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Microsoft’s Market Value At Record High After Excellent Q3 Report And Cloud Growth Forecast


07/19/2019


Microsoft’s Market Value At Record High After Excellent Q3 Report And Cloud Growth Forecast
United States based tech giant Microsoft reached a record market value of more than $1 trillion for the first time in its history after the company forecast steady growth in revenues from its cloud computing business.
 
The company easily surpassed Wall Street expectations in profits and revenues for the third quarter. The company said that its good performance was driven by an unexpected surge in revenues from its Windows business and fast growth in revenues from its cloud business which surpassed expectations reaching revenues of tens of billions of dollars.
 
The report instilled investor confidence in the company pushing the share prices up by 4.4 per cent to $130.54 in late trading. After the increase in market valuation, Microsoft is now the most valuable company in the world surpassing the market valuation of Apple Inc's $980 billion. In recent months, Microsoft and Amazon.com Inc have been jostling for the top position of being the most valuable US-listed company of the world.
 
So far this year, there has been a 23 per cent surge in the shares of Microsoft after it a record high of $125.85 during regular trading hours.
 
Over the last five years, there has been a change in business strategy and focus for Microsoft as he company has looked for alternative means of revenues instead of its once-dominant Windows operating system under its Chief Executive Satya Nadella. One such alternative area of revenues is cloud computing and other cloud-based services. Microsoft's flagship cloud product, Azure, is the major competitor for the market leader in this segment - Amazon Web Services (AWS).
 
Microsoft forecast growth in the business divisions in charge of Azure and Office 365, an online version of its longtime productivity software, in the fiscal fourth quarter, Chief Financial Officer Amy Hood told investors.
 
Compared to a growth rate of 67 per cent in the business of Azure, the growth rate dropped slightly in the third quarter to 73 per cent for the third quarter ended March 31. The drop in the growth rate was more or less in line with the company's estimate, said Mike Spencer, Microsoft's head of investor relations.
 
With Azure, "one should assume a slower rate of growth as we move forward, simply due to the law of large numbers", said Christopher Eberle, a senior equity analyst with Nomura.  He estimated that despite that, Azure will be able to generate revenues of about $13.5 billion in fiscal 2019 and will clock an overall growth rate of 75 per cent. "I can't name another company of that scale growing at these rates."
 
Since most of the sales generated by Microsoft on any given day go to businesses therefore, despite having less revenue, the company tops tech rivals such as Amazon in market capitalization on some days. Those sale are most often much steadier as customers compared to consumers. A large section of the software sale of Microsoft is billed as recurring subscription purchases and therefore are much more reliable compared to one time purchases.
 
A growing proportion of Microsoft's software sales are billed as recurring subscription purchases, which are more reliable than one-time purchases.
 
(Source:www.business-standard.com)


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