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Charting Microsoft's Cloud Boom In the Satya Nadella Era

Microsoft's cloud-driven renaissance has propelled it atop the list of most valuable tech companies, sitting comfortably above a trillion dollar market cap at the moment.

August 23, 2019
The Why Axis Microsoft Cloud Revenue Growth

In 2014, Microsoft's market cap hovered around $300 billion, its stock price was flat, and the mobile, search, and social revolutions had largely passed the company by. The tech giant had just wasted $7.2 billion on Nokia's handset business, its laptop and device sales were stagnant or lagging, and the its flagship OS was mired in the messy transition from Windows 8 to 8.1.

The Why Axis Bug Five years later, Microsoft has vaulted past Apple, Amazon, and Google and currently sits as the only company (for now) above the trillion dollar market cap. Under the cloud-first ethos of CEO Satya Nadella, the company's stock has risen more than 300 percent, and its commercial cloud revenue run rate (quarterly revenue extrapolated to an annual value) has ballooned from single digits in 2014 up to $44 billion in Q4 2019.

Nadella's most enduring legacy thus far in his tenure is a foundational shift to cloud-computing and cloud-based services that informs everything else the company does. The Q4 run rate incorporates not just Microsoft Azure but also revenue from Office 365 and Microsoft 365, its server business, enterprise data services, developer tools and GitHub, andd all the other products and services built on or connected to Azure.

The Why Axis Microsoft Satya Nadella Stock Performance

Every new service or tool Microsoft offers, from AI and blockchain to the increasing number of sales and marketing features built into LinkedIn, feed into the cloud and give organizations a wealth of data—which they then need Microsoft tools to analyze, protect, and feed back into their enterprise operations.

From a business perspective, this gradual shift has rooted Microsoft's earnings in recurring revenue from sources including monthly software-as-a-service (SaaS) subscriptions and cloud consumption models based on resources used. Every big tech company, from Apple to Google, is doubling down on cloud services for the same reason; in an era when physical device sales are plateauing for most form factors, companies' bottom lines are increasingly reliant on services.

Microsoft is far ahead of most of the pack on cloud infrastructure, but it's not the leader. Sitting at around 16 percent market share, it's still not half as dominant as Amazon, which currently counts about 33 percent of the market (and a broad swath of the internet) as Amazon Web Services (AWS) customers.

The two cloud behemoths are duking it out for a lot of business, but the greatest test for Azure will be whether it can beat out Amazon for the Pentagon's $10 billion JEDI contract to build the US government's "war cloud." Either way, Microsoft's and other tech giants' cloud competition is only intensifying; from cloud gaming and augmented reality to the AI arms race taking place around the world, the primary battleground is the cloud.

Slack, Google Docs among others to be banned by Microsoft
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About Rob Marvin

Associate Features Editor

Rob Marvin is PCMag's Associate Features Editor. He writes features, news, and trend stories on all manner of emerging technologies. Beats include: startups, business and venture capital, blockchain and cryptocurrencies, AI, augmented and virtual reality, IoT and automation, legal cannabis tech, social media, streaming, security, mobile commerce, M&A, and entertainment. Rob was previously Assistant Editor and Associate Editor in PCMag's Business section. Prior to that, he served as an editor at SD Times. He graduated from Syracuse University's S.I. Newhouse School of Public Communications. You can also find his business and tech coverage on Entrepreneur and Fox Business. Rob is also an unabashed nerd who does occasional entertainment writing for Geek.com on movies, TV, and culture. Once a year you can find him on a couch with friends marathoning The Lord of the Rings trilogy--extended editions. Follow Rob on Twitter at @rjmarvin1.

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