Red Hat Is Now a $2 Billion Open-Source Baby

Red Hat

Mission accomplished.

Red Hat, which promised a few months ago to hit $2 billion in annual revenue, has done so and now claims to be the world’s first open-source company to reach that milestone. It crossed the $1 billion-a-year line four years ago.

While $2 billion pales in comparison to many proprietary software sellers—Microsoft (MSFT) reported $93.6 billion in revenue for its last fiscal year, for example—it’s still a healthy benchmark.

Open-source software like Linux lets developers access the basic source code and customize it if need be. That process frowned upon in the proprietary software world where source code is a closely guarded secret.

Red Hat and Microsoft Sign Cloud Pact

Red Hat (RHT) Enterprise Linux (RHEL) is popular among businesses that pay Red Hat subscription fees for the software itself plus service and maintenance. RHEL competes with other versions of Linux but perhaps most directly with Microsoft Windows Server to run a company’s important business applications.

On the earnings call, Red Hat chief executive Jim Whitehurst said that IT trends, including the desire of big companies to deploy applications on multiple clouds, is boosting Red Hat’s cause since RHEL can run on Google (GOOG), Amazon, or Microsoft’s public clouds or on a company’s own internal data centers.

To back up, public cloud companies like Amazon Web Services aggregate and manage big pools of computer servers, storage, and networking that it then rents out to customers that don’t want to build more data centers of their own.

“What we’re seeing now is that enterprises typically pick one cloud to start but even today they recognize they have to run on multiple clouds just to have some leverage and some choice,” Whitehurst told analysts. “Even those running on one cloud today are architecting applications to run on multiple clouds.”

Talking to Fortune after the call, Red Hat chief financial officer Frank Calderoni said 150 third-party cloud service providers, including Amazon (AMZN) Web Services, Google Cloud Platform, and most recently Microsoft Azure are certified to run RHEL on their infrastructure. That business logged $100 million in revenue last year, he said.

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Big customers had been waiting for quite some time for Microsoft and Red Hat to get over their Windows vs. Linux wars, at least enough to let customers run RHEL on Microsoft Azure. That finally happened last month.

On the call Whitehurst also claimed Microsoft’s recent decision to allow its popular Windows-centric SQL Server database to run on Linux as a win for Red Hat—and for Microsoft too.

How Amazon took over cloud.

“Microsoft is recognizing that Linux is a big part of the enterprise footprint,” he noted.

But he also acknowledged that it was a problem for Linux that most of the supported database alternatives were “pretty pricey.” While he didn’t call out Oracle (ORCL) by name, that company’s market-leading database does run on Linux and is considered pretty pricey by most of the IT universe.

In its earnings Red Hat said its fiscal fourth quarter revenue rose 17% year over year to $544 million. For the full year, total revenue was $2.05 billion, up 15% from a year ago.


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