Microsoft’s profits soared 21%, providing a cushion for its gaming instincts

Microsoft's profits soared 21%, providing a cushion for its gaming instincts

Tech Highlights:

  • The Redmond, Washington company on Tuesday reported fiscal second-quarter profit of $18.8 billion. It posted revenue of $51.7 billion for the October-December period, up 20% from a year earlier. In a call with investors, CEO Satya Nadella said the company is transitioning from a period of pandemic-fueled demand to one in which digital technology can help overcome economic constraints to “drive productivity while keeping costs down.” “The other area we are seeing strength is gaming,” Nadella said. “That’s where we have doubled down in terms of our consumer category.”

  • As the epidemic kept many office workers at home, demand for Microsoft’s cloud computing services and work applications helped boost quarterly profits by 21%. A sign advertising Microsoft offices in New York on Thursday, May 6, 2021. The gaming industry was astonished when Microsoft revealed on Tuesday, Jan. 18, 2022, that it would buy game producer Activision Blizzard for $68.7 billion, a deal that would instantly make it the largest in the world. A sign advertising Microsoft offices in New York on Thursday, May 6, 2021. Microsof. As the epidemic kept many office workers at least partially at home, demand for Microsoft’s cloud-computing services and work applications helped improve the company’s quarterly profits by 21%.

Microsoft last week announced its plans to buy high-profile game publisher Activision Blizzard for $68.7 billion, an all-cash deal that could be the priciest tech acquisition in history if it withstands scrutiny by antitrust regulators. It could also catapult the Xbox-maker ahead of Nintendo to join Sony and Tencent as one of the three biggest video game companies. But the financial results revealed Tuesday show that business-focused offerings such as Microsoft’s Azure cloud computing platform and its suite of software products are still driving the company’s growth.

Sales from Microsoft’s cloud computing business segment — where its biggest competitor is Amazon — grew 26% to $18.3 billion in the quarter ending in December. Microsoft’s productivity segment, which includes its Office suite of workplace products such as email, grew by 19% from the same period a year earlier, to $15.9 billion. The productivity segment also includes revenue from Microsoft’s LinkedIn jobs networking service, which increased 37% from the same time a year earlier. Nadella said it’s getting more engagement because of the “great reshuffle across the labor market.”

Net income of $2.48 per share beat Wall Street expectations. Analysts surveyed by FactSet were expecting Microsoft to earn $2.32 per share on revenue of $50.71 billion for the fiscal quarter. It’s the first time the company hit over $50 billion in sales in a three-month period. Beating analysts’ forecasts wasn’t enough to stop Microsoft shares from first dropping, then rising about 2% in after-hours trading on a jittery day for investors. As markets have been swinging between steep losses and gains, expensive stocks in high-flying tech companies have led losses as investors worry about rising interest rates.

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