- Microsoft’s cybersecurity business has grown to approximately $20 billion annually as of January 2023.
- Traditional cybersecurity companies like CrowdStrike and Palo Alto Networks now face competition from Microsoft.
- Google became a cybersecurity rival after acquiring Mandiant for $5.4 billion in 2022.
- 5 stocks we like better than Microsoft
You might not think of Microsoft Corp. NASDAQ:MSFT Although it has established itself as a leader in cybersecurity, the company is also making significant strides in that area of the technology industry.
Like many business changes, Microsoft increased its focus on security after incidents in 2021 in which hackers accessed emails from the U.S. Departments of Commerce and State, private companies and other agencies.
That year, Microsoft rolled out its Secure Future program to improve cloud security.
More than two years later, Microsoft is becoming a competitor to more traditional cybersecurity companies such as CrowdStrike Holdings Inc. Nasdaq: CRWDPalo Alto Networks, Inc. Nasdaq: PANWand fast-growing startups like Zscaler Inc. NASDAQ:ZS and Okta Inc. NASDAQ: OKTA.
Microsoft extorts $20 billion from cybersecurity software
In January 2023, Microsoft announced that its cybersecurity business had annual revenue of approximately $20 billion, an increase of $5 billion in just one year.
Historically, Microsoft hasn’t been seen as very strong when it comes to cybersecurity, let alone being seen as a leading vendor of cybersecurity services. The events of 2021 were a wake-up call, and the company acted very quickly to turn the situation around and even developed a solid revenue stream.
Microsoft competes with Amazon.com, another technology giant known for services other than cybersecurity. Nasdaq: AMZN Amazon Web Services also rolls out its own suite of security software products.
Microsoft is building its cybersecurity technology into its Azure cloud computing and Office 365 platforms. This is an advantage Microsoft and Amazon share, as they are able to build cybersecurity fees into productivity and cloud software prices. Chances are, many buyers won’t be upset about paying for cybersecurity services.
Growth in cloud business means increased security threats
In its latest annual report filing, Microsoft addressed the cybersecurity challenges inherent in its software products. He noted that the company’s cloud services face competition from other technology stocks such as Amazon and Alphabet. Nasdaq: Googleinternational business machine New York Stock Exchange: IBMOracle Corporation New York Stock Exchange: ORCL and VMware Inc. New York Stock Exchange: VMWand various open source software programs.
“We believe that our cloud global reach, combined with our broad portfolio of identity and security solutions, will enable us to effectively solve our customers’ complex cybersecurity challenges and differentiate us from our competitors.” said Microsoft.
Google acquired cybersecurity expert Mandiant in 2022 in a deal valued at $5.4 billion, making it a cybersecurity rival. But while Google’s cybersecurity business hasn’t yet grown to the scale of Amazon or Microsoft, investors shouldn’t be surprised if Google quickly catches up.
For example, Google reported in April 2023 that its cloud computing business was profitable for the first time. Alphabet is investing heavily in the division to compete with Microsoft and Amazon.
Why is it important for cybersecurity? Simple: As cloud businesses grow, so do cybersecurity threats. Alphabet doesn’t want to face an embarrassing situation like Microsoft experienced with the email breach in 2021.
Emerging threats related to AI investments
Meanwhile, the growing rise of AI has also increased the need for tech giants to strengthen their cybersecurity capabilities.
Microsoft, a major financial backer of OpenAI, which operates the generative AI platform ChatGPT, also faces the possibility of an embarrassing breach. Aside from the lawsuit brought by the New York Times Company. New York Stock Exchange: New York Times On December 27, Microsoft and OpenAI were accused of copyright infringement by using Times content without permission.
Note that this lawsuit, and potentially others by major media companies, could serve as a catalyst for further tightening of cybersecurity guardrails.
Microsoft doesn’t disclose cybersecurity revenue in its quarterly or annual reports, so analysts can only make predictions based on the company’s sporadic earnings releases.
However, Microsoft’s revenue growth has accelerated over the past three quarters, likely helped by a rise in its cybersecurity business.
Rapidly growing cybersecurity industry
Industry-wide cybersecurity spending is expected to continue to increase.
Microsoft has been a hot topic as an enterprise software maker, but the cybersecurity sub-industry, home to stocks like CrowdStrike, Zscaler, and Palo Alto Networks, has rallied in the past three months as these and other stocks soared. is increasing its ranking.
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