In today’s Cloud Wars Minute, I dig into Microsoft’s fiscal Q2 results, unpacking the headline RPO surge, the OpenAI effect, and what the numbers really say about future demand.

Highlights

00:10 — Want to talk about Microsoft's fiscal Q2, numbers that came out yesterday. That's for the three months ended, December 31 and there was some remarkable numbers in there, but we're going to dig into those a little. They're still remarkable, but they need to be understood in a deeper context, and I want to share that today.

00:28 — So, the big number that jumped out to me very good, Q2 Microsoft Cloud revenue growth overall. But the big number that jumped out to me was for their Q2 RPO, remaining performance obligation, which is future contracted business not yet recognized as revenue. So, it's a look into the future the pipeline and customer demand for that.

00:51 — Microsoft said their RPO for Q2 jumped 110% to $625 billion an enormous number that's even larger than Oracle, which in the past couple quarters, has leapfrogged Microsoft as the RPO leader. But now it's back to Microsoft. Now, that 110% includes an enormous deal, a commitment from OpenAI. I if we take that out the OpenAI commitment then the RPO growth from all of Microsoft's other customers grew 28%.

01:29 — I'm not saying this try to undercut a tremendous performance by Microsoft. They earned that OpenAI deal. It's great. And hey, 281 billion is 281 billion, but this reflects a little bit of a different tone to that enormous number. Looking back the other direction, so not into the future with RPO, but the past three months, cloud revenue was up 26% to $51.5 billion.

02:34 — Now the RPO totals, I mentioned, $625 billion. Microsoft said that 45% of that 625 billion, that equates to about $281 billion is from an a commitment for OpenAI for future cloud and AI infrastructure services.

04:19 — Late last year, OpenAI signed a $38 billion deal with AWS. And there are not many $38 billion deals in any industry, of any kind, anywhere. It's only in the cloud — this greatest growth market the world has ever known — that you can look at a $38 billion deal and say, "Wow, that's 1/10 the size of these other deals with AWS competitors, Microsoft and Oracle."

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Microsoft Q2 RPO Jumps 110% to $625B; Minus OpenAI, +28%

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