Microsoft (MSFT) Azure Adopted by Blackrock to Host Platform

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Microsoft Corporation MSFT recently announced partnership with Blackrock to host the latter’s Investment management platform — Aladdin — on Azure cloud.

Per the terms of the deal, Blackrock will utilize Azure’s enhanced cloud computing capabilities to provide better experiences to Aladdin’s clients. Moreover, Azure will aid Blackrock to undertake innovation in the financial services industry.

The two firms will also be working together on initiatives that aim to accelerate sustainability in finance by leveraging Microsoft’s AI and big data capabilities as well as Blackrock’s investment management solutions.

The Blackrock deal is a notable win for Microsoft as it highlights strength of Azure’s cloud solutions in finance domain and is anticipated to boost the company’s cloud revenues in the coming quarters.

Expanding Azure clientele is expected to induce investor optimism in the stock. Notably, shares of Microsoft have returned 3.7% year to date, compared to the industry’s decline of 2.7%.

Microsoft Corporation Price and Consensus


Microsoft Corporation Price and Consensus


Robust Azure Adoption to Drive the Top Line

Microsoft has been witnessing robust traction for its cloud services, courtesy of the digital transformation taking place in the market.

Notably, the company’s cloud and IoT solutions were recently adopted by insurance giant — Swiss Re — to improve its risk prediction and management strategies as well as for the development of next-gen risk technology solutions.

Moreover, the company’s cloud services were adopted by Spanish telecom company Telefónica to drive digital transformation for enterprises in Spain and also to achieve its own digital transformation goals.

Further, Microsoft inked a deal with Genesys to aid enterprises in providing enhanced services to their customers by leveraging the Azure cloud platform.

These client wins highlight the growing demand for Microsoft’s cloud services and are expected to drive the top line the long haul.

Notably, revenues in the Intelligent Cloud segment increased 27% year over year to $11.9 million in second-quarter fiscal 2020. Azure witnessed 64% year-over-year growth in revenues during the quarter.

Demand for Cloud Services to Aid Competitive Position

Microsoft is expected to benefit from robust adoption of digital transformation technologies triggered by coronavirus-led work-from-home wave.

There is immense scope for growth for cloud computing platforms like Azure, as more companies shift away from legacy systems to scalable, enterprise-tuned platforms, in turn driving demand for cloud-based services.

These factors are expected to aid the tech giant counter stiff competition in the cloud computing market from Amazon’s AMZN Amazon Web Services (AWS).

Per Canalys, Microsoft Azure’s market share increased from 14.5% in fourth-quarter 2018, to 17.6% in fourth-quarter 2019. Notably, Azure trails only AWS, which has lost ground in the cloud infrastructure market. This is evident from AWS’ market share of 32.4% in fourth-quarter 2019, shrinking from 33.4% in fourth-quarter 2018.

Zacks Rank & Key Picks

Microsoft currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are CyberOptics Corporation CYBE, and LogMeIn, Inc. LOGM which sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for CyberOptics and LogMeIn are currently pegged at 12% and 5%, respectively.

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