Microsoft Corp\u2019s first-quarter revenue climbed a better-than-projected 12%, strengthened by corporate demand for cloud-computing services to support customers\u2019 remote workers and move more of their business online.<\/p>\n
Sales in the period that ended Sept. 30 rose to $37.2 billion, the software maker said Tuesday in a statement. That exceeded the $35.8 billion average estimate of analysts polled by Bloomberg, and marked Microsoft\u2019s 13th straight quarter of double-digit revenue growth.<\/p>\n
Net income was $13.9 billion, or $1.82 a share. Analysts had predicted $1.54 a share.<\/p>\n
Since the pandemic started, business customers have accelerated a shift to Microsoft\u2019s Azure internet-based computing services and online subscriptions to Office software that comes with teleconferencing programs and work-from-home tools.<\/p>\n
That\u2019s helped shore up growth at the company, which is No. 2 in cloud infrastructure behind Amazon Web Services, even as the global economy languishes.<\/p>\n
Sales of video games have also risen with people looking for ways to pass the time while stuck at home. That\u2019s made up for weaker one-time software purchases by smaller businesses and consumers.<\/p>\n
\u201cThe pandemic and work-from-home has caused some information technology guys to move faster on building out a public-cloud strategy,\u201d said Daniel Morgan, senior portfolio manager at Synovus Trust Co.<\/p>\n
\u201cThey have also made some big headway in market share from where they were in cloud just three years ago. Microsoft has done a good job in not letting AWS just blow them out of the water.\u201d<\/p>\n
Microsoft shares slipped about 1% in extended trading following the report, after rising 1.5% on Tuesday in New York.<\/p>\n
Though its first-quarter report was decisively upbeat, the Redmond, Washington-based company gave a second-quarter forecast for revenue in some divisions that fell short of the highest analysts\u2019 projections.<\/p>\n
On a conference call following the results, Microsoft said sales in the Intelligent Cloud unit, the group that includes Azure and server software, will be $13.55 billion to $13.8 billion, compared with the $13.9 billion average estimate.<\/p>\n
The company\u2019s forecast for the More Personal Computing division was $13.2 billion to $13.6 billion, also below the $13.9 billion average prediction.<\/p>\n
\u201cWe see this as prudent and conservative as Redmond continues to under-promise and over-deliver for the Street on this Covid backdrop,\u201d said Dan Ives, an analyst at Wedbush Securities.<\/p>\n
In the first quarter, Azure revenue rose 48%, compared with a 47% gain in the prior quarter. Analysts polled by Bloomberg on average projected sales of Azure cloud services to increase by 45%.<\/p>\n
Three years ago, Azure revenue had been almost doubling each quarter, and that growth rate has been closely watched among investors.<\/p>\n
The software maker\u2019s results may ease fears stoked by some early technology-industry earnings reports that indicated demand was crimped by the pandemic.<\/p>\n
Earlier this week, SAP AG, one of Europe\u2019s largest tech companies, cut its revenue forecast for the full year and said it expects new Covid-19 lockdowns to curb sales through the first half of 2021.<\/p>\n
Last week, Intel Corp reported a surprise drop in sales of chips for data centers, potentially signaling a drop-off in demand for expansion of the server farms that underpin cloud-computing services.<\/p>\n
Microsoft, by contrast, has seen strong customer interest in its commercial products, where bookings, a measure of future sales, rose 23%, Chief Financial Officer Amy Hood said.<\/p>\n
\u201cWhat we\u2019ve seen and continue to see are customers across industries really looking to push their digital transformation priorities forward, even in a time of constraint,\u201d Hood said in an interview.<\/p>\n
Next month, Microsoft will launch a new version of its Xbox video-game console – right at a time of high unemployment, particularly among young people.<\/p>\n
The company is hoping to entice users by offering payment plans, a cheaper model that will go for $300, and programs that give buyers a new machine and a subscription with hundreds of games for a monthly fee.<\/p>\n
Hood forecast strong demand for the new console and said gaming hardware sales will rise 40% in the current period.<\/p>\n
Commercial cloud sales in the first quarter rose 31% to $15.2 billion in the recent period, Microsoft said in slides posted on its website.<\/p>\n
Gross margins in that business widened by 5%, mostly because of an accounting change. Revenue from Xbox content and services soared 30%, and sales at the LinkedIn professional-networking service gained 16%.<\/p>\n
The company\u2019s Teams videoconferencing and chat software, which competes with Slack Technologies Inc., now has 115 million daily active users, up from 75 million in April.<\/p>\n
While subscription revenue for offerings such as cloud services performed well, the company continues to see weakness in one-time purchases of corporate software as some customers try to pare costs.<\/p>\n
In the personal-computer market, consumer demand remains strong from buyers looking for extra devices and larger screens to support remote work and school, Hood said.<\/p>\n
That helped boosted Surface device revenue 37% in the September quarter. Still, commercial sales were weaker, especially compared to the year-earlier quarter, when companies were upgrading ahead of the expiration of support for Windows 7.<\/p>\n