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Can We Expect Microsoft to Continue to Increase Spending?

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Microsoft’s capex rose to $3.5 billion

What’s happening in the global cloud computing market will greatly influence spending at Microsoft (MSFT). The company could continue to increase its capital spending as long as there’s strong demand for its cloud services, according to what chief financial officer Amy Hood told Bloomberg in an interview.

Microsoft’s capex (capital expenditure) was $3.5 billion in fiscal 3Q18 (March quarter) compared to $3.3 billion in 2Q18 and $2.1 billion in 3Q17. Microsoft saw a strong demand for its cloud services in the latest quarter, with Azure revenue increasing 93% YoY (year-over-year).

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Microsoft to open its first Middle East data centers

To meet the growing demand for its cloud services, Microsoft is planning to build more data centers as it looks to expand its cloud computing capacity to better compete with larger rival Amazon (AMZN). It will open its first Middle East data centers in Abu Dhabi and Dubai in the United Arab Emirates. The company is also planning to open more data centers in Europe with two more cloud locations in Germany.

Microsoft’s share of the cloud market grew the fastest last year

Microsoft recorded the fastest increase in its global cloud market share last year, according to Synergy Research. Its share of the global cloud market increased 3% in 2017 compared to a 1% increase for both Alphabet’s (GOOGL) Google and Alibaba (BABA). Amazon’s share of the cloud market increased only 0.5% last year, while International Business Machine’s (IBM) share declined 0.5%. However, Amazon remains the cloud provider to beat since it boasts a market share that is more than twice its closest competitor, Microsoft.

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