Once a company runs on Microsoft, leaving is almost unthinkable. That's the moat.
↓ scroll to read
✦ The bottom line
Rivals have better individual products. What they can't beat is the bundle — Windows, Office, Teams, and Azure woven into how companies operate, at 68% gross margins.
↓ the brief below
✦ Teach me
Cents kept per dollar of sales
Of every $1 of revenue, the cents a company keeps before paying for offices, R&D, and marketing. High and steady means customers can't easily walk away — so they pay up year after year.
Wall Street calls this
Gross margin
Microsoft holding *68¢ on the dollar* across software *and* a capital-heavy cloud is proof the lock-in is real.
The moat, measured · gross margin
~68
¢
Of every dollar Microsoft sells, it keeps about 68¢ before overhead — extraordinary for a business now running millions of physical servers.
A 68% margin that holds for decades isn't about any one product — it's about being impossible to remove. Your company's email, files, logins, and now its AI all live inside Microsoft. Switching means retraining everyone and rewiring everything. That position took 50 years to build. Here's the short version.
How the lock-in was built
1980s-90s
Windows + Office become the default for every office on earth.
2011-14
Office 365 turns one-time software sales into monthly subscriptions.
2014-
Nadella bets on Azure — renting cloud computers to the same customers.
Now
Copilot weaves AI into the bundle, raising switching costs again.
The moat, in one number
Commercial remaining performance obligation — contracted future business customers have signed up for but Microsoft hasn't delivered yet — increased 99% to $627 billion.
↳ $627B of business already under contract. Customers don't sign multi-year commitments to a vendor they're planning to leave. That's the moat made visible.