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Can Microsoft’s Azure Cloud Maintain Its Growth Momentum?

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Analyzing the key catalysts

Microsoft’s (MSFT) Azure Cloud platform is the company’s key driver. The tech giant is gaining from the ongoing digitalization trend, where enterprises are gradually shifting their data to the cloud. So, the demand for IaaS (infrastructure-as-a-service), which deals with cloud storage, is on the rise. Moreover, the growing number of connected devices has led to greater demand for Azure Cloud.

According to Gartner’s April 12 report, IaaS remains the fastest-growing cloud segment and is expected to climb 35.9% YoY (year-over-year) to $40.8 billion in 2018.

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The exponential usage of the Internet coupled with the growing popularity of IoT (Internet of Things) services has led to huge demand for data storage in the cloud. In order to boost its cloud service, Microsoft has set up global data centers in 54 regions and has added nearly 500 new Azure capabilities in fiscal 2018.

Innovative launch driving popularity

Microsoft has enhanced its cloud platform by launching Azure Stack in September 2017 and Azure Sphere in April. It offers cloud-to-edge solutions to its customers and has gained popularity since its debut.

The company is also combining its Azure Cloud platform with machine learning. In July, Microsoft formed a five-year partnership with Walmart (WMT). The deal allows the retail giant to use Azure Cloud, AI, Office 365, and IoT to boost its retail performance.

Azure Cloud’s business growth

In the fiscal fourth quarter,[1. fiscal Q4 2018 ended June 30] Microsoft’s Commercial Cloud revenues came in at $6.9 billion, up 53.3% year-over-year. In the last five quarters, this segment has grown at a CAGR (compound annual growth rate) of 11.2%. 

The graph above shows the revenue growth of Microsoft’s Azure Cloud unit in the last five quarters. During this period, this unit maintained steady growth.

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