What's going on?

Europe�s largest tech company, SAP, officially announced a partnership with Microsoft on Monday � and some investors can smell dollars in the air�

What does this mean?

SAP, which makes business operations software, announced that its third-quarter revenue grew 10% compared to the same time last year, while its profits grew 15%. But given that the company released its preliminary results a couple of weeks ago, investors already knew which way the wind was blowing. The big news was the official announcement of a three-year cloud computing deal with Microsoft.

The deal (which has been in place for a while, just under the weather radar) will make it easier for SAP�s customers to move to Microsoft�s cloud platform � so they won’t need to worry about costly server maintenance. SAP will benefit too: as part of the deal, Microsoft will resell its partner’s cloud tools to its own customers.

Why should I care?

For markets: Fair-weather friends.
The Microsoft deal boosted SAP�s new cloud sales by 18% last quarter, and it�ll probably help SAP hold on to its current customers too. And this isn�t SAP�s only successful partnership: it�s also been working with Amazon�s and Alphabet�s cloud platforms (tweet this). Investors were on cloud nine, and sent SAP�s stock up 3% on Monday.

The bigger picture: The calm before the storm.
Investors were likely hoping SAP integration brings Microsoft customers too: its stock also rose. They�ll be looking at its cloud business performance closely when the software giant reports quarterly earnings on Wednesday � just as they will with Alphabet and, above all, Amazon. While Microsoft still makes a lot of money from selling Windows � and Alphabet from selling ads � Amazon relies on its cloud business for the majority of its profit. No wonder its investors are hoping it�ll beat Microsoft to secure a $10 billion cloud deal with the US Defense Department.