Episode summary
Microsoft Drops Most Since 2020 Amid Slowing Cloud Growth | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney, Scarlet Fu · Guests: Anurag Rana, Mandeep Singh, Steve Man, Christopher Ciolino
Summary
Microsoft’s selloff centered on slower Azure growth rather than weak absolute numbers. An analyst said cloud revenue growth of 38% was only slightly below the prior quarter and guidance of 37% to 38%, but investors were reacting to the gap between capex growth in the 60s and cloud revenue in the 30s. He argued Microsoft will keep spending because it needs its own models by 2032, when it loses OpenAI-related intellectual property, and sees gen-AI spending eventually flowing back into Azure.
Meta got a much warmer reception because it paired strong holiday-quarter revenue with a big forward guide and a clearer monetization story. A guest said the company is already applying AI and GPU clusters to its ad stack, with e-commerce standing out as a vertical where ad conversions are improving. The market liked the combination of faster growth, higher capex, and no sign that the business is losing momentum, even though the company gave few details on new products.
Tesla’s quarter highlighted a large capital plan aimed at factories, batteries, robots and chips, while Caterpillar showed how AI demand is reaching industrials through power-generation equipment for data centers. IBM also moved higher on a better-than-expected software and revenue print, though the market response was framed as a low-expectations trade rather than a big reacceleration.
Key takeaways
- Microsoft’s 38% Azure growth was solid, but investors focused on capex rising faster than cloud revenue, pressuring the stock.
- The analyst said Microsoft will keep spending to build its own models before OpenAI-related IP terms change in 2032.
- Meta’s upside came from stronger revenue guidance and AI-driven ad conversions, especially in e-commerce.
- Tesla is using more than $20 billion of capex to reshape factories, expand robo-taxi plans, and vertically integrate chips.
- Caterpillar’s fourth quarter was boosted by power-generation sales to AI data centers, with backlog and orders showing broadening demand.
Notable quotes
“last quarter the growth rate of Azure was 38 or 39. This quarter was 38. They've guided to 37 to 38. And that's not good enough for investors”
“if they allocated all the GPUs to Azure they would have grown north of 40%”
“they are making progress. Uh they're going to launch the next version of the humanoid robot”
“the real standout and the takeaway this quarter was really the unprecedented order and backlog growth that we saw”
How the episode opens
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Listen on demand wherever you get your podcasts or watch us live on YouTube. Tech stocks are really in focus. The NASDAQ composite index, Paul, is down 2 and a4%.
Uh the mag seven names began reporting yesterday and it's really a split view here when it comes to those big big tech names. And another one is on the docket tonight. You've got Apple reporting this evening um at 4:30 p.m.
uh Wall Street time. And of course we know that the latest Apple iPhone came out. So this is a huge quarter for the company.
Uh Honor Grana is our technology analyst and he covers all things big tech.
Honor Microsoft here. I mean, it's north of a three billion uh $3 trillion market cap company puts up 38% cloud revenue growth. Stock down 12%. What's going on?
Yeah, I think that's really what you're saying is, you know, last quarter the growth rate of Azure was 38 or 39. This quarter was 38. They've guided to 37 to 38.
And that's not good enough for investors. So, I think that's really what it is. Um and you know they said it on the call that if they allocated all the GPUs to Azure they would have grown north of 40%.
What's happening right now within Microsoft is the cloud capacity that they have built and they've done a very good job about it in the last 12 months. they're allocating it differently whether it's their GitHub copilot which is the coding agent or the uh the M365 co-pilot their Azure business and also internally for their R&D and that if you if you can only have this much capacity um you can you know you will realize the revenue only on the Azure side and I think that's where the mismatch is the biggest question people are asking is well the capex is growing in the 60s but their cloud revenue is growing on the 30th I think it's a bit silly to be very honest with you.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- microsoft earnings
- slowing cloud growth
- ai data center capex
- meta earnings forecast
- tesla factory retooling
Companies and tickers mentioned
- MSFT
- IBM
- META
- TSLA
- CAT
- Microsoft
- International Business Machines
- Meta Platforms
- Tesla
- Caterpillar
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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