Yimin X
Founder of YX Insights, Ex-FX/Rates Market Maker
Microsoft's AI spending is producing faster growth with better economics: Azure accelerated to 48% on a $100B+ base while capex was $39.4B, below expectations. Management then guided Azure to 49-50% and said demand still exceeds supply, ending the debate over whether AI investment is paying off. Overweight, $625 target. x.com x.com x.comÂ
Azure's accelerating growth and better returns per capex dollar leave further upside on the table for Microsoft, the favored hyperscaler. Azure grew 48% versus 44-45% guidance, its fifth straight beat. The stock is holding eight-week EMA support, with the blue candle still intact. x.comÂ
Microsoft is a great business but still an expensive bet at $385, because heavy AI capex is eroding free cash flow. Capex was revised to $190B for the year, $43B above expectations, and free cash flow fell to $15.8B. Revenue grew 18% to $82.9B, operating income 20%, Azure 40% and AI run rate reached $37B, with a 47% operating margin. The average analyst target of $560 implies 45% upside only if the AI spending converts on schedule. x.comÂ
Accelerating Azure and AWS growth shows hyperscaler buildout and monetization have not slowed. Microsoft reported 48% Azure growth and guided to 49-50%; Amazon expects AWS growth above 40% in 2027 and 2028, positive for the infrastructure trade. Amazon's growth is more capital intensive, with deeply negative free cash flow projected, though AWS margins remain healthy. x.com x.com x.comÂ
Microsoft's salesforce and governed platform unlock AI spending at conservative firms. Faster enterprise than consumer AI adoption makes it effectively the only pure play. M365 Commercial may top 20% growth next quarter, sooner than expected on tonight's guide; GitHub resegmentation helps, but it should do so this year anyway. Azure and M365, two-thirds of revenue, should grow above 50% and 20% and may accelerate. $24-25 CY27 EPS remains achievable, implying under 22x forward earnings. x.com … Show more
Microsoft's delivery delays are affecting earnings, making other sources of returns look safer now. x.comÂ
Microsoft's hold on enterprise software and the cloud running AI makes it one of tech's best positions to own. Fiscal Q1 revenue rose 19% on Azure and the AI stack, while operating income rose 21% and net income 32%. Grade: A. x.comÂ
Amazon, Microsoft and Alphabet's rapid cloud growth and expanding margins will eventually be too large for the market to ignore. These multi-hundred-billion-dollar businesses were expected to post cloud growth of 40%, 50% or even over 90% year over year; Azure has now grown 48% in constant currency and Google Cloud 103%. Google Cloud's operating margin rose to 36.22% from 35.6% last quarter and 23.7% a year ago. Amazon's result remains an expectation. x.com x.com x.com x.comÂ
Microsoft's Azure has lost its OpenAI-model access edge because those models are also on AWS and are coming to Google Cloud. Azure now has to win on price and service rather than access. x.comÂ
Microsoft is showing real ROI on AI spending, with Azure growth accelerating to 43% and the business now over $100B a year. RPO reached $678B, up 84%, with about 30% converting to revenue within 12 months, and Microsoft delivered without the aggressive capex step-up the market feared. x.com x.comÂ