Microsoft expects double-digit growth for this year as demand for cloud computing services increases

Microsoft on Tuesday forecast double-digit revenue growth for the next fiscal year, driven by demand for cloud computing services, and its shares jumped about 4%.

Microsoft forecasts Intelligent Cloud revenue of $21.1 billion (approximately Rs 1,61,695 crore) to $21.35 billion (approximately Rs 1,63,611 crore) for its fiscal fourth quarter, driven by strong growth of its Azure platform. That compares to a Wall Street consensus of $20.933 billion (roughly Rs. 1,60,427 crore), according to Refinitiv data.

“If there’s a macro headwind, where you get more value for less price means you win. In our case, when it comes to our commercial cloud offerings, we have significant advantages on that over the ‘whole stack,’ said Microsoft chief executive Satya Nadella. , said when asked how the company expects double-digit growth for the next fiscal year.

TECHnalysis Research chief analyst Bob O’Donnell noted Microsoft’s ability to counter industry trends.

“Despite the current gloom around big tech, Microsoft’s solid earnings and strong guidance show that not all tech is at risk,” O’Donnell said. “For companies that are focused on providing the products and services that businesses need to modernize their operations . . . there are still a lot of upsides.”

Microsoft reported earnings and revenue for its fiscal third quarter on Tuesday that beat Wall Street expectations, also benefiting from demand for its cloud-based services.

Microsoft’s results indicate it can sustain pandemic-fueled sales growth as economies reopen and businesses shift to a hybrid model that allows staff to alternately work from the office and from home.

This trend is also helping to boost Windows product revenue, said Brett Iversen, Microsoft’s general manager of investor relations. “The strength of the commercial PC market drove Windows OEM revenues up 11%,” he told Reuters. Azure’s third quarter annual growth of 46.0% was flat from the prior quarter and in line with growth estimates of 45.6% compiled by Visible Alpha. Still, Azure’s growth has shown a steady decline from fiscal 2020, when it was in the 60% range.

In contrast, Google’s parent company, Alphabet Inc, reported on Tuesday that Google Cloud’s first-quarter growth rate fell slightly to 43.8% from 44.6% in the fourth quarter of 2021. Alphabet’s revenue in the first quarter were below expectations and its shares were down 2% in after-hours trading.

Microsoft’s Nadella said the number of Azure transactions over $100 million (about Rs 766 crore) more than doubled year-on-year in the third quarter.

“These numbers show that customers continue to turn to Microsoft as they accelerate their journey to cloud computing and that the current troubling economic environment has yet to impact the company’s primary growth engine. company,” said Haris Anwar, senior analyst at Investing.com.

Still, Microsoft chief financial officer Amy Hood said the company’s business could be affected if China’s pandemic shutdown extends into May, though the current impact of the shutdowns is already being reflected. in Microsoft’s outlook.

“However, extended production shutdowns through May would further negatively impact our outlook for Windows OEM, Surface and Xbox hardware,” she told investors.

The company posted revenue of $49.36 billion (about Rs. 3,78,270) in the third quarter, up from $41.7 billion (about Rs. 3,19,567 crore) a year earlier. Analysts on average had expected revenue of $49.05 billion (about Rs 3,75,895 crore), according to Refinitiv IBES data.

Net profit rose to $16.73 billion (about Rs. 1,28,210 crore), or $2.22 (about Rs. 170) per share, in the quarter ended March 31, from $15.46 billion dollars (about Rs. 1,18,470 crore), or $2.03 (about Rs. 150) per share, a year earlier. This beat analysts’ targets of $2.19 (around Rs 150).

© Thomson Reuters 2022