Key insights
- The article argues that Microsoft's (MSFT) reliance on Microsoft Office, which generates 60% of its revenue, makes it vulnerable to AI disruption, similar to Adobe. The author believes AI can replace the functionalities of Word, Excel, and PowerPoint, leading to a potential rerating of MSFT's stock to a lower PE multiple. This suggests a bearish outlook for Microsoft due to the perceived threat of AI-native productivity software.
People think $MSFT is cheap. They don't realize the market is rerating it to a low PE like Adobe because 60% of its revenue is coming from SaaS that is getting disrupted by AI.
MSFT is just coasting on Microsoft Office for the past 50 years. After all this time, Microsoft Office still make up 60% of its profits. Problem here is, Microsoft Office is also easily replaceable by AI. Even easier to be replaced than Adobe.
Story is the same. AI can now generate graphics. AI can now make new better tools that don't need Excel or Word or PPT. Especially PTT, nowadays I just ask AI to make slides without needing PPT. I can see Excel and Word getting replaced easily with AI-native productivity software. It is over for MSFT.