Microsoft (MSFT) Azure to Aid Digital Overhaul of Halliburton
Microsoft MSFT recently announced a five-year strategic partnership with Halliburton HAL and Accenture ACN to overhaul Halliburton’s digital capabilities. Per the deal, Microsoft’s cloud platform Azure will help Halliburton enhance its customer offerings and drive digital transformation.
Markedly, Azure’s advanced cloud computing capabilities will be leveraged by Halliburton to support remote work through improved real-time platforms, strengthen its analytical capabilities and accelerate the roll out of new applications, while ensuring SOC2 compliance.
Moreover, Halliburton will shift all of its physical data centers onto Azure cloud. Meanwhile, Accenture will collaborate with Microsoft to help Halliburton with the transition and provide additional transformation opportunities by utilizing its comprehensive cloud migration framework.
The Halliburton deal is a notable win for Microsoft as the company is one of largest oilfield service providers in the world. As of first-quarter 2020, Halliburton had a market share of 13.1% in the Completion & Production segment and 13.7% in the Drilling & Formation segment.
Moreover, it highlights strength of Azure’s cloud solutions. The move is anticipated to boost the company’s cloud revenues in the upcoming quarters. Expanding Azure clientele is also expected to boost investors’ optimism in the stock.
Microsoft Corporation Price and Consensus
Notably, the company’s shares have returned 28.6% in the year-to-date period compared with the industry’s rally of 22.8%.
Growth Prospects Aplenty in Oil & Gas Industry
Microsoft has been witnessing robust traction for its cloud offerings among oilfield services providers in the past few years.
In November 2019, Microsoft announced a strategic alliance with Baker Hughes and C3.ai to help the former develop and roll out solutions that combine Azure’s cloud computing capabilities with C3.ai’s AI platform. The joint offerings will help customers in the Oil & Gas industry lower costs by optimizing inventory and improving operational safety.
In September 2019, Microsoft entered into three-party collaboration with Schlumberger and Chevron to accelerate digital transformation in the energy space. Markedly, Azure will be leveraged to generate deeper insights that will help customers improve efficiency, security and sustainability.
These client wins highlight growing demand for Microsoft’s cloud services and are expected to drive the top line over the long haul. Markedly, revenues in the Intelligent Cloud segment increased 27% year over year to $12.3 million in third-quarter fiscal 2020. Azure witnessed 59% year-over-year growth in revenues during the quarter.
The momentum is likely to continue in the upcoming quarters driven by the coronavirus-led drop in oil prices, which has made it necessary for companies to overhaul operations and reduce expenditures to meet the needs of a changing work environment. Per a Barclays report, quoted by CNBC, the oil-focused digital services industry will grow from less than $5 billion in 2020 to more than $30 billion annually over the next five years, leading to $150 billion in annual savings for oil producers.
Moreover, the growing traction for its solutions will likely enable Microsoft expand its footprint in the global cloud computing market, which per Grand View Research data, is anticipated to witness a CAGR of 14.9% between 2020 and 2027.
Demand for Cloud Services to Aid Competitive Position
Microsoft, which currently carries a Zack Rank #3 (Hold), is expected to benefit from robust adoption of digital transformation technologies as more companies shift away from on-premise systems to scalable cloud-based platforms. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
This is expected to help the tech giant counter stiff competition in the cloud computing market from Amazon’s AMZN Amazon Web Services (“AWS”). Notably, AWS has a significant client base in the Oil & Gas industry which includes services providers like Blueware and GuildOne as well as major oil companies like British Petroleum (BP) and Shell.
Nevertheless, Microsoft Azure’s market share increased from 15% in first-quarter 2019 to 17% in first-quarter 2020, per Canalys data. Azure trails only AWS, which is losing ground in the cloud infrastructure market. This is evident from AWS’ market share of 32% in first-quarter 2020, down from 33% in first-quarter 2019.
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