Tuesday 27 July 2021 9:22 pm

Microsoft beats Wall Street expectations on soaring demand for cloud computing

Microsoft beat earnings expectations and posted a rise in revenue for the fourth quarter, as the ongoing shift to remote working bolstered demand for its cloud computing services.

Microsoft reported a 21 per cent rise in revenue to $46.2bn in the three months ending 30 June – beating analysts’ consensus estimates of $44.24bn, according to IBES data from Refinitiv.

Operating income jumped by 42 per cent over the period to $19.1bn and net income increased by 47 per cent to $16.5bn.

The computing giant reported earnings per share increased by almost half to $2.17 – ahead of analysts’ expectations of $1.92.

The shift to remote working has seen demand for Microsoft’s cloud services soar and today it said revenue in its “intelligent cloud” division jumped 30 per cent to $17.4bn over the quarter, with 51 per cent growth in its Azure service.

“We are innovating across the technology stack to help organizations drive new levels of tech intensity across their business,” said Satya Nadella, chairman and chief executive officer of Microsoft.

“Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing markets, we generate growth, as we’ve seen in our commercial cloud – and in new franchises we’ve built, including gaming, security, and LinkedIn, all of which surpassed $10 billion in annual revenue over the past three years.”

Microsoft shares were down 2 per cent on the news.

Microsoft’s products “look set to generate reliable cash flows for years to come,” said Steve Clayton, a fund manager at Hargreaves Lansdown.

“Their Azure cloud computing division is the number 2 global player and is growing like Topsy. Microsoft may be huge, but it is still growing at pace, as these figures demonstrate so clearly.

“Few things are as valuable as cash generative businesses with dominant market positions in growing markets. Microsoft fits the bill perfectly, especially with a rising proportion of its revenues coming from recurring sources, like Office 365,” Clayton said.

The stock dip in after-hours trading was “not surprising” given some investors may have been looking for even higher growth rates from Azure and the wider Nasdaq market had already taken a 1.2 per cent pasting today, Clayton added.