Fueled by its traditional fourth-quarter tax hike and explosive new market for generative AI tools, Microsoft will almost certainly surpass $30 billion in quarterly cloud revenue for the first time when it releases fourth-quarter numbers later this year. month.
Three months ago, in Microsoft’s third-quarter fiscal release, CEO Satya Nadella announced “a new era of computing” made possible as “the world’s most advanced AI models are merging with the world’s most universal user interface.” world: natural language”.
And just last month, Microsoft CFO Amy Hood and CTO Kevin Scott, also the company’s executive vice president of AI, spoke about how huge customer demand will shape the company’s next-generation AI solutions.” the fastest growing $10 billion business in our history.”
To get a sense of what’s driving the growing client demand, here’s Hood’s key comment during his June 10 “AI Discussion” with Scott for investors.
“Financial analysts will ask me, ‘Well, where does the revenue show up?’ Hood said.
“It really comes from two places, right? There are the tools and services that customers will use to build AI apps and services. They will run Azure OpenAI APIs, they will run on our Azure infrastructure. And then, to the point, it’s going to be built into every Microsoft Cloud solution. Everyone. So whether it’s announced or not, whether it’s called Copilot or not, it’s going to look the same. There’s going to be something that shows up AI-enabled,” Hood said.
“And I think that’s why this is going to be our sort of next generation AI business is going to be the fastest growing $10 billion business in our history. I think I have that confidence because of the energy that we’re seeing.
Against that backdrop, here’s what to expect when Microsoft reveals its fiscal fourth-quarter results later this month for the quarter ended June 30.
Total Cloud Revenue: Last quarter, Microsoft achieved outstanding cloud performance with revenue of $28.5 billion, up 22%. For the fourth quarter, I expect Microsoft Cloud revenue to grow 22% again to $30.6 billion. That would be a tremendous accomplishment for a company that size, and if anyone knows of a business in any industry with $30 billion in quarterly revenue up 22%, please let me know!
Azure Growth: Over the past four quarters, revenue growth from Azure and “other cloud services” has decreased from 40% to 35% to 31% to 27%. For the fiscal fourth quarter, I expect Microsoft to reverse that decline with Azure revenue up 28% on the strength of the AI services described by Hood above.
Cloud as a percentage of total revenue: About a year ago, cloud revenue reached 50% of Microsoft’s total and I believe it will reach 57% for the fiscal fourth quarter. Last quarter, it was up 54% ($28.5B in cloud revenue out of a total of $52.9B). This figure will begin to reflect the point Hood mentions above about Microsoft’s intentions to have GenAI “integrated into every Microsoft Cloud solution. Everyone.”
Final thought
Microsoft has been #1 in the Cloud Wars Top 10 for the past four years. I moved them there at a time when most analysts were adamant that AWS was the undisputed king of the cloud. My rationale was that while AWS is the undisputed leader in infrastructure, Microsoft’s vast portfolio of cloud software has made it the major player in terms of size and growth, and I believe that initial claim has been borne out by the results.
With the GenAI revolution picking up speed, I believe Microsoft’s hold on the top spot will continue for some time.
Get insights into how Bob Evans creates and updates the Cloud Wars Top 10 ranking, as well as how C-suite executives use the list to inform strategic cloud purchasing decisions. It is available exclusively through the Acceleration Economy Cloud Wars Top 10 course.
Get insights into how Bob Evans creates and updates the Cloud Wars Top 10 ranking, as well as how C-suite executives use the list to inform strategic cloud purchasing decisions. It is available exclusively through the Acceleration Economy Cloud Wars Top 10 course.
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