Microsoft vows to have $20 billion in cloud revenue by 2018

Microsoft CEO Satya Nadella vowed that the company will have 1 billion Windows 10 devices on the market and $US20 billion in annual cloud revenue by the middle of 2018.

The Windows 10 number isn’t that surprising — even though PC sales have fallen for the last couple years, it’s still a huge business, with more than 350 million shipped each year. Most of those run Windows.

But the $US20 billion in cloud revenue is more of a boast. Microsoft would have to triple cloud revenue in three years for that to happen.

In its quarterly earnings report last week, Microsoft said revenues from its cloud business were at a $US6.3 billion revenue run rate for the year — that means that if all customers who are currently paying for services continue to do so through the year with no growth, its cloud revenues will be $US6.3 billion. But in fact the number of customers buying Microsoft cloud services is increasing fast — as of the end of 2014, Microsoft’s claimed revenue run rate for the cloud was $US5.5 billion.

Most of this money is coming from Office 365, Microsoft’s hosted productivity applications and related services like email.

But Windows Azure, its closest equivalent to the type of cloud computing that Amazon dominates, is also starting to take off. Usage more than doubled from last year, Microsoft says. That’s important because Microsoft has been offering customers steep discounts on other software to get them on board with one-year trial Azure licenses, but if they aren’t using the product, they won’t renew those licenses.

Nadella made his comments to a group of financial analysts at the company’s Financial Analyst Briefing, which took place in San Francisco this afternoon alongside the company’s BUILD developers conference.

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