Microsoft sees revenue growth amid pandemic digitization demand

SAN FRANCISCO, United States — Despite falling profits, Microsoft saw revenues rise in the past quarter amid strong demand for cloud computing services from pandemic-hit businesses and consumers and big gains in its Xbox gaming operations.

Profits in the quarter ending June 30 fell 15% to $11.2 billion, the result of increased tax charges compared with a year ago, the company reported on Wednesday.

Revenues, meanwhile, rose 13% year-on-year to $38 billion, led by strong gains in its cloud computing and its Xbox gaming services.

Chief executive Satya Nadella said Microsoft was equipped to deal with the coronavirus pandemic with its “integrated, modern technology stack.” “We are seeing businesses accelerate the digitization of every part of their operations from manufacturing to sales to customer service,” Nadella told a conference call.

Microsoft shares dipped some 2.5% in after-hours trade on the results, which were largely ahead of forecasts. Its shares have been trading at near record levels amid a 50% surge since March, giving it a market value of more than $1.6 trillion.

Revenues from Microsoft’s “intelligent cloud” division which includes its Azure enterprise business rose 17% annually to $13.4 billion in the fiscal fourth quarter.

In the personal computing segment including the Windows operating system, revenues were up 14% to $12.9 billion.

Within that segment, Xbox gaming service revenues rose 65% and sales for its Surface devices were up 28%.

Xbox hardware revenue increased 49%, as Microsoft boosted the number of consoles sold even with a newer version expected later this year. “This was a breakthrough quarter for gaming,” Nadella said.

“We saw record engagement and monetization... as people everywhere turned to gaming to connect, socialize and play,” she said.

Microsoft saw a more modest 6% increase in revenues in its productivity and business operations which include the Office software suite and LinkedIn.

Daniel Ives at Wedbush Securities called the Microsoft results “robust,” led by its cloud computing that benefits from the work-from-home trend.

“This current remote work from home environment is further catalyzing more enterprises to make the strategic cloud shift with Microsoft the main beneficiary as evidenced by the solid results this evening,” Ives said.

Earlier Wednesday, the workplace messaging platform Slack filed an EU antitrust complaint against Microsoft, alleging that the integration of the “Teams” service into the Office software suit represented unfair competition.

Microsoft said Teams was growing because it offers video, which Slack does not.