GitHub's Impressive Growth Under Microsoft
Satya’s Nadella tenure at Microsoft has been nothing less than miraculous. What I find most impressive is how wildly successful he has been with his bets. From a successful cloud transition to OpenAI investment. And GitHub.
GitHub wasn’t struggling when it was acquired as it was making decent revenue and growing at a healthy pace. But under Microsoft, the growth has just been tremendous.
Github’s Revenue has Grown 5x times
Microsoft doesn’t disclose Github’s revenue separately, but we do know that the ARR was around $250M in 2018. In Oct 2022, Microsoft announced that the ARR had grown to $1B. It represents an annualized growth rate of 41.4%.
If we look at valuations of public SaaS companies like Cloudflare, Snowflake, and even Gitlab, the valuation can anywhere between 12-22x of sales. I estimate that Github must be at least $16-18B now, almost twice what it was acquired for, possibly way more considering the growth and the hype around its projects.
More impressive stuff: In 2019, Github set the target for 100M users by 2025. It achieved the target two years ahead. Currently, Github is used by 90% of F500 companies. This is a crazy stat according to me. Even Salesforce is only used by 80% of F500. Is there any other product with this level of Enterprise penetration?
Co-Pilot: A cash-generation machine
Github Co-Pilot has become a massive cash-generation machine. In just two years, it climbed to $100M ARR. There was some reporting that GitHub is losing money on co-pilot, but Nat Friedman denies it and claims that it’s profitable.
Impressive Features, Generous Free Plan, and a ton of Goodwill
Under Microsoft, Github rapidly grew its Enterprise revenue and used that growth to make the free plan even more generous. Here’s what Nat Friedman had to say when they announced “Free for Teams” news
We’ve wanted to make this change for the last 18 months, but needed our Enterprise business to be big enough to enable the free use of GitHub by the rest of the world. I’m happy to say that it’s grown dramatically in the last year, and so we’re able to make GitHub free for teams that don’t need Enterprise features.
GitHub also launched Actions, Sponsors, new searches, and a host of other things under the new leadership.
So, not only did Github grow impressively justifying its rich valuation, but it also brought an indirect impact of generating developer goodwill for Microsoft.
GitHub represents a successful acquisition on all fronts. Of course, it worked in Microsoft’s favor that they acquired the company two years before Covid-boom. But, it is still impressive how much it grew in terms of users, revenue, and features, against the expectation that Microsoft would bungle the acquisition badly.