Huge — and Growing

Microsoft (NASDAQ: MSFT), with a market value recently topping $1.5 trillion and annual revenue topping $143 billion, was once an aging tech giant that had grown complacent and overly dependent on its Windows and Office software cash cows. But under CEO Satya Nadella, who took the helm in 2014, Microsoft evolved its core software products into cloud-based subscription services, and became the world’s second-largest cloud infrastructure platform provider after Amazon. The Office 365 Commercial segment saw revenue grow 19% year over year in the most recent quarter, while Microsoft’s cloud service Azure posted revenue gains of 47%. For context, the company’s overall revenue rose 13%. Microsoft’s Surface and Xbox businesses are also growing briskly — delivering revenue gains of 28% and 65%, respectively, in the last quarter. The company has been abandoning its dying smartphone business: Instead of producing more low-margin phones, Microsoft launched iOS and Android versions of its popular apps, which kept it relevant in the mobile market even without a leading mobile OS. With a forward-looking price-to-earnings (P/E) ratio recently near 32, Microsoft’s stock isn’t cheap. But though the stock has soared more than 340% over the past five years, Microsoft is likely to keep growing in the years ahead, rewarding long-term investors. It also offers a small but growing dividend. (The Motley Fool owns shares of Microsoft and has recommended Microsoft stock and options.)