What has happened to the stock prices of Microsoft over the past twenty years?
In the last two decades Microsoft’s stock price has surged exponentially.
Changing it from a software company to a cloud computing, AI, and enterprise service giant. This stellar performance makes Microsoft (MSFT), in particular, one of the most appealing long-term investment options out there, with robust fundamentals and future growth on its sails.
By the year 2004, Microsoft was already well-known and established as a business but since the burst of the dot com bubble in the early 2000s, the stock price has been stable for the past few years. The major focus of the company was Windows operating system and its Office productivity software. However, this period around the mid-2000s was when Microsoft started to change and set the stage for future success.
From 2004 until 2010, Microsoft’s stock price increased accordingly, but only in 2014 with Satya Nadella assuming the CEO position did the company undergo radical change. Nadella turned Microsoft into a cloud-centric company which was a turning point in the stock price rise of the company.
2004-2010: In the period of this phase, Microsoft’s price grew slowly as the popularity of its application reached its peak. Although, stock momentum was high due to Windows XP and the Office suite growth, the company saw increasing competitive pressure from Apple, Google, and Amazon.
2011-2014: Microsoft began the upward trend after introducing additional new Windows systems such as Windows 7, then Windows 8 and also increased the Xbox gaming population growth. Microsoft, however, struggled to stay competitive within fast-growing fields such as mobile markets. Nokia acquisition made by the company was unsuccessful.
2014-present: Microsoft’s growth has been at its peak in recent times. As Microsoft’s chief, Nadella initiated the cloud strategy through the launch and growth of its Azure cloud network. Today, Azure is among the best cloud services in the world second only to Amazon Web Services (AWS). By pivoting to Cloud services, Artificial intelligence, and enterprise software, Microsoft cemented its place in the current world of technology.
Between 2014 and 2024, Microsoft stock prices have increased significantly:
Microsoft stock price traded slightly above $40, for each share in 2014, which is more or less the price that was available on the market on the opening of the market on the last day of 2014.
By 2024, Microsoft stock had appreciated to $415 or above, thus recording over 900% over the ten year period.
| Year | Start Price | End Price | Year High | Year Low | ROI (%) |
|---|---|---|---|---|---|
| 2004 | $26.89 | $27.58 | $30.25 | $23.70 | 2.57% |
| 2005 | $27.58 | $26.83 | $28.43 | $23.82 | -2.72% |
| 2006 | $26.83 | $29.86 | $30.85 | $21.51 | 11.29% |
| 2007 | $29.86 | $35.60 | $37.50 | $27.57 | 19.22% |
| 2008 | $35.60 | $19.44 | $35.80 | $17.11 | -45.39% |
| 2009 | $19.44 | $30.48 | $31.50 | $15.15 | 56.77% |
| 2010 | $30.48 | $28.04 | $31.58 | $23.01 | -8.01% |
| 2011 | $28.04 | $25.96 | $29.46 | $23.32 | -7.41% |
| 2012 | $25.96 | $27.62 | $32.95 | $25.15 | 6.39% |
| 2013 | $27.62 | $37.41 | $38.98 | $26.47 | 35.44% |
| 2014 | $37.41 | $46.45 | $49.41 | $34.63 | 24.15% |
| 2015 | $46.45 | $55.48 | $56.85 | $40.12 | 19.45% |
| 2016 | $55.48 | $62.14 | $64.10 | $47.18 | 12.02% |
| 2017 | $62.14 | $85.54 | $86.20 | $59.08 | 37.64% |
| 2018 | $85.54 | $100.55 | $115.61 | $83.83 | 17.55% |
| 2019 | $100.55 | $157.70 | $159.55 | $93.96 | 56.77% |
| 2020 | $157.70 | $222.42 | $232.86 | $135.50 | 41.02% |
| 2021 | $222.42 | $335.35 | $349.67 | $211.94 | 50.80% |
| 2022 | $335.35 | $239.82 | $343.11 | $219.55 | -28.49% |
| 2023 | $239.82 | $415.80 | $466.73 | $252.57 | 73.39% |
| Average | – | – | – | – | 15.57% |
This growth was catalyzed by Microsoft’s robust numbers, their continued penetration into new emerging markets of cloud, AI, and gaming, as well as expansion of their revenue streams. The performance of the cloud segment AZURE has rapidly transformed into one of the key contributors on revenue for Microsoft with its share reaching considerably more than half of the overall total revenue of the company within the last recent years.
Basic points that can be referred to as reasons behind this stock price appreciation of Microsoft
Cloud computing (Azure): Azure is now one of Microsoft’s most important segments of the business. As businesses are moving toward the cloud infrastructure for storage, data processing and AI functionalities, Azure has become one of the most important segments contributing to Microsoft’s revenue and profit growth. This move from depending on traditional software sales to subscription services has created considerable growth in earnings.
Shift to a subscription model (Microsoft 365): Microsoft shifted it’s Office suite of products away from a sealable type of structure to a subscription based structure termed as Microsoft 365. This not just improved the company’s recurring revenue but also enhanced the business model. The cloud base of Microsoft 365 promotes the idea of regular updates in business models and hence, the concept has been accepted in most parts of the world.
AI and machine learning: Microsoft’s cloud computing services and products such as Microsoft 365 are complemented by the many investments made in AI and machine learning technologies. AI is forecasted to be a major revenue driver for the company in the long term as enterprises shift their focus towards leveraging AI for various processes including productivity enhancement and data analytics.
Gaming (Xbox and Game Pass): In line with its investments, Microsoft has focused on broadening its gaming segment, whereby Xbox and Game Pass the subscription service have now become significant revenue streams. The company’s acquisitions of game studios like ZeniMax Media (Bethesda) and attempts to acquire Activision Blizzard has bolstered Microsoft’s reputation in the gaming segment. Gaming has a long-term growth opportunity and Microsoft has the capacity to tap into its future potential.
Strong financial performance: Microsoft has recorded a growth in revenue, net income and operating cashflow in over 5 years now. In the recent FY2023, revenues of the company reached $211.91 billion, with 34% being the net profit margin. These profits have enabled Microsoft to implement technology development plans, growth through acquisitions, and rewarding shareholders through dividends and share repurchases.
Why Microsoft is still a stock worth your investment
Cloud computing remains in its early stages of penetration across the world but Microsoft Azure remains a major force. As companies continue the trend of moving to the cloud and utilizing hybrid models, there’s every reason to expect strong growth from Azure for the foreseeable future.
Microsoft made a smart move when it spread out its revenue base moving away from traditional software sales. Besides Azure, the progressive segments of the company include productivity tools such as Microsoft 365, gaming (Xbox and Game Pass), and business solutions (LinkedIn, Dynamics 365). This diversification makes Microsoft robust to market changes and recessions.
Microsoft AI investment strategy has been effective in remaining ahead of one of the great technology revolutions of this time. AI is expected to spur growth in automation, cloud services and personalized computing, all of which Microsoft heavily pursues.
Microsoft is known for its generous dividends and proceeds from share buybacks which are attractive features for all investors when determining an investment. With such investments consistently offered to shareholders, the number of shares on the market greatly reduces, thus increasing earnings per share.
Strong balance sheet: Microsoft holds a cash heavy balance sheet with more than 100B dollars in cash and short term investments which is able to provide the firm with sufficient resources needed to cushion themselves in the event of an economic downfall, invest in new opportunities that will foster growth or even make acquisitions that would improve the company’s standing in the market.
Future growth opportunities
Microsoft has further strengthened its position in the cloud gaming market, AI, and reportedly has plans to make moves in the metaverse, further providing growth opportunities for the company in the future. There are different ways for the company to augment revenue and boost profits via ongoing innovation and market expansion through acquisitions as well.
Conclusion
Over the last 20 years Microsoft has had a stellar return on stock as a result of restructuring itself towards more of a cloud business, shifting various products towards subscription models and placing a strong emphasis on innovative focuses like AI and gaming. Microsoft is now a mature business thanks to its robust expansions, but remains an attractive business for potential investors because of the well-priced diversified cash flows, dominant positions in artificial intelligence and cloud, and sound financial performance. Given the blend of growth, predictability, and income, Microsoft is still one of the most preferable stocks to possess in the tech industry.
