Microsoft Cloud Revenue Up 147%, May Spell Meaningful Growth

Microsoft Corp.'s (NASDAQ: MSFT) fast-growing cloud business picked up a new fan Wednesday as an analyst said the sector may soon account for a significant slice of the company's revenue.The sector, which presently accounts for less than 5 percent of Microsoft's $86.8 billion in annual revenue, grew 147 percent in the recent fiscal fourth quarter to a $4.4 billion annual equivalent."Many investors are skeptical, but we think the opportunities in cloud are under appreciated, Pacific Crest's Brendan Barnicle said in a note maintaining a Buy rating on the company and $54 target.Synergy Research recently estimated the total value of cloud services at more than $13 billion annually, with Microsoft and IBM Co. (NYSE: IBM) growing far more rapidly than the sector's lead player Amazon.com (NASDAQ: AMZN).https://www.srgresearch.com/articles/microsoft-and-ibm-chase-amazon-while-google-falls-pace"Microsoft is making some huge strides," Synergy's John Dinsdale said. Barnicle believes each $1 billion of Microsoft's cloud revenue adds $0.03 cents a share to annual earnings, with the ratio expected to improve "over time."Participants at a recent Pacific Crest technology conference as well as those responding to the firm's survey of chief information officers were generally enthusiastic about cloud offerings from Microsoft, Barnicle said.The company's cloud services are aggressively priced and "very competitive with 'best of breed' alternatives," Barnicle said.Microsoft traded recently at $44.99 a share, down 0.7 percent.