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Microsoft Sees Growth Amid Pandemic Computing Demands

Microsoft on Wednesday reported rising revenues in the past quarter amid strong demand for cloud computing services from pandemic-hit businesses and consumers and big gains in its Xbox gaming operations.

Profits in the quarter ending June 30 fell 15 percent to $11.2 billion (roughly Rs. 83,622 crores), the result of increased tax charges compared with a year ago.

Revenue meanwhile rose 13 percent to $38 billion (roughly Rs. 2.83 lakh crores), led by strong gains in its cloud computing and its Xbox gaming services.

Chief executive Satya Nadella said Microsoft was equipped to deal with the coronavirus pandemic with its “integrated, modern technology stack.”

“We are seeing businesses accelerate the digitisation of every part of their operations from manufacturing to sales to customer service,” Nadella told a conference call.

Microsoft shares dipped some 2.5 percent in after-hours trade on the results, which were largely ahead of forecasts.

Its shares have been trading at near record levels amid a surge of some 50 percent since March, giving it a market value of more than $1.6 trillion (roughly Rs. 1,19,42,000 crores).

Revenue from Microsoft’s “intelligent cloud” division which includes its Azure enterprise business rose 17 percent to $13.4 billion (roughly Rs. 1 lakh crores) in the fiscal fourth quarter.

In the personal computing segment including the Windows operating system, revenues were up 14 percent to $12.9 billion (roughly Rs. 96,298 crores).

Within that segment, Xbox gaming service revenues rose 65 percent and sales for its Surface devices were up 28 percent.

Xbox hardware revenue increased 49 percent, as Microsoft boosted the number of consoles sold even with a newer version expected later this year.

“This was a breakthrough quarter for gaming,” Nadella said.

“We saw record engagement and monetisation… as people everywhere turned to gaming to connect, socialise, and play.”

Microsoft saw a more modest six percent revenue rise in its productivity and business operations which include the Office software suite and LinkedIn.

Daniel Ives at Wedbush Securities called the Microsoft results “robust,” led by its cloud computing that benefits from the work-from-home trend.

“This current remote work from home environment is further catalysing more enterprises to make the strategic cloud shift with Microsoft the main beneficiary as evidenced by the solid results this evening,” Ives said.

Earlier Wednesday, the workplace messaging platform Slack filed an EU antitrust complaint against Microsoft, alleging that the integration of the “Teams” service into the Office software suit represented unfair competition.

Microsoft said Teams was growing because it offers video, which Slack does not.

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