Microsoft (NASDAQ:MSFT) is a $2 trillion market cap company, but it isn’t showing signs of slowing down anytime soon. Revenue keeps growing at an astonishing rate for a company this big, and it keeps on innovating. Recently the software giant announced a brand-new version of its dominant PC operating system. On a Fool Live episode recorded on June 16, Fool contributors Toby Bordelon and Brian Withers discuss the upcoming Windows 11 and the potential it has to push Microsoft’s revenue even higher.
Toby Bordelon: Well, speaking of cash, let’s move into a company that has a lot of it and makes a lot of it, Microsoft. What I want to talk about here is something very interesting that’s happened in the last couple of weeks. Some news about a new version of Windows. Not just an update on Windows 10 — what we’ve seen over the past few years is that there’s two big updates every year on Windows 10. But this looks like a brand new version of Windows, and there are signs that suggest we are going to actually have something called Windows 11. We didn’t expect this. Microsoft has made past comments that suggest Windows 10 was going to be the last version of Windows, and it would just be updates from there. This is really interesting to see. We don’t really have much info yet on how it’s going to be marketed, how it’s going to be sold. If I were to take a wild guess, I think they’re going to do what they did with Windows 10 which is it’s going to be a free update to users, and then maybe licensing fees for PC and enterprise if you buy a new computer that will be built into the cost, that sort of thing.
But one very interesting possibility that I wonder if we’re going to get here is if we’ll finally see Windows as a subscription for consumers, or at least some features of Windows. Maybe rolled into Office 365, which is their Office subscription suite, both for businesses and consumers. That’ll be really interesting. They have been going that way in a lot of their services. Office — available as a subscription, Xbox — available as a subscription, both for the online version, Xbox Live Gold and Xbox Game Pass, which gives you access to games. Will we see that with Windows? I don’t know, but it will be interesting if they make that last leap to full into the subscription services for Microsoft. We’ve got some screenshots that are out there on the web. You can take a look at it. It looks more modern, more sleek from what we’ve seen, but nothing official yet. There is a Windows event coming up on June 24. I hope all of our questions will be answered then, but we shall see. Interesting news here.
Brian Withers: Yeah. That’s really cool, Toby, to go back to their 11th version of their original business that started the company, it’s pretty exciting. As I look at Microsoft, it’s one of the trillion-dollar darlings, and when we did the deep dive, I was really surprised that Microsoft’s addressable market is in the trillions of dollars. Even as big as Microsoft is, their market that they’re addressing is significantly bigger. What are Mr. Softy’s biggest growth engines that investors should be watching?
Bordelon: Well, I think the big one you have to look at is cloud computing and Azure specifically. You look at the last quarter server and cloud products were up 26% year over year, Azure, 50%. Which is astonishing. That’s really what’s driving [the business] right now, the cloud, and that’s why I think you could maybe see some of this trying to move Windows into a subscription and make it part of the cloud, build that into the cloud offering somehow with maybe some premium options in the OS. Overall revenue from Microsoft was up 90% last quarter, and again, a $2 trillion company giving us 90% year-over-year revenue growth. Is hard to find any issue with that. Every part of their business seems just to be doing well right now, so it’s the fantastic company, and as big as it is, I think there’s still some opportunity here.
Withers: That’s just mind-blowing. That’s awesome, Toby, thanks for the update.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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