Abu Dhabi, UAEThursday 12 December 2019

How Amazon edged past Microsoft to become the world's most valuable company

Shares of the e-commerce company rose 3.4 per cent, a rally that gave it a market capitalisation of $797bn

Amazon closed Monday's trading session as the world's biggest company by market capitalisation, overtaking Microsoft. AFP
Amazon closed Monday's trading session as the world's biggest company by market capitalisation, overtaking Microsoft. AFP

Amazon surpassed Microsoft to become the world’s largest public company on Monday, in the latest example of the list of Wall Street’s biggest names being reordered.

Shares of the tech giant rose 3.4 per cent, a rally that gave it a market capitalisation of $797 billion (Dh2.92 trillion), according to Bloomberg data. While this is down from Amazon’s record market cap, which topped $1 trillion in September, it was enough to push it past Microsoft at $789 billion. Shares of Microsoft, which claimed the title of the world’s most valuable stock in November, rose 0.1 per cent on Monday.

Such megacap technology and Internet stocks have been jockeying for the top spot for weeks, and Amazon briefly claimed the crown in early December.

Both companies are now notably larger than Apple, which had held the position for years. The iPhone maker now has a market cap of about $702bn, down from a record $1.1tn in early October. The company has been pressured by weaker-than-expected iPhone demand in China. Last week, it cut its sales outlook, sending the stock to its lowest level since April 2017.

Apple currently stands as the fourth-largest US stock. In third place is Alphabet, the parent company of Google, which has a market cap of $745bn.

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The frontrunner, Amazon, is keeping things interesting for investors on a number of fronts, making it a tough to beat stock in 2019.

With Microsoft's cloud services at a distant second, Amazon Web Services remains the world’s largest cloud provider, with 40 per cent of the public cloud market share, according to Synergy Research Group.

AWS has more than 140 services for developers, and the business continues to expand geographically. Amazon cloud data centres are being built in Bahrain, Hong Kong, Italy and South Africa, and the company is vying to win a $10bn US Defense Department contract, according to CNBC.

The cloud provider is also now focused on signing big-name clients at increasingly large commitments that are locked in for fixed terms instead of its pay-as-you-go model that it launched with – meaning more reliable, predictable revenue. Terry Wise, vice president of global alliances and channels at AWS, said in a speech in December that the total deal size brought in by partner sellers has increased 3.5 times compared with 2017.

Meanwhile, Amazon still has room to grow in revenue-driving segments like health care, advertising and content. Last year, the company acquired Pillpack, a full-service online pharmacy, for $1bn. Advertising, part of Amazon's "Other" business segment, was up 123 per cent in the third quarter, cresting $2.5bn. The company is also taking on Netflix and Hollywood with Amazon Studios, producing original television series and movies for its Prime subscribers.

While it’s expanding into these new ventures, its core business remains e-commerce. Amazon accounted for about one in two e-commerce transactions in the US last year, according to eMarketer. Its Middle East outpost, Souq.com, is expanding, with plans to hire 600 new workers in Dubai this year.

Updated: January 8, 2019 04:42 PM

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