Microsoft keeps proving that it’s a leader time and again even if the company doesn’t always get the kind of recognition that the FAANG (Facebook, Amazon, Apple, Netflix, and Google) businesses do. For example, Microsoft is:

  • Pioneering the use of mixed reality as a way of doing business. For example, Ford engineers and designers use Microsoft’s mixed reality technology HoloLens (goggles equipped with augmented reality) to overlay 3D car features on clay models, which enables teams to more quickly assess the viability of features they’re designing (such as side mirrors) and make alterations as needed.
  • Building a cloud business that leads the industry. Microsoft has steadily built a cloud computing business that positions the company with Amazon as the two leaders in the space. The company just recently signed a five-year agreement with Walmart to use Microsoft’s cloud services. Raj Bala, a Gartner analyst, said in a New York Times article about Microsoft that the booming cloud computing industry is “a two-horse race between Amazon and Microsoft,” which Google being a follower.
  • Setting an example for embracing an open platform and open community by acquiring GitHub. The acquisition sends a strong sign to the many companies that are holding out on embracing new ways of working, open source development, and infrastructure as code (e.g. use of containers).

On July 19, The company offered a progress report on its journey to leadership. At market close, Microsoft reported  it had achieved $100 billion in annual revenue for the first time. The company’s fourth quarter fiscal 2018 revenue (ended June 30) and earnings both exceeded analysts’ expectations.

Although growth came from several sources, the story of Microsoft’s quarter was the ascendance of its cloud services, known as Commercial Cloud, which grew 53 percent for the quarter, bringing in nearly $7 billion in revenue. That rate of growth also exceeded analysts’ expectations.

Evercore ISI analyst Kirk Materne told CNBC that Microsoft’s public cloud service, Azure, is growing at a faster rater rate than Amazon Web Services did when AWS was a similar size.

That growth rate is even more impressive when you consider that Microsoft, unlike Amazon, has needed to transition a legacy company to the digital age. As The New York Times noted,

For Amazon and Google, cloud-computing services were a natural outgrowth of their original businesses — e-commerce and search, respectively. Both companies were born on the internet.

Not so for Microsoft, which has made the most striking transition to the cloud. Its heritage, corporate wealth and industry dominance was based on selling packaged software and its Windows.

On its blog, Microsoft is crowing about its accomplishments, and rightfully so, for Microsoft is working with industry leaders to build their businesses with Microsoft technologies as the foundation. Of the recently announced Walmart agreement cited above, Microsoft said, ‘Using a broad base of cloud, AI and Internet of Things (IoT) solutions, [Walmart] plans to further its mission in creating incredibly convenient ways for customers to shop and empower associates to do their best work.”

Microsoft is also helping Walt Disney World use internet of things technology to fight the demise of purple martins and to transform Campbell Soup’s information technology operations on top of global hybrid cloud solution.

By contrast, IBM has been trotting out case study after case study of clients using its Watson artificial intelligence technology, but the company’s financial performance has not been as impressive as its innovation story. Microsoft is delivering both technology leadership and impressive financials. And Microsoft is, once again, a force to be reckoned with.

Saul Delage

Saul Delage

VP Growth