Analyst firm Atlantic Equities has increased the price target of Microsoft to $125, which is about 25 percent upside from Microsoft’s current stock price. Atlantic Equities analyst James Cordwell told clients in a note that Microsoft Azure will be key to Microsoft’s growth and the revenue of Azure will top $100 billion over the next 10 years. Even though Azure will never reach the monopoly position which Windows enjoyed in the market, the revenue will be much higher than peak Windows revenue since it is addressing a much larger market. James mentioned that AWS will continue to be the market leader with about $185 billion in revenue in next 10 years.
“Azure has replaced Windows as the platform underpinning Microsoft’s enterprise offering, and we forecast it exceeding $100 billion revenue over the next decade. With Office 365, Microsoft has already established a strong position in the software as a service market and there remains robust growth potential as the greater accessibility of the cloud delivery model continues to drive expansion in the user base and customers steadily upgrade from basic packages,” Cordwell wrote.
During its FY18 Q3 earnings results, Microsoft reported that Server products and cloud services revenue increased 20% (up 17% in constant currency) driven by strong Azure revenue growth of 93% (up 89% in constant currency). Enterprise services revenue increased 8% (5% in constant currency). Overall company revenue was $26.8 billion and the operating income was $8.3 billion.