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What Drove Microsoft Stock to Touch an All-Time High

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Microsoft’s fiscal 4Q17 and 2017 results

On July 21, Microsoft (MSFT) stock crossed $74.3, its all-time high since the company became public in 1986. On July 20, 2017, Microsoft posted its fiscal 4Q17 and fiscal 2017 results. On the same day, in after-hours trading, Microsoft’s stock surged to $77.

In the past three months, Microsoft stock has gained 11%, outperforming the S&P 500 Index (VOO), which has gained only 5%.

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Improved cloud performance

Microsoft stock surged primarily on better-than-expected fiscal 4Q17 results and its improved stance in the crowded and competitive cloud space. Microsoft’s revenues of ~$24.7 billion and non-GAAP (generally accepted accounting principles) EPS (earnings per share) of $0.98 beat analyst estimates by $430.0 million and $0.27, respectively, in fiscal 4Q17.

Microsoft’s commercial cloud revenue grew 56% on a YoY (year-over-year) basis and hit an annualized run-rate of $18.9 billion in the last quarter. In order to focus on Azure and overall cloud sales, Microsoft recently announced employee layoffs. The company’s cloud business contribution has now grown to 20% of total revenues, as compared to 5% three years ago.

Azure, Microsoft’s cloud computing offering, reported 30% growth in its bookings for fiscal 4Q17, while its revenue rose 97%. Microsoft Office 365, Dynamics CRM, and Azure have collectively played a vital role in the company’s improved cloud performance.

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