Bullish on Microsoft Despite Long-Term Lease Risks
Microsoft's (MSFT) latest quarterly results have caused some analysts to reevaluate their bullish stance on the company.
In a recent article, an analyst noted that while Microsoft's in-house AI models are driving significant cost savings, with up to 89% reduction in GPU costs supporting robust margins despite surging capital expenditures (capex), there are still concerns about long-term risks.
The cloud gross margin remained at 65% in the June quarter, and a recent 8% dividend raise appears sustainable, as free cash flow covers the payout more than twice over. Additionally, Microsoft's Copilot is shifting to usage-based pricing, set to launch on November 2 for small businesses, which positions MSFT to capture incremental revenue and profit as adoption scales.
The company has a $329 billion backlog of unstarted data center leases, introducing long-term risk for shareholders. However, the analyst believes current demand and cost efficiencies justify maintaining their bullish stance, outweighing this concern.