Azure

“If I was to buy an H 100 for, let's say, 30,000 dollars, that's how much the, kind of, a single card would cost. If I wanted to rent an H 100 for one hour spot instance from GCP, it could cost me five dollars. If I rented it from, like, You know, Azure or AWS,…”

“And for AWS and GCP and Azure, all the money Is in massive enterprise contracts with companies that have massive DevOps teams. So guess who they're building for? They're building for DevOps engineers.”

“When we started perplexity, we had like around 200,000 dollars worth of Amazon credits and GCP credits and Azure credits. That almost like together, cumulatively, this was worth like a million dollars in compute credits.”

“So they built this agentic system. They even have a character for it. It's called miles and it sort of does all this stuff, right? They, Started sort of screaming for more tokens and so on. And so they were saying, look, I, we don't need headcount. We need tok…”

“You saw that I talked about sort of how we built in the last 15 months more Azure capacity than we built in the first 15 years.”

“So they built this agentic system. They even have a character for it. It's called Miles and it sort of does all this stuff. Right. They started sort of screaming for more tokens and so on, and so they were saying, look, we don't need headcount, we need tokens …”

“We have a new underlying agent containerization service. It's like through, we're using it under the hood. It's through Azure. They recently announced it. The Azure like dev compute, but it's like very fast very fast compute to be able to like spin up you know…”

“And the only option right now is an EC two with Windows or on, on, on Azure. Both of them take anywhere from three to five minutes to spin up. We've created an actual sandbox. So it's a second instead of milliseconds, but you have like point in time snapshots,…”

“Even though Azure has grown 40% a quarter, which is absurd, I guess, until you start to think that Google's grown 62% a quarter, albeit on a smaller base,”

“Microsoft remains open as primary cloud partner. And open AI products will ship first on Azure, unless Microsoft cannot and chooses not to support the necessary capabilities.”

“Companies that say they're selling the same model through different vendors, whether it be through first party or Bedrock, Azure, et cetera, we do see different qualities sometimes, and that's not necessarily what's advertised.”

“Because the context, the mission-critical context of those workloads is so important to be run locally that you can't run them on Amazon, AWS, GCP, or Azure, and it's the first time In 15 years that the sort of hyperscaler dominance is up for grabs for startup…”

“Anthropic isn't giving Microsoft mythos to sell through Azure. It's giving Microsoft mythos to test.”

“You've just seen with Cloud Code and even OpenAI's API business, like, these are durable businesses, and yes, can you switch? You can, the same way you could switch AWS or Azure but it's not worth it for a lot of businesses to do it, and there's sufficient dif…”

“Over the next 10 years, I think the business, these hyperscalers, AWS, Azure, will grow fast. I think the margins, my guess, will be challenged, both because the businesses are getting a lot more capital intensive, because AI is capital intensive, more capital…”

“It took Azure seven years to reach one year of AI revenue.”

“They revealed that they booked ten billion cash gain from the amount of cash OpenAI has on this balance sheet due to all these, like, huge fundraisings that they're doing. But they also said that 45% of their future Azure contracts were based on OpenAI.”

“Limited availability of artificial intelligence hardware is affecting how quickly Microsoft's cloud business can grow, and it's capping Azure's revenue potential.”

“When I speak to Fortune 500, I can tell you without hesitation, they are all still talking about I need to move X percent of apps to GCP, AWS, Azure, some combination, Alibaba in Europe, whatever the case might be.”

“What standout product does AI product does Microsoft have outside of selling AI services from Azure? What standout product does Amazon, AI product does Amazon have outside of selling some AI with AWS. What standout AI product does Apple have? We both know that…”

“Kind of, you didn't mention it, but in the same announcement, I think, Anthropic also said they're going to break ground on a physical data center. So that's another one of the model companies saying it's not enough to rely on compute from your service provide…”

“Half of their AI revenue approximately which is again, a big piece of the Azure growth, which is the biggest piece of Microsoft's growth, is coming from OpenAI.”

“And so you think about the new core core AI organization, you've got Visual Studio Code, GitHub, and parts of Azure, all in one.”

“The deal has open AI committing to purchase an additional two hundred fifty billion dollars worth of Azure cloud computing services.”

“We were involved even in 2016 when initially OpenAI started, in fact, Azure was even the first sponsor, I think. And then they were doing a lot more reinforcement learning at that time. I remember the Dota two competition, I think, happened on Azure, and then …”

“You have the profit you make off the two hundred and fifty billion dollar of the Azure compute commitment from OpenAI.”

“Not only we have the exclusivity of the model in Azure, but we have access to the IP. I mean, having a royalty free, let's even forgetting all the know how and the knowledge side of it, but having royalty free access all the way till seven more years gives us …”

“Sometimes you may have to say no to some of the demand, including some of the open AI demand, right? Because sometimes, you know, Sam may say, hey, build me a dedicated, you know, big, you know, whatever, multi-gigawatt data center in one location for training…”

“Some of times our investors are overly fixated on the Azure number. But remember, for me, the high margin business for me is co-pilot. It is security co-pilot. It's GitHub co-pilot. It's the healthcare co-pilot. So we want to make sure we have a balanced way t…”

“Absolutely. Absolutely. There's no question. There's no question.”

“We're not demand constrained, we're supply constrained. So we are shaping the demand such that it matches the supply in the optimal way with a long-term view.”

“Everything is a commodity, right? Compute, storage. I remember everybody saying, wow, how can there be a margin? Except at scale, nothing is a commodity.”

“When you have the biggest workload there is running on your cloud, that means not only are we going to learn faster on what it means to operate with scale, that means your cost structure is going to come down faster than anything else. And guess what? That'll …”

“My capital allocation is for the cloud from whether it is Xbox cloud gaming or Microsoft three, six, five, or for, Azure. It's one capital outlay. And then everything is a meter, as far as I'm concerned, from an MSFT perspective. It's a question of, hey, the b…”

“Our investment of let's say that 13 and a half, which was all the training investment, that was not booked as revenue. That is the reason why we have the equity percentage. That's the reason why we have the 27% or a hundred and thirty-five billion. So that was…”

“Hey, I'm happy with OpenAI. I would love to have Anthropic, MAI, Crock, anyone. If Google wants to put Gemini on Azure, please do so.”

“I mean, think about our server business. It's super profitable, except it was one-tenth the size when I look at it compared to Azure.”

“Building a business on guardrails really scares me because there are so many incumbents that can come in and eat your lunch. And it's like, It's not actually that hard to build a guardrail. I don't know if I'm gonna make people angry by saying that maybe some …”

“It started with the original, from my perspective, with the original Microsoft open AI deal where credits go in as A in kind investment. And then those credits are used back against, you know, Azure and Microsoft cloud services. And in the, in that case, you k…”

“And while they're there, they hash out a deal for Microsoft to invest one billion dollars into OpenAI in a combination of both cash and Azure cloud credits. And in return, Microsoft will get access to OpenAI's technology, get an exclusive license to OpenAI's t…”

“We've got the world's largest consumer application with ChatGPT that runs on top of Azure, and we have thousands hundreds of thousands and millions of businesses that are also building their own AI applications on top of us.”

“Microsoft in one quarter deployed a bunch of GPUs, and then announced that they weren't going to make them available in Azure because they made more money using them themselves than renting them out.”

“We could deduce that there was massive amounts of costs and losses being poured into these hardware initiatives. To the tune of four or five, six billion dollars a year that might be better spent driving Office three 65 in Azure instead of trying to chase the …”

“But they would like to have the same direct relationship with us, direct working relationship, and direct purchasing relationship. Meta, just as what Zuck and Meta has with us it's exactly a direct. Our relationship with between us and Sundar and Google, direc…”

“A single million qubit quantum computer would outperform The net total of conventional computing on the entire planet. So you take all of the supercomputers on the planet, you take every AWS system, every Azure system, you add them all together, and we trash t…”

“People have been building leadership class supercomputers for a very long time, and usually people don't care about them, and that's fine. Like nobody cared prior to GPT-III. Nobody cared that Azure and Microsoft and open AI were building big, ugly computers. …”

“15,000 customers who have produced agents. I think the number of agents is actually, like, millions.”

“In the cloud super cycle, you know, you have about. Four hundred billion dollars of revenue that is being earned by the applications. Let's call it the layer one. You've got about two hundred billion spent on infrastructure. This is AWS and GCP and Azure, et c…”

“Especially building for Europe. You've got to go through a lot of hassle to kind of conform with all the data processing requirements. So, you know, all data hosted within Europe, nothing for training, no retention. Exemption from human review when you look at…”

“So I think engineers there have job security for the foreseeable future, right? Because of the problem of stochasticity of these models and all of that, you need every line of code to be reviewed and managed very carefully.”

“More than half of Azure's 33% revenue jump in the company's March quarter came from non-AI services. While the company didn't give a comparable breakdown of the cloud unit's 39% growth in its June quarter, it said that the core infrastructure business, Microso…”

“Non-AI gross margins within Azure were around 73%. Wow. That compares to 30 to 40% gross margin for AI, he estimated because of the huge cost of setting up AI infrastructure.”

“They really haven't had much success building their own models, and a lot of what they're offering customers, their big millions of enterprise customers off their Azure platform is, is their own spin on OpenAI's underlying technology.”

“The information also reported that Microsoft will only make about thirteen billion dollars, not profit, just revenue, on AI this year. Ten billion of that is OpenAI's Azure cloud spend. Three billion is them selling Copala.”

“They came to us to develop a name that started or ended with cloud. Made sense to them because it was a cloud service. And our reaction was, if you do that, ah, you're gonna be in an ocean of other cloud this, cloud that.”

“The reaction wasn't good. You know, one of the clients said, that's just a dumb idea.”

“So where we have, you know, some of the hyperscalers like a Microsoft or an Azure who are partnering with us. We have one of the big four audit firms, who's also a partner with us, who's using us internally and taking us out to market in the APAC or the Asia r…”

“Well, I think all four of us would agree that if we could synthetically own AWS, Azure, and GCP, if I could somehow automagically create an index of all three of those businesses, right, over the next five years, you wouldn't need to own anything else.”

“From a business perspective, that meant the GitHub revenue became part of the Azure KPI that is reported, you know, in, in earnings calls every quarter from Microsoft.”

“We say we're going to build platform as a service because it's a Windows platform. Infrastructure as a service, a little bit if you think about it, you're sort of by nature accepting everybody's infrastructure. It's by nature, multi quote, multi-platform. You …”