Cloud growth pushes Microsoft to $18.8 billion profit

Microsoft's cloud services, Windows and Office helped increase the company's revenues in last quarter, but gaming hardware growth was low

Significant growth in cloud pushed Microsoft to a better-than-expected profit of $18.8 billon in the quarter ended 31st December (Q2'22): up 21 per cent year-on-year (YoY).

The Seattle-based software giant's revenue for the quarter was $51.7 billion, up 20 per cent YoY and ahead of analysts' expectations.

Growth in Microsoft's cloud services, Office and Windows all helped boost the firm's sales.

Overall cloud revenue rose 32 per cent YoY to $22.1 billion. Its Azure cloud infrastructure service grew 46 per cent, although that was down slightly from the previous quarter's 48 per cent growth.

Microsoft's Intelligent Cloud segment, which includes the Azure public cloud, GitHub and Windows Server, generated $18.3 billion in revenue, up 25.5 per cent YoY.

Microsoft's business has benefitted in the pandemic as governments, companies, and other institutions worldwide have increased their use of cloud-based technologies.

While an increasing number of organisations are now returning to the office, the Omicron variant has delayed a full return to normalcy.

"Digital technology is the most malleable resource at the world's disposal to overcome constraints and reimagine everyday work and life," said Microsoft CEO Satya Nadella.

"As tech as a percentage of global GDP continues to increase, we are innovating and investing across diverse and growing markets, with a common underlying technology stack and an operating model that reinforces a common strategy, culture and sense of purpose."

Microsoft's revenue from the More Personal Computing segment, which includes Windows, devices, gaming and advertising, was $17.5 billion.

Windows licensing revenue from PC makers rose 25 per cent, while Surface computer sales increased 8 per cent, driven by the Surface Laptop.

The Productivity and Business Processes segment, which includes Office, Dynamics and LinkedIn, generated $15.9 billion in revenue, up 19 per cent from the same period a year ago.

Microsoft's Xbox hardware revenue rose 4 per cent, thanks to the continued demand for latest Xbox Series X and Series S consoles. The company's overall gaming revenue was up 8 per cent.

Microsoft's gaming business has been in the spotlight recently, as the company says it is acquiring Call of Duty publisher Activision Blizzard for $68.7 billion.

The acquisition is expected to close in fiscal year 2023, and it will see Microsoft publish franchises like Candy Crush, Warcraft, Call of Duty, Diablo and Overwatch.

Amy Hood, Microsoft's finance chief, said demand remains robust across much of the business. The firm expects sales of $48.5 billion to $49.3 billion in the fiscal third quarter (ending March), compared to analyst expectations of $48.1 billion.