Could Azure Pass Office as the Biggest Revenue Stream for Microsoft?

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Piper Sandler analyst Brent Bracelin believes that Azure will pass Office as the biggest source of revenue next year.

Microsoft Azure has been rapidly expanding as the demand for cloud space increases. Microsoft has been actively altering its business model, moving away from software to incorporate additional cloud-based services.

Piper Sandler has a buy rating on Microsoft stock. They cited that Azure revenue in the most recent quarter totaled 17 percent of Microsoft's total revenue at $7.20 billion. Three years ago, Azure revenue only represented 4 percent of total revenue.

So when could Azure pass all of Office? Bracelin believes this will happen next year.

“We have quarterly Azure revenue of $11.8B by June 2022 (eclipsing Office all-in revenue of $10.9B for the first time),” he said on Wednesday.

Microsoft CEO Satya Nadella, who has been in the position since 2014, has made the transition to additional cloud services exposure a cornerstone of his vision for the company.

“He spearheaded major strategy and technical shifts across the company’s products and services, most notably our move to the cloud and the development of one of the largest cloud infrastructures in the world supporting Bing, Xbox, Office 365 and other services,” Microsoft said of Nadella in 2014 after he became CEO. “This experience is fundamental to the company’s current strategic direction.”

Now over 6 years later, we have seen a massive increase in the demand for cloud services which has resulted in a larger share of Microsoft's total revenue coming from Azure.

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