RBC: Microsoft’s Cloud Segment Is Crushing It

Microsoft  may still lag Amazon.com in the cloud computing market in terms of overall revenue, but the Azure segment continues to boom thanks to the tech company’s superior ability to cater to enterprise customers with other cloud-based services like Office 365. RBC Capital analyst Alex Zukin yesterday assumed coverage of Microsoft with an outperform rating and boosted the firm’s price target from $153 to $160.

The “King of Cloud”

Zukin dubbed Microsoft the “King of Cloud” in a research note to investors after taking over coverage from another analyst. As enterprises continue to transition their technology infrastructure to the cloud, Microsoft is poised to earn much of that business throughout the secular shift.

Microsoft's Cloud

“In a world increasingly moving to the cloud, but still encumbered by legacy investments that sit elsewhere and still drive value today, Microsoft is uniquely positioned to take an increasingly large percentage of corporate IT budgets in a hybrid world,” Zukin wrote. Azure and Office 365 are a potent combination, offering “mission-critical functions” to organizations, in the analyst’s view.

For example, AT&T and Microsoft had announced a major multiyear partnership to help the telecommunications and media conglomerate accelerate its transition to the cloud, migrating its non-network workloads to Azure while using Office 365 for productivity and collaboration. That deal is worth $2 billion, according to TechCrunch, and CEO Satya Nadella called it “one of our largest cloud commitments to date.”

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