Microsoft reaches US$20 billion cloud revenue target early

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Microsoft reaches US$20 billion cloud revenue target early

Microsoft announced its first quarterly revenue yesterday and revealed it had hit its cloud services target three quarters early.

Microsoft's target for its cloud services was to reach an annual run rate of US$20 billion by the end of the 2018 fiscal year, and its commercial cloud run rate hit US$20.4 billion this quarter.

"This quarter we exceeded US$20 billion in commercial cloud ARR, outpacing the goal we set just over two years ago," said Microsoft CEO Satya Nadella. "Our results reflect accelerating innovation and increased usage and engagement across our businesses as customers continue to choose Microsoft to help them transform."

In a call with analysts, Nadella also revealed that the retailer Costco had chosen Azure as its hybrid cloud platform, according to Reuters.

Server products and cloud services increased by 17 percent thanks to Azure's strong revenue growth of 90 percent. Intelligent Cloud revenue measured US$6.9 billion which was an increase of 14 percent.

Furthermore, Office commercial products and cloud services increased by 10 percent year-on-year which was driven by Office 365's commercial revenue growth of 42 percent. Office 365's consumer subscribers increased to 28 million too and LinkedIn produced a revenue of US$1.1 billion during the quarter.

More Personal Computing's revenue fell by 0.2 percent to US$9.4 billion. Last quarter, Surface revenue fell by 2 percent and 26 percent in the quarter before that but this time around Surface revenue was up by 12 percent, thanks to the new Surface laptop. Windows OEM revenue increased by 4 percent and Xbox software and services' revenue grew by 21 percent, although gaming revenue only increased by 1 percent.

The company's overall revenue was US$24.5 billion and increased by 12 percent year-on-year.

Clive Longbottom, an analyst at Quocirca, said: "Azure has moved from being a quiet backwater in Microsoft to being its main focus under Satya. With it supporting Linux workloads as well as Windows, and with the latest introduction of Azure Stack, Microsoft is making a solid play for the enterprise. On top of this, it is introducing better analytics capabilities, and using these to underpin its IoT and AI strategies.

"Overall, Azure is now showing its strengths and is positioned well against AWS and Google, and is accelerating away from the likes of IBM and Oracle in what it provides as a general cloud engine for enterprises.

"It will still face issues: the portfolio of offerings is complex; systems architects struggle to figure out what they need to create a suitable platform for their needs. However, this is the same issue facing all the general public cloud platforms. Microsoft will have to continue chasing the cost models of its competitors: this could stress margins over time. It will also need to work on workload portability more -- both into the Azure platform and out of it."

Redmond recorded a 13 percent year-on-year growth of its fourth quarter in July, bringing its quarterly revenue to US$23.3 billion. Much of the surge in growth came from a 43 percent year-on-year jump in Office 365 commercial revenue.

This article originally appeared at

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