Microsoft is now more valuable than Google and its listed parent company, Alphabet. For the first time since 2015, the Redmond-based technology company overtook the behemoth that is Google to become the third most valuable company in the world.
Valued at US$753 billion (A$994 billion), Microsoft sits just ahead of Alphabet's US$739 billion (A$975 billion) valuation. Microsoft and Google have been trading places on the rankings since Google first surpassed the company in 2012. However, with this decisive gain, it shows that Microsoft CEO Satya Nadella has really managed to change the company's image and turn its fortunes around.
Since taking over four years ago, Nadella has helped more than double Microsoft's stock price, and the business has gone from being a 40-plus-year-old company to a modern tech icon. By focusing Microsoft into product categories like AI and cloud computing, while simultaneously axing failing divisions like the Windows Phone, Microsoft has successfully modernised. The latest ranking shift just goes to show these rather drastic methods of moving away from Windows as its core product have clearly worked.
Microsoft is also hot on the heels of Amazon, the second largest company in the world - sitting at US$782 billion (A$1.032 trillion). At the top of the pack is Apple - which, with a market valuation of US$923 billion (A$1.218 trillion), isn't going anywhere soon. Interestingly, though, Microsoft arguably has a larger portfolio than Apple and that could well be used to its advantage.
As The Verge points out, Google generates around 90 percent of its revenue directly from advertising, and 60 percent of Apple's entire revenue is also attributable to iPhone sales which could see billions wiped from its valuation if sales slow.
Microsoft, however, has grown much of its business through hardware, software and services. In its latest earnings report, Microsoft's Windows, Surface and Xbox divisions chalked up to around 35 percent of its revenue. Cloud services clocked in at around 30 percent and Office and productivity solutions at another 30 percent.
So where next for Microsoft? Morgan Stanley believes that Microsoft will be one of the first companies out there to hit a $1 trillion valuation within the space of a year thanks to the growth of cloud services. If this is the case, Apple certainly has something to be worried about.
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