Microsoft’s investing strategy has undergone major shifts in the past decades as it adapts to new technologies and maintains competitiveness. In recent years, Microsoft’s strategic move into cloud computing with Azure has been crucial in driving the company’s growth and stock rise. Msft has leveraged acquisitions, partnerships and in-house development to rapidly expand Azure’s capabilities and cement its position as the second largest cloud provider after AWS. This cloud focus combined with steady revenue streams from Microsoft Office and diversification into gaming has transformed Msft from primarily a software company into a broad technology firm well positioned for future growth.
Msft expanded cloud capabilities through strategic acquisitions
Microsoft has made several key acquisitions to quickly gain technology and talent needed to develop Azure’s capabilities. In 2013, Microsoft acquired cloud infrastructure provider StorSimple to bolster Azure’s hybrid cloud offerings. The following year, Msft purchased Revolution Analytics for its predictive analytics capabilities to enhance Azure Machine Learning. In 2016, Msft made its largest acquisition by purchasing LinkedIn for $26 billion, providing access to invaluable data on professional social networks to improve Microsoft 365’s offerings. Other major acquisitions include GitHub in 2018 to boost Azure’s developer tools and appeal, and Nuance Communications in 2021 for its conversational AI strengths which can be integrated into Azure and Dynamics 365.
Msft forged strategic partnerships to promote Azure adoption
In addition to acquisitions, Microsoft has actively pursued partnerships to promote Azure adoption, especially with open source software companies. In 2020, Msft partnered with Red Hat to make Red Hat Enterprise Linux the preferred Linux choice on Azure. Msft also partnered with Docker to simplify container workflows for developers on Azure. Major partnerships were also formed with SAP and Adobe to optimize their enterprise software on Azure. These partnerships validate Azure’s enterprise capabilities and make it more appealing for companies already using these other software platforms.
Msft focused in-house development on machine learning and infrastructure
While acquiring capabilities, Msft also expanded Azure’s services through in-house development. Major in-house projects included building Azure Machine Learning and Cognitive Services to provide AI capabilities like natural language processing, computer vision and prediction. Msft also focused on developing Azure’s global infrastructure and data centers to rival AWS, cutting costs with hyper-scale infrastructure while meeting security and compliance needs.
Transition to cloud drove Msft growth and stock gains
Microsoft’s strategic push into cloud computing has been crucial for its renewed growth and stock market success in recent years. While legacy software products continue generating steady revenues, Azure’s growth has driven Msft’s overall revenue and stock appreciation. In 2022 Azure revenue grew by 35% and accounted for over 22% of total Msft revenue. Msft stock rose by 18% in 2022, significantly outperforming the S&P 500’s decline, boosted by strong cloud growth. The cloud shift has been transformational for Microsoft, turning it into a leading enterprise technology company poised for future success.
In summary, Microsoft’s investing strategy in recent years has focused on scaling Azure into an enterprise cloud leader through acquisitions, partnerships and internal projects. This successful transition to cloud services has made Msft into a high-growth technology firm and driven major stock gains.