Microsoft Corp. (MSFT) now has a market capitalization that is over $600 billion for the first time since the dot-com boom, but it's not Windows or personal computers that are driving the increase. It has its Azure cloud computing business to thank for its newfound value.

As of midday trading, Thursday the Redmond, Wash., software giant’s market cap stood at $610 billion, with shares up 0.6% or $0.48 to $79.11 a share. The software giant reports fiscal first-quarter earnings after the close of trading.

While in the past its value was tied closely to how many Windows OS units it sold, these days it's the cloud computing business that has gotten Wall Street and investors giddy. So much so that some analysts have even predicted it could end the year with more revenue than its fiercest rival, Amazon Web Services. It’s also being blamed for the expected slowdown in revenue growth at AWS as it chips away at its dominance. (See more: Microsoft Could Surpass Amazon in Cloud Computing This Year.)

Mistrusted Competitor

Take Keybanc Capital Markets analyst Brent Bracelin, for one example. He wrote in a recent research report that Microsoft could report cloud sales that are up 45%, getting the company closer to its $20 billion annualized run rate goal the company laid out in 2015. The goal is to hit $20 billion at some point in 2018. “We have been impressed by solid execution and strong customer adoption of Microsoft’s cloud applications and platforms,” Bracelin wrote in the research noted covered by MarketWatch. “Reaching $20 billion would imply the commercial cloud mix could cross over 20% of revenue for the first time in the first quarter of fiscal 2018, up from 5% in early 2015.”

Microsoft’s fortunes in the cloud computing market has a lot to do with the diversity of its client base and the expansion of AWS’s parent Inc. (AMZN) into all sorts of markets. Take its acquisition of Whole Foods. Because it is now in the grocery store market and because it has been entering and disrupting a whole swath of industries, retailers are balking at doing business with AWS. After all, they don’t want to house their data with a competitor. That has paved the way for Microsoft and Alphabet Inc.’s (GOOG) Google to win more customers.

Project Brainwave

At the same time, Microsoft  is injecting a lot of artificial intelligence into its cloud offering to lure more clients and boost revenues. According to Forbes, the company has  20 different intelligent services built into its Azure such as image recognition and the ability to comprehend languages. It also recently launched Project Brainwave, which uses a series of chipsets to enable real-time AI in its data centers. (See more: Microsoft Vs. Google: Who's Got the Smartest Cloud?)  

How is cloud business is faring will be a key focus later Thursday when it offers up its results for the fiscal first quarter. If business continues to improve, Microsoft’s market cap is likely to stay above $600 billion. If sales are down, get ready for a slide in the stock and a return to the post-dot-com boom values.


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