Microsoft's $7.5 Billion GitHub Acquisition Has Officially Closed

Microsoft is now the official owner of the largest repository of open-source code in the world.

In a company announcement and blog post from new GitHub CEO Nat Friedman, the company reaffirmed a sticking point that led to some initial backlash from the code-sharing and collaboration service's 31 million developers: GitHub will continue to operate independently as both a business and a platform.

The $7.5 billion deal deal received EU regulatory approval last week. Announced in June, the GitHub acquisition is another major milestone in Microsoft's broader strategy of establishing cloud services and enterprise software as its major revenue pillars going forward. The company announced strong Q1 earnings earlier this week that puts it on track to become the third company to eclipse a trillion dollars in market cap, and maybe pass Amazon in the process.

The biggest growth drivers are the company's Microsoft Azure cloud services revenue combined with Office 365 subscriptions, though Microsoft also reported strong gains in Surface and Xbox revenue.

"Redmond is still in the early innings of benefiting from a transformational secular cloud shift in this two-horse race with Amazon (AWS) as more enterprises around the world head down the cloud path," said Daniel Ives, Managing Director of Equity Research at Wedbush Securities. "With FY19 numbers showing healthy double-digit growth, a margin expansion story still taking hold, and underlying cloud growth showing no signs of slowing down, we continue to believe Microsoft is firing on all cylinders as Nadella continues to transform the company into a cloud behemoth."

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Microsoft has a lot of plans for how GitHub factors into all of this, but some of its first priorities are to "accelerate enterprise use of GitHub, and bring Microsoft's developer tools and services to new audiences." While GitHub will operate independelty, Friedman (formerly CEO of cross-platform developer software company Xamarin, which Microsoft acquired in 2016) will report to Microsoft Cloud and AI head Scott Guthrie.

As with Microsoft's acquisition of LinkedIn in 2016, we should begin to see the first fruits of this deal in 2019 in the form of product integrations. When the deal was announced, Microsoft tipped plans like making its developer tools and services available in the GitHub Marketplace, integrating GitHub with Azure and other cloud services, and building capabilties from its open-source Visual Studio Code developer environment directly into GitHub.

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