Few businesses are immune from the outbreak of new crown pneumonia. As a world-class technology giant, Microsoft is no exception. But Microsoft is actually a lucky one, and it’s doing well in the outbreak. Externally, at least, the outbreak seems to have subtly avoided Microsoft’s main business and even helped it, to some extent, by emphasizing social distance.
Of course, beyond luck, Microsoft also has to rely on its technological prowess, as Satya NadelLla, Microsoft’s chief executive, says, that technology intensity is the key to business resilience.
Microsoft gave up a good job.
Nadella says so, there’s a bottom line.
As recently as July 22, Microsoft reported its fourth-quarter results for fiscal year 2020 through June 30, as well as its full-year report for fiscal 2020 .
Microsoft Q4’s revenue was $38,033 million, up 13 percent from $33.717 billion a year earlier, and net profit was $11.202 billion, down 15 percent from $13.187 billion a year earlier.
Here’s a statistic to note: Microsoft’s net profit fell because last year’s net profit included a one-time tax break of about $2.6 billion.
Excluding Non-GAAP, Microsoft’s profit for the same period last year should be $10.62 billion, up 5% from a year earlier, compared with a year-on-year increase of $1.46 per share.
It’s worth noting that Microsoft closed its brick-and-mortar store last quarter, a move that counted in a $450 million loss and also had an impact on Microsoft’s net profit.
Twenty-six Wall Street analysts had expected Microsoft’s fourth-quarter revenue to be $36.5 billion, while 29 had expected microsoft earnings of $1.37 per share in the fourth quarter, according to Yahoo Finance.
Microsoft’s performance beat Wall Street expectations, both in terms of revenue and net profit.
In addition, Microsoft’s revenue for fiscal 2020 was $143.015 billion, up 14% from $125.843 billion in fiscal 2019, and net income was $44.281 billion, up 13% from $39.240 billion in fiscal 2019
However, under Non-GAAP, Microsoft’s net profit in 2020 is up 20% from the previous year.
The outbreak has had a positive and negative impact on Microsoft.
In the overall performance of the excellent situation, let’s look at Microsoft’s business development in various sectors.
The first was the Productivity and Business Processes segment, which reported revenue of $11.8 billion, up 6% year-on-year.
Office business products and cloud services revenue increased by 5%, driven by a 19% increase in Office 365 Business revenue;
Revenue from Office consumer products and cloud services increased 6 percent, while Office 365 had 42.7 million consumer subscribers.
Linkedin revenue up 10%;
Revenue from Dynamics products and cloud services increased by 13%, with Dynamics 365 up 38 percent.
The second was the Intelligent Cloud segment, which reported revenue of $13.4 billion, up 17% year-on-year.
Among them, revenue from server products and cloud services increased by 19%, and Revenue from Azure cloud services increased by 47% — while revenue from enterprise services remained largely unchanged.
It’s important to note that for the first time in this financial report, Azure cloud service revenue grew at less than 50% year-on-year, but still showed strong driving force.
The third was the More Personal Computing segment, which reported revenue of $12.9 billion, up 14% year-on-year.
Windows OEM revenue increased by 7%;
Revenue from Windows business products and cloud services increased by 9%;
Xbox content and services revenue up 65% and Xbox hardware revenue up 49%;
Surface revenue increased by 28%, driven by telecommuting and learning scenarios;
Search ad revenue decreased by 18% due to lower customer ad spending.
As you can see, in the last quarter, the performance of this section is relatively bright. Microsoft also highlighted the growth of the gaming, Surface and Windows businesses, but the decline in advertising.
Obviously, this is the impact of the outbreak.
Notably, Microsoft emphasized in its interpretation that the non-Pro portion of Windows OEM revenue increased by 34% because of remote versions and learning scenarios, but the Pro segment decreased by 4% because of weak demand from small and medium-sized businesses.
Offset by this, windows OEM revenue growth of 7% was achieved.
Overall, Microsoft’s revenue performance in the last quarter is typical of the impact of the outbreak on technology companies, there are positive factors, there are bad factors.
But for Microsoft, the positives are clearly greater than the positives.
The outbreak is actually helping Microsoft.
For a world-class giant like Microsoft, it is unlikely to stray from this world-class outbreak, so the key to its future growth lies in its backbone business, where the edge business is inevitably damaged.
Fortunately, Microsoft’s main driver of growth, the cloud computing business, is very strong.
This is first reflected in the comparison of the three sectors, with the highest growth rate being The Second Sector, Intelligent Cloud, with a year-on-year growth rate of 17%, and Azure’s revenue growth rate of 47% yoY, slowing down but still high, not losing out to AWS (Q1 in 2020 is 33%).
Second, Microsoft also highlighted its Commercial Cloud revenue, which reached a milestone in fiscal 2020.
Microsoft’s business cloud revenue exceeded $50 billion in fiscal 2020 for the first time in history, while Microsoft’s business orders grew 12 percent year-on-year, according to Amy Hood, Microsoft’s executive vice president and CFO.
Microsoft’s performance in the cloud computing business has led Microsoft’s transformation in the six years since he took office, especially in cloud computing.
In fact, Azure has been adopted by 95% of the world’s top 500 companies, and is second only to Amazon AWS in the global public cloud service market.
If cloud computing is the embodiment of Intelligent Cloud at Microsoft, then, at the other end of the cloud, Microsoft’s other focus is The Intelligent Edge, which together constitutes the era defined by Microsoft.
Businessally, The essence of The Intelligent Edge is actually OEMs, Surface, Xbox, and so on, which are connected by Intelligent Cloud, creating a closed-loop relationship.
It’s important to emphasize that once this closed-loop relationship is formed, it naturally builds a cloud-based connection and covers the work, study, manufacturing, and communication scenarios, thereby amplifying the social distance between people – in other words, the better it develops, the greater the social distance.
In this section, the new crown pneumonia outbreak, people are increasingly finding the importance of social distance, and society is increasingly in need of this closed-loop relationship, businesses and organizations are increasingly needed for digital transformation.
And Microsoft, as a result, is becoming more and more useful.
Because what’s really powerful about Microsoft is that it’s been hosting this closed-loop relationship well for more than four decades. As Microsoft CEO Nadella put it:
Organizations that build their digital capabilities will recover faster and become stronger as they emerge from this crisis. We’re the only company with an integrated modern technology stack – powered by cloud and artificial intelligence, based on security and compliance – that will help every organization transform…
Nadella’s words are full of confidence, but he’s actually explaining Microsoft’s vision of digital transformation in the era of “smart clouds and smart edges.”
The outbreak will bring Microsoft closer to that vision.