Microsoft earned more than expected in its second quarter thanks to its strong cloud business. Nevertheless, in an initial reaction to the figures, the share fell by around 5 percent. Some investors had expected even stronger growth in the cloud business, Stifel analyst Brad Reback explained the negative price reaction.
The company, based in Redmond, a city in the Greater Seattle area, reported net income of $18.8 billion for the quarter ended December on Tuesday night after the US market close. Compared to the previous year, this corresponded to an increase of 21 percent. Sales broke the $50 billion mark for the first time, rising 20 percent to $51.7 billion. Analysts had estimated earnings at $17.5 billion and sales at $50.7 billion. Earnings per share for the quarter were $2.48 (prior year: $2.03). According to a fact set consensus, the analysts had expected only $2.32 per share.
Revenues related to the cloud service Azure increased by 46 percent. While that was down from the previous two quarters of 50 and 51 percent, analysts had seen Azure revenue grow just 45.3 percent. Azure has become a bigger revenue stream for Microsoft over the past year than the Windows operating system. The trend towards working from home and homeschooling caused by the Corona crisis gave Microsoft’s cloud computing business an additional boost. In the field of video games, Microsoft reported sales of 17.47 (previous year: 15.12) billion dollars. According to Factset, analysts had estimated sales in this segment at $16.62 billion.
Microsoft had recently declared that it wanted to expand its already not small business in this area by taking over a heavyweight from the video game industry. The software giant plans to acquire Activision Blizzard for $68.7 billion in cash. If successful, the transaction would be the largest in the company’s history. With Activision, Microsoft would expand its Xbox gaming console business, as well as games like Minecraft and Doom, to include some of the most popular offerings on the market, including Call of Duty, World of Warcraft and Candy Crush.
The Microsoft share shows after-hours trading on the US stock exchange NASDAQ significantly lower and loses 4.24 percent to 276.25 US dollars.
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