Microsoft (NASDAQ:MSFT) Set To Move More Services to Azure

On a normal Microsoft (NASDAQ:MSFT) earnings day, the Wall Street analyst’s main focus is on the cloud services. This is therefore a great time to try and define what Microsoft cloud really means.

During the company’s quarterly earnings announcements, Microsoft talks immensely about what they refer to as “the intelligent cloud.” This includes revenues gained form the Azure which is Microsoft’s public cloud, private ad hybrid server products, and services. However, this package include mainly products and services classified under the Microsoft’s Cloud & Enterprise domain most of which are not even cloud at all such as Windows Server, SQL Server, Azure, Enterprise Services, and System Center.

During the fiscal 2016 third quarter, the company’s executives said that the intelligent cloud segment garnered an increase of 3.3% to $6.1 billion in revenue compared to the year ago period. The report did not include the Office 365 consumer and business services since they are under the Productivity and Business Processes.

Microsoft’s Commercial Cloud which is part of its business is expected to gather $20 billion on an annual run rate during the 2018 fiscal year, including the revenues gained from the office 365 business services (SharePoint Online, Exchange Online, and Skype for business, Azure, Dynamics CRM Online and the Enterprise Mobility Suite (EMS). This bucket does not include the on-premises server, cloud hosting, or other Microsoft consulting services.

For the fiscal 2016 third quarter, officials said that Microsoft’s commercial cloud run rate hit $10 billion annually. The officials went onto emphasize that the Microsoft of on track to meet the $20 billion run rate goal.

Not everything in Micorsoft’s commercial bucket runs on the Azure platform. A few services which include Office 365 business, Bing, Office 365 Consumer and Xbox Live are not run on Azure. Instead they run on designated stacks and datacenters.

However, new entrants of the above services such as the new Azure Active Directory service which is at the core of the Office 365 and the complementary Xbox Live services are now hosted on Azure. On the other hand, Bing, commercial and consumer office 365 and the Xbox Live services have not been hosted on the Azure platform.

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