Shares of Microsoft Corporation (MSFT) slightly increased by 0.2% in premarket trading on Wednesday, after renowned Wedbush analyst Dan Ives raised his price target to $315 from $290. This followed his research, which demonstrated overall positive cloud deal flow and momentum for the Redmond, Washington-based software giant. Ives maintained the outperform rating he has held on the stock for at least the past three years. This gain came after MSFT stock had declined by 2.3% on Tuesday, leading the Dow Jones Industrial Average (DJIA) decliners.
Microsoft’s stock has been on a strong upward trend so far this year, as investors have begun to gradually recognize its potential in the cloud computing space – an area that has been steadily gaining momentum throughout the wider technology industry. In fact, recent research by MarketsandMarkets suggests that the global cloud computing market is expected to grow from $371.4 billion in 2020 to $832.1 billion by 2025, at a Compound Annual Growth Rate (CAGR) of 17.5% during the forecast period. This growth will primarily be driven by the increasing adoption of cloud computing solutions in both small and large enterprises, as well as the expanding data center capacity to support cloud services.
Microsoft has been at the forefront of this growing industry with its Azure cloud computing platform, which has become a significant competitor to market leader Amazon Web Services (AWS). The company has been investing heavily in its cloud infrastructure, data centers, and platform innovation.
One notable factor that sets Microsoft apart from its competitors is its hybrid cloud strategy, which provides customers with the flexibility to connect on-premises infrastructure with public clouds. This differentiated approach has allowed Microsoft to attract more enterprise customers who are seeking the benefits of cloud services without completely abandoning their existing on-premises infrastructure.
Microsoft has also been acquiring companies to bolster its cloud offerings. In 2020, the company acquired ADRM Software, a developer of large-scale, industry-specific data models to help organizations build intelligent cloud-based systems. Another high-profile acquisition was ZeniMax Media, the parent company of video game publisher Bethesda Softworks, in a $7.5 billion deal designed to strengthen Microsoft’s position in the gaming market and expand the company’s cloud gaming service, xCloud.
Additionally, Microsoft has been exploring new strategic partnerships to expand its cloud services. In June 2021, the company signed a deal with AT&T Inc. (T) in which Microsoft will become AT&T’s preferred cloud provider for non-network applications, as well as assist the telecommunications giant in developing its 5G core. Another recently announced partnership is with Germany-based Siemens AG, aimed at delivering a series of cloud services designed to improve manufacturing processes and accelerate the Industry 4.0 digital transformation journey.
Investors seem to have taken notice of Microsoft’s efforts in the cloud computing realm, as well as the potential profitability of this space. In the third quarter of 2021, Microsoft reported that its “Intelligent Cloud” division saw a solid 23% increase in revenue, with a 50% increase in Azure revenue. This growth contributed to the company’s overall quarterly revenue of $41.7 billion, a 19% improvement over the prior year.
As the cloud computing market continues to expand, Microsoft is well-positioned to capitalize on this growing trend, with its innovative platform, strategic acquisitions, and partnerships setting it apart from the competition. Furthermore, the company’s strong financial performance and increasing enterprise adoption provide investors with confidence in Microsoft’s prospects in this rapidly evolving industry.
Therefore, as Ives’ research suggests, the cloud deal flow and momentum seem to be moving in a favorable direction for Microsoft, and as a result, the software giant’s stock has been earning increased attention and appreciation from investors. If the current trends continue, Microsoft appears to be on a promising path toward sustained success in the lucrative cloud computing market.
