While there are many mind-bending numbers in the greatest growth market the world has ever known, the one that gets my vote for the most impressive big number of all is that Microsoft is extremely likely to finish calendar 2022 with more than $100 billion in cloud revenue.
Just 14 years after launching Windows Azure as its entré into a promising but ill-defined and poorly understood category, the Microsoft Cloud this year is generating average monthly revenue of $8.3 billion per month, or $277 million per day, or $11.5 million per hour.
That $100 billion achievement (and I’ll share some details on that in a moment) will make Microsoft’s cloud business about 25% larger than that of the second-largest cloud vendor, Amazon, which will finish calendar 2022 at about $80 billion. (I’m emphasizing “calendar year” because I want to distinguish it clearly from Microsoft’s fiscal year, which runs July 1 through June 30.)
Microsoft has achieved this remarkable level of growth and acceptance for a variety of reasons, and I’d say these are the primary ones:
- The leadership, vision, and fearless commitment to the cloud of CEO Satya Nadella
- The breadth of its product line, spanning tablets and desktops to data centers
- Its focus on seeing the world and articulating its value through the voice of the customer
- Its early and aggressive move to offer end-to-end security solutions across the cloud and on-premises environments, which has resulted in Microsoft being — by far — the world’s largest cybersecurity vendor with about $15 billion in annual revenue
- Nadella’s early and aggressive commitment to move beyond cloud infrastructure and into cloud applications, databases, AI, low-code/no-code, developer tools, solutions (hello GitHub), and more recently industry clouds
- Microsoft’s proven ability to forge multi-year, multibillion-dollar partnerships with large global customers that transcend technology purchases and at their core address sweeping business transformations to meet the demands of the digital economy
- Nadella’s ability to deftly navigate the ferocious competition in the Cloud Wars to be able to establish collaborative and customer-centric partnerships with just about every major cloud vendor
Further, as we covered yesterday, another contributing factor to Microsoft reaching this achievement is, in part, due to its ability to slash costs through its use of technology — something EVP Dave O’Hara considered to be the “most surprising thing.”
So, what does Microsoft’s financial path to $100 billion look like?
- For the quarter ended March 31 (Microsoft’s FY22 Q3), its cloud revenue was $23.4 billion, up 32%; and
- For the quarter ended June 30 (FY22 Q4), cloud revenue was $25 billion, up 28%.
That adds up to $48.4 billion for the first half of calendar 2022, meaning Microsoft has to generate second-half cloud revenue of $51.6 billion to reach $100 billion for the year. That’s an average of $25.8 billion per quarter. While it would be foolish to say that achieving such volume is in the bag, I do not recall Microsoft’s cloud revenue going down in sequential quarters for the past handful of years. So, the fact that Microsoft hit $25 billion in the second calendar quarter means it has a very good chance of bumping that up to at least $25.8 billion in each of the next two quarters.
Quarter after quarter and year after year, we’ve seen the companies in the Cloud Wars Top 10 deliver astonishing growth rates of 20%, 25%, 30%, and higher on revenue bases ranging from a few billion to $15 billion — $18 billion in the cases of Microsoft and Amazon.
Just yesterday, in response to an article I wrote about how Oracle next week will very likely become the fastest-growing vendor in the Cloud Wars Top 10, a few readers took the view that growth rates of 44% on only a $2 billion or $3 billion in revenue is no big deal. While those folks are certainly welcome to their own opinions, I had to wonder at the manner in which this ongoing record of astonishing growth has jaded some of us to the point where growth rates of 40% or more are waved off as “meh” because the revenue base was “only” $2 billion or $2.5 billion.
But I would hope that anyone who knows anything about business, and who has even a fleeting comprehension of how industries work, would still feel a sense of wonder at what Microsoft will, I believe, certainly accomplish this year as it rings up $100 billion in an incredibly competitive and demanding market.
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