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January 27, 2021

Microsoft Q2 earnings boosted by cloud and gaming products

By Ellen Daniel

Microsoft has reported strong second-quarter earnings driven by success in its cloud services.

For the quarter ended December 31 2020, the company reported revenue of $43.bn, an increase of 17% on the corresponding period of last fiscal year, beating revenue expectations.

Operating income was $17.9bn, up 29%. Net income was $15.5bn, an increase of 33%. Diluted earnings per share were $2.03 and increased by 34%.

“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” said Satya Nadella, chief executive officer of Microsoft. “Building their own digital capability is the new currency driving every organization’s resilience and growth. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”

The company attributed this in part to growth in its cloud services, with its commercial cloud revenue reaching $16.7bn, up 34% year over year. Office Commercial products and cloud services revenue increased by 11% and Office Consumer products and cloud services revenue increased 7%.

Amy Hood, executive vice president and chief financial officer of Microsoft said that the company continued to “benefit from our investments in strategic, high-growth areas”.

Revenue in Productivity and Business Processes was $13.4 billion and increased by 13%.

The company’s personal PCs and gaming segments also contributed to its strong earnings, with the ongoing Covid-19 pandemic driving demand. Xbox content and services revenue increasing by 40%. Revenue in More Personal Computing was $15.1bn and increased by 14%. Azure, Microsoft’s cloud computing service, saw revenue growth of 50%.

“This was a near-perfect quarter for Microsoft,” said Logan Purk, senior analyst at Edward Jones. “While the company exceeded expectations across all of its business lines, the re-acceleration within its cloud business, namely Azure, is particularly impressive.  This should help sooth investor concerns that growth could potentially be slowing for this business.  Also of note was the tremendous growth within gaming, lead by the launch of the new Xbox console.  This segment should continue to shine because of hardware supply constraints and increased player engagement.”

Microsoft shares rose by 4% in after-hours trading following the announcement.

Commenting on the results, Tom Homer, GTT senior vice president Europe, said:

“As we edge closer to the one-year mark since various pandemic-induced global restrictions came into play, cloud-based tools still shine within the working world – a trend that is clearly seen in Microsoft’s latest earnings results. Even with promising vaccines rolling out, industry analysts expect that a higher percentage of remote working is here to stay for the foreseeable future”.

Read More: IBM revenue slumps 6% in “disappointing” Q4 results.