Microsoft : Earnings Boosted by Rise in Online Work, Play – - Freelance Rack

Work from Home freelancing

Post Top Ad

Post Top Ad

Thursday, April 30, 2020

Microsoft : Earnings Boosted by Rise in Online Work, Play –

By Aaron TilleyMicrosoft Corp. reported strong growth in quarterly sales and profit and said the shift of more activities online amid the coronavirus pandemic is helping propel growth in areas from cloud-computing to videogames.The world’s most valuable public company showed it was largely immune to any immediate ill effects from the pandemic even as many U.S. companies have reported falling earnings and pulled their full-year outlook because of economic uncertainty from the health crisis.Microsoft on Wednesday said sales rose 15% in the first three months of the year to $35 billion, and it generated a net profit of $10.75 billion. Both measures topped Wall Street expectations.“As Covid-19 impacts every aspect of our work and life, we’ve seen two years’ worth of digital transformation in two months,” Microsoft Chief Executive Satya Nadella told analysts.The health crisis has spurred use of Microsoft’s workplace collaboration software suite, called Teams, that includes videoconferencing and messaging functions. It now has 75 million daily active users, Mr. Nadella said, more than double the number in early March.Cloud-computing, already an earnings driver before the pandemic, has become more central for many Microsoft customers as they have moved to support employees working remotely amid a boom in online activity with people sheltering at home. That helped drive a 59% jump in sales in the Azure cloud business in the latest period, the Redmond, Wash., company said.The broader intelligent cloud segment, which includes Azure, booked revenue of $12.3 billion, up 21%, while the company’s productivity and business process division, which includes LinkedIn, sales-management software Dynamics and commercial subscriptions to the Office 360 product suite, had $11.7 billion in sales, up 15% from the same quarter a year ago.Microsoft’s stock rose more than 2.56% in after-market trading.The results are the sharpest illustration of how some big tech companies are avoiding many of the business ills afflicting other industries, and in some cases benefiting from the dramatic shift in the economy.Microsoft’s personal computer business held up relatively well. The company in February has warned supply chain disruptions linked to the Covid-19 outbreak were expected to cause first-quarter sales in its personal-computing business — which includes licensing revenue from PC sales, the Xbox gaming platform and Surface laptops — to fall short of the previous revenue forecast of $10.75 billion to $11.15 billion.On Wednesday, the company said the PC group generated sales of $11 billion, as demand to support remote work and teaching offset some of the supply chain issues. The gaming business benefited from people staying at home, with Xbox sales increasing 2% in the quarter, an improvement from the 11% drop in the previous three-month period. Surface laptop sales rose 1% as demand from people rushing to buy devices to work remotely outpaced supply chain issues.Microsoft also said that the supply chain constraints it had seen improved later in the quarter. “The supply chain in China returned to more normal operations at a faster pace than we had anticipated,” Chief Financial Officer Amy Hood said.Although demand for the cloud has been growing rapidly during the pandemic, Microsoft has faced some capacity issues dealing with the increased usage. Microsoft also said it had to slow some of its cloud infrastructure spending because of the supplier constraints in China.“Cloud infrastructure investment will pick up quite a bit,” said Logan Purk, technology analyst for Edward Jones, as Microsoft, like rival cloud-computing providers such as Inc. and China’s Alibaba Group Holding Ltd., tries to keep pace with demand.Another challenge for Microsoft is maintaining its cloud-computing momentum. Although remote working and people stuck at home are increasing the appetite for tools that run on the cloud, a broader economic downturn could dent spending plans for some companies forced to cut costs.Microsoft said that in the final weeks of the quarter there was a slowdown in finalizing some licenses, particularly involving smaller and medium-sized businesses, many of which have been hit hard by the economic effects of the pandemic.Microsoft’s business social-media network LinkedIn also felt the effect toward the end of the quarter, with reduced advertising spending, the company said, though revenue over the full quarter rose 21% from a year earlier. Advertising spending is expected to remain muted in the current quarter, Ms. Hood said, and LinkedIn also could be affected as hiring slows during the economic downturn.Microsoft gave a mixed outlook for the quarter ending June 30. Some of the businesses that have benefited from working from home, including Surface laptop sales and gaming, should see continued demand, though growth could ease as stay-at-home guidances are eased, Ms. Hood said.Microsoft’s sales outlook for the current quarter for the personal computer segment was slightly ahead of Wall Street’s expectation, though the forecast for the Intelligence cloud and business process segment was slightly short of analysts’ expectations.Write to Aaron Tilley at

No comments:

Post a Comment

Post Top Ad