Holding Review: Microsoft

Last updated on August 18, 2023

Microsoft is a multinational technology company that develops, manufactures, licenses and markets system software, server software, application software, consumer electronics, and other related services. Some of the company’s core products and services include their cloud computing offerings through Microsoft Azure, their wide range of applications and software including Microsoft Office, Outlook, and LinkedIn, and their personal computing items such as the Microsoft Surface and Xbox gaming console.

Company Value Proposition

Microsoft offers a wide range of products, services, and partnerships, ensuring a well-diversified portfolio that helps mitigate the company's risk. With a global presence, Microsoft can leverage various geographic economies and tailor their solutions to meet diverse needs and markets. Thanks to their subscription-based models, widely used tools such as Word, Excel, PowerPoint, Teams, and Outlook generate stable and recurring revenue streams for the company.

Investment Thesis

Qube has maintained its investment in Microsoft since the inception of our Kaleo portfolio. Currently, Microsoft is at the forefront of technological innovation, including artificial intelligence (AI), machine learning, and quantum computing. Additionally, Microsoft Azure, their leading cloud computing platform, offers a wide range of cloud services and has been steadily expanding its market share in the cloud computing industry since 2017.

As a leader in the AI space, MSFT is strategically positioned to achieve accelerated growth compared to its competitors by integrating the efficiencies brought about by AI into their cloud computing platform.

Qube Risk Profile: Medium

An investment in Microsoft is considered just as risky as an investment in the market. The technology industry is extremely competitive, requiring businesses to have a steady stream of new products to maintain their market shares. Microsoft has a diversified portfolio of products and services and is a leader in several technology sectors which often translates into stability and resilience.

Additionally, Microsoft has a strong balance sheet with substantial cash reserves and a history of consistent profitability which provides a buffer against economic downturns and financial crises.

Recent Material Events

MSFT is in the works of acquiring Activision-Blizzard, one of the world’s most valuable gaming companies. As of July 18, 2023, the merger agreement has been extended, pending the outcome of negotiations with UK regulators. If this deal is successful, Microsoft is expecting increased revenue growth from their personal computing segment.

Current Portfolio Recommendation

Continue to hold in our Kaleo portfolios as future announcements surrounding Artificial Technology may unlock additional upside for the business.