Microsoft's strength in cloud computing boosts earnings, shares rise

Microsoft's strength in cloud computing boosts earnings, shares rise

"What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry", Microsoft CEO Satya Nadella said in a canned statement.

The Redmond, Washington-based company is a victor of the pandemic-driven shift to working and learning from home, with businesses and schools adopting its Teams collaboration software and shifting many other apps to the cloud.

We may earn a commission for purchases using our links. That's $2.9 billion more than what analysts were expecting.

Distilling the numbers further, it's apparent that Microsoft's gamble on Xbox Game Pass is working for now as it helped guide revenue growth by 40% during a quarter where the division had few exclusive titles to push digital sales.

The software maker posted revenue of $43.1 billion (€35 billion) in the October-December period, up 17% from a year ago and also beating forecasts. Xbox content and services revenue also grew 40 percent in the quarter, and Xbox hardware revenue, as expected, was up big, by 86 percent.

Microsoft earnings in spotlight for signs of business recovery

Windows OEM growth was also up slightly by 1 percent, a mix of declining OEM Pro revenue (down 9 percent) and a significant uptick in OEM non-Pro licenses (up 24 percent).

The company bundles several sets of software and services such as Office and Azure into a "commercial cloud" metric that investors watch closely to gauge the company's progress in selling to large businesses.

Server products and cloud services revenue increased 26% driven by Azure revenue growth of 50%. Office did well with both commercial and consumer customers: Office commercial revenues grew 21 percent in the quarter, while Office consumer revenues jumped 7 percent.

"Accelerating demand for our differentiated offerings drove commercial cloud revenue to $16.7 billion, up 34% year over year".

Overall, this was a very healthy quarter for Microsoft.

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