While the new crown has had a significant impact on the world’s major economies, with many of the physical sectors suffering heavy losses, they have given a boost to many of the businesses of technology giant Microsoft. The tech giant, the first to report results this earnings season, said: “It’s not going to be able to do anything about it. Microsoft’s earnings have attracted a lot of attention. Microsoft’s revenue for the vast majority of its businesses has grown strongly and ushered in a bumper quarter, according to the second-quarter results released today.
In the second quarter ended June 30, Microsoft reported revenue of $38.03 billion, up 13 percent from a year earlier and above market expectations of $36.5 billion. Net profit for the quarter was $11.2 billion, down 15% from a year earlier. Earnings per share were $1.46, above market expectations of $1.34.
Net profit fell after Microsoft accounted for $450 million in related expenses for closing its brick-and-mortar business in the quarter, shutting down Mixer video game streaming, acquiring software automation company Softmotive, cyberx ($165 million) and communications software company Metaswitch.
In the past fiscal year, Microsoft reported full-year revenue of $143 billion and a profit of $44.28 billion, both a record high, up 14 percent and 13 percent year-on-year, respectively. Instead of impacting Microsoft’s performance, the new crown industry has given a boost to the company’s cloud services, Windows and productivity needs.
Microsoft’s “smart cloud” division reported revenue of $13.4 billion in the quarter, up 17 percent from a year earlier and above market expectations of $13.1 billion. Microsoft does not publish the specific results of The Azure Public Cloud business alone, but is listed in the “Smart Cloud” business unit along with services such as Server, GitHub, and SQL. Microsoft said revenue from Azure grew 47 per cent year-on-year (although growth slowed, up 59 per cent in the previous quarter) and business contracts grew 12 per cent year-on-year in the quarter.
Microsoft’s commercial cloud services revenue exceeded $50 billion for the first time this fiscal year. This is a milestone in Microsoft’s strategic transition to cloud services since Nadella took office in 2014. Today, the cloud business now accounts for 35% of Microsoft’s total revenue, and Azure’s public cloud business is second only to Amazon’s AWS in the global cloud service market.
During the outbreak, the enterprise’s telecommuting needed more support from public cloud services, which also provided a significant boost to the PC market and demand for productivity software. According to IDC, global PC shipments rose 11% year-on-year in the second quarter of this year, sweeping away the weakness of the “post-PC era” of the past few years.
Microsoft’s More Personal Computing division reported revenue of $12.9 billion in the quarter, up 14 percent from a year earlier and beating analysts’ expectations of $11.48 billion, boosted by demand. The division includes the Windows business, Xbox consoles and hardware such as Surface. Windows Consumer Licensing revenue rose 34 percent in the quarter. Large-scale homes around the world have also created demand for Microsoft’s Xbox gaming content and services business, which saw revenue swell 65 percent in the quarter.
In addition, the Productivity and Business Processdivision division, which includes Office, LinkedIn and Dynamics, reported revenue of $11.8 billion in the quarter, up 6 percent from a year earlier, but below market expectations of $11.91 billion. Microsoft’s only decline in the quarter was the Internet search advertising business, which fell 18 percent in the quarter.
Despite the quarter’s strong results, Microsoft’s share price recovered slightly after the session, largely due to the company’s lower-than-expected quarterly revenue growth target.
Microsoft has decided to cut thousands of jobs worldwide, mainly to marketing and sales teams overseas, Reuters reported. Microsoft currently employs 120,000 people worldwide, 19% of whom are marketing and sales team employees. Microsoft had previously decided to close its brick-and-mortar retail business, taking in $450 million in expenses, but said at the time it would not cut jobs.
LinkedIn, which grew 10 percent of its revenue in the quarter, also decided to cut 960 jobs worldwide and cut 6 percent of its workforce. LinkIn’s job cuts are focused on global sales and talent acquisition, and CEO Ryan Roslansky explains that the new crown crisis has affected hiring needs across the globe and that companies need to ensure that they have the energy and resources to focus on their most strategic priorities.