Microsoft Officially Hits US$1 Trillion Market Cap For The First Time

Microsoft Earnings
A Microsoft store is pictured in New York City (Photo: Reuters)

After reporting better-than-forecasted earnings results, Microsoft share prices jumped by as much as 5.1 percent. The jump has pushed the company's public valuation well past the US$1 trillion-mark, officially making Microsoft a trillion-dollar company.

Earlier in the week, Microsoft stocks were trading at around US$129.15, giving the company a market capitalization of around US$990 billion. Shares only needed to hit US$130.51 in order for the company to hit the trillion-dollar mark. On Thursday, shares passed that mark when stocks closed at US$131.37.

The jump in stocks was preceded by Microsoft announcement of its fiscal third-quarter earnings of US$1.14 per share, exceeding analyst's estimates. The company also reported that its revenues had climbed by 14 percent to US$30.6 billion, once again exceeding average estimates.

Microsoft's increase in sales is partly due to the increasing rate of transitions by large corporations to the public cloud. More companies are now offloading their data into servers and data storage facilities using Microsoft's Azure service. Microsoft reported gross margins of 66.7 percent, a marginal increase to the 65.4 percent reported last year. Meanwhile, its net income rose by around 19 percent to US$8.8 billion.

The company's commercial cloud business, led by its Azure service, rose by as much as 41 percent to US$9.6 billion. Its Azure business was a major contributor with a revenue increase of 73 percent. Microsoft's Azure is currently not as expansive as Amazon's Web Service, but it is growing rapidly. Analysts predict that it may soon overtake Amazon's service given its current rate of growth.

Adding to its cloud infrastructure growth is its slew of cloud-based applications, such as its cloud-based Office 365 suite. Commercial sales of the company's cloud application surged by 30 percent. LinkedIn, the networking site Microsoft bought in 2016, is also seeing a much faster growth rate with a revenue increase of 27 percent in the quarter. During its latest earnings call, Microsoft announced that it expects its earnings for the fiscal fourth quarter to be somewhere around US$32.2 billion to US$32.9 billion, well above average analyst's forecasts.

Microsoft joins a slew of other tech giants this season, who are also expected to report stellar earnings. Facebook kicked off the tech earnings season with its shares rising more than 6 percent. Amazon is expected to reveal its numbers very soon, while Alphabet and Apple are expected to announce their earnings early next week. Investors are of course betting big on tech as early as now given the high expectations in the sector.

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