Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Microsoft sees cloud business growth, but supply woes continue for Xbox

Stock MarketsOct 26, 2021 07:30PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A Microsoft logo is seen on an office building in New York City, U.S. on July 28, 2015. REUTERS/Mike Segar

By Subrat Patnaik and Stephen Nellis

(Reuters) -Microsoft Corp on Tuesday forecast a strong end to the calendar year thanks to its booming cloud business but said supply chain woes will continue to dog key units such as those producing its Surface laptops and Xbox gaming consoles.

The company beat Wall Street expectations for its fist quarter ended Sept. 30, with pandemic-induced demand for the software giant's cloud-based services driving sales.

Contracts for cloud services provided by Microsoft (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN)'s AWS and Alphabet (NASDAQ:GOOGL) Inc-owned Google Cloud have surged since last year when the COVID-19 pandemic shut offices and schools, pushing more activity online.

First-quarter revenue growth for Azure, the company's flagship cloud-computing business, came in at 48% in constant currency to beat analysts' estimates of 47.5%, according to consensus data from Visible Alpha. Amy Hood, executive vice president and chief financial officer of Microsoft, said that the company also expected "broad based growth" for the unit in the fiscal second quarter.

Azure's growth rate is the best direct measure of competition with rivals such as AWS and Google Cloud as Microsoft does not break out revenue from the cloud-computing unit.

Microsoft appeared to hold off Google Cloud's rising challenge. Google Cloud said on Tuesday https://www.reuters.com/technology/google-parent-alphabet-beats-revenue-expectations-2021-10-26 its revenue surged by 45% to $4.99 billion, but failed to live up to estimates of $5.2 billion.

Revenue at the firm's other business units that house Windows software, the Teams messaging service and LinkedIn professional social networking platform also beat analyst expectations.

The supply chain issues affecting much of the global tech industry had mixed consequences for Microsoft.

Hood said Microsoft has continued to increase its cloud computing margins despite higher data center construction costs because it keeps adding more profitable services to those data centers. Hood also said that the company was able to ship more Xbox S and X gaming consoles than it expected in the first quarter - sales of gaming consoles and accessories were up 166% as the company continued to see strong demand for new models after the pandemic forced millions to seek entertainment at home.

But Microsoft and its rivals have been unable to keep up with demand because of the global chip crunch. Hood told Reuters the company expects Xbox demand to continue to exceed supply in the company's second quarter, which includes Christmas.

She also said that sales of the company's Surface computers, which declined 17% in the fiscal first quarter, were likely to keep sinking in the second quarter, with supply chain shortages hitting premium items in the lineup.

Microsoft's revenue from selling Windows to PC makers grew 10% year over year, beating the overall PC market, which only grew 3.9% over the same period because of supply constraints, according to data from IDC.

Hood said that the company was able to outperform in the PC market because of its strength in selling licenses for Windows destined for corporate customers, where it gets more revenue per license and has better market share.

Overall, revenue rose 22% to $45.32 billion in the first quarter ended Sept. 30, beating expectations of about $43.97 billion.

Net income rose to $20.51 billion, or $2.71 per share. The company said its results included a $3.3 billion net income tax benefit.

On an adjusted basis it earned $2.27 per share, trumping 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, above estimates of $17.84 billion, according to Refinitiv data.

First-quarter revenue from "Intelligent Cloud" surged 31% to $17 billion. Analysts had expected a figure of $16.58 billion, according to Refinitiv data.

Microsoft's forecast for its software app and Windows centric segments with midpoints of $15.83 billion and $16.55 billion, respectively, were also above Refinitiv estimates of $15.40 billion and $15.51 billion.

Shares of the company, which have risen nearly 40% this year, were marginally up in extended trading.

Microsoft sees cloud business growth, but supply woes continue for Xbox
 

Related Articles

More Chinese developers seek domestic bond issuance
More Chinese developers seek domestic bond issuance By Reuters - Dec 01, 2021

SHANGHAI (Reuters) - Three Chinese developers, including the main operation platforms of Country Garden Holdings Co and Longfor Group Holdings Ltd, plan to sell bonds in China to...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email