Two years ago, Microsoft’s value was at $1 trillion. On June 24, it reached over $2 trillion. It’s incredible how Microsoft — one of the world’s top software companies — doubled their value in only a short amount of time.
Let’s take a moment to look at how they went from $1 trillion to $2 trillion, and see how it could reach the $3 trillion milestone.
$1 trillion to $2 trillion
When Nadella took over as CEO, he had a new “cloud and mobile first” agenda. Under his watch, Microsoft left the Windows Phone and created mobile apps for Android and iOS instead. It changed Office’s desktop software into cloud services, which kept users with subscriptions, and pushed Azure into the number two cloud infrastructure service after AWS.
Between fiscal ’14 and ’20, which ended July of last year, the company’s commercial cloud revenue — which mostly comes from Microsoft 365, Dynamics, and Azure — increased from $2.8 billion to $51.7 billion.
Nadella’s new approach started out as a squeeze on the company’s margins, but it has certainly paid off and led to exciting new growth.
Future: $2 trillion to $3 trillion
For Microsoft to make it to the $3 trillion marker, its stock must rise another 50% — which could certainly happen during the next couple of years, for three reasons.
First, the cloud market might grow at a compounded annual growth rate (CAGR) of 16.4% between 2020 and 2027. If Microsoft maintains its pace in the sector, its cloud revenue could keep rising at high double-digit rates and account for an even greater percentage of its top line.
Azure will keep attracting customers, especially retailers, as the perfect alternative to AWS. And the increasing need for AI and data storage will tie those customers to its platform.
Second, Microsoft’s gaming sector will also grow as it creates new Xbox systems, improves its cloud gaming platform, and buys more game publishers like Bethesda to create exclusive first-party titles. Microsoft could slowly also remove the boundaries that exist between Windows games and Xbox systems with local streaming options.
Finally, Microsoft will keep expanding into next-gen markets. Its HoloLens AR headset, as an example, will likely make way for new consumer-oriented hardware — which will diversify its business and increase its reach well beyond PCs and cell phones.
Author: Steven Sinclaire