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Microsoft Azure: The Trend Continues

Mar. 11, 2020 10:00 AM ETMicrosoft Corporation (MSFT)AMZN24 Comments
Business Quant profile picture
Business Quant


  • Azure posted a yet another quarter of 60%-plus revenue growth.
  • Its revenue growth accelerated, while AWS' decelerated.
  • The platform seems well-positioned to continue growing and becoming a prominent growth driver for Microsoft in the near future.

Microsoft’s (NASDAQ:MSFT) Azure revenues were thought to be slowing down, but the company proved naysayers wrong once again. Azure’s revenue growth actually accelerated during Q2 FY20, and the platform recorded a yet another quarter of 60%-plus revenue growth. But its growth won’t stop here. There is reason to believe Microsoft’s Azure will continue to grow at blistering rates and become a prominent growth driver for the company as a whole in coming quarters.

(Image source, Image labeled for reuse)

Growth Continues

Let me start by giving credit where it’s due. Many firms have tried to crack their way into the IaaS and PaaS space, but to no avail. After all, the barriers to entry involve enormous capital expenditures, ambitious leadership, aggressive roadmaps and think tanks that are well-versed with up-and-coming trends in the cloud. But Microsoft was able to make its way into the industry quite successfully in spite of Amazon Web Services (AMZN) dominating the space nearly all by itself. This, in my opinion, is a truly commendable feat.

Having said that, Azure has posted 60%-plus year-over-year revenue growth in 13 of its 14 last quarters. Its growth slid slightly below the 60%-mark during Q1, and that was enough to spark speculation over its prospects. Where some said that challenging macroeconomic conditions are weighing down on Azure’s growth, others argued that Azure is downright incompetent against AWS. But Microsoft proved the naysayers wrong by posting an acceleration in Azure’s revenue growth in the very next quarter.

(Source: Business Quant)

Now, I do expect Azure’s growth to eventually slow down at some point in the future. Its revenue base is growing by a significant amount every quarter, and it can’t keep growing at these monumental rates forever. But the fact that Azure posted revenue acceleration, instead of deceleration, in the last quarter suggests that the platform

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Comments (24)

So called good numbers to not always equate to a zooming price especially with many stocks in bubble areas like this one.
Has anyone been paying attention to the new flight simulator game currently in development? Alpha footage shows near realistic world including high level of details of individual buildings via real Bing Maps technology. And all of that computation is being powered by Azure cloud! Once they prove out how viable Azure compute is, the number of practical use cases will grow. Azure is nowhere near its full glory yet.
how low should we wait before buying back in? do you expect the drop to go as low as $90.
Niksurfs profile picture
Excellent article__thank you!
Growlzler profile picture
@Business Quant ,

Have you looked into Azure's work on Augmented Intelligence yet?

Dividend Ambassador profile picture
MSFT is a great company with fantastic products and services but it has been significantly overpriced. It will be interesting to see if it reverts to a more normal valuation as we enter what I believe will be the MAGA Trump/Coronavirus recession of 2020-2021.
Unless they provide terrible earning number, I doubt it will drop much.
GR Value profile picture
Yup. It's worth under $100 no question. Not even a close question. 1.1 trillion market cap? 1.3% yield distributing most of earnings? It can easily fall to $80 for no reason or for good reasons.

To give an example of how insane MSFT's valuation got, it was $101 in early 2019 and is still up 350% in 4 1/2 years, while earnings have only doubled (incorporating the tax cuts as well).

MSFT seems more like a short if you are brave and think this downturn continues.
Jorl profile picture
12 Mar. 2020
Hi so what will be a gd price to buy?
Good Article -- MSFT is firing on all cylinders. Down $30+/share. LOL - if it was a strong buy thirty dollars higher, it's a fantastic buy at the current price.

I respect the uncertainty of COVID-19 virus but common sense tells me that MSFT isn't the Cruise industry. People aren't going to stop using MSFT's products (or AAPL's for that matter). The misery cadre on CNBC have terrified many elderly and other retirees with the constant tirades that constantly reinforce negative, negative, negative segment after segment.

What passes for Journalism on business channels is a F***ing Joke! Don't just report --- add your own spin, or making medically and public health conclusion w/o a scintilla of actual knowledge. Bring some naysayer on early in the day and then parrot every blessed speculation or negative inference over and over and over again.

Business is known to be heartless but these Journalists are malicious, imo. Shareholder sdeserve better from the business media. Cut out the B.S. about 'we only report the facts'. That's a baldface lie adding to a story, quoting unreliable sources for medical/public health conclusions.

Be objective! Maybe then, the Media wouldn't be rated lower than Politicians by Americans.
Dead Man Joaquin profile picture
Like you, I believe the Corona virus is problematic but likely overstated. But from a financial point of view the recession, very possibly depression that follows is extremely concerning. The financial impact of all of the behavioral changes along with the oil crash will be felt in many unanticipated areas for a long while.
DividendGems profile picture

"People aren't going to stop using MSFT's products"

If the economy contracts it will be felt across all industries. Some businesses are already cutting spending. Some businesses will go bankrupt. Many people will lose their jobs. Microsoft revenue declined in 2009 and 2016. We will likely see a repeat.
yieldhunter196 profile picture
Fantastic stock! I buy the dip. Cant have enough shares of this one
The trend for MSFT shares continues to go down so I can get it at my original wanting price of 144 😄
How is AAOI doing lately?
Azure always had an advantage because of their software dominance with the Windows platforms across all industries who used PCs and servers. So moving to the cloud with them was a safe bet. AWS is more memorable because they didn’t have that built in advantage. They started from scratch by building on their internal systems that ran their businesses.
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