Notes

Microsoft Has A Strong Outlook For Earnings On Cloud Computing

Microsoft expects strong earnings for its quarterly period



Microsoft beat market expectations Tuesday with strong quarterly performance in cloud computing and software, still benefitting from the pandemic's online shifting of work, play shopping, and learning.



The US tech colossus has announced a blockbuster deal to buy gaming giant Activision Blizzard, said profit increased to $18.8 billion in the final three months of last year.



CEO Satya Nadella said that digital technology was the most flexible resource available to overcome limitations and reinvent the way we work and live, announcing revenues of $51.7 million.



Microsoft investments involve pouring money into the video game market and in turn, the metaverse, which is the virtual reality vision of the internet's future.



In an earnings call, Nadella pointed to the tens of millions of people playing games like Forza, Halo and Minecraft, many of whom are investing in "avatar" proxy services for online worlds, stating that the metaverse is an natural extension.



According to executives, Microsoft is also integrating virtual gathering elements into non-game offerings like Teams online collaboration software.



"We are very well placed to be able to catch what I believe to be the next generation of the internet," Nadella said on the call.



The Redmond Washington-based tech firm last week announced a landmark agreement to purchase scandal-hit "Call of Duty" maker Activision for $69 billion.



This would be Microsoft's biggest ever buyout, beating LinkedIn's $26.2 billion in 2016.



Revenue at the career-focused social network was up 37 percent when comparison with the same period the year before as per the earnings report.



Microsoft stated that Microsoft will be the third-largest gaming company in terms of revenue after acquiring Activision an unpopular but highly successful company, after Tencent and Sony.



At a time when both the United States and Europe are trying to curb Big Tech, the proposed merger will need approval from the regulator.



According to the earnings report, revenues in the Microsoft division that produces Xbox consoles as well as video game content grew by 10 percent in the most recent quarter.



- 'PC renaissance' -



"Redmond is still seeing strength in the field, as many enterprises continue to move towards the cloud using Nadella & Co," Dan Ives, Wedbush analyst said in a letter to investors.



Ives saw the strong earnings from Microsoft as a "broader sign of the that we will see a lot of improvement across the cloud-based enterprise software landscape during this earnings season."



Microsoft is competing with Amazon and Google on the cloud computing market.



According to the earnings report, every unit dedicated to cloud services at Microsoft saw double-digit revenue growth and generated tens to billions of dollars.



Microsoft's Windows operating system division also thrived on Nadella's claim of the "renaissance of the personal computer market" that was stifling prior to the pandemic, which forced many to stay home.



"More than ever before, people are turning to PCs to exercise their freedom, and unleash their creativity," Nadella said.



"We are experiencing a revival of the PC with increases in time spent on PCs and PCs per household."



Microsoft stock was slightly higher in the wake of the earnings call.



According to Wedbush, some of the most optimistic investors were expecting better financial results.



Ives said that "In this jittery marketplace we will see every technology print first seen in glass half empty, but, ultimately this remains an essential brand to own."



Third Bridge vice president Scott Kessler was among analysts keen to learn more about the impact an end to the pandemic will have on Microsoft growth fueled by remote work, play, and school.



"We've seen many darlings of the early Covid period becoming fallen angels," Kessler said in a note.



Nadella believed that digital technology would remain a valuable resource as people "reimagine" their lives and society seeks solutions to problems like the lack of workers.



"We are experiencing an evolution of our society and economy," Nadella said.


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