Microsoft 365 is big and getting bigger fast
Microsoft trumpeted last week that it had surpassed $50 billion in "commercial cloud" revenues in FY'20. As usual, officials didn't share publicly during the disclosure of its fiscal results how much its various services, including Azure, contributed to that total. But officials did provide a bit more of a breakout privately to some employees and partners.
Among a few of the additional data points Microsoft Chief Financial Officer Amy Hood discussed during a session at Microsoft's internal Ready conference, according to my contacts, who asked not to be named:
- Microsoft 365 -- its Windows/Office 365/Enterprise Mobility + Security bundles -- contributed $20 billion in billed revenues to Microsoft's FY'20 $143 billion total, Hood told Ready attendees, my contact said. That was up more than 50% over the $13.2 billion that Microsoft garnered from Microsoft 365 in FY'19.
- Demand for Microsoft 365 E5/Office 365 E5, Microsoft's highest priced and most feature-rich SKU, doubled in FY'20, officials said during the earnings call. But Hood privately shared more: In FY'20, E5 contributed $7.5 billion, up from $4.2 billion in FY'19. She told employees and partners that Office 365 E5 represents only 5% of the Office 365 seats available.
- Dynamics 365 revenues (which I believe means both cloud and on-prem versions of Microsoft's Dynamics 365 apps and services) were $2.2 billion in FY'20, up from $1.6 billion in FY'19.
- Azure: Hood said Microsoft's goal for Q4 was to grow 60% (of some base which Microsoft has not disclosed, even privately to employees and partners); it came in at 59%. Deal sizes continue to get bigger, with a growing number of Azure deals falling into the $10 million-plus category.
Microsoft created its commercial cloud metric in 2015. At that time, officials said they expected the company to hit a $20 billion annual run rate for commercial cloud by 2018. Microsoft actually surpassed the $20 billion annual run rate for commercial cloud in October 2017.
The primary services that are part of Microsoft's commercial cloud are Azure; Office 365 business services (Exchange Online, SharePoint Online, Skype for Business Online, Microsoft Teams); Dynamics 365 cloud services; "commercial" LinkedIn services and its Enterprise Mobility + Security Suite (EMS). On-premises products are not included in the total.
I've asked Microsoft if all Microsoft 365 revenues currently are counted as part of the commercial cloud. No word back so far. Update (July 29): All M365 Commercial revenues are part of commercial cloud, a Microsoft spokesperson said. (This does not include consumer M365 revenues.)
Microsoft 365 E5 costs $57 per user per month for an annual commitment. Microsoft 365 E3 goes for $32 per user per month, and Microsoft 365 F3 (formerly known as F1, the firstline worker SKU) goes for $10 per user per month. The E5 SKU includes meetings and voice, analytics, identity and management, threat protection, and other features not in the other two main Microsoft 365 SKUs.
Microsoft is expected to make its Project Cortex knowledge management service a premium feature available only to E5 subscribers once the service launches this fall. Microsoft was hoping to make Cortex generally available early this summer, but the launch is delayed.