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The Microsoft stock price has been riding on a cloud lately.
Microsoft's cloud-based businesses – Office 365, customer relationship management (CRM), and Azure – all had a monster Q1:
- Office 365 revenue grew 70% in constant currency year over year, while the subscriber base increased nearly 20% from the previous quarter, to 18.2 million.
- Dynamic CRM revenue grew 12% in constant currency, while the user base more than tripled from the same period a year ago.
- Azure revenue grew 135% in constant currency, and usage more than doubled.
Since taking the helm in February 2014, CEO Satya Nadella has pushed a "mobile first, cloud first" strategy that focuses on segments that offer MSFT stock the best chances for growth.
He realized that Microsoft needed to act quickly to offset slowing Windows sales – the result of the relentlessly shrinking PC business.
"I think he is realistic about the role of Windows," Gartner tech analyst David Smith told the Associated Press last month. "[Nadella] is much more focused on cloud computing and other services. That's where the future of the company will be."
And despite the recent successes, Microsoft is not standing still with its cloud businesses. In the weeks since those Q1 earnings, the Redmond, Wash.-based company has announced several initiatives to grow its cloud businesses even faster. And that bodes very well indeed for the future of Microsoft stock.
Two Cloud-Based Catalysts for the Microsoft Stock Price
Just today (Thursday), for example, Microsoft announced a deal with long-time rival Red Hat Inc. (NYSE: RHT), which sells and supports its own version of the open source Linux operating system.
The deal specifies that Microsoft will make Red Hat's Linux the preferred option for enterprise customers using its Azure cloud service.
That gives enterprise customers another reason to buy (or stick with) Microsoft's Azure, which faces tough competition from Amazon.com Inc.'s (Nasdaq: AMZN) Amazon Web Services and Alphabet Inc.'s (formerly Google Inc.) (Nasdaq: GOOGL, GOOG) Google Cloud Platform.
The cooperative effort with Red Hat is a far cry from Microsoft's days under former CEO Steve Ballmer. Back in 2001, Ballmer infamously referred to Linux as a "cancer."