What Drives Microsoft’s Office 365?



Growing subscriber base driving business

Microsoft’s (MSFT) Office 365, a key driver of its overall business, has maintained strong growth, driven by demand across the industry. In the last five quarters, its Office 365 subscriber base has grown at a compound annual rate of 4%, as shown in the graph below.

One-stop solution

Office 365 offers multiple solutions for clients. In addition to Word, Excel, and Powerpoint, it offers a wide variety of services, from file sharing through SharePoint and OneDrive, to meetings on Skype, to Power BI to offer insights to customers on different datasets.

The integration of these products, offering seamless service and saving time, may continue to drive demand for Microsoft and maintain its position in the market it shares with IBM (IBM), Amazon (AMZN), and Oracle (ORCL).

40% of its customers still on the E1 plan

As discussed, Office 365 is offered in E1, E3, and E5 versions, where E1 is the lightest version and E5 is the premium version. As 40% of Microsoft’s client base is still below E3, there may be a growth opportunity.

Emerging markets

Emerging markets are key catalysts for Microsoft’s Office 365 suites. It is targeting the PC market in emerging regions such as India and China, where there are growth opportunities and business looks stable. The cloud, allowing customers to easily deploy software from any location, is another driver for Office 365.

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