Michael Yoshikami Microsoft Corp MSFT-Q BUY Jun 05, 2009

Alphabet's report and positive news on the cloud is probably a good thing for MSFT who will report this week.

They reported a strong beat after the bell: 19% YOY EPS growth and 15% YOY revenue growth in a top and bottom line beat. Also, all three segments beat expectations, including intelligent cloud and Azure. Excellent results. Markets will rally tomorrow.

He has been buying tech during this dip, in April particularly. We will eventually exit this volatility and find stability and confidence in the market again. Meta and Microsoft are some of his key holdings, and they affirmed their capex guidance--they are spending to make incredible investments over the next three years, because they know AI is the biggest super-cycle every in technology. There is incredible pent-up demand for AI from businesses and consumers. The CEO of MSFT reported that his company processed 50 trillion tokens last month alone, or 3.5 million years of AI conversation. 

Fared very well during the downturn and reported great numbers last week. Very positive on it, based on the generative AI trend. Growing cloud business well. 365 Copilot gaining traction. Expected to grow 15% top and bottom lines. Not cheap at 28x.

Incredibly wide competitive moat. Growing quickly, especially in Azure and the cloud. Globally dominant franchise difficult to dislocate anytime soon.

It's a great company, because monetizing AI though Copilot adoption is early.

Likes the stickiness to both personal and corporate clients -- once you get into the network, it's very hard to get out. Cloud business has improved significantly. If quantum computing ever comes to the forefront, MSFT is there. 

ROIC is 23% vs. WACC of 9%. This gives them lots of cashflow to pour money into the next greatest thing. R&D development is important, given how fast things are changing these days. Yield is 0.72%.

Excellent company that meets his criteria. If you made him choose one or the other today, he'd have to say META based on valuation (with the assumption that the investor would hold a position for the long run). MSFT trading ~37-38x PE, whereas META is in the mid-high 20s.