Microsoft’s Sales Top Estimates on Booming Cloud Demand

Microsoft Corp.’s first-quarter revenue climbed a better-than-projected 12%, strengthened by corporate demand for cloud-computing services to support customers’ remote workers and move more of their business online.

Sales in the period that ended Sept. 30 rose to $37.2 billion, the software maker said Tuesday in astatement. That exceeded the $35.8 billion average estimate of analysts polled by Bloomberg, and marked Microsoft’s 13th straight quarter of double-digit revenue growth. Net income was $13.9 billion, or $1.82 a share. Analysts had predicted $1.54 a share.

Since the pandemic started, business customers have accelerated a shift to Microsoft’s Azure internet-based computing services and online subscriptions to Office software that comes with teleconferencing programs and work-from-home tools. That’s helped shore up growth at the company, which is No. 2 in cloud infrastructure behind Amazon Web Services, even as the global economy languishes.

Sales of video games have also risen with people looking for ways to pass the time while stuck at home. That’s made up for weaker one-time software purchases by smaller businesses and consumers.

“The pandemic and work-from-home has caused some information technology guys to move faster on building out a public-cloud strategy,” said Daniel Morgan, senior portfolio manager at Synovus Trust Co. “They 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.”

Microsoft shares were little changed in extended trading following the report, after rising 1.5% in New York. The stock rose 3.4% in the September quarter, lagging behind the 8.5% increase in the Standard & Poor’s 500 Index.

Azure revenue rose 48%, compared with a 47% gain in theprior quarter. Analysts polled by Bloomberg on averageprojected sales of Azure cloud services to increase by 45%. Three years ago, Azure revenue had been almost doubling each quarter, and that growth rate has been closely watched among investors.

Commercial cloud sales rose 31% to $15.2 billion in the period, Microsoft said inslides posted on its website. 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%.

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. 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.

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