Microsoft Corp. became even more deserving of its $800 billion-plus valuation Thursday by showing strong growth and projections for more, but the 43-year-old software giant can’t rest now if it wants to maintain its seat at the table with other tech giants.
Microsoft MSFT, -0.68% reported fiscal fourth-quarter earnings that surpassed Wall Street’s expectations Thursday, and surpassed the $100 billion annual revenue mark for the first time, topping $110 billion to boot. At an age when growth is hard to come by for most tech companies, Microsoft reported double-digit revenue growth across all its businesses except for Office consumer products, which was up 8%. The star again was its Azure cloud business, continuing its tear with revenue growth surging 89% in the quarter.
The company’s shares, up about 22% this year compared with a 4.9% gain in the S&P 500 SPX, -0.40% jumped further in after-hours trading, after Chief Financial Officer Amy Hood predicted the company would have slightly better revenue growth than Wall Street had forecast for the first quarter of its new fiscal year.
All of those numbers show how the conversation around Microsoft, which had grown as stale as the company, has changed under Chief Executive Satya Nadella. There was even a debate Thursday on CNBC about whether Microsoft is a “growth stock” that should be included with the so-called FAANG stocks (Facebook Inc. FB, -0.61% Amazon.com Inc. AMZN, -1.63% Apple Inc. AAPL, +0.78% Netflix Inc. NFLX, -2.91% and Google parent company Alphabet Inc. GOOG, -0.75% GOOGL, -1.14% GOOGL, -1.14% two of which are fast approaching $1 trillion in market cap).
Microsoft’s growth shows it does belong in that discussion. In the quarter, Microsoft’s overall revenue grew 17% year-over-year, a peak for the company over the last eight consecutive quarters, after it had sunk into the single digits with one quarter of no growth in early fiscal 2017. However, that doesn’t mean the future is going to produce the same results: Positive growth in the PC market, which recorded its strongest growth in six years, is not a given moving forward, as the Windows 10 refresh slows down.
Nadella has steered the company to much higher growth in his tenure so far, but the PC business is just one of Microsoft’s many endeavors that could struggle to grow enough in the years ahead to maintain the current trajectory. With profit growing and a strong foothold in the ever-critical cloud and software businesses, though, Microsoft should not be forgotten when we discuss the tech giants of this age.