Microsoft Corp. took its place in the history books, as just the second US public company to reach $2 trillion market value, buoyed by its dominance in cloud computing and enterprise software.

Indications are that Microsoft’s value will expand even further in a post-coronavirus (COVID-19) world. Bloomberg is reporting that shares in the American software giant rose as much as 1.2 per cent in New York yesterday, enough for the company to briefly join Apple Inc. as one of only two companies trading at such a lofty value before closing pennies short of the mark at US$265.51.

According to Bloomberg, Saudi Aramco eclipsed that threshold briefly in December 2019, but currently has a market value of about US$1.9 trillion. Since taking the reins in 2014, Microsoft’s Chief Executive Officer, Satya Nadella has reshaped the Redmond, Washington-based company into the largest seller of cloud-computing software, counting both its infrastructure and Office application cloud units. 

Microsoft still evades antitrust regulators scrunity

In fact, Microsoft is also the only one of the biggest US technology companies that have so far evaded the recent wave of scrutiny from increasingly active American anti-trust regulators. As a result, Microsoft has been given a freer hand in both acquisitions and product expansion.

Since the start of the year, Microsoft has gained 19 per cent, outperforming Apple and Amazon Inc., as investors piled into the stock on expectations of long-term growth for both earnings and revenue.

The increased investor optimism was bolstered by expansion in areas like machine learning and cloud computing. 
Microsoft’s third-quarter results, released in late April, topped expectations and demonstrated strong growth across its business segments.

The tech-heavy Nasdaq 100 Index outperformed the S&P 500 Index yesterday after Federal Reserve Chair, Jerome Powell reiterated his view that inflation will be short-lived. 

Analysts comment on Microsoft’s performance

Microsoft “has its hands in a lot and it is doing it all well: gaming, cloud, automation, analytics, AI, (Artificial Intelligence) commented, Hilary Frisch, senior research analyst at Clearbridge Investments. She added, “It is an attractively valued name within tech, and it should benefit from both the economy reopening as well as from a more pronounced shift toward the cloud.”

Co-founded in 1975 by Bill Gates and Paul Allen, Microsoft created the personal-computer software industry and dominated the market for PC operating systems and Office software for years. “Microsoft checks all the boxes: it is in the markets that investors favor, it offers strong and sustainable growth, and it remains very well-positioned to capitalize on the long-term secular trends we see in technology,” said Logan Purk, an analyst at Edward Jones.

He remarked that a US$2 trillion valuation, “is warranted, given how it has pivoted toward the cloud, and it remains attractively valued even given the strong performance.”

According to data compiled by Bloomberg, more than 90 per cent of analysts recommend buying Microsoft, while none has the equivalent of a sell rating on the stock. 

Microsoft’s cloud-computing business has been a central force behind the advance. Data compiled by Bloomberg showed that the Intelligent Cloud business accounted for 33.8 per cent of Microsoft’s 2020 revenue, making it the largest of the three major segments for the first time, and up from 31 per cent in 2019. 

The division showed revenue growth of 24 per cent last year, compared with the 13 per cent growth in Productivity and Business Processes and the six per cent growth of Microsoft’s More Personal Computing unit.