Microsoft Sees Strong Earnings On Cloud Computing

Microsoft sees strong quarterly earnings

Microsoft beat market expectations Tuesday by delivering a strong quarter-end performance in cloud computing and software, still benefitting from the pandemic's online shift of play, work shopping and learning.

The US tech giant, which announced on Wednesday a major deal to buy gaming giant Activision Blizzard in a blockbuster deal, said that profit increased to $18.8 Billion in the last three months of last fiscal year.

"Digital technology is the most adaptable resource at the world's disposal to overcome constraints and reimagine everyday life and work," CEO Satya Nadella said, in announcing revenues of $51.7 billion.

Microsoft investments involve pouring money into the booming video game market, and in turn, the metaverse, the virtual-reality vision for the future of the internet.

On an earnings call, Nadella pointed to the thousands of millions of gamers playing games like Forza, Halo and Minecraft, many investing in "avatar" proxy services for online worlds, stating that the metaverse is a natural extension.

Microsoft is also integrating virtual gathering components with other products, like Teams online collaboration software, according to executives.

"We are in a great position to be able to catch what I think is essentially the next technology of the internet," Nadella said on the call.

Last week, the Redmond, Washington-based tech company announced an important deal to acquire the scandal-plagued Activision's "Call of Duty" maker for $69 billion.

This would be Microsoft's biggest ever buyout, beating LinkedIn's $26.2 billion in 2016.

According to the earnings report, revenue on the social networking site that focuses on career increased by 37% compared to the same quarter the previous year.

Microsoft stated that Microsoft will be the third largest gaming company in terms of revenue by buying Activision which is a troubled but extremely successful company after Tencent and Sony.

The merger is expected to receive regulatory approval at a time when Europe and the United States are seeking to restrict Big Tech.

Revenue from the Microsoft division that makes Xbox consoles and video game content grew 10 percent in the just ended quarter, according to the earnings report.

- 'PC renaissance' -

"Redmond is still seeing growth in the field as a lot of enterprises continue to move towards the cloud using Nadella & Co," Dan Ives, Wedbush analyst said in a letter to investors.

Ives believed that the high earnings from Microsoft as an "broader sign of the strength we expect will be seen across the enterprise cloud software landscape throughout the earnings season."

Microsoft is competing with Amazon and Google in the cloud computing market.

According to the earnings report, each of the units dedicated to cloud services at Microsoft saw double-digit revenue growth and brought in tens to billions of dollars.

Microsoft's division devoted to the Windows operating system also thrived in what Nadella described as a "renaissance" of the personal computer (PC) market that was in decline prior to the pandemic forced many people from all over the world to stay home.

Nadella stated that "more people are using computers to exercise their power and unleash their imagination."

"We are experiencing a PC Renaissance, with increased time spent on PCs and per household." Minecraft

Microsoft stock was up a bit following the earnings call.

Some of the most bullish investors had hoped for better financial results, as per Wedbush.

"In this volatile market, we'll see every tech print initially viewed as glass half empty, but ultimately it's an essential cloud name that is a good one to own," Ives said.

Third Bridge vice president Scott Kessler was among those who were looking to know what impact an ending of the pandemic would have on Microsoft growth fueled by remote work, play, and school.

"We've seen a lot of darlings from the early Covid period becoming fallen angels," Kessler said in a note.

Nadella believed that digital technology would remain a valuable resource as businesses and individuals "reimagine" society and is looking for solutions to issues like labor shortages.

"We are experiencing the shift of generations in our society and economy," Nadella said.