Microsoft's cloud business will push it over the $1 trillion mark (MSFT)

pulse

May 3, 2018 5:43 PM

Microsoft has been in an intense cloud war with Amazon. Morgan Stanley says, whatever the outcome, Microsoft's cloud business will be the leading cog in propelling the company to become a $1 trillion company.

Microsoft's exploding cloud business has a lot of life left in it, and will be the key driver to get Microsoft to the level Weiss predicts.
Office 365 will also be key.

There's been a lot of talk about whether Microsoft, Amazon, or Google will be the first ever $1 trillion company, but Morgan Stanley analyst Keith Weiss is here to settle the score. While he didn't address the other companies, in a note sent out to clients on Thursday, Weiss said that Microsoft will reach the $1 trillion mark, driven in large part by its cloud business.

"Strong public cloud positioning, large distribution channels, a big installed customer base, and improving margins support a path to $1 trillion market cap and $130 price target for Microsoft," Weiss wrote.

Microsoft Azure is one of Microsoft's most important drivers of its cloud business. The company's third-quarter earnings report, out last Thursday, said that Azure sales grew 93% year-over-year. That helped drive commercial cloud-service revenue at large up 58%. And Weiss doesn't see Azure's growth stopping there.

Azure will be the "leading contributor to gross margin dollar growth through 2021," Weiss says. He projects gross profit on Azure products to be $6.4 billion by 2021.

And it's not only Azure that will help propel Microsoft to these lofty heights. Office 365 will also provide a boost. "Our forecasts show Office 365, along with Azure, as the top contributors to gross profit dollar growth over the next several years," he said.

Microsoft is up 8.46% this year.

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