Why Microsoft stock is at an all-time, 31-year high

Microsoft’s share price set an all-time record high yesterday, $74.30. This morning, it’s down a bit, in the $73-$74 range. But yesterday, after Microsoft reported strong fourth-quarter results, it passed $77 in after-hours trading.

This is significant because Microsoft has been a public company since 1986, so this is effectively a 31-year high-water mark for the company, with a market capitalization around $570 billion.

It’s also significant because many — myself included — had been pessimistic for years about Microsoft’s prospects, considering how it blew two massive shifts in how software is used and sold, both on the web and mobile devices.

So why is Microsoft stock at its all-time high?

First and foremost, because Microsoft didn’t simply collapse during the massive global shift to mobile computers from desktop PCs and software sold as a subscription service instead of on a CD-ROM in a cardboard box — the way Microsoft had become the world’s dominant software company.

The mobile era is mature — the revolution has happened — and yet Microsoft still generated $21 billion of profit on $90 billion of revenue in its 2017 fiscal year that just ended. It’s still a very big business, still growing a bit, and many things are still working.

Second, because — better late than never — Microsoft is finding success in the cloud software era, selling software to businesses on a recurring subscription basis.

The company’s “Commercial Cloud” business is within spitting distance of its fiscal 2018 goal of a $20 billion annualized revenue run rate. Its Azure cloud business, which competes with Amazon Web Services, grew 97 percent year over year last quarter, a re-acceleration of growth.

And for the first time last quarter, Microsoft’s Office 365 Commercial business generated more revenue than its traditional licensing business, CFO Amy Hood said on the company’s earnings call. So the rise of Google Docs and other web-based apps didn’t actually destroy Office — it just forced Microsoft to change business models, which it has done. Also, the PC hasn’t collapsed at the rate some predicted.

The question in technology is, as always, what’s next, and Microsoft may still miss the next several big shifts. But for now, it’s still here. And investors are interested.

This article originally appeared on Recode.net.

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