How big do you think Microsoft’s cloud business is? Well, Microsoft is stealthily making its cloud business worth $10 billion.
According to a regulatory form filed with the SEC by Microsoft, the company indicated that in the just concluded 2015 fiscal year, that ended on June 30, its cloud business earned $9.5 billion. Its primary cloud products are Office 365 and Azure.
In simpler terms, Microsoft is fast approaching the $10 billion mark from its cloud products. Other big tech companies interested in the business, such as Google, Salesforce and Amazon are not yet near there.
Financial analysts speculate that Salesforce will achieve the $10 billion mark in the 2017 fiscal year. Its recent acquisition of Quip may make the company reach that mark sooner than expected. Amazon is right behind Microsoft, with analysts predicting it will reach that mark this fiscal year, which started beginning of July. Oracle is also in the race and hoping to arrive at the $10 billion mark. But, it will have to increase its revenue in the cloud business three times to achieve that target.
Most of the revenue accumulated from the cloud division came from Office 365 commercial and other products like Azure, which is Amazon’s competitor and Salesforce rival Dynamics Online.
The cloud revenue the company is generating is impressive but does not mean the company is making a lot of profit. The cloud revenue is more or less compensating where Microsoft is making losses. For instance, Office 365 is no doubt growing, but at the expense of Microsoft Office software business. Most enterprises are ditching Microsoft Office for Microsoft Office 365 because of the cloud benefits. The replacement factor could be a reason Microsoft is not making a big deal of its profits in the cloud business.
Last year, Microsoft did not disclose its cloud revenue. This year’s disclosure could be a way of responding to Steve Ballmer’s, the largest shareholder and former CEO, challenge. Steve Ballmer, who is currently not in good terms with Bill Gates, questioned Microsoft for not disclosing the company’s actual revenue from the cloud business instead of simply talking about the run rate. Ballmer currently does not hold any official responsibility or position at Microsoft.
The run rate is a figure that represents revenue growth without revealing the actual revenue number. Microsoft calculates it by taking revenues of the last month of a year and comparing the figures with the revenue figures of the whole year.
Satya Nadella, Microsoft’s CEO assured that Microsoft would hit the $20 billion mark in cloud revenue by 2018. Considering that Microsoft recently acquired LinkedIn, that figure is easily achievable.