Business in the cloud increases Microsoft sales

San Francisco In the fourth quarter, Microsoft clearly exceeded analysts’ expectations. Revenues of $ 51.7 billion surpassed $ 50 billion for the first time in the holiday quarter. Compared to the year on year, this corresponds to an increase of 20 percent.

Net income was $ 18.8 billion, an increase of 21 percent or $ 2.48 per share. Analysts surveyed by the analyst firm Factset expected sales of $ 50.7 billion and an average of $ 2.32 per share. “It was a record quarter,” Microsoft CEO Satya Nadella summed up on Tuesday.

CFO Amy Hood later discussed in detail with the analyst: Despite all the uncertainties and problems with the supply chains, the current quarter will also show a positive trend compared to the previous year.

Despite good data provided by the cloud and software giant on Tuesday after the US market closed, stocks initially plunged more than five percent in overtime trading. Then the trend reversed and at the start of trading on Wednesday, the stock rose by 6.9%. This is probably due to the good outlook for the current quarter. Overall, however, market action reflects the general jittery sentiment in the US stock markets.

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“We are experiencing a generational change in society and economy,” said Nadella, “with digital technology as the most malleable resource to overcome limitations and rediscover everyday work and life.” As every business goes digital, it will need a decentralized computer network to build, secure and ship applications anywhere in the world, Nadella said. For years he has called his cloud division “Azure” “the computer of the world”.

All areas of the group made a positive contribution to the result, but once again the division of the cloud stood out. Total cloud business revenues grew 32 percent to $ 22 billion, “more than expected,” assisted CFO Amy Hood. The Azure cloud computing platform, the core of the cloud segment, grew 46 percent. Analysts expected 45 percent.

Amazon will have to be measured based on these growth figures on Feb 3. Its Amazon Web Services (AWS) cloud platform is currently a global market leader. However, with the figures presented today, Microsoft is showing stronger growth than the recent AWS – so the gap between groups is narrowing. This could become a problem for Amazon – the cloud is by far the biggest source of profit for an online retailer.

Growth in all divisions

Meanwhile, Microsoft is experiencing a PC “renaissance”, according to Nadella. The growing number of PCs in the household is making the weakening Windows division grow faster again. Windows 10 or 11 currently runs on more than 1.4 billion devices, and the More Personal Computing division, which includes Windows, the Xbox game console, and the Surface family of products, has grown significantly with a 15 percent increase in sales.

According to CFO Hood, the Windows business for PC makers grew 25 percent “much more than expected.” Even his long-sluggish internet search and news ad firm is catching up with the competition, with “first revenues exceeding $ 10 billion in the quarter,” reports CEO Nadella.

Quarterly data comes less than a week after Microsoft announced the acquisition of the Activision Blizzard gaming group. If approved, it would become the largest $ 69 billion acquisition in the history of the tech industry. The deal is expected to close in 2023 and will make Microsoft the third largest gaming company in the world.

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Activision delivers some of the biggest hits from competing Sony Playstation. However, market analysts do not expect Nadella to cut off the supply of software for Playstation – also to avoid risking competition lawsuits. Rather, top titles would be transferred to the Xbox in parallel. According to Nadella, the monthly “Gamepass” for PC and Xbox, which allows customers to download and play games for a flat fee, now has over 25 million customers.

The racing game Forza 5 is played online every day by 18 million people and the science fiction game Halo Infinite is played by 20 million people every day. Additionally, says Nadella, Activision is gearing up for what’s to come: the Metaverse. A real-time online virtual world for individuals and companies where participants will navigate using avatars.

This also applies to the “Teams” communication platform, which is increasingly outperforming its competitor Zoom videoconferencing. Teams are now the standard for 90 percent of the S&P 500 companies. Retail giant Walmart alone connects two million employees through teams. Along with Office 365 office software, Microsoft is in a better position in the business sector than any competitor. Microsoft also wants to expand its “Mesh” offer here.

With digital glasses such as Hololens, people in “Mesh” move in an intermediate world made up of digital and real images, for example at conferences or events, which is a kind of metaverse. The biggest competitors here are the former Facebook Meta group and game groups like Activision or online platforms like Roblox.

In a connected world, the risk of becoming a victim of cybercrime or ransomware attacks increases. For years, Microsoft has been offering its own solutions for the world of PC and the cloud, and the demand is growing disproportionately. Cybersecurity activities, including digital access control to the cloud and applications, grew 45 percent year-on-year to approximately $ 15 billion.

According to CFO Hood, the current quarter will continue to be characterized by strong demand in most areas. However, there can be supply bottlenecks, for example in the Surface or Windows industries. The Group’s revenue for the quarter ended March is expected to be between $ 48.5 billion and $ 49.3 billion.

Christopher Ouimet, an analyst at Logan Management, which owns 60 million Microsoft documents, advises Microsoft with peace of mind in terms of numbers and prospects. “There’s a lot of noise outside right now,” told CNBC. “But whether or not 10-year government bond yields increase or not has little to do with whether Microsoft can sell contracts to Azure.”

More: From an economic point of view, the timing of the transaction is ideal. However, it is difficult to estimate the consequences of an image scandal such as the one that affects the game developer Activision Blizzard

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