Microsoft MSFT recently teamed up with Nutanix NTNX to improve capabilities of its Azure cloud platform by extending the latter’s hybrid cloud infrastructure on to Azure.

Microsoft will deploy Nutanix clusters on its Azure platform to build a new hybrid cloud solution. The new offering is designed with an aim to offer unified application along with licence and data mobility both on-premises environment as well as on the Azure platform.

The companies will focus on creating Nutanix-ready nodes on Azure, which will provide support to Nutanix clusters and services.

This will enable customers to accelerate digital transformation and improve operational efficiency, resulting in ample cost savings. The seamless data transfer will help clients to run workloads on both public and private clouds without the need to worry about managing multiple cloud environments.

Furthermore, clients will also be able to operate and manage Azure from Nutanix’s management interface.

We believe this is an important development in the enterprise cloud market. Collectively, new capabilities of Nutanix hybrid cloud platform, is likely to enhance Azure’s competitive stance against Amazon’s AMZN cloud computing platform Amazon Web Services (AWS).

This will likely boost confidence in the stock among the investor community. On a year-to-date basis, shares of Microsoft have returned 34% compared with the industry’s rally of 31%.

Focus on Democratizing Multiple-Cloud Model

Microsoft-Nutanix collaboration will utilize the Azure Arc control plane to focus on management of containers, servers, and data services on Nutanix HCI and Azure. This will help Nutanix clients to move Azure services on to their Nutanix HCI environment.

Furthermore, both the companies remain committed to their existing clients in terms of offering adequate customer support services. Azure customers will be able to buy Nutanix software by utilizing their existing Azure credits, which pertains to Microsoft Azure Consumption Commitment (MACC) plan.

On the other hand, Nutanix customers will have the liberty to switch their term licences to Nutanix Clusters on Azure platform. They can also buy on-demand Nutanix software from the Azure Marketplace. This will help them to migrate workloads between public and private clouds without any hassle. 

Both Microsoft and Nutanix aim to help enterprises with a democratized approach towards multiple-cloud model amid acceleration in digital transformation. Further, higher spending on public cloud platforms and increasing clout of digital transformation favor the growth prospects of the cloud partnership in the longer haul.

Per a MarketsandMarkets report, cloud computing market is expected to witness a CAGR of 17.5% between 2020 and 2025.

Endeavors to Strengthen Azure Capabilities Augur Well

Microsoft is strengthening Azure capabilities with investments in technologies like Kubernetes and GitHub Actions to automate the process of checking code as well as deploy containerized applications, and web applications. This is expected to be a strong driver for Azure cloud adoption going ahead.

In fact, Microsoft Azure is gaining ground in the cloud space and trails only AWS. Per a Canalys Report, for the second quarter of 2020, Microsoft’s market share in the cloud services space increased to 20% from 18% in the prior-year quarter. AWS market share remained unchanged at 31% for the second quarter of 2020 on a year-over-year basis.

In the fourth quarter of fiscal 2020, Azure revenues soared 47% on a year-over-year basis.  Intelligent Cloud segment, which include Azure cloud services, contributed 33.8% to fiscal 2020 revenues for Microsoft.

Microsoft’s cloud initiatives are expected to aid it in capitalizing on alluring growth prospects and benefit its financial performance in the coming days. 

Zacks Rank and Key Pick

Microsoft currently carries a Zacks Rank #3 (Hold).

A better-ranked stock worth considering in the broader sector is Zoom Video Communications ZM, which flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Zoom Video is currently pegged at 25%.

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