微软快评：产能约束正在制造奇怪的利益同盟

FirozValliji,CFA+19173448316firoz.vallj@bernsteinsg.com Shelly Tang,CFA+19173448342shelly.tang@bemstelnsg.com Price Target MSFT 646.00USD Quick Take on Microsoft: Capacity constraints are causing strangebedfellows Capacityconstraintshaveplaguednot justMicrosoftbuttodiffering extents all thehyperscalers dueto Al demands drivenbymodel training,coding,and otherforms ofAl.InitiallythelimitingfactorwasGPUavailability,butthatseemstohaveabatedatleastasitrelatestothehyperscalers.NextwaspoweredupsqftindatacenterscapableofsupportingAlandnownot justAlbutalsotraditional capacity,atleastas it relatestoMicrosoft,isanissue. Close Date16Jun2026MSFTClosePrice(USD)393.83Price Target (USD)646.00Upside/(Downside)64%52-Weck Range555.45/356.28SPX7,511.35FYEJun%6:0MarketCap (USD)(B)2,925.54EV(USD) (B)2,972.70 Microsofthastaken atwo-prongedapproachtodrivebothmorecapacityandtriagewhotogivethenextavailablecapacityto.Yesterdaywesawthenextstepandinsomewaysthemostunusual stepas Microsoft,itwouldseembased on news articles (Business Insider),willberentingcapacityfromAmazonAwS(itslargestcompetitor)forGitHub. quicklyaddmorecontextonMicrosoft'sapproachtoaddingcapacity. MicrosoftstartedtobuildcapacityforGenerativeAlworkloadsstarting,webelieve,in2019andhasbeenrampingcapacityeversince.Thecompany,all thewaybacktotheearlydays ofAzure,wouldmuchratherown theirowndatacentersthan leaseorleveragethirdparties (seeMicrosoft:FlashbacktotheCloudbuild-outforanexplorationofthetopic).Butbuildingdatacenterscantakeyears(WhatisinaDatacentercontract?)sothenextbestwas rentingfromdatacenterbuilders.Asdemandcontinuedtosurgeoverthelast12-18months Microsoftstartedrentingnot justdatacentersbutcapacity(datacenterspopulatedwithservers)fromneocloudsonarelativelyshorttermbasis. Now itwouldseemthatMicrosoft hastakenanotherpageouroftheircooperatingwithcompetitorsplaybookandisgoingtorentcapacityitwouldseemforGitHubfromAwS. Whilethismay seemabitbizarre itin factisnot. MicrosoftinNovember2023rentedcapacityfromOracleforBing(Microsoftand Oracle:Bing+OCl-moretothisthanmeetsthe eye)as well as for OpenAl model training'. WHYISMICROSOFTADDINGCAPACITY AT 3RPARTIES? Fast-forwardtotoday,and it would seem thatGitHubusagehas exploded.There was apost April3'donXbyKyle DaigleGitHubsthatplatformactivityissurging.Therewere1billion[code]commits in2025andnow its275millionperweekonpacefor14bilionthisyearifgrowthremains linearandas hesaidintheblogpost-itwon't.HegoesonfurthertosaythattheyarepushingCPUs,scalingservicesandstrengtheningGitHub's corefeatures. Whilethedemand is being drivenby Aland all the codethatisbeingbuilt using Al codewritingtoolsthedemand problemMicrosoft,webelieve,ishaving istraditional (CPU)workloadbased whichis in linewithcommentsmanagementmadelastquarteranda very importantsign that inferencingwilldriveboth increasedGPUandtraditional CPUutilizationupward. WeunderstandthatGitHubhasbeenrunningacross Microsoft,independentlymanageddatacenters,andmultipleCloudprovider'sdatacenters since Microsoft acquiredGitHub (many oftheseagreements preceded the acquisition).Microsoft hasbeen workingtomove those workloads into Azure datacenters butnaturally theirpriority has been tomeetthe demands ofAzureand1stpartyappcustomers overdecreasingtheusageof3rpartydatacenter andCloudproviders. Whilewedonotknowif Amazon AwSwas oneofthepre-existing CloudprovidershostingGitHubwefranklywouldnotbeatallsurprisedgiventhesizeofAwS'businessandthequalityofits laas. Withdemand exploding across Aland non-Al workloads Microsoftis continuing theapproachofmoving 1stpartyapps to 3rdparty datacenters while leveraging Azure for Azure customers which makes sense.You wantto get your customers usedtoafullyAzureexperienceandlocktheminforthelongterm,whileyoucanmoveyourownworkloadsmoreeasilyandnotplacefuturecustomerdemandatrisktogoelsewhere, Whatis interestingistheramp indemandthatMicrosoftisseeingthatwearenotnecessarilyseeingelsewhere.WeunderstandfromourchecksthatcustomersarebeingtoldtowaitforAzurecapacitydueto limitations inAzurecapacity(likelywheretheworkloadsneedtobelocated).Office365Copilotpaidusagegrew33%QoQ(likelyfasterthanmost ifnotallotherSaaSAl WHATDOESTHISMEANFORORACLE? FromanOracleperspectivethearticles(Timesoflndiaarticle)implythatMicrosoftrequiredFedrampcertificationwhichweunderstandOracleCloudforGovernmentandOracleDefenseCloudofferbutnotallotherOracledatacentersanddatacenterofferingswhichwebelieveisnotatypical.Inotherwords,OracledidnothavethecapacitywhereMicrosoftwanteditandthecostandtimeofaddingcertificationmayhavebeenprohibited,soMicrosoftwenttotheproverbialplanB(AmazonAwS-whichhadcapacitywithcertification). WHATABOUTAZUREUSAGETRIAGE? Wehavebeenmeaningtowriteforawhileaboutthe issueofwhereMicrosoftisallocatingadditional Cloudresources.Atahigh-level Microsofthasdetermined,andwewouldagree,thattheymustdeveloptheirownmodels.Theyneedtohavetheirownmodels for multiple reasons including: Specializedmodelsfor1spartyapps.ThereareveryspecificqueriesgoingtothedifferentCopilotsandifMicrosoft isgo