What happened
Shares of the tech giant Microsoft (NASDAQ: MSFT) are up 21.8% in the first half of 2021, according to S&P Global Market Intelligence. The company continued to benefit from the fact that global populations more often stay at home and work remotely.
The rally continued into July and the stock is now up 27.1% year-to-date.
Microsoft stock rose 21.8% in the first half of 2021. Image source: Getty Images.
So what
Microsoft’s revenue and profits surged in its most recent quarter as consumers sought technological solutions during the pandemic. Overall turnover increased by 19% and net income increased by 44%. Even as economies reopen around the world, one of the last things to come back is the return of professionals to their offices. This increases the demand for several Microsoft products and services as people have to develop the technology to work from home.
In addition, the company’s highly profitable commercial cloud business is growing faster than the overall business. The company’s cloud offerings are a viable alternative to Amazoncloud services. Indeed, commercial cloud reservations increased by 39%. The segment operates with a gross profit margin of 70%.
The fast-growing segment is fueling growth for the giant company which has now grown double-digit revenue in three consecutive years. Investors are excited that Microsoft, with more than $ 100 billion in annual sales, continues to find ways to grow.
Now what
It appears that when companies call employees back to the office, it will be for part of the week. Staff will have the option of working from home for a few days and in the office the rest. The mixed work arrangement will require two workstations per worker, one at home and one in the office.
Microsoft is well positioned to continue to profit from secular long-term trends that are not expected to go away, even in the aftermath of the pandemic. The development of cutting-edge technology, complemented by stable treasury activities such as Microsoft 365, could allow it to continue to grow its turnover for several years.
In addition, Microsoft has proven that it can grow profitably. Over the past decade, it has averaged an operating margin of 33.1%. Despite its rapid rise so far in 2021, the stock appears to have more room to rise.
This article represents the opinion of the author, who may disagree with the “official†recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
