New York (CNN Business)Microsoft exceeded Wall Street analysts’ expectations for quarterly revenue by nearly $3 billion and hit a three-month sales record, it reported Tuesday.
The results signal that the pandemic is continuing to buoy the tech giant’s business — from computers and gaming systems to the cloud computing systems helping companies navigate continued remote working.
Microsoft (MSFT) posted $43.1 billion in revenue for its fiscal second quarter — a 17% increase from the same period in the prior year and well above the $40.2 billion analysts had predicted. Income hit $15.5 billion, or $2.03 per share, compared with the $1.64 earnings per share Wall Street predicted.
The company’s stock shot up as much as 6% in after-hours trading immediately following the report. About two hours after the report, shares were up just over 3%.
“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” Microsoft CEO Satya Nadella said in a statement. “Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”
Microsoft’s cloud computing continues to drive sales, as the pandemic has sped up many companies’ transitions away from operating their own on-premises servers. Revenue growth from Microsoft’s Azure cloud platform, which competes with Amazon Web Services and Google Cloud, accelerated from the previous quarter to 50%.
Commercial cloud revenue — which includes Office 365 Commercial, an essential tool for many businesses whose employees are still working from home — posted year-over-year growth of 34%, totaling $16.7 billion.
“This cloud shift and WFH dynamic looks here to stay and the company stands to be a major beneficiary of this trend,” Wedbush analyst Dan Ives said in a note to investors Tuesday.
Even as Covid-19 vaccines roll out and infection numbers begin to fall, analysts expect the move to the cloud will continue. The number of workloads run in the cloud is poised to reach 55% by 2022, up from 35% currently, according to Ives. He added that he believes “health cloud budgets (are) already in place for 2021.”
Microsoft also expects the strong growth in its cloud business to continue — it projects that revenue from its intelligent cloud segment, which includes Azure, will grow as much as 21.5% during the current quarter, which ends March 31, CFO Amy Hood said during a call with analysts Tuesday.
Microsoft’s new Xbox Series X and Series S consoles generated massive demand during the December quarter — so much so that retailers had a hard time keeping them stocked and Microsoft asked chipmaker AMD (AMD) for help in making more available.
Revenue from Microsoft’s “more personal computing” segment, which Xbox sales fall under, increased 14% year-over-year to $15.1 billion.
That number includes the company’s quarterly gaming revenue, which surpassed $5 billion for the first time. Xbox content and services revenue grew 40% — a major turnaround compared to the same period a year earlier, during which Xbox content and services revenue had decreased 11%.
“The launch of Xbox Series X and Series S was the most successful in our history, with the most devices ever sold in the launch month,” Nadella said on the Tuesday earnings call, adding that the company is gaining console share. Hood noted that the company expects “significant demand for the Xbox Series X and S that will still be constrained by supply” in the current quarter.
For the full fiscal year 2021, Hood said the company expects to generate double digit growth of both revenue and operating income.