A lot of people seem confused at why an earnings boost in cloud revenues at the expense of traditional licensing revenues would result in positive market response. But you have to remember, there's a whole lot more to an earnings report than the sum of all the numbers in the balance sheet. Even more important is the story they tell.
In the last few years, IT has seen growth in new business lines such as SaaS, cloud etc. and a growth stall n traditional revenue (HW, on-prem & licenses etc.)
Older companies like Microsoft, IBM, Oracle have been making their bread and butter for decades in traditional technologies whilst new upstart companies like Salesforce, Amazon & Google have all established themselves as leaders within newer fields.
In a sector where being an early winner within new technologies is key for future revenue (like Microsoft & Windows in the 90's) the market is judging these older giants not at the revenue they bring in, but in their ability to retain market share and beat new players in the innovation game.
The boost in share price should be seen as a recovery from previous depreciation of share price (Nokia & Windows phone anyone?) and a belief the company has finally woken up to reality and is moving in the right direction.
In the last few years, IT has seen growth in new business lines such as SaaS, cloud etc. and a growth stall n traditional revenue (HW, on-prem & licenses etc.)
Older companies like Microsoft, IBM, Oracle have been making their bread and butter for decades in traditional technologies whilst new upstart companies like Salesforce, Amazon & Google have all established themselves as leaders within newer fields.
In a sector where being an early winner within new technologies is key for future revenue (like Microsoft & Windows in the 90's) the market is judging these older giants not at the revenue they bring in, but in their ability to retain market share and beat new players in the innovation game.
The boost in share price should be seen as a recovery from previous depreciation of share price (Nokia & Windows phone anyone?) and a belief the company has finally woken up to reality and is moving in the right direction.