These 7 charts show all the ways Satya Nadella transformed Microsoft from a tech has-been to a trillion-dollar giant in 6 years (MSFT)
- Business Insider analyzed Microsoft’s securities filings and market data since Satya Nadella took over as CEO in February 2014 to gauge his impact on the company.
- The following charts show Microsoft’s performance over the years, including changes in market value, revenue, headcount, and growth in the cloud.
- The charts also chronicle Nadella’s leadership, from unwinding the failed Nokia acquisition led by his predecessor to finding a bright spot in the cloud computing business.
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Satya Nadella is credited with leading a grand reinvention of Microsoft.
The central pillar is the cloud computing business – and it has propelled Microsoft into becoming one of the most valuable companies in the world.
Business Insider analyzed Microsoft’s securities filings and market data since Nadella took over as CEO in February 2014 to assess his impact on the company.
The following charts chronicle Nadella’s leadership over the years, from unwinding the failed Nokia acquisition led by his predecessor, writing off billions of dollars and laying off thousands of employees, to finding a bright spot in the cloud computing business and doubling down.
Microsoft market capitalization
Microsoft’s market capitalization under Nadella has increased to more than $1.2 trillion at the time of this writing from $315.9 billion in January 2014, the month before he took over.
Microsoft Chairman John Thompson recently pointed to Microsoft’s growing market value as one of the reasons to justify why Nadella makes 249 times more in compensation than Microsoft’s median employee.
Microsoft’s headcount declined significantly in Nadella’s first couple years on the job, in the aftermath the company’s failed $7.6 billion acquisition of Nokia, led by former CEO Steve Ballmer.
Microsoft closed the Nokia deal in April 2014. The acquisition was contentious within Microsoft and the friction between Ballmer and Microsoft’s board of directors that was generated by the Nokia acquisition is ultimately what led to his decision to resign.
The company ultimately took a write-down for almost the entire purchase price and laid off thousands. Microsoft’s headcount has started to climb since then.
Microsoft revenue has steadily increased under Nadella, expect for in the 2016 fiscal year – which could be seen as an inflection point for the company.
At the time, Microsoft was experiencing declines in the business segment that includes its Windows operating system and its struggling mobile business.
But a bright spot emerged. Microsoft’s cloud computing business was turning into a significant money-maker. In 2016 Microsoft started publicly disclosing the revenue growth for its Azure cloud business – 113 percent that year. The promise of Microsoft’s cloud business helped the company regain favor from investors.
Microsoft crossed $100 billion in revenue for the first time in fiscal year 2018 and topped that last year with $125.8 billion in revenue (non-GAAP).
Microsoft commercial cloud revenue
It’s hard to know exactly how much money is generated by the central pillar of Microsoft’s cloud business – Microsoft’s Azure cloud computing platform – because the company doesn’t report its standalone revenue.
Instead, Microsoft breaks out “commercial cloud” revenue, which includes Azure, but also Office 365 and other cloud services. Commercial cloud revenue has increased to $38.1 billion during the company’s 2019 fiscal year from $2.8 billion during the 2014 fiscal year when Nadella took over.
The way Microsoft reports cloud revenue makes it difficult to compare with market-leading Amazon Web Services sales reached $25.7 billion in 2018, its last full fiscal year.
Microsoft net income
Microsoft’s net income in Nadella’s first full fiscal year as CEO took a big hit due to costs related to its failed $7.6 billion Nokia acquisitions.
The company wrote off more than $7.5 billion related to the deal and said it incurred $2.5 billion in “integration and restructuring expenses,” mostly related to its phone business.
Microsoft’s net income has climbed since then, except for 2018 when the company said it took a $13.7 billion charge related to new federal tax laws in 2018.
Azure revenue growth rate
Azure growth has slowed since the company first revealed a figure for its revenue growth in 2016 (it still doesn’t break out Azure’s actual revenue figures).
While the growth has declined, analysts chalk it up to the “law of large numbers.” Basically, the bigger these platforms get, the harder it is to post the triple-digit growth figures that they did when the platforms were younger. Amazon Web Services revenue growth has consistently slowed, too.
Microsoft research and development spending
Microsoft has spent an increasing amount on research and development since Nadella took over, but that’s only because the company’s revenue has increased.
Microsoft has consistently spent 13 or 14 percent of its revenue on research and development since before Nadella was CEO, so the increase likely doesn’t represent a change in strategy or more R&D investment.
Amazon, for comparison, spent 12.4 percent of its 2018 sales – $28.8 billion – on what it calls “technology and content,” which is generally accepted as the company’s R&D spending though some analysts say it’s not an exact comparison.