Introduction
Market conditions can influence a company’s performance and change its approach to development, financial stability, and goals. Several major events have affected the market in previous years and challenged businesses to review their practices and aims. The technology industry had to adapt to the high need for cloud-based services and the remote working style popularized during the pandemic (Microsoft, 2022). At the same time, the financial crisis 2008 continued to influence the economy (Federal Reserve, 2022). The following chart represents Microsoft’s financial performance in 2020 and 2021 and analyzes it in relation to market conditions.
The Financial Crisis of 2008
Market Conditions
Firstly, the aforementioned crisis has led to the government keeping interest rates low. This initiative allowed companies to take loans and invest in their business ideas, growing the economy and supporting national technological development (Microsoft, 2022). The Federal Reserve Bank did not change its course in the previous fiscal year and retained the interest rates at near-zero levels – between 0% and 0.25% (Federal Reserve, 2022). Moreover, the agency noted that economic activity increased last year following the COVID-19 pandemic (Federal Reserve, 2022).
The market favored technology companies in the last few years. The Nasdaq Composite Index (COMP) rose by over 40 points recently, and the YoY increase was more than 43%, which means that the market created a profitable environment for such corporations as Microsoft (Nasdaq., 2023).
Microsoft’s Financial Performance
Figure 1 below represents Microsoft’s financial performance in the last two fiscal years, showing how the company grew in these market conditions. The YoY (Year-over-Year) increase in these years was around 18% for net income and between 19% and 38% for revenue.
The corporation’s numbers presented above are consistent with this rate of change, which signifies its solid presence in the industry. Figure 2 shows the change in earnings per share between 2021 and 2022 for the company. The growth is stable, and the conditions created in the technology industry are supported by the growing demand for services and products offered by Microsoft.
COVID-19
Market Conditions
Another notable event that affected the market was COVID-19. Although the pandemic started in 2019, it has had a long-lasting effect on the global economy, and its impact is still present in the market (Microsoft, 2022). The technology sector experienced positive changes, as the need for remote office applications and cloud-based service increased greatly with people working from home.
Microsoft’s Financial Performance
Many businesses had to undergo digital transformation, raising the need for products offered by Microsoft. The corporation reports increased customer demand for cloud services, Office products, and server hosting and explains this high interest as a result of rapid digitalization (Microsoft, 2022). The charts above support this conclusion, as the company’s performance improved following the pandemic. Notable increases in revenue based on this event are presented in Figure 3.
Conclusion
In conclusion, the market conditions were extremely favorable for the technology industry and such companies as Microsoft. The corporation took advantage of low interest rates, beneficial policies, and the growing demand for digital transformation. As can be gathered from the recent reports, Microsoft has performed better than other companies in the industry, which explains the company’s leading position in the market. Overall, Microsoft successfully adapted to the market factors and found ways to continue expanding its influence.
References
Federal Reserve. (2022). Monetary Policy Report – February 2022. Web.
Microsoft. (2022). Annual report 2022. Web.
Nasdaq. (2023). NASDAQ Composite Index (COMP). Web.
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