red as far as the stock price goes. and since then, they’ve gone positive. I think last time I checked, uh, they were up by about 2%. Um, and you know, for for Microsoft, the narrative has been less about, uh, you know, <\/p>\n
00:23 Danny <\/p>\n
it’s it’s it’s been interesting because they rely so heavily on Open AI. Uh Google has Gemini. Amazon’s just kind of playing the field it seems. They say they’re working on their own models as well. Meta’s doing their thing. And Microsoft was kind of, you know, you you were the leader but now you’ve fallen behind. what’s going on? What what are you doing with co-pilot? How are you doing? <\/p>\n
00:46 Speaker A <\/p>\n
And then there was this whole like the whole bear narrative that goes up like, oh, AI disruption fears, friends that’s going to wreck enterprise software, right? <\/p>\n
00:52 Danny <\/p>\n
Yes. But it seems as though the the co-pilot numbers, they have 30 million co-pilot paid co-pilot seats. Microsoft 365 co-pilot seats. That coupled with Azure growth, I think was enough to get investors on board with Microsoft going forward now. It seems as though this is starting to really pay off for them. <\/p>\n
01:13 Danny <\/p>\n
You know, it’s it’s 30 million seats. They have a lot more Microsoft 365 users than that, which by the way, that’s just office. They just rebranded it for whatever reason. But uh they still have a way to go, but it’s proof that they’re they’re seeing the growth accelerate. Azure growth also accelerating. It was 43% in the quarter looking to accelerate into Q1 and Q2 as as well. So we’ll just have to see, but it looks as though this is kind of the start of perhaps where they they start to show that return on investment. <\/p>\n
01:42 Speaker A <\/p>\n
Now, one wrinkle in your story, Danny, you talk about how Bloomberg notes here, the bulk of Microsoft’s AI growth came from Open AI. In your opinion, does that raise uh questions about customer concentration risk? <\/p>\n
02:01 Danny <\/p>\n
Yeah, I mean, it’s uh I think uh they did the calculations over at Bloomberg. They said about 70% of that co uh that, excuse me, that uh AI revenue is Open AI. And yeah, I mean, they’re they are one of Open AI’s biggest backers. You know, despite the kind of uh frenemy relationship that they have going on right now, they’ll still continue to have Open AI using their Azure services going forward. And so, you know, uh they have that revenue sharing agreement where Microsoft gets the revenue, they don’t have to share it anymore. We we’ll just see how this kind of goes on moving forward. <\/p>\n
02:37 Danny <\/p>\n
Uh, you know, Open AI is now working with uh uh Microsoft’s competitors. And so overtime you you would think or you would hope that Microsoft continues to try to diversify away from this. But it’s it’s yeah, this this concentration is still I think it’s it’s enough to keep people on edge just just enough at this point. <\/p>\n
02:59 Speaker A <\/p>\n
Let’s say you’re looking out, Danny, six months out, 12 months out. What could in your opinion, I mean what what do we have to watch to see if you know, this Microsoft AI story could get derailed. <\/p>\n
03:13 Danny <\/p>\n
If honestly, if co-pilot growth doesn’t keep up, if they, you know, uh don’t give us updated numbers as to overall AI uh revenue, right? because this this this number that that uh Bloomberg was referring to, uh they basically took the revenue that was generated from Open AI. It was like $24 billion or something like that. And then they took uh a prior estimate of what Microsoft expected uh uh going forward. <\/p>\n
03:42 Danny <\/p>\n
Uh and so we haven’t gotten an updated number from Microsoft yet. So if that number, if they do update it doesn’t come in as impressive as people were hoping or it doesn’t grow as much as people were hoping, that would do it. If co-pilot doesn’t keep up or continue to grow, if in the back half of next year, their their next fiscal year, we see a slowdown in Azure growth, because they’ve only said the first half of their next fiscal year will see continuing uh growth or accelerating growth. If that starts to slow down, then people might say, okay, was that it? This is kind of a big, you know, whoop. It was a growth and then it kind of peter back out. So I think those are the things that people are going to be watching here. <\/p>\n
04:15 Danny <\/p>\n
As well as obviously the investments. You know, Microsoft has been a little bit better about their investing strategy or not not better, I would say uh uh more cautious about their investing strategy. And that caused some back and forth between them and Open AI. Uh but they they’ve now kind of reworked some of their uh leasing uh uh leasing kind of uh categorization where they say that uh they’re extending the usefulness of offices and data center space so it doesn’t necessarily go to Capx. So I think they’re they’re more better equipped to uh kind of handle that blowback from Wall Street than say, you know, meta. <\/p>\n
04:47 Danny <\/p>\n
Uh but I I do think if those kind of growth numbers don’t continue to show, if co-pilot doesn’t really take off and people say, I’m just going to use Open AI or you know, anthropic, then that could be a problem. <\/p>\n
04:58 Speaker A <\/p>\n
All right. Thank you, buddy. Appreciate it. <\/p>\n","protected":false},"excerpt":{"rendered":"00:00 Speaker A All these AI investments, are they making money? Did Microsoft answer that? 00:02 Danny It…\n","protected":false},"author":2,"featured_media":132060,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[420,7853,416,2209,320,7852],"class_list":["post-132059","post","type-post","status-publish","format-standard","has-post-thumbnail","category-microsoft","tag-azure","tag-azure-copilot","tag-copilot","tag-dan-howley","tag-microsoft","tag-microsoft-copilot"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/132059","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/comments?post=132059"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/132059\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media\/132060"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media?parent=132059"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/categories?post=132059"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/tags?post=132059"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}