Microsoft Jumps to the Top

By Runisan Natheeswaran, Staff Writer

Despite Apple’s long-lasting tenure as the world’s most valuable publicly-traded company, Microsoft overtook Apple in market cap on Friday October 29th.  The last time this briefly occurred was during the first half of 2020, when investors fled towards growth stocks amid the height of the pandemic. 

Microsoft’s surge in stock price can be attributed to their extremely positive third-quarter earnings report, topping analysts’ estimates in expected revenue and earnings per share categories. Their total company revenue rose to a staggering 22% year over year, the fastest growth since 2018. 

As a result, Microsoft’s stock (MSFT) rose 8% as of November 5th, with an enormous 2.52 trillion dollar market cap. However, their stock has already grown more than 50% year-to-date, so what is fueling their massive success? 

In recent years, the global cloud computing business has boomed, as more people look for on-demand digital services during the pandemic. This segment is growing at a staggering rate, as it is expected to roughly double in market size by 2026.

Microsoft has continuously developed and invested in their “Intelligent Cloud” unit. Microsoft Azure, commonly known as Azure, is a service that is able to add cloud capabilities to an existing network through its platform. Major clients such as GE Healthcare and Procter & Gamble, continue to migrate their critical workloads to Microsoft’s cloud platform led by Azure. 

This surge in demand for its cloud-based services has positively translated towards a total revenue of 45.3 billion from their “Intelligent Cloud unit” this quarter, and their strong financial results are heavily dependent on the cloud side of its business.  

Microsoft’s CEO, Satya Nadella, commented on their biggest growth driver, as he said “Over a year into the pandemic, digital adoption curves aren’t slowing down. They’re accelerating, and it’s just the beginning.” 

He believes that cloud technology is going to be a major part of society moving forward, mentioning that, “we are building the cloud for the next decade, expanding our addressable market and innovating across every layer of the tech stack to help our customers be resilient and transform.”

Dan Ives, a financial analyst from Wedbush, says that Microsoft’s efforts to continue gaining share in the cloud arms race has the potential to light a fire under the company’s stock. He forecasts that the continued growth in its cloud business along with its success in sales in its PC business sets the stock to cross the $400 threshold. Microsoft clearly has quite a backing to justify being the world’s most valuable publicly-traded company, but it remains to be seen how long they can hold this title for. With some believing that the company is overvalued and is bound for a correction, it might not hold that title for long. One thing is for certain, Microsoft clearly is heading in the right direction, and will continue to be a dominant force in the industry.

Photo by Matthew Manuel on Unsplash

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