Microsoft profit jumped 21%, dampening gaming momentum

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Washington Hispanic:

Demand for Microsoft's cloud computing services and work software helped boost its quarterly profit by 21% as the pandemic continued to keep many office workers, at least in part, at home.

The Redmond, Washington company reported fiscal second-quarter profit of $18.8 billion on Tuesday. 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-driven demand to one in which digital technology can help overcome economic constraints to "drive productivity while maintaining costs." low costs”.

"The other area we're seeing strength in is the game," Nadella said. "That's where we've doubled down on our consumer category."

Microsoft last week announced plans to buy high-profile game publisher Activision Blizzard for $68.7 billion, an all-cash deal that could be the most expensive technology acquisition in history if it withstands the scrutiny of 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 financial results released Tuesday show that business-focused offerings, such as Microsoft's Azure cloud computing platform and its suite of software products, continue to drive the company's growth.

Net income of $2.48 per share beat Wall Street expectations. Analysts surveyed by FactSet had expected Microsoft to earn $2.32 per share on revenue of $50.71 billion for the fiscal quarter. It is the first time the company has reached more than $50 billion in sales in a three-month period.

Beating analyst forecasts wasn't enough to keep Microsoft shares from first falling, then rising about 2% in after-hours trading on a nervous day for investors. As markets have been swinging back and forth between heavy gains and losses, pricey shares in high-flying technology companies have led losses as investors fret about rising interest rates.

Sales from Microsoft's cloud computing business segment, where its biggest competitor is Amazon, grew 26% to $18.3 billion in the quarter ending December.

Microsoft's productivity segment, which includes its Office suite of workplace products like email, grew 19% from the same period a year earlier, to $15.9 billion.

The productivity segment also includes revenue from Microsoft's LinkedIn job networking service, which was up 37% from the same time a year ago. Nadella said he's getting more engagement because of the "major shakeup across the job market."

Late last year, the company halted its localized version of LinkedIn in mainland China, citing tightening government restrictions affecting the only major Western social media platform that had still operated in the country.

Microsoft's personal computing business, which includes software licenses for Windows, Xbox and the Surface line of devices, grew 15% to $17.5 billion.

Holiday gadget sales typically make the October-December quarter a big one for Surface devices and Xbox games and consoles. The company said Xbox content and services revenue grew 10% compared to the same period a year earlier. Xbox hardware revenue grew more modestly by 4%, in part because the numbers at the end of 2020 had been boosted by the launch of Microsoft's Xbox Series X system, the company's first new console since 2013.

Microsoft hopes the acquisition of Activision, the owner of popular games like Candy Crush, Call of Duty, Overwatch and World of Warcraft, will boost demand for its Xbox Game Pass subscription service while advancing its broader virtual worlds ambitions. immersive.

"The next wave of the internet will be a more open world where people can build, a more metaverse world," Nadella told investors on Tuesday.

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