Microsoft (NASDAQ:MSFT) released its Q4 earnings on Friday and in response, MSFT stock rose as much as 5%. The reason? The company’s bet on the cloud is paying off in a big way. With a market cap now topping $800 billion, Microsoft has doubled in value since Satya Nadella took over as CEO in 2014. With Azure revenue up 89% and Office still firing on all cylinders, it’s possible Amazon could even beat Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) to be the first company worth $1 trillion.

MSFT stock slid a little after the initial euphoria over the earnings results, but still closed up a respectable 1.8%, putting the company’s market cap at over $802 billion.

Microsoft Earnings Q4 Earnings Boost MSFT Stock

On Friday morning, Microsoft announced its Q4 2018 and 2018 annual earnings, with good news for MSFT investors.

Quarterly revenue of $30.1 billion was up by 17% and operating income of $10.4 billion represented a 35% increase year-over-year. The company surpassed $100 billion in revenue for the fiscal year.

Some of the company’s hardware bets paid off significantly during the quarter. The continued push into Windows hardware with its Surface line (including the newly announced Surface Go tablet) saw revenue in that division rise 25% compared to Q4 2017. Gaming revenue was up 39%, despite the Xbox One’s continued struggle against the PS4 and Switch. Even Bing search revenue was up 17%.

But it was Microsoft’s investment in cloud services that is really having the impact on MSFT stock.

Betting on the Cloud Is Paying Off

In Microsoft’s earnings press release, CEO Satya Nadella is quoted as saying:

“Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation.”

MSFT’s Chief Financial Officer went on to say the company’s growth was “anchored by commercial cloud revenue growing 53% year-over-year to $6.9 billion.”

Clearly Microsoft is putting the spotlight on its cloud investment, and the performance of MSFT stock reflects the fact that investors like what they’re seeing. Among the cloud-based success stories? Quarterly revenue for Productivity and Business Processes (which includes Office commercial and consumer cloud services, and LinkedIn) was up 13% to $9.7 billion. Revenue in the Intelligent Cloud division was up 23% to $9.6 billion — led by MSFT’s Azure cloud services which saw year-over-year revenue growth of 89%.

When you break down MSFT revenue by segment, Intelligent Cloud trailed More Personal Computing (which includes Windows, Office, Surface, Bing and Gaming), and Productivity and Business Processes (including Office and LinkedIn).

But… Intelligent Cloud was the most profitable segment ($3.9 billion) and the second ($3.5 billion) most profitable segment, Productivity and Business Processes, includes many products that are cloud-based –including Office 365 and LinkedIn. And Intelligent Cloud profit posted impressive 34% year-over-year growth.

Microsoft CEO Satya Nadella has taken heat for killing off products like the company’s Lumia smartphones, and shifting focus from traditional software sales to cloud-based versions like Office 365. But there’s no arguing with success. And as Reuters points out, the latest pop in MSFT stock means the company’s market cap has now more than doubled since Nadella took the reigns of the company in 2014.

With its market cap now at $802 billion — compared to $943 billion for Apple and nearly $880 billion for Amazon — Microsoft is a contender to become the world’s first trillion dollar company. It still has a lot of catching up to do, but with continued rapid growth in its cloud services driving MSFT stock (up 43% in the past year), it could happen…

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.