Microsoft Corp. The company continued to benefit from the shift to remote work last quarter, analysts said, as profits from its cloud business increased.
According to analysts surveyed by FactSet, the software giant expects to announce about $50.7 billion in sales for the three months through December, up about 18% from a year ago and a 13% increase in net income. With close to $17.5 billion. The Redmond, Wash., company is scheduled to report its fiscal second-quarter earnings after the market closes on Tuesday.
Dan Morgan, senior portfolio manager at Microsoft-investor Synovus Trust Company, said in a note ahead of the earnings release that investors will focus on the profitability of its popular cloud-services business.
It is expensive to build the infrastructure to meet rising demand, so some are questioning whether Microsoft’s cloud products can “continue revenue growth ahead of the accelerated cost curve,” Mr. Morgan wrote. He pointed out that Microsoft said last year that it would be investing $20 billion over five years on advancing its security products.
Over the past two years, Microsoft has been one of the biggest beneficiaries of the transition to remote working, which occurred after the spread of COVID-19. Companies, governments and schools around the world have turned to cloud-based technologies to facilitate their work, and Microsoft is selling the tools used for Shift. While more organizations are returning to work in offices, the Omicron version of the virus could further delay the return to normalcy.
The cloud business is the fastest growing business in technology and is expected to grow from $385 billion in 2021 to $809 billion by 2025. According to Gartner Inc., the % share of the worldwide cloud computing market is followed by Amazon.com Inc., which dominates the region with over 40% share.
Demand for personal computing machines, many of them using Microsoft’s Windows operating system, has increased, and so has Microsoft’s videogame business. The demand for laptops and desktop PCs is expected to continue.
Microsoft is taking big steps to boost its videogame business. Its quarterly results could provide more clues about how its Xbox business is doing and what it plans to do next with this important source of revenue.
Last week, the company acquired Activision Blizzard Inc. announced an all-cash offer of $75 billion to acquire If it goes through, it will be its biggest acquisition to date — nearly three times bigger than any deal Microsoft has struck — and will position it as a status quo. The world’s third largest videogame company by sales. The planned investment will also boost its subscription-game service, Game Pass, which recently hit 25 million subscribers.
“We believe this is the clearest indication of Microsoft’s intention to share and grow the company’s own Xbox and gaming business,” Bernstein Research Analyst, Mark Mordler, wrote in a recent note to investors.
The company’s shares have performed well since the start of the pandemic. They’re up about 85% over the past two years, even making Microsoft the world’s most valuable company for a short period of the past year. Microsoft’s shares have fallen more than 10% since the start of the year, as part of a broader stock selloff. They’re down 5% since the Activision acquisition was announced last week.
This story has been published without modification to the text from a wire agency feed
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