For technology investors, the cloud is certainly not a new investment concept. However, even in 2018, the cloud services technology supercycle is just getting started and Microsoft Corporation (Nasdaq: MSFT) is becoming a larger part of the equation.
According to GBH Insights analyst Daniel Ives, Microsoft investors should expect enterprise spending on public and private cloud to accelerate in 2018. Even with new competition from Alphabet ( GOOG, GOOGL) and Cisco Systems ( CSCO), Ives says Microsoft’s cloud business is showing no signs of slowing down. In the most recent quarter, Microsoft reported an 89 percent year-over-year increase in Azure revenue.
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“Based on our checks, Microsoft has clear momentum in the field and especially among partners, with Commercial Cloud now exceeding a $20 billion run rate, a number that the skeptics thought ‘was a pipe dream’ a few years ago,” Ives says.
He says the next big boom in Microsoft’s cloud business will be a shift toward higher-margin services, including Office 365.
Ives says Microsoft will still face stiff competition from Amazon.com ( AMZN) as it attempts to convert businesses to the cloud model, but he sees 2018 as a window of opportunity for Microsoft. GBH estimates that 35 percent of application workloads will transition to the public and hybrid cloud over the next year. Ives says Microsoft may have a slight advantage over Amazon in this transition given its extensive network of more than 70,000 global partners.
[See: 7 of the Best Tech Stocks to Buy for 2018.]
“While AWS remains in a formidable position, we believe Microsoft’s Azure platform, Office 365, and enhanced AI capabilities coupled by a major partner and sales force push is a unique value proposition that puts Microsoft in a differentiated position to drive cloud sales for 2018 and beyond and help shape the future growth trajectory in Redmond,” Ives says.
GBH has a “highly attractive” rating and $95 price target for Microsoft stock.
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Microsoft Corporation (MSFT) May Be the Top Cloud Stock of 2018 originally appeared on usnews.com
