As many of us are aware, Microsoft was not always the software and internet service company it is famous for being today. The technology giant was once known for providing traditional software services before it made the shift to the Cloud in order to keep up with the ever-changing world of technology.
This major transition of the company’s business model over the years has proven to be very successful, especially due to the company’s profitable cloud software. A lot of the credit goes to CEO Satya Nadella, who envisioned and executed this achievement. The success of the new business model has also been much to the delight of Microsoft’s investors, with share prices of the company growing around 40% over the past year.
According to Credit Suisse, since Nadella started as CEO in 2014, the revenue of Microsoft’s cloud business has risen dramatically from 3% to over 21% of total turnover by 2018. This was also echoed by Microsoft’s chief financial officer, Amy Hood, in an interview where she explained the financial success in the quarter has been “driven by ongoing demand” for the company’s cloud services.
The strong growth of Microsoft was reflected clearly in recent reports showing strong increases in profits and sales in the fiscal third quarter. Reports have shown the company enjoyed a rise in net income of 35% (to $7.4bn) compared to year 2017, whereas revenue increased by 16% (to $26.8bn) in the quarter – this performance was even better than previously forecasted by the Wall Street consensus. Microsoft Azure also was reported to have grown by 93% more than during the same quarter a year ago.
The transition to focusing heavily on developing the cloud business has benefitted the company via an increasing portion of ongoing and repetitive revenue from cloud subscriptions, compared to the more traditional one-off software sales. In fact, according to Credit Suisse analyst Michael Nemeroff, 30% of Microsoft’s sales is currently made up of recurring revenue from cloud-based Office software and gaming subscriptions. Nemeroff has also predicted this figure may increase to 50% within a period of four years.
Not too long ago, the rise in popularity of smartphones and the strength of such companies as Apple and Google led Microsoft to be seen as a “faded power” by some analysts. However, the company’s stock market value in now on par with Amazon, and even performing slightly better than Google. Furthermore, Microsoft’s personal computer shipments are currently profiting steadily as many organisations and businesses are in the process of replacing their outdated PCs with new devices equipped with the latest Microsoft operating system, Windows 10.
If you are interested in finding out more about Microsoft’s cloud services or hardware, contact us at WM Reply for the most updated information. As experts in this area, our friendly customer service team will be able to provide professional tips and advice regarding the pros and cons of the services or tools of the technology giant, while patiently guiding you through the selection process for finding the best products for your business.