Earlier this year, Microsoft (NASDAQ:MSFT) became just the third company in U.S. history to achieve the distinction of reaching a $1 trillion market cap, capping off a stunning run that was years in the making. One of the biggest contributors to its recent success has been the emergence of Azure as a cloud computing powerhouse, second only to leader Amazon.com's (NASDAQ:AMZN) Amazon Web Services (AWS). This has helped supercharge Microsoft's stock price, which has gained nearly 40% so far this year.

Microsoft cited its cloud business as the principle driver of its success last quarter, and investors will be looking for more of the same when the company reports the results of its 2020 fiscal first quarter (which ended Sept. 30) after the market close on Wednesday, Oct. 23. Let's recap the fourth-quarter results to see what has shareholders so giddy about Azure and why the good times could continue.

The Microsoft logo outside its headquarters.

Image source: Microsoft.

Head in the clouds

For the fiscal 2019 fourth quarter (which ended on June 30), Microsoft reported revenue of $33.7 billion, up 12% year over year, and beating estimates by $920 million. Each of the company's major business segments played a part in the better-than-expected results. The tech giant's productivity and business processes grew by 14%, driven by its strong growth in Office and Dynamic commercial products. More personal computing lagged slightly, up 4% on increases in both its Windows and Surface businesses.

It was the intelligent cloud business, however, that exhibited the greatest gains, growing 19% year over year, topping $11.4 billion, and becoming Microsoft's biggest revenue generator in the process. This was driven by server products and cloud services revenue that climbed 22%, while Azure growth stole the show, up 64% compared to the prior-year quarter.

On cloud nine?

There's evidence to suggest that Microsoft investors will continue to reap the benefits of the ongoing digital transformation. According to research and advisory company Gartner, more than one-third of companies see the cloud as a top three investing priority, driving the overall public cloud market to more than $331 billion by 2022, up from just $182 billion last year.

Some estimates are even higher. International Data Corporation projects that worldwide spending on public cloud services will double by 2023 to nearly $500 billion.

While Amazon remains the industry leader, Azure has been growing more quickly. In the June quarter, AWS grew to $8.38 billion, up 37% year over year. At the same time, Microsoft closed the gap, with Azure growing 64% compared to the prior-year quarter, though it's important to note that Microsoft has yet to divulge how much revenue Azure alone generates. 

More to come

Investors are clearly expecting the share gains to continue. Analysts' consensus estimates are calling for revenue of $32.2 billion, an increase of about 11% year over year, and earnings per share of $1.24, up about 8.8%. If Azure continues its solid performance -- and many believe that it will -- the company could once again exceed expectations on the strength of its cloud business.