A few in-depth points about Microsoft's strongest financial report this season: 1. Microsoft has seen five key positive signals this quarter: 1) Azure growth of 43%, significantly higher than market expectations of about 40%; 2) Azure guidance for the next quarter will further accelerate to about 45%; 3) The commercial RPO has risen to $678 billion, and all new orders added in the quarter on quarter are from customers outside of leading model companies; 4) Microsoft 365 Copilot paid seats have jumped from around 20 million to over 30 million; 5) The operating cash flow for the single quarter was 55.4 billion US dollars, still exceeding the total capital expenditure of approximately 41 billion US dollars. It can be said that Microsoft has preliminarily proven that the final ROIC of AI investment is still quite promising. 2. The most important thing is that Azure's growth has not slowed down, but is preparing to continue accelerating. The reasons given during the phone call include: faster than expected launch of new capacity, improved efficiency of CPU and GPU clusters, and nearly halved deployment time from GPU to usable state; Once the capacity is put into operation, it is quickly digested by customers; Both AI and non AI workloads have strong demand; Demand remains higher than available supply, and capacity constraints are expected to continue until at least the end of 2026. 3. The order quality is very high The remaining commercial performance obligation (RPO) reached $678 billion, a year-on-year increase of 84% and an increase of approximately $51 billion compared to the previous quarter. More importantly, the management stated: 1) All month on month growth in RPO for this quarter came from customers outside of leading edge model companies; 2) Nearly 90% of FY2026 cloud revenue comes from customers outside of model vendors About 30% of RPOs are expected to be confirmed in the next 12 months; This means that in the next year, RPO conversion to revenue will exceed $200 billion. 4. The most critical Copilot is accelerating its volume increase 1) The paid seats for M365 Copilot have increased from approximately 20 million in the previous quarter to over 30 million, with a single quarter growth of over 50%, and market expectations of approximately 26.9 million. The phone conference also revealed: The number of newly added paid seats this quarter has doubled compared to the previous quarter; The number of customers with over 50000 Copilot seats has increased by approximately 7 times compared to the previous period; The number of customers deploying the majority of seats within the organization has increased by approximately 75% month on month; The time required for customers to deploy to high-intensity use is decreasing from the past few months to just a few days. This means that Copilot is shifting from "small-scale pilot and departmental procurement" to "enterprise level batch deployment and high-frequency production use" 2) GitHub Copilot has reached approximately 50 million users; After adding usage billing, Copilot's related revenue increased by about 60% month on month. Microsoft has also started promoting the "seat fee+consumption fee" model in M365 and Dynamics. This is crucial for ROIC, as fixed seat fees can only capture user growth, while consumption billing can capture: token usage; Number of agent executions; Workflow call; Data and security services; Model inference strength. Therefore, the revenue ceiling for the same batch of AI infrastructure will be raised 5. Capex 'decline' mainly due to changes in accounting classification Microsoft has stated that it will extend the estimated lifespan of data centers and office buildings from 15 years to 25 years in the future. Due to the accounting evaluation of finance leases and operating leases comparing the lease term with the asset's economic life, this change will result in more new data center leases being classified as operating leases rather than finance leases. So the report for calendar year 2026 shows that Capex has decreased from around $190 billion to around $175 billion, which cannot be understood as' Microsoft cutting $15 billion in AI investment '. A more accurate understanding is: The same portion of data center economic investment has shifted from 'current financing lease Capex' to 'future operating lease expenses and cash payments'. Microsoft also plays accounting games In summary, Microsoft's true strength lies in its ability to monetize the same batch of AI capacity at four levels: 1) IaaS layer: GPU, CPU, storage, and network; 2) PaaS layer: database Fabric、Foundry、 Security and Agent Platform; 3) Application layer: * * Microsoft 365, GitHub, Dynamics, Power Platform; 4) Internal layer: Bing, Windows, Teams, and Microsoft's own R&D and business processes. Last week, Google's financial report proved that AI infrastructure can generate strong revenue and segment profits; Microsoft has preliminarily demonstrated that the same batch of AI infrastructure can not only drive Azure, but also continue to monetize the application layer through Microsoft 365, GitHub, Dynamics, security products, and OpenAI commercial arrangements, and the operating cash flow can still cover capital investment.