Yes, Microsoft is Racing to a $1 Trillion Market Cap Too

Posted on March 27, 2018 by Paul Thurrott in Microsoft with 10 Comments

With Amazon having recently surpassed Alphabet/Google’s market capitalization, analysts are turning their attention to an often-ignored technology giant, Microsoft. Which, like other top tech firms, is now poised to hit a market capitalization of $1 trillion in the coming year.

This shouldn’t be news. Microsoft is, after all, one of the world’s largest companies, period. And that’s true no matter how you measure its value.

Market capitalization is one such way. It is calculated by multiplying the total number of a company’s shares by its current share price. And today, the world’s five largest firms by market cap are Apple ($876.64 billion at the time of this writing), Amazon ($753.20 billion), Alphabet/Google ($730.73 billion), Microsoft ($722.09 billion), and Berkshire Hathaway ($494.04 billion).

A couple of things stand out to me when I look at those numbers.

First, the top four are all U.S. technology giants. Second, there is a big market cap delta between those four firms and Berkshire Hathaway. And third, Microsoft, like Amazon before it, is creeping up nicely on Alphabet/Google.

That last bit was helped along by Morgan Stanley, which this week predicted that the software giant would hit a $1 trillion market cap within a year. Microsoft’s stock price—and market cap—jumped accordingly.

Granted, Apple and Amazon will almost certainly get there first: The $1 trillion market cap milestone is eagerly awaited in financial circles, and the betting on which firm will get their first has shifted in recent weeks thanks to Apple’s softer-than-expected iPhone X launch. But it is now possible that Microsoft will get there ahead of Alphabet/Google.

Further helping matters is that Facebook, the only other tech firm in the top ten from a market cap perspective, is nose-diving thanks to recent privacy concerns. The company’s stock has fallen over $30 in the past few months and its market cap has likewise fallen, to $464.97 billion.

Whatever the reason, Microsoft’s moment in the sun is both deserved and overdue.

Despite being much bigger than most Silicon Valley firms, Microsoft is rarely afforded much attention by Wall Street, or by business reporters for that matter. That Microsoft has several solid businesses seems not to matter, either. So the Morgan Stanley note is a welcome acknowledgment that Microsoft has a great future ahead of it.

As to the “why” of Microsoft’s path to a $1 trillion valuation, it shouldn’t surprise anyone: It’s all about the cloud, Morgan Stanley says.

“Strong positioning for ramping public cloud adoption, large distribution channels and installed customer base, and improving margins support a path to … a $1 trillion market cap for MSFT,” Morgan Stanley analyst Keith Weiss wrote in a note to the firm’s clients on Monday.

 

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Comments (10)

10 responses to “Yes, Microsoft is Racing to a $1 Trillion Market Cap Too”

  1. Simard57

    It seems that there is an emphasis on PWAs which require backend (cloud) web services. Alphabet and Microsoft seem well poised to benefit from this (perhaps the PWA allure is due to their App Stores not being great revenue generators?). But where is Apple in this play? Their App Store is a large revenue source which PWAs may threaten and Apple does not have a strong Cloud play. Where is PWA support in their roadmap (as if they ever communicate that)?


    • IanYates82

      In reply to Simard57:

      Apple could allow site devs to block a PWA being installed on a device without it coming from the app store. That still allows a site to monetise things, and Apple to get their ridiculous 30% cut (I know it's not just them with that figure, but it seems crazy high and all other walled garden owners copied it)

  2. PeteB

    The Facebook data collection debacle should serve as a cautionary tale for Microsoft to add a telemetry and data collection opt out. Only a matter of time until that blows up in their face with the "2000+ datapoints" they are stealing from users even in "Basic" mode. Shameful.

    • ym73

      In reply to PeteB:

      Shouldn't that cautionary tale also apply to google? Facebook's sole money stream comes from collecting data and using to sell advertising. Guess who else has the exact same business model. Google. Microsoft can stop collecting data today and it's business would be fine. In the meantime, it seams like a double standard to require microsoft to not collect data when these other tech giants use it as a prime revenue source. When people start dumping facebook and google, then Microsoft should consider changing its data collection. They would be at a competitive disadvantage if they stop collecting. They need the data for their AI efforts. If they stop, google would get a huge advantage. They already have a larger data collection to develop algorithms for their AI programs. Microsoft would be locked out of the next big market, just how they got locked out of mobile.

      • William Kempf

        In reply to ym73:


        Exactly. Microsoft doesn't really have a money stream for data. Telemetry, while I'm sure someone creative could figure out how to abuse, isn't data you'd sell. If Facebook's "debacle" were due to theft, maybe you could draw parallels here, but Facebook sold that data. There's no equivalence here.

      • Jorge Garcia

        In reply to ym73:

        I hate to admit this, but Google's software products are sooo good and work so well, that even if their business model changed and we had to *cough* -pay- for its services, I probably would, assuming they were fairly priced. Nothing compares to Google Photos, I like Google Drive better than OneDrive, I love Google Play Music, Gmail is perfect, Google Maps is completely indispensable, Google Voice gives me TRANSCRIBED visual voicemail, etc....

  3. Tony Barrett

    These are all just numbers to keep Wall Street happy. The actual value of a company is far different from these figures. It's the same as Internet startups that never turned a profit suddenly being 'worth' billions. Just numbers.

  4. Bats

    I am not surprised a bit that Microsoft is trying to copy what someone else did. Lol...joke.

  5. ulrichr

    "the top four are all U.S. technology giants".

    If Donald Trump pushes ahead with his trade war, you won't see the $1 trillion target hit this year. China (and Europe) will doubtless retaliate, and Apple in particular is susceptible to competition from Chinese handsets if tariffs are introduced.

  6. Jorge Garcia

    Apple cannot seem stay above $180/share, and in my opinion might never do so. Investors are starting to see that Apple has reached every single customer it can, and its potential for growth in an ever more competitive World has pretty much evaporated. Mind you, what I just said is very different than "Apple is doomed".

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