Key Drivers of Microsoft’s Cloud Business

Microsoft’s (MSFT) Azure cloud platform continues to see increased adoption across different organizations driven by the ongoing migration of workloads to the cloud. The graph below shows the revenue growth of Microsoft’s commercial cloud business in the last five quarters. During the period, it maintained robust growth. It improved at a CAGR (compound annual growth rate) of 11.3%.

In the trailing four quarters, the tech giant also maintained a quarterly run rate of $5.8 billion in revenues, which is higher than IBM’s (IBM) average quarterly cloud revenue of $4.6 billion. Gartner anticipates that by 2022, nearly 28% of the enterprise IT spending will be related to cloud computing as compared to 19% in 2018. Thus, the increased investments in its cloud platform could certainly help Microsoft. 

Microsoft offers flexibility to clients with its hybrid cloud platform. Its SQL server license allows users to use it on-premise as well as on the Azure cloud at no extra cost. Thus, the company’s hybrid cloud strategy may not just boost flexibility, but it could also save clients time and money.

Microsoft has made a lot of investment in its cloud infrastructure and its security features. The company offers secure data storage facilities to large organizations. The tech giant is also integrating data analytics and AI technology with its cloud platform. In 2018, the company bought several AI-based firms like Lobe, Bonsai, and Semantic. So, these acquisitions could help Microsoft enhance its cloud platform with AI tools and help it drive market share.