Microsoft has quietly taken the lead in the race to $10 billion in cloud revenue.
Tucked away in a regulatory form filed to the SEC, Microsoft revealed that in its 2015 fiscal year, which ended in June, Microsoft has already earned $9.5 billion in revenue from its cloud products such as Office 365 and Azure.
That means that Microsoft has almost crossed the $10 billion in annual revenue mark already, even while other big IT companies are racing to get there.
Salesforce is expected to achieve $10 billion in annual revenue in next fiscal year, 2017. Oracle is trying to get to $10 billion before Salesforce (although it will need to triple its revenue in a hurry to do that) and Amazon is on track to make it this fiscal year.
Most of Microsoft’s revenue came from its Office 365 commercial offerings (the versions of Office 365 sold to to business) but it also includes revenue from its Amazon-competitor Azure, its Salesforce competitor Dynamics Online, and “other cloud properties.”
Now, this cloud revenue isn’t all brand new revenue — a lot of it is replacement revenue. In particular, Office 365 is growing at the expense of the Microsoft Office software business, as businesses shift from buying the software to buying the cloud service.
Still, it’s sort of surprising, and curious, that Microsoft didn’t make a bigger deal out of this.
The disclosure is also a quiet way to answer the challenge presented by its largest shareholder and former CEO Steve Ballmer.
Ballmer, who has had a strained relationship with Bill Gates in recent years, and now has no official role with the company, criticised Microsoft late last year for not disclosing the company’s actual cloud revenue number and instead only talking about “run rate.”
“Run rate” is a way to show revenue growth without revealing the actual number. Microsoft arrives at it by taking revenues from the latest month and calculating them out for a year.
In the same filing, Microsoft said its commercial cloud revenue run rate exceeded $12.1 billion. This number also includes Office 365, Azure, Dynamics Online.
Microsoft CEO Satya Nadella has promised that Microsoft will hit $20 billion in cloud revenue by 2018. With Microsoft’s purchase of LinkedIn, the company is expected to easily achieve that.
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