As Dow Posts Record, This Tech Stock Leads the Surge

By Douglas A. McIntyre Updated Mar 13, 4:34PM EDT · Published Jul 3, 12:11PM EDT

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As Dow Posts Record, This Tech Stock Leads the Surge — © Stephen Brashear / Getty Images

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The Dow Jones industrial average posted its best June rise since 1938, up 7.2% to 26,599.96. Its performance for the first half also was spectacular, a gain of 14.3%. One of America’s iconic tech stocks outpaced the other 29 in the index.

Microsoft Corp. (NASDAQ: MSFT) shares rose 31.9% so far this year to $133.96. It is up 220% in the past five years, to hit a market cap of $1.03 trillion. All the performance has come under CEO Satya Narayana Nadella, who was appointed to the top job in February 2014.

Much of Microsoft’s recent success has been based on its cloud computing business. In the most recent quarter, the period that ended March 31, total corporate revenue was up 14% to $30.6 billion. Net income rose 19% to $8.8 billion. Its cloud segment handily beat both. “Intelligent Cloud” revenue was up 22% to $9.7 billion, and its core Azure cloud operation bested that. Server products and cloud services revenue increased 27% (up 29% in constant currency), driven by Azure revenue growth of 73% (75% in constant currency). First released in February 2010, Azure has become the core of Microsoft’s success. Azure runs on and operates from Microsoft’s own data centers, primarily.

Microsoft’s cloud operations have benefited from impressive growth across the industry. In its recent cloud industry report, research firm Synergy reported:

[I]n Q1 the enterprise SaaS market generated well over $23 billion of revenue for software vendors and will hit a $100 billion annual run rate in the current quarter. The market continues to grow at almost 30% per year. Microsoft has a worldwide market share of 17% and continues to enhance its overall market leadership, thanks primarily to its dominance in the high-growth collaboration segment.

Those numbers put it well ahead of rivals Salesforce, Adobe and SAP.

Microsoft has one of the most valuable brands in the world, though it is among companies with the most corporate debt as well.

Hedge funds also have stampeded into Microsoft’s shares. Among the top 400 hedge funds by assets, in the first quarter, Microsoft was the top holding, ahead of Amazon, Facebook and Apple.

There is nothing in the way of Microsoft’s Dow leadership, which means the stock may end the year up 40% or more.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.