Office 365 revenue surpassed revenue from traditional Office licensing business for the first time

Last night, Microsoft announced its FYQ4 2017 earnings results with revenue of $23.3 billion GAAP and operating income of $5.3 billion GAAP. Revenue from Office products and services for the enterprise increased 6 percent mainly driven by strong Office 365 commercial revenue growth of 44%.

First the first time, Office 365 Commercial revenue surpassed revenue from Microsoft’s traditional Office licensing business. This indicates that organisations around the world are increasingly moving towards cloud based subscription model instead of pay-once licensing model.

Back in 2010, Microsoft first introduced Office 365 as their next generation cloud productivity suite that brings together Office, SharePoint Online, Exchange Online and Lync Online in an always-up-to-date cloud service. In just 7 years, Office 365 has surpassed traditional licensing model in revenue. It is quite a significant achievement in my opinion.

For the next quarter, Microsoft expects that Office 365 commercial revenue growth will continue to be driven by install base growth, ARPU expansion and adoption of premium services like E5, and should outpace the rate of transactional decline. And they expect a more moderate rate of growth in their Office consumer business given prior year comparables.

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