At the company's Build Developer conference held in San Francisco, Microsoft announced its goal to earn $20 billion in annual revenue from its cloud-computing business in the 2018 fiscal year.
With its current annualized run rate of $6.3 billion, this means the company should be able to triple its cloud revenue over a three-year period.
Microsoft's cloud-computing business is comprised of cloud versions of Dynamics CRM and Office 365 as well as the Azure platform, which competes with Amazon's own Web services business. For the past seven quarters, the company has seen a more than double increase of revenue from its commercial cloud business.
"So we have an ambition to get to $20 billion of annualized run rate in the cloud in FY18," said Satya Nadella, Microsoft CEO. "So that's our target, and that's what we're going to pursue with the strategy I just laid out. And this, by the way, is about really the combination of what we today have in Office 365, Dynamics, EMS, Azure."
Run rate means quarterly revenue that is presented on the basis of annualized reference.
Nadella assumed his leadership at Microsoft in February 2014 and has placed a strong focus on cloud-based business services. In addition to the ambitious $20 billion plan, Nadella, who wants Microsoft to be slimmer and simpler, said the company also plans to have around one billion active Windows 10 devices by the 2018 fiscal year.
Amy Hood, Microsoft's Chief Financial Officer, said that the company's current fiscal year would help it achieve a 44 percent gross margin for its commercially-focused cloud business. She also predicted that the company's operating costs for its fiscal year beginning July 1 will be similar to its current year's standing. Moreover, the company will continue make capital expenses in order to support its cloud ambitions.
In the meantime, Microsoft's rival Amazon revealed a revenue growth of almost 50 percent from its cloud services business. Created in 2006, the company's Amazon Web Services grew 49 percent to $1.57 billion in revenue for the quarter compared to last year's record of $1.05 billion. This means the company has an annualized run rate of $6.28 billion, which is on par with the current annualized run rate for Microsoft's cloud revenues.
At Wednesday's trading, Microsoft's stocks closed at $49.06, a decrease of $0.09 or 0.19 percent based on a total volume of 47.80 million shares. The stock continued to decline in after-hours trading by $0.04 or 0.08 percent to $49.02.
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