Subscription services help push Microsoft into vaunted $1 trillion club

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Microsoft Office
Office subscriptions have been a massive boost for Microsoft.
Photo: Microsoft

Apple’s old frenemy Microsoft officially joined the $1 trillion club yesterday, taking its place alongside Apple and Amazon as public companies which have passed the $1 trillion market cap.

While its closing price brought it back down to $990 billion, it still finished the day ahead of Apple $968 billion. This came after Microsoft reported that revenue grew 14% in the last quarter.

Apple passed the $1 trillion value back in August. Amazon followed one month later. However, both then saw declines at the end of last year. Microsoft overtook Apple in value in November 2018, although both companies have remained within spitting distance of one another.

Microsoft hitting the $1 trillion mark is interesting for a couple of reasons. For long-time tech fans, like Apple hitting $1 trillion, it’s an impressive benchmark for a company which started at around the same time.

It’s all about the services, baby!

More significantly, it comes at a point at which Apple is trying to reconfigure itself as a services company, in addition to a hardware one. Microsoft’s biggest earners are now its subscription services. Last year, Windows made Microsoft 18% of its revenue. Office subscriptions, on the other hand, raked in 25% of revenue. Microsoft’s cloud business also brings in plenty of cash.

Hardware is a minority of Microsoft’s earnings — with 9% for its gaming division and 5% for its Surface devices. Apple’s iPhone division, by comparison, still makes up more than half of Apple’s revenue.

However, analysts at Morgan Stanley have suggested that Apple’s Services division could once again see it hit a $1 trillion valuation in the near future.

Apple will report its own latest earnings on April 30. AAPL is currently trading at $205.28. MSFT is trading at $129.15. (If you’re wondering how Microsoft can be beating Apple at those prices, it’s due to the number of shares in circulation.)

Via: BBC