2026-03-01 17:23Summary of Conference Call Notes Companies Involved - Alphabet (GOOGL) - Meta Platforms (META) - Microsoft (MSFT) - Oracle (ORCL) Key Points and Arguments Depreciation Estimates - Updated depreciation model indicates that cumulative depreciation for MSFT, ORCL, META, and GOOGL could exceed $520 billion over the next three years, an increase of $30 billion from previous estimates, primarily driven by GOOGL [2][5] - Depreciation expense is expected to become a significant portion of these companies' cost structures due to rising capital expenditure (capex) investment rates, which are projected to surpass the dot-com peak this year [2][6] GOOGL's Capex Guidance - GOOGL has notably increased its 2026 capex guidance to between $175 billion and $185 billion, significantly above consensus expectations of approximately $120 billion [7] - This increase is expected to result in an additional $20 billion of depreciation over the next three years, with the most substantial impact on depreciation estimates occurring in 2028, where estimates rose by approximately 25%, equating to 13% of revenue [7][11] Impact on Cost Structure - The shift towards higher capital investment indicates a transition to a larger fixed cost structure, moving away from legacy asset-light business models [14] - Analysts anticipate that expense forecasts will need to be revised higher to reflect the increased capex, which could lead to lower margin expectations if revenue growth does not keep pace [14] Depreciation Growth Rate - Depreciation among hyperscalers is projected to grow at a CAGR of approximately 60% over the next three years [3] - The rising depreciation as a percentage of revenue for MSFT, ORCL, META, and GOOGL is illustrated, indicating a trend that could affect overall profitability [15] Financial Implications - Non-depreciation expenses will need to decline rapidly relative to revenue to meet margin expectations, highlighting the pressure on operational efficiency [17][18] Additional Important Information - The estimates for depreciation in FY1 to FY3 are derived from the depreciation model based on Microsoft’s capex estimates, with specific coverage by analysts for each company [5][16] - The lag between capital investment and asset deployment contributes to higher depreciation in future years, emphasizing the importance of timing in financial projections [6] This summary encapsulates the critical insights from the conference call, focusing on the financial implications of increased depreciation and capex for the involved companies.