Microsoft Achieves Record Revenue as Pandemic Continues to Fuel Sales

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The results indicate that the pandemic continues to support the tech giant’s business – from computers and gaming systems to cloud computing systems helping businesses continuously navigate remote work.
Microsoft (MSFT) posted revenue of $ 43.1 billion for its fiscal second quarter – a 17 percent increase from the same period a year earlier and well above the $ 40.2 billion forecast by analysts. Income reached $ 15.5 billion, or $ 2.03 per share, compared to $ 1.64 per share expected by Wall Street.

The company’s shares climbed 6% in after-hours trading immediately after the report. About two hours after the report, stocks were up just over 3%.

“What we have seen over the past year is the dawn of a second wave of digital transformation sweeping across all businesses and industries,” Microsoft CEO Satya Nadella said in a statement. “Microsoft is accelerating this change with the world’s largest and most comprehensive cloud platform. ”

Microsoft’s cloud computing continues to drive sales, because the pandemic has accelerated the transitions of many companies from operating their own on-premises servers. Revenue growth for Microsoft’s Azure cloud platform, which competes with Amazon Web Services and Google Cloud, accelerated from the previous quarter to 50%.

Revenue from the commercial cloud – which includes Office 365 Commercial, an essential tool for many businesses whose employees still work from home – grew 34% year-over-year, totaling $ 16.7 billion .

“This cloud shift and the dynamics of WFH seem here to stay and the company is expected to be a major beneficiary of this trend,” Wedbush analyst Dan Ives said in an investor note Tuesday.

Even as the Covid-19 vaccines are deployed and the number of infections begins to decline, analysts expect the move to the cloud to continue. The number of workloads running in the cloud is expected to reach 55% by 2022, up from 35% currently, according to Ives. He added that he believed that “healthcare cloud budgets (are) already in place for 2021”.

Microsoft also expects strong growth in its cloud business to continue – it expects revenue from its smart cloud segment, which includes Azure, to grow by up to 21.5% in the current quarter, which ends. ends March 31, CFO Amy Hood said on a call with analysts Tuesday.

Microsoft’s new Xbox Series X and Series S consoles generated massive demand in the December quarter – so much so that retailers struggled to keep them in stock and Microsoft asked the chipmaker AMD (AMD) to help make it more available.

Revenue from Microsoft’s “more personal computing” segment, where Xbox sales fall, increased 14% year-on-year to $ 15.1 billion.

That figure includes the company’s quarterly gaming revenue, which topped $ 5 billion for the first time. Xbox content and services revenue rose 40% – a major turnaround from the same period a year earlier, when Xbox content and services revenue fell 11%.

“The launch of the Xbox Series X and S Series was the most successful in our history, with the most devices ever sold during the launch month,” Nadella said on the earnings call of Tuesday, adding that the company was gaining console shares. Hood noted that the company expects “significant demand for the Xbox Series X and S which will always be limited by supply” during the current quarter.

For the full 2021 fiscal year, Hood said the company expects to generate double-digit growth in sales and operating income.

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