Ca$htag$: MSFT Azure Cloud Drives Soaring Demand, Stock Flat Y/Y

Network. I'm Diane King Hall alongside Tom white and our ago r our Cash Tech segment. For that, let's bring in our next guest. And that is Megan Brantley, vice president of research at like folio with new sentiment Mk you so much for joining us. Happy Friday to you So Microsoft over the past, well, I guess probablyng on a couple of months or so, give or take, has seen quite the recovery. What does you latest sentiment data look like? Yeah, Microsoft is a stockhat we've been bullish on for some time now. And this the stock is finally catching up to our sentiment. And really what we're looking at we look at overarching demand for 11% year over year. And this is a massive company. So we don't see, you know, huge moves in that year over year percentage just because the breadth of data that we're taking in is so large. But I want to point out that this is actually acceleration since last quarter. Last quarter, we had that number up about 7% year over year. And in our data, when we look at mentions and really we e can see some pretty strong AIads look to be accelerating and also clo Whenever we look at how Microsoft is stacking up against its peers in the cloud space, we see some nice overperformance t some nice momentum in Azure. And we know that that's an area where'l insight into next quarter. So at l we see continued kind of bullish tailwinds for osoft. e move that we've seen.nk last three months the stock has gained about 32%. So this matches up in our data. And you know we we thit this will continue. The stock reports earnings athe end of the month I believe. So we'll see where it trades between now and the right now we see some strong signs. Megan I kind of wanted to, you know, expand on that discussion about the cloud because this is of a, you know, a head scratcher for me. And I kind of wanted to get your data where Azure is outperforming according to your year over year overear demand growth versus its competitors. And Amazon Web Services, which is only sli positive. And Google, Google Cloud Platform pulling back 4%. Is this based maybe on the fact that all thesepanies that are maybe using copilot, they added 10 million seats l quarter from the previous quarter. So they're getting some traction there on AI. Is this a you know, maybe maybe your data reflects it, hey, all these other companies that use Microsoft's ense systems, hey, it's just an easy facilitation where they go, oh, well, just use Microsoft's Azure cloud because we already have a of their systems built within our software and our techn Is that maybe the reason? Yeah, that's exactly what we're seeing. We'reg a lot of upgrades among those enterprise tiers. And I think thas is really important for just pricing power for Microsoft moving forward. You've got, you know, enterprises that are paying more for that copilot edition. I think that that tier pricing is 65% more. onceu add e you start using Cowork, now you'reaying for usage on top of just that seat. So there's right into Azure. So we'ree seeing some nice momentum there. And this is this is also, I think, important to note that versus let's say an AWS on a mindshare basis, AWS still the massive player here, right? This is just a momentum gauge u, we see somewhat of a rising tideting all of these boats. But just in terms of that growth rate this quarter compared versus last quarter, we see a nice uptick for Azure. And a lot of that is just because of the way it's set up and the rising enterprise on f into its own ecosystem. I got to say, I'm surp about how big the difference is between Azure, AWS andeloud. You know, and so I'm wondering if Azure is pulling some away from Google Cloud. It could be that certainly kind of how our data is leaning right now. I do think, t that at large this is this is still an area of growth for all companies that Google cloud interest would juste maybe potentially a slowdown in their growth rate from last quarter. That' we would interpret that data. And the massive jump that you see in Azure would probably would be lean more to an unexpected jump. And so we've seen this in Azure's growth rate even over the last few quarters. I think t last quarter, the revenue growth came in about 43% higher year over year. And that was up from the prior quartersnsecutivel wee continuing to see that acceleration here. Whereas we're not necessarily seeing that acceleration in Google Cloud. So I want to poit out because that is a pretty big discrepancy. But our our data d you know, lend itself toward those consumer mentio web visits and things like that. So I think it's important to note that there is a significant ramp that we're watching right now in Microsoft that we haven't necessarily seen in the other companies that we're tracking. Megan,l quick, just a follow up question on your one chart where you've got demandupe stock price is catchck up with your data. And that's, you know, a 47% jump fromhose June lows. I mean, this stock hit below 350 bucks. I mean, are you guys still positive on I mean we'll get some clarity on the 28th they report earnings. But are you guys still bullish on this one. Yeah. So we have a couple of different scores that we can long terompany we have an at overarching indicator. And that'sting at about an 84 which for us is is bullish. So we're bullish long teror this company. But if we were to, you know, scale this down and look at an earnings score generated that today. And that earnings score was sitting at an 11 which itty neutral. So we think that the stock and demand are in near lockstep right now. When we look at what we call Main Street demand, the co demand versus investor demand, that gap is really low. I think there's only six points where Main Street is what we perceived as leading Sts looks like a stock that's priced about right. So it's going to be interesting to see how it trades over the next month heanto earnings. But I will say long term we think that this is a bullish still a bullish opportunity even at these levels because we're still very much in early phases of Microso rea rolling out its AI suite to enterprises. I think one thing that really surprised me when I was digging into this research is thatot adoption is still at only 6.5% of its overall comme base. So a lot of room here left, at least on the consumer end that we're looking at. So long term bullish, certainly. But heading into ear you know that gap is shrinking for a surprise. So right now technically we'd be neutral to cautiously bullish. And we'll see thingshake out between now and then. And Megan also got a e yesterday on Nike. Even with the data. And listen some of the demand interest may have been because you know the discounting that they've had to do. I, you know, did a quick search online today. They're discounting again because they have to moveandise now for Nike. So totally understand the bearish view that you all ee of the demand picking up. Thank you. That's Megan