Azure Drives Impressive Quarterly Sales, Profits for Microsoft

Microsoft experienced a successful quarter, due in large part to significant growth in Azure cloud services. The company reported overall Q4 sales of $46.2 billion, up about 21 percent year-over-year, for a $16.5 billion profit, an increase of 47 percent year-over-year. Similar to other Big Tech companies, Microsoft’s numbers exceeded Wall Street expectations. According to chief financial officer Amy Hood, Microsoft expects overall sales of $44.2 billion for the current quarter. Microsoft’s stock is currently up 40 percent over the last year, and its valuation is now $2+ trillion, second only to its rival Apple.

The Wall Street Journal reports that “Azure, Microsoft’s collection of cloud data centers and software tools that has been the backbone of its growth in recent years, saw year-over-year sales growth of 51 percent, topping the 50 percent seen in the two prior quarters.”

Sales of Xbox content and services couldn’t keep up this quarter with last year’s quarter of 65 percent growth, during the pandemic. This quarter, it fell 4 percent; “overall gaming sales advanced 11 percent, down from 50 percent growth in the previous quarter.” But Xbox hardware revenue — Microsoft’s fastest selling Xbox machines — was up 172 percent, “with demand continuing to outpace supply.”

Surface laptops fell 20 percent from the same period last year, and Hood warned in April that it could be impacted by the semiconductor shortage. The Windows operating system also dipped 3 percent, “with device shipments impacted by supply chain issues.”

Microsoft introduced Windows 11 last month, “the first new version in nearly six years” and it anticipates PC manufacturers will begin to install it on devices this quarter, “though revenue associated with those activities will be deferred until the following period.” Hood said it expects $300 million in deferred revenue.

LinkedIn also saw 46 percent year-over-year quarterly sales growth, as the economy began to recover and ramp up hiring. The company “expects more than 30 percent sales growth this quarter for LinkedIn.”

CNBC reports that, “with respect to guidance, Microsoft called for $14.5 billion to 14.75 billion in fiscal first-quarter revenue from its Productivity and Business Processes segment, higher than the $14.07 billion StreetAccount estimate.”

Microsoft “sees $16.4 billion to $16.65 billion in revenue, higher than the $15.71 billion consensus” for its Intelligent Cloud segment (which includes Azure, Windows Server, SQL Server and GitHub) and $12.4 billion to $12.8 billion in revenue for its More Personal Computing segment, just shy of StreetAccount’s figure of $12.67 billion. In Q4, the Intelligent Cloud segment “produced $17.38 billion in revenue, up 30 percent year-over-year” versus the StreetAccount consensus of $16.33 billion.

Microsoft’s Productivity and Business Processes unit (Office software, LinkedIn and Dynamics) added $14.69 billion in revenue, up 25 percent and “above the StreetAccount consensus of $13.93 billion.” Its number of commercial Office 365 subscriptions grew 17 percent from 15 percent, and the Teams chat and calling app in Office 365 now has 250 million monthly active users.

Search advertising grew 53 percent benefitting LinkedIn, which now generates $10 billion in annual revenue, said chief executive Satya Nadella. Microsoft shares are up about 29 percent since the start of 2021.