How Satya Nadella navigated Microsoft to $3 trillion market value

It is Microsoft’s moment in the sun as its market value crossed the $3 trillion mark for the first time. After Apple, Microsoft is only the second company ever to achieve this feat.

The company’s Chief Executive Officer, Satya Nadella, is credited with steering the company’s rise from $381 billion to $3 trillion over the last decade. When Nadella took over the helms at Microsoft in 2014, the company was stagnating and lagging in innovation, but today, it is seen as being at the forefront of the AI era, largely believed to be the next big thing.

“The strategies undertaken by Satya Nadella may be divided into two distinct phases. In the first phase, he initiated a transformational shift in Microsoft around two key pivots, namely agile development and cloud delivery, duly supported by a cultural shift at the organizational level. In the second phase, the focus has been on investing in AI-driven consumer software such as ChatGPT,” said Deepak Kumar, founder analyst and chief research officer at BMNxt Business and Market Advisory.

Nadella’s winning bets

More than anything else, Nadella’s uncanny knack for identifying the winning horse has helped Microsoft move from strength to strength. It was his focus on the cloud that had a transformative impact on the company. Nadella was heading the company’s cloud division before taking over as its CEO and realizing its potential.

“In executing a decisive ‘cloud-first, mobile-first’ strategy, Satya Nadella has steered Microsoft toward a remarkable growth trajectory. By prioritizing the development of cloud services, notably exemplified by Microsoft Azure, and acknowledging the pivotal role of mobile devices in contemporary computing, Nadella strategically positioned the company at the forefront of technological evolution,” said Thomas George, President, CyberMedia Group and CMR.

As per IDC, Microsoft is the world’s largest public cloud provider, with a 17.1% market share in the first half of 2023, followed by Amazon Web Services (AWS) with a 12.6% market share. Nadella also made existing products like Microsoft Office cloud-based.

“The substantial investments directed towards Microsoft’s cloud computing platform, Azure, underscored its ascent as a formidable contender in the fiercely competitive cloud services market, directly challenging established industry leaders, including AWS. With a significant foothold in enterprise and commercial IT stacks, this effort to encash the cloud adoption wave of user organization with suitable offerings aided the growth,” added George.

The OpenAI bet

The same uncanny knack was again evident when he decided to bet on AI. The investment in Sam Altman’s OpenAI in 2019 was instrumental in putting the company way ahead of its peers. Microsoft is believed to have invested $13 billion in OpenAI.

OpenAI disrupted the industry by launching ChatGPT in 2022. Microsoft plans to integrate OpenAI’s large language models across its products. Investment in OpenAI allows Microsoft to be at the forefront of the generative AI market, which, according to some estimates, is likely to touch $66.62 billion in 2024. With AI all set to dominate the tech scene, Microsoft and Nadella’s stars are only going to rise.

Last year also saw Nadella skilfully handling the departure of Sam Altman from OpenAI. He quickly decided to hire Altman to lead Microsoft’s new AI research lab. At the same time, he helped OpenAI’s board reach the consensus of getting Altman back as its CEO, a positive development for Microsoft.

Over the years, Nadella has not shied away from discontinuing a failed product like Windows Phone. In addition, acquisitions have played a key role in Microsoft’s growth over the last ten years. The tech giant has made over 100 acquisitions, including prominent ones like LinkedIn and Activision, helping the company cultivate a culture of innovation.

Under Nadella, Microsoft has also deepened engagement with open-source communities. It is the second largest contributor to open source, as per the Open Source Contributor Index. The company acquired GitHub, an open-source platform, in 2018 for $7.5 billion. As per a TechCrunch report,  GitHub hit an annual recurring revenue of $1 billion in 2022, up from $200 to $300 million at the time of the acquisition.