Robust cloud demand lifts Microsoft sales by 17%

Bloomberg

Microsoft Corp. said fiscal second-quarter sales rise 17%, a faster clip than analysts projected, thanks to buoyant
demand for corporate cloud-computing services and software tools that support at-home workers.
Revenue in the period ended December 31 rise to $43.1 billion, the Redmond, Washington-based software maker said in a statement. That exceeded the $40.2 billion average estimate of analysts polled by Bloomberg, and marked Microsoft’s 14th straight quarter of double-digit revenue growth. Net income was $15.5 billion, or $2.03 a share. Analysts had predicted $1.64. Growth in the US-based company’s Azure cloud-computing division jumped 50%.
Microsoft has benefited as many corporate clients have accelerated a shift to the cloud, where they can store data and run applications via the internet, and as businesses set up work teams with online productivity tools and teleconferencing software. Personal-computer sales also surged in the quarter, boosting the company’s flagship Windows operating-system business, while gaming revenue topped $5 billion for the first time in a single quarter.
“Cloud is going well, said Mark Moerdler, an analyst at Sanford C. Bernstein & Co. “Margins have moved up nicely. There really isn’t a lot that hasn’t gone well.”
Sales in each of Microsoft’s three divisions exceeded the average estimates of analysts polled by Bloomberg. Corporate versions of Office 365 cloud-based software saw revenue rise 21% in the quarter, the company said. Seats — the number of licensed users — rose 15% at corporations. Subscribers to the consumer version of Microsoft 365, which combines Office and Windows, increased 28% to 47.5 million, Chief Financial Officer Amy Hood said in an interview.
The pandemic caused some companies to speed up moves to the cloud and upgrades to internet-based collaboration software. Even though the market is growing, Microsoft continues to face competition from Amazon.com Inc.’s AWS and a renewed cloud-infrastructure push at Alphabet Inc.’s Google. Azure’s revenue gain in the recent quarter exceeded the 43% growth rate predicted by analysts, and outpaced the prior period’s increase of 48%. It was a sign of recovery for some customers hurt by the pandemic, Hood said.
“We really saw signs of recovery across industries, improvement in small and medium-sized businesses, and we obviously saw consumption that was better than we thought,” Hood said. “We saw the improvement across a number of the industries that have been more impacted” in Microsoft’s previous two quarters, she added.
Commercial cloud revenue rose 34% to $16.7 billion, the company said in a slide deck on its website. The gross margin, a measure of profitability, for that business widened by 4 percentage points from a year earlier to 71%.