Microsoft CEO Nadella Targets $20 Billion In Cloud Sales By 2018

SAN FRANCISCO -- Microsoft officials said Wednesday that they are aiming for $20 billion in revenue from cloud services by the end of the fiscal year ending in June 2018. It’s an aggressive target given that the company’s cloud sales are on pace for just $6 billion in the current fiscal year.

Microsoft shares (MSFT:NASD) were off .33 percent in pre-market trading Thursday.

Microsoft’s cloud offerings include Office 365, CRM Online and Azure, a hosted platform on which developers and IT organizations can run applications and other software.

Microsoft CEO Satya Nadella announced the goal at a meeting with financial analysts at the company’s Build 2015 conference in San Francisco. “That’s our target, and that’s what we’re going to pursue,” Nadella said. He added that the cloud is now Microsoft’s “most strategically important battlefield.”

Earlier in the day, Microsoft Executive VP Terry Myerson told attendees his goal is to see at least a billion Windows 10 devices, including PCs, phones and tablets like the new Surface 3, in the market by the summer of 2015.

Microsoft’s cloud business is seeing healthy growth. Azure, along with sales of SQL server, was up 11 percent in the most recent quarter. Recent customer wins include Accuweather, which is using Azure to process 10 billion weather requests every 24 hours, according to Microsoft Chief Operating Officer Kevin Turner.

Still, the company faces a number of challenges. Nadella conceded that many individual developers and startups are opting to use the low-cost Amazon Web Services' cloud for their online computing needs. Nadella said he would like to see Azure capture more customers “in this ZIP code,” referring to San Francisco’s hot tech startup scene.

Like other U.S. multinationals, Microsoft’s sales are also being hit by the strong American dollar, which makes products more expensive in overseas markets. Microsoft Chief Financial Officer Amy Hood said that the impact could be more severe in fiscal year 2016 “if rates stay the same.”

Microsoft’s revenues grew 6 percent, to $21.7 billion, in the fiscal third quarter ended March 30. But sales would have been up 9 percent if not for the currency headwinds, the company said.