Revenue in the firm’s other business units, which include Windows software, the Teams messaging service and the LinkedIn professional social networking platform, also beat analysts’ expectations.
Microsoft on Tuesday forecast a strong end to the calendar year thanks to its booming cloud business, but said supply chain woes continued to dog major units such as those producing its Surface Laptop and Xbox gaming consoles. Will stay
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The company beat Wall Street’s expectations for its first quarter ended September 30, with pandemic-induced demand for sales of the software giant’s cloud-based services.
Microsoft, Amazon.com Inc’s AWS and Alphabet Inc-owned Google Cloud have extended contracts for cloud services Since last year when the COVID-19 pandemic closed offices and schools, pushing more activity online.
First-quarter revenue growth for Azure, the company’s leading cloud-computing business, came in at 48% in constant currency to beat analysts’ estimates of 47.5%, according to consensus data from Visible Alpha. Microsoft executive vice president and chief financial officer Amy Hood said the company also expects “broad-based growth” for the unit in the fiscal second quarter.
Azure’s growth rate is the best direct measure of competition with rivals like AWS and Google Cloud because Microsoft doesn’t break out revenue from the cloud-computing unit.
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Microsoft appeared to be blocking the growing challenge of Google Cloud. Google Cloud on Tuesday said its revenue increased 45% to $4.99 billion, but failed to meet estimates of $5.2 billion.
Revenue in the firm’s other business units, which include Windows software, the Teams messaging service and the LinkedIn professional social networking platform, also beat analysts’ expectations.
The supply chain issues affecting the global tech industry had mixed results for Microsoft.
Hood said Microsoft continues to grow its cloud computing margins despite higher data center construction costs as it continues to add more profitable services to those data centers. Hood also stated that the company was able to ship more Xbox S and X Gaming Consoles Sales of gaming consoles and accessories jumped 166% in the first quarter – higher than expected as the company continued to see strong demand for new models as the pandemic forced millions to seek entertainment at home.
But Microsoft and its rivals have been unable to meet demand due to the global chip crisis. Hood told Reuters that the company expects Xbox demand to continue to exceed supply in the company’s second quarter, which includes Christmas.
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She also said sales of the company’s Surface computers, which declined 17% in the fiscal first quarter, were likely to sink in the second quarter, with supply chain constraints hitting premium items in the lineup.
According to IDC data, Microsoft’s revenue from selling Windows to PC makers grew 10% year over year, outpacing the entire PC market, which grew only 3.9% over the same period due to supply constraints.
Hood said the company was able to outperform the PC market because of its strength in selling licenses for Windows to corporate customers, where it gets more revenue per license and has a better market share.
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Overall, revenue rose 22% to $45.32 billion for the first quarter ended September 30, beating expectations by about $43.97 billion.
Net income rose to $20.51 billion, or $2.71 per share. The company said its results included a net income tax benefit of $3.3 billion.
It earned $2.27 per share on an adjusted basis, beating analyst expectations of $2.07 per share.
For the fiscal second quarter, Microsoft predicted a midpoint of $18.23 billion in revenue for its intelligent cloud business for the fiscal second quarter, up from estimates of $17.84 billion, according to Refinitiv data.
First-quarter revenue from “Intelligent Cloud” rose 31% to $17 billion. Analysts had expected a figure of $16.58 billion, according to Refinitiv data.
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Microsoft’s forecast for its software apps and Windows-focused segments was also above Refinitiv’s estimates of $15.40 billion and $15.51 billion, with midpoints of $15.83 billion and $16.55 billion, respectively.
Shares of the company, which have climbed nearly 40% this year, were up marginally in extended trading.
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