REDMOND, WASHINGTON – JULY 17: A building on the Microsoft Headquarters campus is pictured July 17, 2014 in Redmond, Washington. Microsoft CEO Satya Nadella announced, July 17, that Microsoft will cut 18,000 jobs, the largest layoff in the company’s history. (Stephen Brashear/Getty Images)
Microsoft Corp. reported its most profitable quarter on Tuesday beating the expectation of analysts at Wall Street irrespective of the fact that its PC sales declined as a result of the global chip shortage. The company’s impressive quarter is all thanks to a surge in its cloud business.
After the company projected that growth in its Azure cloud computing business will continue to grow quite rapidly within the next quarter, the company’s shares went up 0.7 percent and sales jumped 51 percent.
Revenue for the quarter was reported at $46.2 billion rising 21 percent and beating expectations of $2 billion, according to IBES data from Refinitiv.
The trend of remote work has helped businesses in cloud computing such as Microsoft, Amazon, and Google to boost their revenue, as the demand for cloud-based computing continues to rise.
Daniel Ives of Wedbush Securities said that the company’s “guidance was off-the-charts strong and it shows the cloud growth story in Redmond is hitting its next gear.”
Revenue in Microsoft’s “Intelligent Cloud” segment went up 30 percent to $17.4 billion. Azure’s revenue growth surpassed the 43.1 percent jump that analysts had forecasted. Currently, Microsoft’s market capitalization stands at $2.2 trillion, a little behind Apple’s, and has climbed almost 30 percent this year, compared with 18% for the overall S&P 500 Index, according to Refinitiv Eikon data based on Monday’s closing price. It has surpassed the price-to-earnings ratios of tech titans Apple Inc and Google, raising concerns among some analysts that it may be overvalued.
Haris Anwar, a senior analyst at Investing.com said that “Microsoft’s stock has made a big run since the beginning of the pandemic, and is trading at rich multiples. After such a powerful rally, its shares may take a breather, especially when investors are still unclear how the demand scenario will evolve in the post-pandemic environment.”
Revenue from Windows Software and Xbox gaming consoles which fall under the category of revenue from personal computing jumped 9 percent to $14.1 billion. Paolo Pescatore, an analyst at PP Foresight mentioned that Xbox content and services dipped suggesting the boost that it had from the pandemic is beginning to fade off. This means that Microsoft has to be on its toes to be able to compete with its rivals.
Microsft’s Chief Financial Officer Amy Hood revealed that “OEM revenue declined 3% and Surface declined 20. Both were impacted by the significant supply constraints noted earlier in a good demand environment.”
Wedbush’s Daniel Ives noted that the global chip shortage may also be a contributing factor to the dip in Xbox content and service revenue. “If there’s any lagging part of Microsoft, it’s the consumer piece. I think that continues to be a work in progress.”
LinkedIn benefitted during the quarter from increased advertising and a growing job market.
The company’s earnings beat the expectation of $1.92 per share with $2.17 per share. Apple also reported an impressive quarter on the sales of its 5G smartphones. Google’s parent company Alphabet reported increased revenue and profit boosted by ads.
Ibhadojemu Lucky Emmanuel is a graduate of Education and Economics from the University of Benin. He has a passion for tech and business and has been writing professionally for over a period of five years. He's written across various topics and segments and knew tech-business was it when he first stumbled on it. He has a great passion for music and arts, and wants to visit as many countries as he can someday.
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