Microsoft Revenue Increases With Demand For Cloud Computing Products

A logo sits on display outside the Microsoft Corp. pavilion at the Mobile World Congress in Barcelona

A logo sits on display outside the Microsoft Corp. pavilion at the Mobile World Congress in Barcelona. Bloomberg Simon Dawson

Microsoft Corp.'s fiscal fourth-quarter revenue rose 13 per cent, signalling persistently strong demand for cloud-computing software and services that are helping businesses keep workers connected from afar.

"Our partner ecosystem is essential to deliver transformative solutions for our customers", said Gavriella Schuster, Corporate Vice President, One Commercial Partner at Microsoft. Analysts on average had expected cloud revenue of $13.09 billion.

Some of the key announcements made during the event include, enhancements to Azure Lighthouse by bringing Multi-Factor Authentication and Privileged Identity Management support; Azure Stack HCI, the latest in Microsoft's hybrid portfolio and now in public preview, that brings hybrid capabilities to customers' datacenters while enabling them to leverage existing skills and investment; and new bundled services for Lenovo Managed Services that are created to help small- and medium-sized businesses support Microsoft software productivity, security, and collaboration.

However, Microsoft's earnings were slightly hurt by a change in retail strategy - it took a one-time pre-tax charge of $450 million, or $0.05 per share, on the closure of its physical stores.

Lockdown measures translated into surges in cloud usage and demand.

"We expect the small and medium business weakness we saw in Q4 to continue, which will impact transactional sales, primarily in Office and Windows OEM", Hood said. Both figures exceeded analysts' estimates of $1.36 per share $35.5 billion, respectively.

The company doesn't break out its Azure revenue, but reported 47% growth for the cloud platform.

The decline in Microsoft's profit margin in the latest period reflected investments in increasing its cloud capacity, giving out free trials of software and offering flexible financing options for customers' struggling with slowdowns in their business, said finance chief Amy Hood on an earnings call.

Sales rose to US$38 billion in the quarter that ended June 30, the software maker said Wednesday in a statement.

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Office Commercial products and cloud services revenue increased 5 per cent, driven by Office 365 Commercial revenue growth of 19 per cent.

The strong general performance, with revenue much more than $1bn ahead of Wall Street's forecasts, arrived regardless of stresses in other components of Microsoft's business.

The revenue in Productivity and Business Processes was $11.8 billion and increased 6 per cent.

The earnings numbers come as Microsoft's LinkedIn social network announced today that it will lay off 960 of its employees.

More Personal Computing: $12.9 billion vs. $11.5 billion expected.

Microsoft returned $8.9 billion to shareholders in the form of share repurchases and dividends in the fourth quarter of fiscal year 2020.

Xbox content and services revenue also increased 65 per cent in the June quarter while Surface laptop revenue increased 28 per cent.

In addition to these highlights, Microsoft released an 18-page list of product additions, improvements and new releases.

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