Is Microsoft on Target to Hit Its Cloud Target by 2018?


Oct. 18 2016, Updated 11:04 a.m. ET

Microsoft’s cloud offerings show steady growth and adoption

Earlier in this series, we looked at analyst expectations for Microsoft’s (MSFT) soon-to-be-announced fiscal 1Q17 results. We also saw how Microsoft intends to facilitate the Windows 10 adoption. If we look at Microsoft’s recent earnings results, we see that the company’s core focus has been to push its cloud offerings as well as diversify its footprint.

In 4Q16, Microsoft’s Azure revenues rose 108.0% in constant currency terms with its computing usage more than doubling on a YoY (year-over-year) basis. In 4Q16, Office 365 and Office consumer revenues rose 54.0% and 19.0%, respectively. Fiscal 4Q16 marked the eighth consecutive quarter that the Dynamics CRM Online seat additions more than doubled YoY. In fiscal 4Q16, Microsoft’s cloud offerings grew to reach an annualized revenue run rate of $12.1 billion.

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Amazon (AMZN) continues to rule the cloud space with more than 30.0% market share in 2Q16. It’s followed by Microsoft, IBM (IBM), and Google (GOOG) (GOOGL), which collectively held a little more than 20.0% of the market share of the cloud space. Among the top four players, Google reported the highest growth rate of 152.0%. It’s followed by Microsoft, which reported 100% growth.

It was the Microsoft Dynamics business solutions that enabled Microsoft to claim the Salesforce.com (CRM) leadership position and emerge as an overall enterprise SaaS market leader. Microsoft’s dominance in the collaboration segment, which is the largest segment in the overall SaaS (software as a service) space, also contributed significantly to its success in the SaaS space.

Please read Why Does Microsoft Have Higher Growth Chances in the Consumer SaaS Space? to know more.

Microsoft’s aim to hit $20 billion in cloud revenue by 2018 looks possible

Looking at Microsoft’s cloud offerings growth in 4Q16 as well as its ability to sustain its momentum in the cloud space, it seems the company is on its way to accomplish the goal it set for its cloud offerings by 2018. Considering Statista estimates, Microsoft could have $20.1 billion in cloud revenues by fiscal 2018.


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