00:00Yeah, to be honest, it's a bit confusing because we really like the numbers.
00:03I mean, I think the cloud business was improving even more than what the street was expecting.
00:09And that's what had happened.
00:10And I think the guidance for next quarter is also conservative.
00:13They should be able to beat that cloud numbers as well.
00:17I think what's happening over here is there is a little bit of uncertainty about data center expansion.
00:24So, you know, it's probably that's more macro, not related just to Oracle.
00:28And I think that could be one factor.
00:31The one thing that I liked about the earnings was that they actually said they're not going to have to
00:36raise CapEx
00:36because that has been my biggest worry when it relates to Oracle is that do they have to keep on
00:42increasing CapEx?
00:43One of the things they're doing is they are asking customers to think about it, bring your own chips or
00:48bring your own hardware.
00:49This way they don't have to foot the bill ahead of time.
00:51So it's really doing these arrangements are helping them out.
00:54But, you know, I think it's more the macro related about data center expansion in general.
01:00So our Bloomberg News story written by Brody Ford points out as well that gross margin shrank to 61 percent.
01:07And sequentially, that's a big drop because it was 66.3 percent in the previous quarter.
01:12Does that worry you, Anurag?
01:16We have been modeling that for a while.
01:17I mean, it is normally a natural whenever you have a brand new, you know, business starting in the infancy,
01:23it will have very low gross margins.
01:25But imagine this, they missed massively on gross margins.
01:28I mean, compared to last year, I shouldn't say missed, but the gross margins dropped.
01:32But their operating margins improved.
01:34They have been cutting costs so well that they are actually showing, you know, very decent operating margins.
01:40So I personally would not worry about it because you are adding a lot of gross profit dollars to the
01:46company, which we would not get otherwise.
01:49All right, Anurag, we've got to get the story of the day here.
01:52Microsoft here.
01:53Bloomberg's got a green B, which means they've got exclusive reporting.
01:56Brody Ford, Matthew Day.
01:58Microsoft plans to more than triple its data center capacity going from 38 gigawatts.
02:03I have no idea what a gigawatt is, but it sounds big, up to, you know, I mean, it's going
02:08to be up from like 12 gigawatts now.
02:10What is going on there?
02:11Who's paying for that?
02:13I mean, they are paying for that.
02:15I mean, they're spending over close to $200 billion a year trying to do that.
02:18And in fact, you know, the gentleman they mentioned in the report, we just, we had him on our podcast
02:23six months ago.
02:24And these guys really are changing the infrastructure of all of Microsoft data centers.
02:30Because the way you do GPU kind of computing or AI computing is very different than what you would do
02:36on a CPU-based or the older cloud-based.
02:39So, I mean, they have some really impressive data centers that are going on live.
02:43There is one in Texas.
02:45There is one in Wisconsin.
02:48So, I mean, they've done a very good job of managing it.
02:51And right now, whatever they actually can't do it in-house, they are outsourcing it to neoclouds at this point.
02:56So, you know, frankly speaking, Microsoft is in the middle of this.
03:00It's one of the biggest beneficiaries of AI.
03:02So, you know, and on top of that, you know, they will still be free cash flow positive this year.
03:08Okay.
03:08I mean, those are ambitious plans.
03:10But will they actually be able to do that, given there's a lot of public opposition to data centers in
03:17local communities?
03:18I mean, it's one thing to say that this is what they want to do.
03:21Can it get done in the time frame they want?
03:24I think that is the single biggest, you could say, obstacle right now, or the overhang, and not just Microsoft,
03:30but you can extend that to everybody, whether it's AWS, Google, Oracle, or the neoclouds, is do they get the
03:36permits to be able to do it?
03:38Will they have the power?
03:39And, you know, so far, we have not seen any major, I would say there have been delays, but not
03:45any massive delays.
03:46But frankly speaking, the opposition we are seeing right now, I would say across the board, not just with the
03:52Democrats, but Republicans as well.
03:53I think this is going to be a bigger issue that plays out over the next six to 12 months.
03:57And that is one thing I could, I think that is one thing that could, you know, soften the growth
04:03rate of some of these AI labs, as well as, you know, I would say just the entire AI trade
04:08in general.
04:10So is this in the numbers?
04:12I'm looking at the, I see CapEx ramping up on the Bloomberg terminal for Microsoft, but is this kind of
04:17gigawatt expenditures?
04:19Is that in the numbers?
04:20I mean, right now, I think you have, because you're looking at this year and next year, almost everybody is
04:27increasing CapEx next year.
04:29You know, in our own BI's projected data center model, we have CapEx going over the next few years.
04:35We have not, we are not tapering it down at this point, because you have more backlog revenue on the
04:42balance sheets than they have the capacity to fulfill it.
04:45And the math is, you know, one gigawatt costs somewhere around, depending on what kind of data center you're building,
04:5040 to 60 billion dollars right now, off an NVIDIA data center.
04:54Are you kidding?
04:56I don't know what these...
Comments