Microsoft sales rise as remote working lifts cloud services during coronavirus crisis
The world’s largest software maker said quarterly sales rose 15% to $35bn
New York — Microsoft said on Wednesday quarterly sales and profit rose, buoyed by demand for internet-based software and cloud services needed to accommodate a shift to remote working during the coronavirus crisis.
Profit in the period ended March 31 rose to $10.8bn, or $1.40 a share, the company said Wednesday in a statement. Sales rose 15% to $35bn. The results from the world’s largest software maker topped analysts’ average estimates for $1.28 a share in profit and $33.7bn in sales, according to data compiled by Bloomberg. Shares jumped in late trading.
Microsoft is better positioned to weather the Covid-19 pandemic than some technology peers because CEO Satya Nadella for years has been shifting its focus to cloud software. As the virus shut down workplaces, the company has seen increasing demand for internet-based Office and conferencing software that keeps employees connected and productive at home. Much of Microsoft’s software is also now sold by subscription, which means customers generally keep paying even amid a slowdown.
“Microsoft revenue is less consumer-centric and far more recurring, and when you go to a subscription, you have a pay-for-it-or-lose-it mindset,” said Mark Moerdler, an analyst at Sanford Bernstein.
While Microsoft had cautioned in February that the spread of the virus in China would hurt its Windows personal-computer operating system and device businesses, that unit ended up benefiting from purchases by workers worldwide who were kitting out home offices. The company also said its gaming service got a boost in engagement as homebound users sought entertainment.
On the cloud side, Azure cloud-infrastructure services and Office 365 software, including the Teams teleconferencing app, gained from work-at-home arrangements. Azure revenue jumped 59% in the quarter, and commercial cloud revenue rose 39% to $13.3bn. Margins widened by 4 percentage points in that business.
The Redmond, Washington-based company said it did start to see some impact from smaller businesses hurt by the virus in March, with some one-time license purchases by those clients slowing down.
Microsoft shares rose more than 5% in extended trading following the report. Earlier, they closed at $177.43 in New York. The stock has gained more than 13% in 2020, giving the company a market value of $1.35 trillion — making it the biggest US publicly traded company.
Revenue in the division that includes Windows, Xbox, Surface computing devices and search advertising rose 3% to $11bn. That’s above the $10.6bn estimate of analysts polled by Bloomberg, a notable beat in a unit coping with lower ad prices and a rocky quarter for electronics supplies, manufacturing and sales.
In the Intelligent Cloud division, sales increased to $12.3bn, compared with an average projection for $11.7bn. For the unit that includes Office software — both cloud and traditional sales — revenue climbed to $11.7bn. That compares with the $11.5bn average Wall Street prediction.
Microsoft shares were unchanged for the fiscal third quarter, a volatile period when global markets were buffeted by worries about the virus’ spread. That was a better performance then the 20% decline in the Standard & Poor’s 500 Index during the same period as investors bet Microsoft’s internet-based software might help it fare better than other companies, including some tech rivals that get a bigger portion of sales from the advertising market or consumer gadgets.
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