Microsoft profits up on cloud computing

SAN FRANCISCO

Microsoft beat market expectations on Jan. 25 with strong quarterly performance in cloud computing and software, still benefitting from the pandemic’s online shifting of work, play, shopping and learning.

The U.S. tech colossus, which announced last week a blockbuster deal to buy gaming giant Activision Blizzard, said profit jumped to $18.8 billion in the final three months of last year.

“Digital technology is the most malleable resource at the world’s disposal to overcome constraints and reimagine everyday work and life,” CEO Satya Nadella said, in announcing revenue of $51.7 billion.

Microsoft investments include pouring money into the booming video game market and by extension the metaverse, the virtual reality vision for the internet’s future.

On an earnings call, Nadella pointed to the tens of millions of people playing games such as Forza, Halo and Minecraft, many investing in “avatar” proxies for online worlds, saying that the metaverse is a natural extension.

Microsoft is also meshing virtual gathering components with non-game offerings, such as Teams online collaboration software, according to executives.

“We feel very well positioned to be able to catch what I think is essentially the next wave of the internet,” Nadella said on the call.

The Redmond, Washington-based tech company last week announced a landmark deal to buy scandal-hit “Call of Duty” maker Activision for $69 billion.

This would be the largest buyout ever for Microsoft, well ahead of LinkedIn in 2016 for $26.2 billion.

Revenue at the career-focused social network was up 37 percent when compared with the same quarter a year earlier, according to the earnings report.

Acquiring the troubled but highly successful Activision will make Microsoft the third-largest gaming company by revenue, behind Tencent and Sony, Microsoft said.

The proposed merger faces regulatory approval at a time when Europe and the United States are seeking to rein in Big Tech.

Revenue in the Microsoft division which makes Xbox consoles and video game content grew 10 percent in the recently ended quarter, according to the earnings report.

Microsoft competes with Amazon and Google in the cloud computing market.

Units devoted to cloud services at Microsoft each logged double-digit revenue growth, bringing in tens of billions of dollars, according to the earnings report.

Microsoft’s division devoted to the Windows operating system also flourished on what Nadella referred to as a “renaissance” of the personal computer (PC) market that had been withering before the pandemic forced many people around the world to stay home.

“We are experiencing a PC renaissance with increases in time spent on PCs and PCs per household.”

Nadella expected digital technology to remain a valuable resource as people and businesses “reimagine” life and society look for solutions to challenges such as labor shortages.

“We are living through a generational shift in our economy and society,” Nadella said.

Beating analysts’ forecasts was not enough to stop Microsoft shares from first dropping, then rising about 2 percent in after-hours trading on a jittery day for investors. As markets have been swinging between steep losses and gains, expensive stocks in high-flying tech companies have led to losses as investors worry about rising interest rates.