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How Microsoft Stock Fared Compared to Its Peers in Fiscal 2017

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Microsoft stock movement compared to its peers

Tech giant Microsoft (MSFT) released its fiscal 4Q17[1. fiscal 4Q17 ended June 30, 2017] earnings on July 20, 2017, after the market closed. Microsoft stock has nearly doubled during the tenure of its CEO, Satya Nadella, who took the reins of the company in February 2014.

The chart below shows the movement of Microsoft stock in comparison with peers Oracle (ORCL) and Alphabet (GOOG). Although Microsoft and Oracle have different core businesses, both companies are going all out to capture a slice of the rapidly growing cloud pie.

Although Microsoft is behind only Amazon (AMZN) in the cloud space, its revenues barely grew in comparison to Alphabet’s revenues. Alphabet’s revenues are growing at a rate of more than 20% on an annual basis, whereas Microsoft wasn’t able to report growth in fiscal 2016.

Microsoft’s revenues fell ~9% in fiscal 2016. Despite the difference in their revenues, both companies generate similar annual revenues. Let’s look into Microsoft’s strategy, which gave it an edge over Alphabet and Oracle.

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Microsoft’s strategy in the changing IT environment

In the last three years, Microsoft stock has reached new heights. This improvement is mostly due to Microsoft’s shift from being entirely Windows-centric to its “Mobile First, Cloud First” strategy. The company’s new strategy involves bundling various offerings with the aim of providing a holistic cloud offering to its customers. 

Office 365, Azure, and Dynamics 365 are the company’s key offerings, which have strengthened and expanded its presence in the cloud space. Better-than-expected fiscal 4Q17 results provided additional lift to the positive sentiment surrounding Microsoft stock.

Later in this series, we’ll discuss Microsoft 365, the company’s recently launched product that utilizes the same strategy.

Although Microsoft is successfully making a transition toward the cloud, this transition comes at the expense of shrinkage in its operating margins. Later in this series, we’ll discuss the methods Microsoft employs to trim its costs.

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