Microsoft earnings rise as pandemic boosts cloud computing, Xbox sales

Microsoft Corp on Tuesday reported its Azure cloud computing services grew 50%, the second quarter of acceleration in a business that had begun to slow as the global pandemic benefited the software maker's investment on working and learning from home.

The company's shares rose 4% in extended trading after gaining about 41% in 2020 as COVID-19 shifted computing to areas where the software maker has bet big. It also saw a surprise recovery in sales on the LinkedIn professional social network and navigated a chip shortage that had threaten to hold back its Xbox business.

The shift to work from home due to the COVID-19 pandemic has accelerated enterprises' switch to cloud-based computing, benefiting Microsoft and rivals such as Amazon.com Inc's cloud unit and Alphabet Inc's Google Cloud.

Microsoft said revenue in its "Intelligent Cloud" segment rose 23% to $14.6 billion, with 50% growth in Azure. Analysts had expected a 41.4% growth in Azure, according to consensus data from Visible Alpha. The previous quarter Azure grew 48%.

"This was really driven by continued customer demand, with stronger-than-expected consumption as customers have increased their focus on digital transformation," Microsoft Chief Financial Officer Amy Hood told Reuters in an interview.

Atlantic Equities analyst James Cordwell said that last year, "economic weakness and delays in implementation had masked the extent to which Azure was benefiting from the accelerated shift to the cloud caused by the pandemic. But with these results that benefit is now plain to see."

LinkedIn revenue growth, which dipped as the pandemic shut down businesses, reached 23%, near its pre-pandemic rate of 24% a year earlier. Hood said advertisements on LinkedIn drove the increase.

"We continue to see advertising market recovery," she said.

Microsoft bundles several sets of software and services such as Office and Azure into a "commercial cloud" metric that investors watch closely to gauge the company's progress in selling to large businesses.

Commercial cloud gross margins - a measure of the profitability of its sales to large businesses - were 71% in the quarter, compared with 67% a year earlier.

Revenue from its personal computing division, which includes Windows software and Xbox gaming consoles, rose 14% to $15.1 billion, driven by strong Xbox content and services growth, beating analysts' estimates of $13.5 billion, according to IBES data from Refinitiv.

Microsoft in November released two new Xbox consoles, its most visible non-work and non-school brand, but the hardware proved difficult to find as a global semiconductor shortage contributed to tight stocks as many retailers. Xbox hardware sales were up 86% despite the shortages, and Hood said growth is likely to continue, with older models also contributing to sales.

"Demand still outpaces supply, and we do expect that to continue," Hood said. "The team did a nice job of getting consoles, both of this newest generation as well as continuing to sell the older generation, which provides a great value for gamers."

The software giant's overall revenue rose to $43.08 billion in the second quarter ended Dec. 31, from $36.91 billion a year earlier, beating analysts' estimates of $40.18 billion, according to IBES data from Refinitiv.

-reuters-

Microsoft gives glimpse of new Xbox console

LOS ANGELES -- Microsoft on Sunday gave the world a first glimpse of a powerful next-generation Xbox gaming console that it aims to release late next year.

Xbox head Phil Spencer pulled back the curtain on "Project Scarlett," the creation of a successor to the Xbox One that will give game makers "the power they need to bring their creative visions to life."

No pricing plans for the new console were revealed at a gala event ahead of the opening of the Electronic Entertainment Expo (E3) video game industry gathering.

The new Xbox was promised to be released in time for the Christmas holiday shopping season in 2020.

"For us, the console is vital and central to our experience," Spencer said during a media event that showcased 60 new games for Xbox.

Xbox battles in the console gaming arena with Sony, which is working on a new generation PlayStation.

The commitment to consoles by longtime contenders in the market comes with the rise of video games hosted as subscription services streamed Netflix-style from data centers in the internet cloud.

Xbox said at the E3 event that it is adding the ability for players to stream games in their libraries for play on mobile devices with Game Pass subscriptions.

"We will bring Xbox to the cloud with Project and console streaming," Spencer said. "Where you play is entirely your choice, you decide."

The new service will be previewed later this year, according to Microsoft.

Heads in the cloud

The E3 opens with gamers gradually moving away from traditional console play and Google seeking to capitalize on that trend with a new Stadia service allowing people to play cloud-powered games on any connected device.

Adapting to the new trends will be critical for contenders in the massive video game industry, which last year generated more than $135 billion globally, and $43.4 billion in the United States. 

According to the Entertainment Software Association, which runs E3, more than 164 million adults in the United States play video games, and three out of four US households have at least one video game player.

"This right now is the single most creative and energizing time in gaming history," Spencer said. "In under two decades, the number of players in the world has more than tripled; now more than two billion of us play games."

Games on smartphones have accounted for a lot of that growth.

Microsoft also announced the launch of a beta version of an Xbox Game Pass that lets people using computers powered by the latest Windows software access a library of more than 100 video games.

Included in the line-up is the entire "Master Chief" collection of the popular "Halo" science fiction shooter franchise on Xbox. The Game Pass for PC will be priced at $9.99 monthly.

A new "Ultimate" game pass lets players combine access to console and personal computer titles for $14.99 monthly.

"Xbox Game Pass Ultimate is off the charts as a consumer value proposition," said NPD analyst Mat Piscatella. "And, the sheer number and scale of games coming to Xbox Game Pass on Day One is very impressive."

Star shine

A highlight of the show was an appearance by actor Keanu Reeves, who was greeted with a standing ovation and shouts of adoration by a packed audience in the Microsoft Theater downtown.

A character in a coming "Cyberpunk 2077" video game is modeled on the looks, voice and body-motion of Reeves, who starred in "Matrix" and "John Wick" films.

The action game is set in a troubled future where humans are enhanced with technology.

"The feeling of being there, of walking the street of the future, is really going to be breathtaking," Reeves said of the game, which is set for release in April for PlayStation 4 and Xbox One consoles as well as personal computers.

"Overall, I thought it a great showing, particularly as we head into next generation consoles in 2020," analyst Piscatella said of the Xbox E3 event.

"There was a lot to like here, especially from a services perspective, that puts Microsoft in great position going forward."

source: news.abs-cbn.com