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Happy Birthday Red Hat! Here is your $3 billion gift

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Red Hat has touched the $3 billion mark on it’s birthday.

Highlights:

  • Red Hat reported revenues of $2.9 billion for 2017
  • Red Hat celebrates it’s 25th Anniversary
  • North Carolina announced March 26, 2018 as “Red Hat Day”

Red Hat, the king of Linux (and crown prince of the cloud), reported revenues of ~ $3 billion in 2017. The exact numbers are $2.9 billion, but we rounded them up as round numbers look good.

Racking in $3 billions with Linux and pure Open Source technologies is impressive. I recall my previous interview with Red Hat CEO Jim Whitehurst in which he said, “If open source was a proprietary technology and we had been the large share player of Linux as we are with RHEL, we would be generating 20 billion dollars of revenue instead of two billion in total for the company.”

This performance of Red Hat is not surprising. It was expected. Red Hat has been growing at an organic rate. As we know, the company is also celebrating its 25th anniversary this year. In these 25 years, Red Hat has evolved from being a Linux vendor to a cloud company.

Yes, Linux does remain their core product. To be honest, Linux also remains the core technology that powers the modern IT infrastructure. Even Microsoft’s Azure runs more than 50% Linux machines. Azure’s own networking switch is powered by Linux.

No wonders Linux contributed to the lion’s share of Red Hat’s revenues. Revenues from subscriptions around RHEL and other products raked in more than $2.6 billion, out the total revenues.

Red Hat offered a breakdown of revenues so we understand where these revenues are coming from. Full fiscal year subscription revenue from Infrastructure-related offerings was $2.0 billion, an increase of 15% in USD year-over-year or 14% measured in constant currency. Full fiscal year subscription revenue from Application Development-related and other emerging technology offerings was $624 million, an increase of 42% in USD year-over-year, or 40% measured in constant currency.

The second part is what I am interested in –  emerging technologies. That’s the area where Red Hat is experiencing almost 50% growth. It’s massive. While Linux has become boring and stable, the second category, which includes cloud, container and IoT related technologies is where all action is happening.

“We maintained strong subscription revenue growth in both of our major technology categories during the year, enabling Red Hat to exceed a $3 billion annualized revenue run-rate exiting the year,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat.

Red Hat recently acquired Core OS, a very influential player of the Kubernetes space, so we will see more aggression from Red Hat in the the cloud space.

What makes Red Hat really so successful is a fine blend of technology and marketing. I have spoken with a lot of vendors and everyone agrees Red Hat sales and marketing teams are among the best. Red Hat is equally strong in the engineering and technology part of the equation. Red Hat is among the top contributor to the technologies they use. Red Hat is also known for acquiring companies and then open sourcing their technologies. Red Hat also believes in upstream first, no code gets into any Red Hat product if it’s not in the upstream. In addition to that they also have Open Source in their DNA like no other company has.

“We put community first. We have an upstream first policy. Everything we do goes upstream and that’s just a part of who we are and what we do. We always say there’s not a conflict between community and upstream because the communities are in enterprise, because we’re all in,” Whitehurst told me in an earlier interview.

I think when you put all of this together, you get a well rounded company (if I may borrow the metaphor from my fiction writing brain). It’s designed to grow and succeed. As someone who has been monitoring Red Hat since it’s early days I can’t wait to see it cross the $5 billion mark in the next 2-3 years.

Happy Birthday Red Hat!

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