TL;DR — The Most Well-Diversified Company in the World, with a World-Class CEO, Leads the Charge in the Age of Data
Microsoft’s 2019 Revenue By Product/Service
Microsoft Touches Everything in the World and Is Poised to Dominate in the Age of Data
Think for a second how often you interact with a Microsoft product on a daily basis.
- If you visit a website, there’s a good chance that it’s running on Microsoft Azure (26% of revenue).
- If you are working from an office, there’s a good chance that you are using Office365 (25% of revenue)
- If you are using a PC, chances are that PC is running on Windows (16% of revenue)
- If you’re gaming, there’s a chance that you’re using an XBOX (9% of revenue)
- If you’re using a search engine, there’s a (low) chance that you’re using Bing (6% of revenue)
- If you’re a working professional, there’s a (high) chance that you’re using LinkedIn (5% of revenue)
The reality is that everyone, in one-way-or-another, is using a Microsoft product. As a result, Microsoft has more data (and types of data) than any other technology company in the world. In the new age of data, where “data is the new oil”, Microsoft is set to dominate.
Combined with one of the world’s strongest balance sheets, Microsoft is also poised to also capitalize on next-generation technologies, including, but not limited to, quantum computing, cloud gaming, VR / AR, blockchain, and smart cloud computing running on artificial intelligence.
Microsoft is the Most Well-Diversified Tech Giant with Products in Very Attractive Markets
Microsoft has a great mix of growth products (Azure, Office365) and value products (Windows, Enterprise Services). Azure and Office365 alone make up over half of the company’s revenue, and based on their revenue trajectory, will make up an increasingly larger portion of the company’s revenue going forward.
Microsoft’s key growth products have attractive momentum, as they continue to win in attractive end markets. Let’s dive into the two key growth products below.
Microsoft Azure (Cloud Computing)
Microsoft Azure has come a long way in catching up to (and oftentimes, beating) its largest competitor, Amazon Web Services (AWS). Although AWS had a nearly 7-year head-start, Microsoft Azure was able to win the $10 billion JEDI defense contract from the United States Defense Department, shocking many investors who believed that the contract would be a shoo-in for AWS.
Microsoft’s cloud revenue has continued to climb, as outlined by the graph below:
Office365, Microsoft Teams (Productivity Tools)
Microsoft’s Office365 continues to gain momentum within businesses across the world, as outlined by the graph of Office365’s monthly active users below:
In recent times, Microsoft Teams has been powering past Slack and should continue to benefit from the transition to a work-from-home environment.
Microsoft offers investors an opportunity to be a part of the world’s most diversified company, with a world-class CEO, with leading products in very attractive end markets. The company offers a good mix of both growth and value products and offers one of the world’s greatest balance sheets.
From a profitability perspective, the company is a cash cow, with 30%+ profit margins, on top of being a growth machine. The company has also proven to have one of the most stable dividend payments in the world.
Led by one of the world’s wisest CEOs (Satya Nadella), who has led the charge at Microsoft since 2014, Microsoft looks poised to continue its amazing streak, and become a powerhouse in the new age of data.
The above thoughts reflect my own personal investment views and not those of my employer.