Here's what we're going to do. We're making it up as we go. And we can do this with Gil Luria, who's extremely wonderful and just incredibly clear thinking here within technology at D.A. Davidson. And we're thrilled that Gil could be with us. And we've also got Robert Schiffman with us. He's in credit as well. And when you have a $25 billion AAA offering, you get Gil Luria and Robert Schiffman. It's the tech conversation of the day.
Gil, let me go to you first here. How is Microsoft financially and the accounting statements different from everybody else? They're still generating cash flow.
So Amazon, Google and Meta have now crossed over to having negative cash flow. Microsoft's business is so strong that in spite of the fact that they'll put 200 billion of CapEx into the ground, they still have positive cash flow, so they don't actually need the capital. Which is always the best time to go get capital because you get the best price, right. And that's what they're doing right now.
We're modeling out 18 months, folks. It's a model out to 2028, almost half a trillion of revenue, 469 billion of revenue. And they're going to bring $0.65 to gross profit. That's the number I care about. Their margin is four times GM's $0.37 on the dollar. Gil, it's a profit machine. But how embedded and stable is the Microsoft profit machine?
Oh, incredibly embedded because most companies use Microsoft. We all still use Microsoft Office on a Microsoft Windows machine. And that does the vast majority of the market. And then on top of that, Microsoft sells all of these other software infrastructure products, and then they sell most companies some cloud storage with Azure, and now they're selling everybody AI compute through that Azure business as well. So they're incredibly entrenched in the global enterprise market. And that's what makes them so bulletproof. That's what makes their margins so high, the revenue so sticky. And the good news for them now is that AI compute is accelerating. Azure accelerated to 48%.
My take, my amateur take, Paul, across reading 678 notes was Azure. And that delta was the key determinant. We're also joined by Rob Schiffman. He covers the tech sector from a credit perspective, an absolutely perfect fit. 1040, 9:00, it's not too much. I mean, who knows? Microsoft, first time in like nine years coming to the investment-grade office market, U.S. market with at least a $25 billion bond offering. Rob, why are they coming to the investment-grade market right now?
This is a great example of why — oh, I'm sorry, I'll take this off. This is why this space is so exciting. Because we have a AAA-rated borrower rated higher than the U.S. government coming to the market. And this is what everyone wants to talk about. And the reality is, this is an implication that they are about to spend a lot more money than they've been spending. And I also think what it means, unlike their peers, who now have to be much more conservative from a capital structure perspective — many are issuing equity right now. Meta is issuing 100 billion of equity. Alphabet's issuing 85 billion of equity. Microsoft is still buying back stock. So Gil's correct that they are in theory generating free cash flow. Right. But not after shareholder returns. And I think Microsoft is going to be one of those companies that continue shareholder returns and continues to raise CapEx, and they can borrow as much money as they want, whenever they want.
I'm looking at a toothpaste company and they have 9.7, make it 10% debt. What do you perceive as a plug-in of the appropriate debt level for a technology company? If they're at 3% now, do they double the debt comfortably or do they go out to a toothpaste company debt?
Well, we're going to get close to doubling the debt now because they only have $40 billion of debt. And if they're issuing 25 billion plus today, let's say that's 30 odd billion. That's a doubling. Listen, look at the weighted average cost of capital. You know, even though yields are rising, and your last guest had said maybe we're going north of 6% on the five-year. I think, you know, from a debt perspective, right, these hyperscalers are cost agnostic and quite frankly, relative to the cost of equity, it's still so low. So I think there's going to be a lot more borrowing out of Microsoft. And that 5% should probably be 10%, if not 15%.
For Global Wall Street and the rest of us this morning, Robert Schiffman and Gil Luria with D.A. Davidson and Mr. Schiffman with Bloomberg Intelligence for commercial free for the next ten minutes. On this key moment for technology, AAA Microsoft goes to the market for seven phone calls or eight phone calls.
Seven or eight phone calls. Exactly right. They'll get that deal done.
Hey, Gil, when we first heard about AI from when Nvidia gave that revenue guide a couple of three years ago, my first thought was, oh my goodness, this could be an existential threat to search, to Google. I mean, and I think maybe last night may have been that seminal moment. How do you think about that?
