$500 Billion Revenue In 2030 Fiscal Year! Microsoft's Plan Reveals Its Great Ambitions
2min read A recently released legal document from Microsoft reveals that CEO Satya Nadella informed other executives and board members last year about the company's plan to achieve $500 billion in revenue by the 2030 fiscal year.
Nadella's goal is not an empty promise. Currently, Microsoft's stock price is sitting at $334.57, marking a 30% increase over the past year, and the company's market value has reached $2.49 trillion, edging closer to the $3 trillion mark.
While Microsoft's growth momentum is strong, the $500 billion target is clearly not easily achievable because it is more than double its current revenue figure. Therefore, to accomplish this goal, Microsoft plans to achieve 20% annual revenue growth and 20% operating profit expansion in the fiscal year 2022 and subsequent years. This plan is referred to as the "20/20 plan" by Nadella.
Microsoft is currently behind the schedule
However, in 2022, Microsoft ends up achieving 18% revenue growth to $198.27 billion and 19% operating profit growth. Both were short of Nadella's targets. If Microsoft wants to grow based on Nadella's "Double 20 Plan", it needs to generate nearly $236 billion in revenue in fiscal year 2023.
So far, in the first three quarters, the tech giant has recorded a cumulative revenue of $155.72 billion, meaning that Microsoft needs to generate an additional $80.26 billion in revenue this quarter to catch up with the plan.
Microsoft's key drivers for revenue growth
In terms of specific measures, Nadella stated in the document that Microsoft will achieve its 2030 goals by "implementing a growth-oriented development strategy aligned with our enduring mission and culture." Additionally, Nadella mentioned that Microsoft's cloud services will be a key driver of revenue growth. According to previous statements by Microsoft, the "Microsoft Cloud" includes Azure public cloud servers, some Office 365 software, and certain features of the professional networking site LinkedIn.
Nadella also wrote in the document, "Our priority is to maintain growth above the market rate to extend our lead over GCP and close the gap with AWS." Indeed, if Microsoft plans to position its cloud services as the main driver of revenue growth, it will have to face challenges from Amazon Web Services (AWS) and Google Cloud Platform (GCP). Currently, AWS dominates the cloud computing market with approximately one-third market share, while Google is aggressively catching up with Azure.
In addition to cloud services, Microsoft is exploring other options to generate more revenue. Earlier this year, Microsoft invested $10 billion in OpenAI for further development of AI models. Microsoft has also expressed its intention to incorporate various functionalities of ChatGPT into its own search engine, Bing, multiple times, indicating its desire to further capture the global search engine market and challenge Google's dominance in the industry.
According to analyst Kirk Materne from Evercore ISI, Microsoft could generate revenue of up to $99 billion from the functionalities supported by OpenAI by 2027.
Furthermore, gaming is viewed as another important potential revenue source by Microsoft. Last week, Microsoft announced price increases for its latest gaming console, Xbox Series X, and the membership fee for Xbox Game Pass, citing the need to "reflect the competitive conditions in each market." Plus, despite facing resistance from entities such as the US Federal Trade Commission, Microsoft is still actively pursuing the acquisition of game publisher Activision; the main reason behind this is Microsoft values the potential profitability from gaming, therefore, Microsoft has to strengthen the competitiveness of its Xbox gaming consoles while it has chances.
Microsoft's ambition raises its stock valuation
Whether or not Microsoft can achieve its goal of reaching $500 billion in revenue by the 2030 fiscal year, its outstanding performance has not only provided CEO Satya Nadella with further confidence for expansion but also injected more confidence into its investors. So far this year, Microsoft's stock price has increased by 37%, and its market value has grown by nearly $800 billion. Recently, JPMorgan Chase analysts raised their target price for Microsoft from $315 to $350, indicating optimism about Microsoft's prospects.
It is worth noting that Nadella believes that achieving the $500 billion revenue target will significantly enhance shareholder returns for Microsoft: "We believe this ambition and approach will help us deliver in excess of 10% annual returns to our shareholders over that timeframe."
