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Microsoft's strength in cloud computing boosts earnings, shares rise

Microsoft said revenue in its "Intelligent Cloud" segment rose 23% to $14.6 billion, with 50% growth in Azure

Photo: REUTERS/Lucy Nicholson
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  • The company’s shares rose 6% in extended trading after gaining about 41% in 2020;
  • The shift to work from home due to the COVID-19 pandemic has accelerated enterprises’ switch to cloud-based computing, benefiting Microsoft.

Microsoft on Tuesday reported its Azure cloud computing services grew 50%, as the global pandemic benefited the software maker’s investment on working and learning from home.

The company’s shares rose 6% in extended trading after gaining about 41% in 2020 as COVID-19 shifted computing to areas where the software maker has bet big.

READ ALSO: Cruise, GM partner with Microsoft to commercialize self-driving vehicles

The shift to work from home due to the COVID-19 pandemic has accelerated enterprises’ switch to cloud-based computing, benefiting Microsoft and rivals such as Amazon‘s cloud unit and Alphabet‘s Google Cloud.

Microsoft said revenue in its “Intelligent Cloud” segment rose 23% to $14.6 billion, with 50% growth in Azure. Analysts had expected a 41.4% growth in Azure, according to consensus data from Visible Alpha. The previous quarter Azure grew 48%.

READ ALSO: Microsoft cloud business gathers steam as pandemic boosts growth

The company bundles several sets of software and services such as Office and Azure into a “commercial cloud” metric that investors watch closely to gauge the company’s progress in selling to large businesses.

Commercial cloud gross margins – a measure of the profitability of its sales to large businesses – were 71% in the quarter, compared with 67% a year earlier.

Revenue from its personal computing division, which includes Windows software and Xbox gaming consoles, rose 14% to $15.1 billion, driven by strong Xbox content and services growth, beating analysts’ estimates of $13.5 billion, according to IBES data from Refinitiv.

Microsoft in November released two new Xbox consoles, its most visible non-work and non-school brand, but the hardware proved difficult to find as a global semiconductor shortage contributed to tight stocks as many retailers.

The software giant’s overall revenue rose to $43.08 billion in the second quarter ended Dec. 31, from $36.91 billion a year earlier, beating analysts’ estimates of $40.18 billion, according to IBES data from Refinitiv.

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