Way back in 2015, Microsoft CEO Satya Nadella called his shot: Microsoft would generate $US20 billion in annual cloud revenue by the end of its 2018 fiscal year, or die trying.
Well, Microsoft just reported earnings for the last quarter of its 2017 fiscal year, and its cloud computing services for businesses are currently sitting at an $US18.9 billion annual run rate. Assuming Microsoft continues that pace, it would already be 94.5% of the way to its goal, with a full year to go before its self-imposed deadline.
Microsoft defines “annual run rate” as a measure of how much revenue a business would generate over the next year if it continued at the pace it was on in the last month of the most recent quarter.
The software giant’s cloud business is anchored by the public cloud platform Microsoft Azure and the Office 365 productivity suite. Both business are growing like crazy. Azure revenue jumped 97% last quarter, compared with the same period in 2016. And Office 365 for businesses grew 43% over the same period.
Indeed, Office 365 had a notable achievement in the quarter. For the first time, Microsoft’s revenue from selling subscriptions to the cloud version of its productivity suite was higher than the revenue it brought in from selling licenses to the traditional version of Office.
Overall, Microsoft’s cloud for businesses grew 56% from the year-ago period. That’s pretty fast when you’re talking about a business that’s already bringing in billions of dollars in revenue.
And yet, Amazon Web Services, the retail giant’s cloud computing arm, is still the one to beat in this market. AWS is on a $US12 billion annualized run rate. That’s obviously less than Microsoft’s pace, but it’s not an apples-to-apples comparison. Amazon Web Services competes directly with just Azure. By contrast, Microsoft counts subscriptions to Office 365 and other software in its cloud revenue.
Still, Microsoft has dedicated itself to closing the gap. And while it remains to be seen if Microsoft’s core cloud business will overtake Amazon, it definitely looks like the battle won’t be quieting down anytime soon.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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