Microsoft Corporation (NASDAQ:MSFT) is a juggernaut tech conglomerate based in Redmond, Washington. The company rose to prominence in the 1980s and 1990s on the back of its Windows operating system. From there, it grew to provide cloud-based applications, database management, video games, and more.
It’s one of the largest companies in the world, which has investors trying to figure out how high can Microsoft stock go?
The company’s market capitalization is circling $2 trillion, making it one of few companies in history to meet that mark. It helped pioneer the software as a service (SaaS) business model and is a market leader in a lot of segments.
But there’s plenty of competition, and the company has as many notable losses as wins. Google’s productivity suite hit Microsoft Office hard. And do you remember the Windows Phone or Zune?
Microsoft Competes With Google, Amazon & More
The company is a vertically integrated tech company that’s involved in a lot of electronics, apps, and technology services. Its Windows OS is the standard on desktop computers, laptops, and workstations, while its Surface tablet PC lineup is a top-rated device. Beyond that, it has its Office suite and Edge web browser.
Microsoft’s Azure platform competes directly with Amazon Web Services. It owns LinkedIn, Skype, Mojang, GitHub, Xbox, and more.
Since being founded in 1975, it grew through mergers and acquisitions. CEO Satya Nadella has been instrumental in transforming the company to prepare for the cloud-focused virtual society the pandemic ignited.
The tech titan has deep and long-standing relationships with large organizational clients, like the U.S. government and many Wall Street banking giants. By leveraging these partnerships, it successfully recovered from the pandemic and has continued growing ever since.
Here’s a breakdown of its financials.
Microsoft Sales Steamroll Higher
Microsoft’s revenues are rising across its segments, with Windows, Xbox, and cloud growth set to lead the fiscal year 2021. Its third quarter revenue of $41.7 billion is a 19-percent increase from the prior quarter. That’s notable because the prior quarter included the launch of its next-generation Xbox console.
Xbox Series X and Series S console sales grew 232 percent in their second quarter of sales. That shows continued growth, as the company holds a third of the video game console market with a strong second place behind Sony’s PlayStation 5.
The company’s Surface sales of $1.5 billion represent a 12-percent year-over-year increase from the same quarter of the prior year.
A global chip shortage did little to slow PC sales, and Microsoft grew its Windows OEM revenue by 10 percent in the quarter. That includes 44-percent growth in non-pro Windows OEM installations for a total of 1.3 billion active Windows 10 devices around the world.
Will Microsoft Earnings Go Up?
The tech giant earned $15.5 billion from its $41.7 billion in revenue, which is a 44-percent increase from the prior quarter. The secret to its success is subscription revenue, and catering to these subscribers is key to growth. With the Xbox, for example, it has 18 million Xbox Game Pass subscribers.
Microsoft Teams usage is up to 145 million daily active users with 300 million paid Office 365 users.
These subscriptions give Microsoft a strong foundation to continue growing its earnings without needing to spend as much on manufacturing and selling new products. This latest generation of video game consoles, for example, could last up to a decade if it continues building on its software and subscription side.
So long as Microsoft continues to grow sales revenues in both its consumer and enterprise divisions, it should be poised for further share price growth.
Is Microsoft Stock Undervalued?
There’s plenty of growth room in all aspects of the company’s business, but much of those future increases may already be baked into the current MSFT share price.
Dividend investors have something to cheer because MSFT has a steady quarterly payment. Its 0.89 percent annual dividend yield is modest but it has proven to be consistent in the past. This is an indicator that it should be dependable moving forward.
There’s very little chance that investing in a multi-trillion-dollar conglomerate like Microsoft will provide more growth than a smaller upstart. It faces antitrust issues because of the companies it acquires and how it leverages its existing relationships to unfairly compete with companies like Zoom Video Communications Inc (NASDAQ:ZM).
Issues like this highlight the risks of investing in Microsoft.
Is Microsoft Stock In A Bubble?
Microsoft’s biggest risk is deflating while the economy recovers. Tech stocks in general lost interest in 2021 and struggled to maintain the same levels of growth they did in the prior year. But Microsoft isn’t declining by any measure.
If anything, it may just grow slower than other possible investments. The company is a market mover – it’s a component of the S&P 100, S&P 500, DJIA, and Nasdaq-100. Between them, these indices are included in practically every retirement plan in the country. It may not outpace the market, but it should certainly stay on pace with it.
Is Microsoft Stock Price Forecast to Rise?
Microsoft is a multinational tech conglomerate that has diversified revenue streams. The company’s Windows operating system is still the industry standard across billions of devices. It also has one of the leading video game consoles and a popular tablet in its Surface lineup.
These device and OEM sales are continuing to grow, but it’s in the cloud where Microsoft’s future truly lies. Its cloud-based apps and websites are already market leaders, and the company continues leveraging its partnerships to grow revenue.
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