Microsoft Beats Expectations with Healthy Q2 Earnings

Yolanda Curtis
January 27, 2021

Microsoft CEO Satya Nadella has heralded the arrival of a "second wave" of digital transformation throughout industry as his company flags a 34 per cent year-on-year increase in commercial cloud revenue during its second quarter.

Microsoft has again done good business with its Azure cloud services in last year's closing quarter, the second quarter of its broken financial year.

Microsoft's stock price was up as much as over 5% in after-hours trading immediately following the release, to around $242 per share.

The US technology stalwart reported net income of $15.5 billion in the final three months of previous year, a 33 percent jump from the same period in pre-pandemic 2019.

The coronavirus pandemic sparked a massive shift to the cloud and to Microsoft that won't likely be reversed once the crisis is over, said Daniel Elman, an analyst at Nucleus Research. Analysts are expecting a 41.4% rise in Azure sales, according to Visible Alpha. That's up from $36.9 billion during the same quarter a year ago.

Other components that showed remarkable growth were business social network LinkedIn, with which Microsoft achieved nearly a quarter more turnover, and the XBOX. Microsoft did not give an update on the 115 million Teams daily users it disclosed in October but did say that the mobile version is used by 60 million daily users. Revenue from the business social network increased $475 million, or 23%, to almost $2.6 billion, which the company attributed to increased advertising demand in LinkedIn's Marketing Solutions business.

Windows Home revenues were up 24 percent, but Windows Pro revenues declined by 9 percent and Windows revenues from PC makers only grew 1 percent despite all the pandemic-related buying.

The firm said it expected business to return to growth in the next few months, including in the critical USA market.

Revenue from Microsoft's "more personal computing" segment, which Xbox sales fall under, increased 14% year-over-year to $15.1 billion. Xbox content and services revenue also grew 40 percent in the quarter, and Xbox hardware revenue, as expected, was up big, by 86 percent.

Office Commercial products and cloud services revenue increased 11% driven by Office 365 Commercial revenue growth of 21%.

Microsoft's gaming business topped $5 billion (roughly Rs. 36,430 crores) in quarterly sales for the first time ever and was propelled by gaming subscriptions and sales as well as new consoles. Azure revenue was up a very healthy 50 percent, while Server revenue grew 4 percent and Enterprise Mobility saw its installed base jump by 29 percent to 163 million seats.

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