More than three years ago, Microsoft promised to reach an annualized revenue of $20 billion in its corporate cloud business by the end of its 2018 fiscal year (ending in June 2018). The company has delivered early: In its Q1 2018 earnings released today, the company has shared its cloud annualized run rate has hit $20.4 billion.

“This quarter we exceeded $20 billion in commercial cloud ARR, outpacing the goal we set just over two years ago,” Microsoft CEO Satya Nadella said in a statement. “Our results reflect accelerating innovation and increased usage and engagement across our businesses as customers continue to choose Microsoft to help them transform.”

In short, Nadella’s plan to turn Microsoft into a cloud company is working.

Here are the highlights across the company’s three operating groups:

  • Productivity and Business Processes: This segment, which includes results from Office and Office 365 (commercial and consumer customers), grew 28 percent to $8.2 billion. Office commercial revenue grew 10 percent, Office consumer revenue was up 12 percent, and Dynamics revenue increased 13 percent. Office 365 subscribers hit 28 million. LinkedIn contributed revenue of $1.1 billion.
  • Intelligent Cloud: This segment, which includes results from server products and services (including Windows Server and Azure), grew 14 percent to $6.9 billion. Server products and cloud services revenue grew 17 percent. But the big number as always was Azure revenue, which grew 90 percent.
  • More Personal Computing: This segment, which includes results for Windows licensing and devices (Surface, phones, and Xbox), was flat at $9.4 billion. Windows OEM revenue was up 4 percent while Windows comercial revenue increased 7 percent. Search acquisition costs jumped 15 percent. Surface revenue increased by 12 percent and gaming revenue was up only 1 percent (Xbox revenue grew 21 percent, but was offset by lower hardware revenue).

A growth in revenue for Surface is always notable, as the category has ups and downs. Microsoft attributed the incrase to Surface Laptop sales, suggesting the company is moving at least some units. The much more expensive Surface Book 2 ships next month, meaning we won’t see the impact of that machine there until next year.

More to follow

The PC Gaming channel is presented by Intel®'s Game Dev program.
Shared from VentureBeat