Dive Brief:
- Besides growing Microsoft's stock more than 200% since coming on board as CEO, Satya Nadella has refocused the tech company around artificial intelligence, cloud and subscription services, placing it on a steady path to a $1 trillion valuation, according to a CB Insights analysis of the company's strategy.
- Cloud is the foundation not only of enterprise products, but also consumer gaming segments within the company; Azure has become the most mentioned product in Microsoft earnings calls, according to BC Insights. A cloud foundation is supporting the company's investments in internet of things and edge computing.
- Microsoft has also beefed up its software as a service capabilities along with moving other products and services to a subscription model.
Dive Insight:
With its transition to an enterprise focus, Microsoft has moved beyond Windows and PCs to become a pillar of many enterprise IT portfolios, supporting cloud, software, AI, collaboration and more. But like any digital transformation, the company's evolution has been a years-long and ongoing process.
Patents and acquisitions have backed the company's progress in fields from AI and the cloud to edge computing, open source development and even quantum computing.
Microsoft underwent a massive reorganization earlier this year to align business segments with the prioritization cloud, AI and business intelligence. The company split engineering teams between "Experience & Devices," "Cloud + AI" and "AI + Research" segments.
That puts AI features into the names of two of the three revenue buckets for Microsoft is a clear an indicator of its foundation to the company's future strategy.
Microsoft is pursuing AI development through three strategies, according to CB Insights:
- Providing AI developer tools and services for customers to adopt AI functionalities in Azure
- Injecting AI capabilities across product lines, from software to laptops
- Leveraging AI for internal operations
The company has acquired seven AI companies in the last five years, increased AI investment activity and mentioned the technology more times on earnings calls than Google and Amazon combined.
AI isn't the only thing the company executives are mentioning more. "Innovation" and "innovative" cropped up 38 times in calls last year, benchmarking the relentless pace of pushing both technology and business boundaries.
About $2.5 trillion in IT spend is at stake, almost one-quarter of which goes to cloud-based offerings. Microsoft is optimistic about its market prospects, especially given its hybrid cloud and software foundation.
