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As the pandemic accelerated the transition to cloud computing, Microsoft maintained its strong financial results.
Microsoft said Tuesday that in the three months ending June, sales were up 21 percent year-on-year to $46.2 billion, with profits up 47 percent to $16.5 billion, producing its most profitable quarter. The results exceeded analyst expectations.
Investors have become accustomed to the company’s beating estimates that its stock fell nearly 2.5 percent in aftermarket trading.
“Our results show that we achieve growth when we operate well in large and growing markets and meet customers’ needs in different ways,” said Satya Nadella, the company’s CEO.
With the pandemic moving more people online and the economy recovering, companies have stepped up their spending in key areas Microsoft has invested in, including security and cloud services. Sales of Azure, the company’s flagship cloud computing product, increased by 51 percent.
According to Kyle Vikstrom, director of investor relations, approximately 250 million people use Teams, Microsoft’s workplace collaboration tool, each month. The company announced for the first time how many people used this tool. Introduced in 2016 To compete with Slack.
Revenue in the commercial cloud business, which includes Office 365, Azure and other offerings, increased 36 percent to $19.5 billion in the quarter. While the pandemic has hit some industries more than others, reservations for the future commercial cloud business are up 30 percent with commitments across industries and geographic markets.
Microsoft is moving its customers to subscription services for Office products like Word, Excel, and Teams. The products generate recurring revenue and opportunities for the company’s salespeople to meet with customers about upgrades and other services. The company recently introduced Windows 11, the first update to Microsoft’s flagship operating system in six years; it also follows a subscription model.
This strategy has worked during the pandemic, and more people rely on their computers for work and school. Revenue from Microsoft’s personal computer business rose 9 percent to $14.1 billion. Sales of new Windows installations dropped slightly as chips and supply chain shortages hindered the number of new computers entering the market. While Xbox console sales increased, revenue from gaming content decreased by 4 percent, reflecting how customers stayed at home and played more online games a year ago.
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