A round of applause, please.
Microsoft Corporation (MSFT) stock is soaring on Friday, and for good reason: The software giant just put together an incredible quarter, crushing revenue and earnings estimates, largely on the strength of its successful shift to the cloud.
The pivot to a cloud-focused model has been championed by 48-year-old CEO Satya Nadella, who is by all accounts doing a fantastic job in leading the new Microsoft.
Nadella’s performance is in stark contrast to the prior Microsoft CEO, Steve Ballmer, who, after years of begging from investors, finally retired in 2014.
After Thursday’s results, it’s more than abundantly clear the passing of the torch was a great move for anyone who owns MSFT stock.
MSFT Stock: Then and Now
Nadella and Ballmer are different in every way: Their personalities are different, their visions are different and they don’t look anything alike. Most importantly, though, the Microsoft stock price has done two very different things under the two regimes.
MSFT stock is up 43% in the roughly two years since Nadella took the helm on Feb. 4, 2014. In contrast, Microsoft stock actually fell 35% from the time Ballmer became CEO in January 2000 to the moment Nadella took over in 2014.
In Ballmer, we have a man who declared in 2007 that the Apple (AAPL) iPhone had “no chance” of picking up significant market share. His aversion to move quickly and decisively on smartphones, tablets and MP3 players likely cost MSFT shareholders quite a bit of money during his reign. Wall Street loathed the guy, and many were calling for his resignation years before it came.
Nadella? He’s seen as MSFT stock’s knight in shining armor. One needs to look no further than Thursday’s earnings results to see why.
This morning, FBR analyst Daniel Ives released the report “Nadella’s Magic Touch Gaining Momentum into 2016”. He raised the price target on Microsoft stock from $60 to $63.
Driving the second-quarter beat was strong performance from Office 365, the cloud-based subscription version of Microsoft Office, as well as Azure, the enterprise-facing cloud computing arm that competes with Amazon.com (AMZN) and its AWS platform.
Thursday, Amazon announced that AWS grew at a 69% clip in the most recent quarter, which is awfully impressive. But not compared to Azure, which grew at twice that blistering pace, its revenues soaring 140%.
So yes, Microsoft stock is way up today. That’s what happens when analysts expect revenue of $25.3 billion and EPS of 71 cents, but you deliver $25.7 billion and 78 cents. That’s what happens when you make serious efforts to embrace new technologies again. That’s what happens when you have the anti-Ballmer as CEO.
Microsoft is back, baby. 2016 should be a good year.
As of this writing, John Divine was long AMZN and AAPL. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
