Microsoft’s business continued to grow and beat Wall Street expectations for the final three months of 2020, powered by continued demand for its workplace software and cloud computing services as people continued to work from home during the pandemic.
During the second quarter of fiscal 2014, the company earned $15.5 billion, an increase of 33 percent from the same period last year.
It’s “the dawn of a second wave of digital transformation” that’s sweeping every company and industry, Satya Nadella, the CEO, said on Tuesday.
The company’s net income of US$2.03 per share exceeded expectations on Wall Street.
In the October-December period, the software company reported revenue of US$43.1 billion, an increase of 17 percent from the previous year and well ahead of forecasts.
A consensus estimate of $1.64 per share on revenue of $40.2 billion was offered by FactSet’s analysts for Microsoft’s fiscal third quarter.
According to an analyst at Nucleus Research, the pandemic of the coronavirus triggered an enormous shift to the cloud and to Microsoft that is unlikely to be reversed once the crisis is over. For many businesses, Microsoft’s apps and services helped ease the transition to new ways of engaging with customers digitally, and many of those businesses relied on Microsoft.
The Microsoft user interface is familiar to so many people that it’s an easy choice, Elman said.
During the three months that ended in December, Microsoft’s productivity segment brought in $13.4 billion in sales, an increase of 13%. The company’s cloud computing business segment grew by 23% to $14.6 billion in revenue.
In the pandemic, Microsoft Teams, which competes with Zoom and Slack as a must-have service for remote workers, has grown to prominence as a sign of this growth. Customer relationship management (CRM) software pioneer Salesforce announced in December that it was buying Slack for $27.7 billion in a deal that could give Microsoft tougher competition when it closes later this year, adding to Salesforce’s already fierce competition with Microsoft.
To $15.1 billion in revenue, the company’s personal computing segment expanded by 14%. There were some holiday gadget sales and Windows licenses sought by homebound workers, but Microsoft’s new Xbox Series X console provided the most significant boost to the segment. Xbox gaming revenue increased by 40% year-over-year.
A “near-perfect” quarter for Microsoft was boosted by Xbox gains, according to Edward Jones’ Logan Purk, who predicted that “in the near term, it’s more people at home playing games.” According to him, pent-up demand from the holiday shopping season could help sustain some of that growth in the months to come.
When comparing the new Xbox One to Sony’s PlayStation 5, Elman noted that Microsoft had fewer supply chain issues. Both companies will debut brand-new systems in 2020, the first time this has happened since 2013.
In terms of market share, Elman predicts that the Xbox One will come within striking distance of Sony’s current throne.