"Microsoft has used OpenAI’s billions in inference spend to cover up the collapse of the growth of the Intelligent Cloud segment. OpenAI’s inference spend now represents around 10% of Azure’s revenue.

Microsoft, as I discussed a few weeks ago, is in a bind. It keeps buying GPUs, all while waiting for the GPUs it already has to start generating revenue, and every time a new GPU comes online, its depreciation balloons. Capex for GPUs began in seriousness in Q1 FY2023 following October’s shipments of NVIDIA’s H100 GPUs, with reports saying that Microsoft bought 150,000 H100s in 2023 (around $4 billion at $27,000 each) and 485,000 H100s in 2024 ($13 billion). These GPUs are yet to provide much meaningful revenue, let alone any kind of profit, with reports suggesting (based on Oracle leaks) that the gross margins of H100s are around 26% and A100s (an older generation launched in 2020) are 9%, for which the technical term is “dogshit.” Somewhere within that pile of capex also lies orders for H200 GPUs, and as of 2024, likely NVIDIA’s B100 (and maybe B200) Blackwell GPUs too.

You may also notice that those GPU expenses are only some portion of Microsoft’s capex, and the reason is because Microsoft spends billions on finance leases and construction costs. What this means in practical terms is that some of this money is going to GPUs that are obsolete in 6 years, some of it’s going to paying somebody else to lease physical space, and some of it is going into building a bunch of data centers that are only useful for putting GPUs in.

And none of this bullshit is really helping the bottom line! Microsoft’s More Personal Computing segment — including Windows, Xbox, Microsoft 365 Consumer, and Bing — has become an increasingly-smaller part of revenue, representing in the latest quarter a mere 17.64% of Microsoft’s revenue in FY26 so far, down from 30.25% a mere four years ago."

https://www.wheresyoured.at/premium-the-haters-guide-to-microsoft/

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