Microsoft last week posted spectacular December-quarter results. Which included 34% growth in what it calls its “commercial cloud business.”.
Which encompasses Azure, Office 365, and various other things. That came to $16.7 billion in revenues for the quarter—about 39% of the company’s total $43.1 billion. And the number is going to get bigger from here. A lot bigger.
After doing a deep dive on the state of the cloud industry. Piper Sandler analyst Brent Bracelin on Tuesday wrote that Microsoft (ticker: MSFT) is one of the best-positioned of the “cloud titans” for the next decade. He thinks the company can boost its total commercial cloud business to $306 billion by calendar 2030. Up from $59 billion in calendar 2020.
“Microsoft remains in a pole position as the world’s largest cloud platform… Driven by a broad product offering across infrastructure and applications,” he writes, with more revenue than Amazon.com ‘s (AMZN) Amazon Web Services’ estimated $45 billion in 2020. Granted, this is a bit of an apples-and-oranges comparison. Since the Microsoft total includes cloud-based applications, but it does make the point that Microsoft plays a commanding role in cloud computing.
Bracelin says growth will be driven by a combination of “an expanding cloud product portfolio. Strong enterprise and government ties, and a consumption-based pricing model.”
He sees continued double-digit Microsoft revenue growth. And contends the company warrants a premium multiple as a high-margin software company operating at a huge scale. He considers Microsoft a core holding, and says there could be 25% upside to his $300 price target. That implies a potential stock price of $375, which would bring the company’s valuation to $2.9 billion.
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