Microsoft Azure is Microsoft's cloud-based operating system, formerly known as "Windows Azure", and like the Azure Services Platform, is the name of Microsoft's "software and services" technology. The main goal of Microsoft Azure is to provide developers with a platform to help develop applications that can run on cloud servers, data centers, the Web, and PCs. Developers of cloud computing can use storage, computing power and network infrastructure services in Microsoft's global data centers. The Azure service platform includes the following major components: Microsoft Azure, Microsoft SQL database service, Microsoft .Net service, Live service for sharing, storing and synchronizing files, Microsoft SharePoint and Microsoft Dynamics CRM service for business.

Azure is a flexible and interoperable platform that can be used to create applications running in the cloud or to enhance existing applications with cloud-based features. Its open architecture gives developers the choice of web applications, applications on connected devices, PCs, servers, or providing optimal online complex solutions. With cloud technology as the core, Microsoft Azure provides a computing method of software + services. It is the foundation of the Azure service platform. Azure can tightly integrate the individual capabilities of developers in the cloud with services hosted by Microsoft's global data center network, such as storage, computing and network infrastructure services.

Microsoft will ensure the openness and interoperability of the Azure service platform from start to finish. We believe that the business model of enterprises and the user experience of accessing information from the Web will change as a result. Most importantly, these technologies will enable our users to decide whether to deploy applications on cloud-based Internet services, on the client-side, or a combination of the two as needed.

On the morning of April 1, Beijing time, according to reports, the EU antitrust agency is currently inquiring with competitors and customers of Microsoft's cloud computing business and software licensing business, a move that may lead to antitrust against Microsoft's related businesses. investigation. It is reported that the media have seen the questionnaire issued by the EU.

In antitrust investigations, Microsoft is already a "regular visitor" to the EU. In the past 2010s, Microsoft was hit with a cumulative 1.6 billion euro ($1.8 billion) antitrust fine by the European Commission for violating EU antitrust laws and failing to comply with EU orders to stop anti-competitive practices. According to reports, this time Microsoft entered the EU's "antitrust radar" again because of complaints from rivals. Previously, German software company "NextCloud" and French software manufacturer "OVHCloud" filed complaints with the European Commission about some market moves in Microsoft's cloud computing business.

In the above-mentioned questionnaire sent to Microsoft's customers and competitors, the European Commission said it had information that Microsoft may be using its dominance in some software markets to crowd out competitors in certain areas of cloud computing services. Questions from the European Commission's questionnaire, including licensing agreements between Microsoft and cloud service providers, allow other rivals to compete effectively.

Another question mentioned whether cloud computing service providers need to obtain Microsoft's operating system and office software to complement their own cloud computing infrastructure in order to compete effectively in the cloud computing market. The European Commission also wants to know the difference in licensing fees and licensing terms between the two business models of cloud computing service providers. One model is between cloud computing service providers and customers, and the other model is that cloud computing service providers combine Microsoft cloud services with their own services. Bundling and indirect sales to customers. Another focus of the investigation is the possible technical limitations of cloud storage services (commonly known as "network disks") in terms of infrastructure of cloud computing service providers.

The positive progress of the cloud business and the resulting improvement in financial indicators such as growth and profitability have been the core support for Microsoft's continued stock price rise in the past five years. After the epidemic, European and American companies are expected to further accelerate their digital transformation and migrate to the cloud. As a technology giant with the most complete cloud computing product system, Microsoft is expected to continue to benefit from this process. At present, Microsoft's share in the IaaS+PaaS field has exceeded half of AWS's, and its SaaS business revenue ranks among the top 1 in the world. Superimposed on the company's long-term accumulation in the enterprise software market, the company's cloud computing business leadership is expected to further expand. Azure, Office 365, etc. It will also become the core support for the company to continue to maintain double-digit growth and promote the continuous improvement of profitability. Considering the uncertainty of the current macro economy and the abundant liquidity in the market, the company is expected to continue to obtain a valuation premium based on relatively ideal performance certainty, growth, and the possibility of continuous improvement in profitability.

Microsoft stock has risen 368% over the past five years (second only to Amazon in FAAMG) and is up 24% year-to-date. The continuous improvement of core financial indicators such as revenue growth & stability and profitability brought about by the cloud computing business is the core support. At present, the company's operating profit margin has risen from a low of about 30% in 2015 to the current 38%. Revenue growth also rebounded to double-digit levels.

At present, Microsoft's cloud business involves three core industries: IaaS, PaaS, and SaaS. The underlying IaaS+PaaS mainly corresponds to Azure, Server products, AI, information security, etc. The upper-level SaaS products include office 365, Dynamics 365, Teams and other products. In addition to the traditional public cloud deployment model, the company has also launched a variety of product architectures and deployment models such as private cloud, hybrid cloud, and edge computing. The product system is the most complete than other cloud computing giants.

In the long run, considering that hybrid cloud has become the mainstream deployment form of cloud computing, medium and large enterprise customers are accelerating their migration to the cloud, superimposing the company's own complete product system, and solid enterprise customer and channel foundation, Microsoft is expected to continue to benefit.

IaaS+PaaS: Narrowing the gap with AWS

In the IaaS+PaaS link at the bottom of cloud computing, the company takes Azure as the core, and the product function modules range from basic computing and storage to more advanced AI, data analysis, etc. Hybrid cloud, edge computing, IOT, etc., the product module richness is basically the same as that of major competitors such as AWS and GCP. At present, Azure's global market share is about 17% to 18%, second only to AWS (32%), and far ahead of other manufacturers. At the same time, compared with AWS in the same period in history, Azure grows faster when it reaches the same revenue scale.

For the IaaS layer, the company launched the hybrid cloud solution Azure Stack as early as 2016, while AWS and Google Cloud launched similar solutions AWS Outposts and Google Anthos in 2018 and 2019 respectively.

The PaaS layer is the main support for cloud computing giants to build long-term differentiated advantages and improve profitability. Currently, Microsoft continues to be in the leader quadrant of Gartner's Magic Quadrant in key capability items such as basic software, developer ecology, and information security.

According to foreign media reports, Microsoft is vigorously developing its cloud computing business, and has achieved good results in recent years, with revenue continuing to rise year-on-year. Among them, they beat Amazon, the largest cloud computing service provider, and successfully won the contract.

Analysts predict that the cloud computing business is developing rapidly, and Microsoft Azure cloud computing service will replace the office business at some point in 2022 and become Microsoft's largest revenue source.

Microsoft currently does not disclose the revenue of its Azure cloud computing business. In its fiscal second quarter financial report for fiscal year 2021, which ended on December 31, 2020, on Tuesday, local time, Microsoft disclosed intelligent cloud services including Azure. Revenue from the business reached $14.6 billion in the quarter, up 23% year-over-year, and Azure's revenue increased 50% year-over-year.

Although Microsoft has not disclosed the revenue of its Azure cloud computing business, the analyst who expects revenue to exceed the office business next year expects the Azure cloud computing business to reach $7.2 billion in revenue in the second quarter of fiscal 2021. The proportion of Microsoft's revenue has also increased from 4% three years ago to 17%.