October 29, 2020
Microsoft’s sales rose 12 percent to $37.2 billion, with a net profit of $13.9 billion for Q1 of its fiscal year, exceeding Wall Street expectations. Its cloud unit Azure’s revenue jumped 48 percent from the same quarter last year, driving the quarter’s results, said chief financial officer Amy Hood. Much of the dramatic leap in Azure’s use can be attributed to online demands created by the COVID-19 pandemic. Likewise, the company’s gaming content business showed a 30 percent increase in sales from last year.
The Wall Street Journal reports that, despite the strong showing, Microsoft’s “projection for $13.2 billion to $13.6 billion in revenue for the segment that included its gaming business fell short of Wall Street’s lofty expectations, sending the stock down more than 1.5 percent in after-hours trading.”
This quarter, Microsoft will unveil its new Xbox Series X gaming console and, said Hood, the company expects “very strong demand.” Last month, Microsoft chief executive Satya Nadella said the company would purchase ZeniMax Media for $7.5 billion, “shortly after Nadella’s failed bid to buy parts of the popular short-form video app TikTok.”
During the pandemic, Microsoft has also seen a boost to its workplace collaboration tool Teams, which now has more than 115 million daily active users, up from 75 million daily active users in April. Nadella said he expects the workplace changes to endure beyond COVID-19. “It’s clear that people will need more flexibility in when, where and how they work,” he said. “The next decade of economic performance for every business will be defined by the speed of their digital transformation.”
Reflecting the ongoing shift to cloud computing, Microsoft’s commercial cloud business sales rose to $15.2 billion in the latest quarter, compared to $11.6 billion in the same period a year ago. IDC stated that, by end of 2021, “it expects 80 percent of enterprises will put a mechanism in place to shift to cloud-centric infrastructure and applications — a rate twice as fast as before the pandemic.”
Long-term Azure contracts rose 23 percent year-over-year, compared to 7 percent and 12 percent in the previous two quarters. Piper Sandler analyst Brent Bracelin revealed that, “Azure is now a bigger source of Microsoft revenue than its iconic Windows software package.”
The Verge notes that it’s difficult to compare Microsoft Teams’ numbers with rivals Zoom and Google, which “report daily active participants, which means a single user could be counted multiple times through different meetings during a day.” Earlier this year, Google stated it had 100 million daily active participants and Zoom said it had 300 million.
Throughout the pandemic, Microsoft has added improvements, including a “Together Mode [which] was designed specifically for pandemic-era meetings, allowing participants to sit virtually next to each other.” Microsoft also “opened Teams’ doors to third-party apps, made the service available to consumers, and promised features like breakout rooms by the end of the year.”
Nadella also stated that LinkedIn now has 722 million users.