Microsoft Corp. on Tuesday forecast revenue for the current quarter ahead of Wall Street targets, driven by its Intelligent Cloud unit.
The outlook eased concerns about growth from the holiday quarter’s results, and shares erased earlier-hours losses, trading 3% above closing price.
Investors were seeking reassurance that the enterprise cloud business was still growing strongly and Microsoft would also examine financial reports coming from rivals Amazon.com Inc. and Alphabet Inc.’s Google.
According to Refinitiv data, executives forecast intelligent cloud revenue of $18.75 billion-$19 billion, compared to $18.15 billion by the Wall Street consensus. This will be driven by “strong development” in its Azure platform.
Microsoft’s greater computing unit revenue would be $14.15 billion-14.45 billion, ahead of Wall Street’s target of $13.88 billion, and productivity and business processes would be $15.6 billion-$15.85 billion, compared to the consensus target of $15.72 billion.
Full-year operating margin will be slightly up compared to last year.
Total Microsoft revenue for the second quarter beat expectations but the improved performance didn’t flow through to the Azure cloud service. Azure revenue growth of 46% was in line with analysts’ expectations compiled by Visible Alpha, but demonstrated a steady decline from fiscal 2020 when growth was in the 60% range.
Microsoft has become one of the world’s most valuable companies on corporate software and services, especially its cloud services and the Web traffic of its Outlook email and calendar software, known as Office 365.
The switch to work and learn from home during the pandemic has drawn more users to Microsoft’s Office communication software and services, such as Teams and Office 365. And increased demand for cloud services from Microsoft and rivals Amazon.com and Alphabet as the pandemic intensified. Online Shift.
Revenue from Microsoft’s largest segment, which provides cloud services and includes Azure, its flagship cloud offering, grew 26%, while its Office 365 services business grew 19% in the quarter.
Net income rose to $18.77 billion, or $2.48 per share, from $15.46 billion, or $2.03 per share, a year ago.
The company said revenue rose to $51.73 billion in the three months ended December 31, up from $43.08 billion a year ago.
Analysts were expecting an average of $50.88 billion in revenue, according to Refinitiv data.
Investors are also focusing on Microsoft’s proposed $69 billion acquisition of Activision Blizzard Inc. https://www.reuters.com/technology/microsoft-buy-activision-blizzard-deal-687-billion-2022-01- Announced on 18, Jan. 18, a huge expansion for its gaming division. It also broadens the company’s efforts at merging the so-called metaverse, or online and offline worlds, which will have corporate and consumer applications.
Microsoft said Activision will help boost Xbox content and services revenue when the Blizzard deal closes. Growth fell sharply in the fourth quarter of fiscal 2020 when Xbox content and services grew 65%. Last quarter, revenue grew 10%, compared to 40% in the same quarter a year ago.
“They have great content and franchises. And that’s where that revenue will eventually come when the deal is definitely in place,” said Brett Iverson, general manager, investor relations at Microsoft, referring to the Activision deal.
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