Results help MS rally to lifetime high

Boom in demand for cloud-based software has helped MS double in value

Bengaluru, July 20: Microsoft shares rose about 5 per cent to an alltime high on Friday, after investors cheered another blockbuster quarter, backed by growth in its legacy software business and Azure cloud computing services.

Shares of one of the technology world’s oldest and best-known names rose nearly 4 per cent to $108.20 in early trade, adding more than $30 billion to a market capitalisation that was already $802 billion at Thursday’s close.

At least six brokerages raised their price targets on the company’s stock after the results.

Helped by a boom in demand for cloud-based software, Microsoft has more than doubled in value since Satya Nadella took over as CEO in 2014 and refocused the software behemoth on newer businesses.

While Microsoft’s core productivity and business processes unit, which includes the Office 365 software suite, rose 13.1 per cent to $9.67 billion, revenue for the Azure cloud service jumped 89 per cent.

“Based on the results, they were able to beat on all major metrics that people were focusing on. I don’t see anything that should raise an eyebrow of concern”, said Daniel Morgan, a portfolio manager at Synovus Trust who holds 4,18,716 Microsoft shares.

Microsoft has been investing heavily to bolster the fast-growing cloud business and catch up with market leader Amazon’s AWS.

“Given the competitive market and need to invest in both capex and operating expenses, profitability along AWS’s level may prove elusive for Azure for several years, if not forever,” Jefferies analysts said.

Microsoft also competes with Alphabet, IBM and Alibaba.

According to research firm Canalys, AWS is beating the competition in terms of market share, followed by Microsoft, which continues to grow faster than AWS, as of April this year. Google was ranked third. “Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation,” Nadella said on a conference call on Thursday.

Analysts expect the investments to pay off in the long run and provide rich dividends to shareholders, allowing Microsoft to rival Apple and Amazon in the race to be the first firm worth $1 trillion. — Reuters