Microsoft sets commercial cloud goal of $20 billion run rate by 2018

Microsoft officials claim the company's combined Azure, Office 365, CRM Online and Enterprise Mobility Suite revenues will be at a $20 billion run rate in three years.
Written by Mary Jo Foley, Senior Contributing Editor

Last week, during Microsoft's third quarter fiscal 2015 earnings, company execs said Microsoft had hit an annual run rate of $6.3 billion for its commercial cloud.

This week at the company's annual Financial Analyst Meeting (FAM), CEO Satya Nadella said Microsoft's goal is to hit a $20 billion run rate for its commercial cloud by 2018.

Products that are included in Microsoft's commercial cloud business currently include Azure, Office 365 business services and its CRM Online service. Microsoft also seemingly will be adding EMS, its Enterprise Mobility Suite to this group, as it rolls out in the coming months. Commercial cloud does not include cloud-hosting revenues.

Microsoft officials said today that Microsoft now has 50 million active monthly Office 365 business customers. Chief Financial Officer Amy Hood also revealed that Microsoft's gross margins on its commercial cloud business by the end of the current fiscal year at the end of June this year will be 44 percent, as Bloomberg noted.

This new cloud computing prediction comes the same day that company execs said Microsoft will see Winndows 10 installed on 1 billion devices of all kinds by mid-2018.

At the Financial Analyst Meeting, executives went through the changes coming to the company's transactional and business models. Among those changes are the company's move to Windows as a Service, Office as a service and via its growing Azure public/private/hybrid cloud business.

Transitioning Windows and Office from standalone software to regularly updated services will have some significant impacts on how and how frequently Microsoft interacts with its customers.

Unlike Office 365, which is a paid monthly/annual subscription service, Windows as a Service won't result in Microsoft charging its Windows 10 customers an annual fee in order to obtain new features and fixes. Because it will be regularly updated, Windows 10 will always be up-to-date; usable on a variety of devices; provide users with a rich graph of people and other kinds of information.

Nadella said that Microsoft will be talking more about a new variant of its Windows Update service that it is calling Windows Update for Businesses during next week's Ignite conference in Chicago. That service will provide new capabilities around management, security and control, he hinted.

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