The hype around investing in Microsoft is all AI, but the money comes from somewhere else. Investors looking at the stock today need to know how the tech giant actually earns it’s keep. The company is taking a page out of Amazon’s playbook and has started giving investors the information they need to see clearly.
Transcript:
This is Doug McIntyre, the editor-in-chief of 24-7 Wall Street in New York, and I’ve got Lee Jackson, senior editor for everything about investing, finance, economics.
And we’re going to talk about Microsoft today, specifically staying away from as much as we can AI, because when you think about it, Microsoft’s revenue is not AI-based.
That could change in a while, but Nevertheless, if you are investing in Microsoft right now, you can’t just say they’re an AI play because almost all their revenue is from other things.
Now, Lee, that’s really been the cloud Azure for five years.
Is that still a promising business?
Well, yeah, Azure has been really the base of their growth, like you said, for almost over five years.
And I think it will remain that way simply because they’ve gotten better at it.
They’re competitive on pricing with AWS.
And, you know, it’s Microsoft.
And so I’m sure they’re improving Azure’s capabilities.
And I think it’ll be a strong, you know, base for years to come.
Does cloud-based computing ever become a commodity business?
I mean, you’ve got two big guys, AWS and Microsoft, and then probably four or five people like IBM, Oracle, Alphabet, the next tier.
Is there still pricing leverage in that business?
I would suspect there’s not until, and we hate to get back to it, until AI is a component of that somehow and somehow can enhance the cloud computing business and they can wrap that in.
Maybe then, but I think, like everything, I think it’s…
And when you’re competing against your biggest competition, I think pricing will always be difficult.
One of the things…
You know, it’s always hard to look at the Microsoft P&L and see exactly what’s cloud, you know, income, expense.
It’s not crystal clear.
Amazon is good enough to take AWS and break it out as a separate division, show revenue.
Well, but just recently.
But nevertheless, it does tell you that the margins in that business are still very good.
If you look at AWS and say, let’s make that a proxy. for Azure.
It’s still a very good business.
Oh, incredibly good.
Especially when you get the huge infrastructure construction done, you know, in vast server farms and everything else that’s required.
Once that’s in place, other than replacing for upgrades or things of that nature, that cost diminishes.
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