Microsoft benefited from strong demand for its Teams collaboration software, which now has 75 million users
Microsoft cloud business- Microsoft Corp on Wednesday beat Wall Street sales and profit expectations, powered by sharp demand for its Teams chat and online meeting app and Xbox gaming services as the world shifted to working and playing from home because of the novel coronavirus pandemic.
The company’s shares, up over 12 per cent this year, rose about 5 per cent in extended trading.
The results reflect Chief Executive Satya Nadella’s focus over his six-year tenure on cloud computing, in which companies tap Microsoft’s data centres for computing power – a growing business dominated by Amazon.com Inc’s Amazon Web Services.
For the fiscal fourth quarter, Microsoft gave business-unit forecasts that were below analyst estimates, predicting tough times for LinkedIn and some small-business software sales.
“Ultimately, Microsoft is not immune from what is going on broadly in the world in terms of GDP growth,” Nadella said on a conference call with investors.
But results benefited from sales of its Windows operating system and Surface hardware devices as people upgraded personal computers to work or study from home. Microsoft also cited all-time-high engagement on its Xbox Live gaming service, with 19 million active users.
“The biggest missed opportunity was in Surface, where demand was huge, the channel inventory was depleted, and supply chain constraints reduced finished goods output,” said Moor Insights & Strategy analyst Patrick Moorhead. “I believe the company could have easily sold 15-20% more if available.”
Microsoft also benefited from strong demand for its Teams collaboration software, which Nadella said on a conference call now has 75 million users and competes with Zoom Video Communications Inc and Slack Technologies Inc. The demand influx strained Microsoft’s data centres, forcing it to limit new cloud customers’ usage and prioritise healthcare and government users.