Coronavirus: Microsoft sees growth amid pandemic computing demands

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Microsoft revenue climbs 13% to $38B as stay-at-home trends boost cloud and games businesses

Microsoft's flagship cloud computing business, Azure, reported quarterly sales growth of under 50 per cent for the first time ever on Wednesday, sending the tech giant's shares down 3 per cent.

"On a significant base, server products and cloud services revenue increased 19 per cent and 21 per cent in constant currency". Wall Road had anticipated income growth of only 9 per cent and unchanged earnings. The Azure business grew 59% in the previous quarter, before the full weight of the pandemic hit.

Some of the key announcements made during the event include, enhancements to Azure Lighthouse by bringing Multi-Factor Authentication and Privileged Identity Management support; Azure Stack HCI, the latest in Microsoft's hybrid portfolio and now in public preview, that brings hybrid capabilities to customers' datacenters while enabling them to leverage existing skills and investment; and new bundled services for Lenovo Managed Services that are created to help small- and medium-sized businesses support Microsoft software productivity, security, and collaboration.

Satya Nadella, chief executive, said that this year's crisis had added momentum to a strong change to cloud computing, with quite a few businesses for the initially time looking at switching to digital technologies in purchase to make their enterprises far more resilient.

Shares in Microsoft slipped 2.2 percent, to $207.09 a share, in after-hours trading Wednesday.

Microsoft's Intelligent Cloud business, which comprises its Azure public cloud service, GitHub, Windows Server, SQL Server and its enterprise services, reported revenue of $13.37 billion, up 17% from a year ago.

Revenue from the unit, the largest by sales, rose 14 per cent to US$12.9 billion, beating analysts' estimates of US$11.46 billion.

Within that segment, Xbox gaming service revenues rose 65 per cent and sales for its Surface devices were up 28 per cent.

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"Some of the bulls were hoping for more of a beat", said Dan Ives, an analyst at Wedbush Securities. "You saw a surge in demand but that demand is starting to level off a bit", Mr. Thill said of the boost to Microsoft's cloud business in the early months of the pandemic. The segment enjoyed "better than expected performance across all businesses, as we continued to benefit from work, learn and play from home scenarios", CFO Amy Hood said. But some cloud customers also have been looking to cut costs as they grapple with the effects of the economic downturn from the coronavirus outbreak. Ms Hood forecast revenue for the Productivity division will range from US$11.65 billion to US$11.9 billion, below the US$12.16 billion average estimate of analysts polled by Bloomberg.

Microsoft shares have climbed about 34% since the beginning of the year.

Microsoft's total revenue rose 13% to $38.03 billion in the quarter, beating estimates of $36.5 billion, according to IBES data from Refinitiv.

Microsoft Teams is helping people be together even when they are apart. The Redmond, Wash. -based company was early in shifting employees to remote working when Covid-19 cases spread across the U.S.

And LinkedIn, which it acquired for more than $26 billion in 2016, is dealing with weakened demand for its recruitment services and soft advertising spending during the pandemic.

The earnings numbers come as Microsoft's LinkedIn social network announced today that it will lay off 960 of its employees.

Investors pushed Microsoft's stock 29 per cent higher in the June quarter. Slack is asking the European regulator to force Microsoft to sell Teams as a stand-alone product.

"Surface was another highlight for Microsoft", Moorhead said.

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