Microsoft Corporation (NASDAQ: MSFT) is one of the world’s leading technology companies, with a diversified portfolio of software, hardware, cloud, gaming, and social media products and services. The company has been consistently growing its revenue and earnings, as well as its market value, which reached $2.4 trillion as of August 20211. Microsoft has also been investing heavily in research and development, acquiring innovative companies, and launching new initiatives to stay ahead of the competition and meet the changing needs of customers and society. In this article, we will explore some of the key aspects of Microsoft’s stock performance, business strategy, competitive landscape, market analysis, trends and roadmap.
Microsoft’s stock has been on a strong upward trend since 2016, when it surpassed its previous peak in 1999 during the dot-com boom. The stock has more than quadrupled in value since then, reaching an all-time high of $366.78 in July 20212. The stock has also outperformed the S&P 500 index, which gained about 120% in the same period3. Microsoft’s stock performance reflects its solid financial results, driven by its diversified revenue streams, high-margin businesses, loyal customer base, and strong cash flow generation. The company has also been rewarding its shareholders with regular dividends and share buybacks. In 2020, Microsoft paid $16.9 billion in dividends and repurchased $22.3 billion worth of shares4.
Microsoft’s main business strategy focuses on customer requirements and satisfaction by providing innovative and interoperable solutions that empower individuals and organizations to achieve more. The company operates in three segments: productivity and business processes, intelligent cloud, and more personal computing. The productivity and business processes segment includes licensing and subscription revenue for Office and Office 365 for commercial and consumer customers, LinkedIn solutions, Dynamics business solutions, Skype communications services, and other cloud-based services. This segment accounted for about 32% of the total revenue in 20205. The intelligent cloud segment includes the public, private, and hybrid server offerings and related services under the Azure brand, as well as Windows Server, SQL Server, Visual Studio, System Center, GitHub, Enterprise Services, and other cloud-based services. This segment accounted for about 34% of the total revenue in 20205. The more personal computing segment includes devices such as Surface tablets and laptops, Xbox gaming consoles and accessories, Windows operating system licenses for PCs and other devices, search advertising revenue from Bing, MSN online services, and other devices and services. This segment accounted for about 34% of the total revenue in 20205.
Microsoft’s strategy is also guided by its vision to enable every person and every organization on the planet to achieve more. To realize this vision, the company is pursuing four key ambitions: reinvent productivity and business processes; build the intelligent cloud platform; create more personal computing; and democratize artificial intelligence (AI). These ambitions are supported by several core principles that shape Microsoft’s culture and values: customer obsession; growth mindset; diversity and inclusion; one Microsoft; making a difference; trustworthiness; innovation; quality; agility; collaboration; accountability; respect; integrity; responsibility; sustainability; accessibility; social impact; digital transformation; security; privacy; compliance; ethics; transparency; reliability; resilience; scalability; performance; efficiency; simplicity; usability; design; elegance; beauty.
Microsoft operates in highly competitive markets that are constantly evolving with new technologies, customer preferences, industry standards, regulatory requirements, and business models. The company faces competition from various sources depending on the product or service category. Some of the major competitors include:
- Apple Inc. (NASDAQ: AAPL), which competes with Microsoft in devices (Surface vs Mac), operating systems (Windows vs macOS), productivity software (Office vs iWork), cloud services (Azure vs iCloud), gaming (Xbox vs Apple Arcade), online music (Spotify vs Apple Music), online video (Netflix vs Apple TV+), online news (MSN vs Apple News), online books (Kindle vs Apple Books), online podcasts (Spotify vs Apple Podcasts), online education (LinkedIn Learning vs Apple Education), online health (Fitbit vs Apple Health), online payments (PayPal vs Apple Pay), online maps (Bing Maps vs Apple Maps), online search (Bing vs Siri), online voice assistants (Cortana vs Siri), online messaging (Skype vs iMessage), online social media (LinkedIn vs FaceTime), online shopping (Amazon vs Apple Store), online advertising (Bing Ads vs iAd), hardware accessories (Surface Pen vs Apple Pencil), smart speakers (Harman Kardon Invoke vs HomePod), smart watches (Fitbit vs Apple Watch), smart glasses (HoloLens vs Apple Glasses), and smart cars (Azure vs CarPlay).
- Alphabet Inc. (NASDAQ: GOOG), which competes with Microsoft in cloud services (Azure vs Google Cloud Platform), productivity software (Office vs Google Workspace), online search (Bing vs Google Search), online voice assistants (Cortana vs Google Assistant), online maps (Bing Maps vs Google Maps), online video (Netflix vs YouTube), online music (Spotify vs YouTube Music), online news (MSN vs Google News), online books (Kindle vs Google Play Books), online podcasts (Spotify vs Google Podcasts), online education (LinkedIn Learning vs Google Classroom), online health (Fitbit vs Google Fit), online payments (PayPal vs Google Pay), online messaging (Skype vs Google Meet), online social media (LinkedIn vs Google+), online shopping (Amazon vs Google Shopping), online advertising (Bing Ads vs Google Ads), hardware devices (Surface vs Pixel), operating systems (Windows vs Chrome OS and Android), gaming (Xbox vs Stadia), smart speakers (Harman Kardon Invoke vs Google Home), smart watches (Fitbit vs Wear OS), smart glasses (HoloLens vs Google Glass), and smart cars (Azure vs Android Auto).
- Amazon.com Inc. (NASDAQ: AMZN), which competes with Microsoft in cloud services (Azure vs Amazon Web Services), online shopping (Microsoft Store vs Amazon.com), online video (Netflix vs Prime Video), online music (Spotify vs Amazon Music), online books (Kindle vs Amazon Kindle), online podcasts (Spotify vs Audible), online education (LinkedIn Learning vs Amazon Education), online health (Fitbit vs Amazon Halo), online payments (PayPal vs Amazon Pay), online advertising (Bing Ads vs Amazon Advertising), hardware devices (Surface vs Fire and Echo), gaming (Xbox vs Luna and Twitch), smart speakers (Harman Kardon Invoke vs Echo), smart watches (Fitbit vs Halo Band), smart glasses (HoloLens vs Echo Frames), and smart cars (Azure vs Alexa Auto).
Microsoft operates in a global market that is characterized by rapid technological changes, increasing customer expectations, and intense competition. According to the International Data Corporation (IDC), the worldwide information technology (IT) spending is expected to grow from $2.7 trillion in 2020 to $3.8 trillion in 2024, at a compound annual growth rate (CAGR) of 8.9%. The major drivers of this growth are the digital transformation initiatives across various industries, the adoption of cloud computing and artificial intelligence solutions, the expansion of 5G networks and edge computing, the emergence of new business models and ecosystems, and the increased demand for remote work and learning solutions amid the COVID-19 pandemic.
Microsoft has a strong position in several segments of the IT market, such as operating systems, productivity software, cloud services, gaming, and social media. According to StatCounter, Windows had a 76.3% market share of desktop operating systems as of July 2021, while Office 365 had a 54.8% market share of enterprise cloud applications as of Q4 2020. According to Synergy Research Group, Azure had a 20% market share of public cloud infrastructure services as of Q2 2021, while Xbox had a 25% market share of console gaming hardware as of Q1 2021. According to Sensor Tower, LinkedIn had a 9.5% market share of social networking apps by revenue as of Q2 2021.
However, Microsoft also faces significant challenges and risks in the IT market, such as the saturation and commoditization of some segments, the emergence of new competitors and substitutes, the regulatory scrutiny and legal disputes over antitrust and privacy issues, the cybersecurity threats and data breaches, the environmental and social impacts of its operations and products, and the potential disruption from technological innovations and paradigm shifts.
Trends and Roadmap
Microsoft is constantly monitoring and adapting to the trends and opportunities in the IT market, as well as anticipating and shaping the future with its vision and innovation. Some of the key trends that Microsoft is following and influencing are:
- Cloud computing: Microsoft is investing heavily in expanding its cloud capabilities and offerings, such as Azure, Office 365, Dynamics 365, Power Platform, GitHub, and Teams. The company is also developing hybrid cloud solutions that enable customers to seamlessly integrate their on-premises and cloud environments, such as Azure Arc and Azure Stack. Moreover, Microsoft is exploring new domains of cloud computing, such as quantum computing with Azure Quantum, edge computing with Azure Edge Zones, and confidential computing with Azure Confidential Computing.
- Artificial intelligence: Microsoft is leveraging its AI expertise and resources to enhance its products and services across various domains, such as natural language processing with Cortana and Translator, computer vision with Face API and Video Indexer, machine learning with Azure Machine Learning and Cognitive Services, knowledge mining with Project Cortex and Bing, conversational AI with Bot Framework and Power Virtual Agents, and autonomous systems with AirSim and Project Bonsai. Microsoft is also democratizing AI by making it accessible and affordable for everyone, such as through AI for Good initiatives, AI for Health grants, AI for Accessibility tools, and AI for Earth programs.
- Gaming: Microsoft is expanding its gaming ecosystem with its Xbox brand, which includes hardware devices such as Xbox Series X|S consoles, software platforms such as Xbox Game Pass subscription service and Xbox Cloud Gaming streaming service, content studios such as Bethesda Softworks and Mojang Studios, and community networks such as Xbox Live and Mixer. Microsoft is also innovating in gaming technologies, such as virtual reality with Windows Mixed Reality headsets, augmented reality with HoloLens glasses and Minecraft Earth game, and adaptive gaming with Xbox Adaptive Controller and Gaming for Everyone program.
- Social media: Microsoft is growing its social media presence with its LinkedIn platform, which connects professionals and provides solutions for talent acquisition, learning and development, sales and marketing, and social impact. Microsoft is also integrating LinkedIn with its other products and services, such as Office 365 and Dynamics 365. Microsoft is also exploring new ways of social media engagement, such as through video creation with Flipgrid app, podcast production with Skype app, and live streaming with LinkedIn Live feature.
Microsoft’s roadmap for the future is guided by its mission to empower every person and every organization on the planet to achieve more. The company is pursuing several strategic goals and initiatives to realize this mission, such as:
- Modernize the workplace: Microsoft aims to enable customers to work from anywhere and collaborate effectively with its modern workplace solutions, such as Windows 10 and Windows 11 operating systems, Surface devices, Office 365 apps, Teams app, OneDrive cloud storage, SharePoint intranet, Yammer enterprise social network, and Stream video service.
- Transform the business: Microsoft aims to help customers to optimize their operations and innovate their products and services with its business applications solutions, such as Dynamics 365 apps, Power Platform apps, Power BI analytics service, Power Apps app development platform, Power Automate workflow automation platform, and Power Virtual Agents chatbot creation platform.
- Build the cloud: Microsoft aims to provide customers with a trusted and scalable cloud platform that supports their digital transformation and business growth with its cloud infrastructure solutions, such as Azure services, Azure DevOps development tools, Azure IoT internet of things solutions, Azure AI artificial intelligence solutions, Azure Blockchain blockchain solutions, and Azure Synapse analytics solutions.
- Create the future: Microsoft aims to inspire customers to imagine and create new possibilities with its future technologies solutions, such as HoloLens mixed reality device, Windows Mixed Reality virtual reality device, Surface Neo dual-screen device, Surface Duo dual-screen phone, Project xCloud cloud gaming service, Project Natick underwater data center, Project Silica glass storage medium, and Project Brainwave neural network accelerator.
Microsoft is a tech giant with a vision for the future. The company has a strong stock performance, a diversified business strategy, a competitive market position, and an innovative roadmap. Microsoft is well-positioned to capitalize on the opportunities and overcome the challenges in the IT market, as well as to fulfill its mission and vision of empowering every person and every organization on the planet to achieve more.