Greg
Public Equities Commentary
Microsoft is neither a loser nor overvalued, and the bear case misreads it. @jmartinprin argues capex up to 30% of revenue warrants a below-market multiple and that Microsoft ex-Azure is declining. But that business is not declining, and Azure should not be excluded. A real bear case must show AI labs' model and harness integration can beat Office and Copilot incumbency, with productivity gains big enough to override enterprise legal, regulatory and compliance procurement. x.comÂ
Microsoft can still sell Copilot on the strength of its distribution, though the bull case faces hard questions. MAI may be about eight months behind if Microsoft's Opus 4.6 coding-parity claim holds; bundling Copilot into the standard tier instead of E7 pricing could drive adoption, and it may win non-frontier uses at lower cost. Azure is a good, utility-like business, but 45% of backlog is OpenAI. On about $260 billion of 2029-30 EBIT it trades near 10x ex-OpenAI stake versus a historical 20x. x.com x.com x.com x.com x.comÂ
Alphabet may use AI-enabled Workspace and bundled pricing to win Office 365 subscribers. There is a real chance of conquest, while standalone OpenAI and Anthropic lack a competitive bundled-pricing response that could support their valuations. 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
Microsoft is getting outworked as an infrastructure company. Its 40% Azure growth came entirely from OpenAI, which now runs on other clouds, while Anthropic runs on Google and Amazon. Amazon has Trainium, which Anthropic uses heavily, and Google has TPUs; Microsoft has no equivalent. Agentic software making Office less useful is a smaller part of the bear case. x.comÂ
AI's threat to incumbent tech makes SpaceX the preferred investment for the next decade. AI has begun taking business from Google, with Amazon and Apple next; Microsoft's 27% workforce reduction program signals desperation. x.comÂ
Microsoft has been here before: a year or two behind, but with crushing distribution to almost every white-collar worker that has smothered rivals from Netscape to Slack and Zoom. AI expands software's value, Office ARPU could double or more within five years, and enterprises say they want to buy AI from Microsoft. AI revenue reached $37B in Q1 CY26, up 123%. The risk is real: Anthropic has leapfrogged OpenAI and is beating Microsoft in code and productivity. Shares sit 19% below their peak. … Show more
Microsoft is this generation's IBM and will bleed market cap and cloud share through over-reliance on an AI lab that is, rightly, not loyal to it. Apple at least has a hardware and consumer ecosystem edge while it sits this wave out. x.comÂ
Microsoft's 50% Azure growth and prospect of positive cash flow in 2027 make the stock look bulletproof. Headcount cuts, lower Anthropic spend, a better Copilot routed to cheaper tokens, and coming proprietary chips and model usage add to the case. It should get Apple's multiple plus recognition for cybersecurity. x.com x.comÂ
Microsoft's AI ROI is massive because it expects to sustain its current 18% year-over-year growth with 27% fewer employees. It is cutting its workforce by 27%, undercutting claims that AI has no ROI. x.comÂ
Microsoft and software stocks broadly still look expensive, because AI will get exponentially better over the next two years and the market may reset software valuations much lower. Software valuations have always been ludicrous, and heavy stock-based compensation behind many software revenues is widely ignored. Winners will emerge, but picking them is not worth trying. 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
