Microsoft’s second quarter report surpasses highest forecasts

Microsoft shares hit a new high after the company reported 50% growth in Azure cloud computing revenue and 40% growth in Xbox sales, among strong growth in other segments.

Microsoft (MSFT) shares, up 43.2% in the past 12 months, hit a new high in the past 52 weeks with a rise of 8.6% after closing on Tuesday.

Microsoft demonstrated the strength of all its divisions during the holiday quarter ending December 31st. Sales of Azure cloud computing, new Xbox game consoles and a rebound in LinkedIn ad sales were particularly strong.

Microsoft CEO Satya Nadella said the company is benefiting from companies’ long-term transition to digital cloud computing.

“What we have witnessed over the past year is the dawn of a second wave of digital transformation, engulfing every company and every industry. Building your own digital capabilities ensures the sustainability and growth of every organization, ”Nadella said.

Microsoft posted a 34% rise in 2Q earnings per share (yoy) to $ 2.03, $ 0.39 better than analysts’ estimates of $ 1.64. Profit for the quarter was $ 15.5 billion.

Total quarterly revenue grew by 17% to $ 43.1 billion, which also surpasses the analytical estimate of $ 40.18 billion. Microsoft’s quarterly revenue and earnings statistics for the last 2 years are available here.

Over the past quarter, Microsoft returned $ 10 billion to shareholders in share repurchases and dividends, up 18% from the second quarter of fiscal 2020.

Microsoft Business Unit Revenues

Microsoft’s sales are split between three large divisions.

1. Division “Productivity and business processes” (Productivity and Business Processes), which includes commercial and consumer products Office, cloud services, Microsoft 365 Consumer, Dynamics and Dynamics 365, showed revenue growth by 13% to $ 13.4 billion.

The company’s management noted a recovery in demand for its services among companies affected by the pandemic, as well as a 23% increase in LinkedIn’s ad revenue, close to 24% growth a year earlier.

2. The Intelligent Cloud business unit, with the highest and fastest growing revenues, posted 23% revenue growth to $ 14.6 billion, driven in large part by a 50% rise in revenue from Azure.

“These were huge numbers and will be another spike for the tech sector as cloud growth is just beginning,” said Dan Ives, an analyst at Wedbush Securities, commenting on Microsoft’s quarterly report.

3. The More Personal Computing division, the company’s second-highest revenues, reported revenue growth of 14% to $ 15.1 billion.

The growth was fueled by a 10% increase in sales of commercial Windows products and cloud services and 40% growth in revenue from Xbox content and services. At the same time, the Xbox gaming business for the first time in Microsoft history exceeded $ 5 billion in quarterly sales thanks to subscriptions to games, as well as sales of new video consoles.

Microsoft’s monthly $ 10 GamePass game subscription boosted its user base to 18 million, up from 15 million in September. Online gaming service Xbox Live has reached over 100 million monthly active users.

Commercial cloud gross margins, which include software and service suites such as Office and Azure, grew 71% this quarter, up from 67% a year earlier.

This metric is viewed by analysts and investors as a measure of Microsoft’s ROI to large businesses. “Microsoft’s profit was excellent even when compared to high market expectations,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Microsoft forward-looking statements

For the current quarter, Microsoft said it expects Intelligent Cloud revenues in the $ 14.7 billion to $ 14.95 billion range, “More Personal Computing” from $ 12.3 billion to $ 12.7 billion. business processes ”were projected at the level of $ 13.35 billion to $ 13.6 billion.

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