Microsoft becomes third most valuable firm globally

May 30, 2018 13:55 IST
Microsoft becomes third most valuable firm globally

Software giant Microsoft has surpassed Google’s parent company Alphabet in market capitalisation for the first time in three years, becoming the third most valuable firm globally after Apple and Amazon.

On May 29, 2018, Microsoft reportedly had a market cap of $753 billion at the close of trading, almost $14 billion ahead of Alphabet.

While Apple leads with a market cap of nearly $924 billion, Amazon is at a distant second, with nearly $783 billion.

Key Highlights

In its third quarter that ended on March 31, 2018, the tech giant posted revenue of $26.8 billion and net income of $7.4 billion.

The growth was mainly driven by consistent growth in its Office and Cloud solutions.

The major credit in the growth, however, goes to the company’s CEO who has been strategically restructuring the company towards Cloud and Office offerings.

The company has managed to innovate across key growth categories of infrastructure, artificial intelligence, productivity and business applications to deliver differentiated value to customers.

Revenue increase in Key categories

• The revenue of Microsoft Office commercial products and Cloud services recorded a 14 per cent increase, driven by Office 365 commercial revenue growth of 42 per cent in the third quarter.

• The revenue of Microsoft Azure cloud offering recorded growth of 93 per cent in the same period.

• The revenue in Productivity and Business Processes was $9 billion and increased by 17 per cent during the period.

• The revenue in Microsoft’s Intelligent Cloud was $7.9 billion and it increased by 17 per cent.

Amazon’s upward graph!

 Microsoft becomes third most valuable firm globally

The American e-commerce giant, Amazon surpassed Google’s parent company Alphabet for the first-time ever in March 2018, becoming the second most valuable publicly traded company after Apple.

The company recorded a 36 per cent increase this year, in comparison to Alphabet’s 4 per cent.

The company first passed Microsoft for the number three spot in mid-February.

Apple, however, continued to hold the top spot, with a value of $889 billion.

Following the Cambridge Analytica data breach scandal, Facebook has lost billions in stock value thus, bringing down its market valuation.

Market Capitalisation: FAQs

 Microsoft becomes third most valuable firm globally

What is Market Capitalisation?

Market capitalisation, also known as market cap, means the total value of shares of a firm, a sector or a market.

How is it calculated?

It is calculated by multiplying a company's shares outstanding by the current market price of one share.

For eg:  A company with 20 million shares selling at $100 a share would have a market cap of $2 billion.

Why is it important?

  • The investment community uses the figure to determine a company's size, as opposed to using sales or total asset figures.
  • It is important because a company’s size is a basic determinant of various characteristics in which investors are interested, including risk.
  • It will help the investor determine the returns and the risk in the share.

Different sizes of companies under Market Capitalisation

Large-cap companies: The category includes largely companies that have a market capitalisation of $10 billion or more. These are those companies that have been around for a long time, and they are major players in well-established industries.

Mid-cap companies: The category generally includes companies that have a market capitalisation of between $2 billion and $10 billion. These companies are those that are established and that operate in an industry expected to experience rapid growth.

Small –cap companies: The category includes companies that have a market capitalisation of between $300 million to $2 billion. These companies are generally those that are young in age or serve niche markets and new industries.

What can alter company’s market cap?

The two factors that can alter the market capitalisation of a company include significant changes in the price of a stock or when a company issues or repurchases shares.

 

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