Microsoft Corp beat Wall Street estimates for quarterly results on Tuesday on pandemic-induced demand for the software giant’s cloud-based services and gaming consoles as businesses moved to hybrid working and people entertained themselves at home.
Orders for cloud services provided by Microsoft, Amazon.com Inc’s AWS and Alphabet Inc-owned Google Cloud have surged since last year when the COVID-19 pandemic shut offices and schools, pushing more activity online.
Microsoft said revenue from its largest and fastest growing “Intelligent Cloud” segment surged 31% to $17 billion. Analysts had expected a figure of $16.58 billion, according to Refinitiv data.
Revenue growth for Azure, the company’s flagship cloud-computing business, came in at 48% to beat analysts’ estimates of 47.5%, according to consensus data from Visible Alpha.
Azure’s growth rate is the best direct measure of competition with rivals such as AWS and Google Cloud as Microsoft does not break out revenue from the cloud-computing unit.
“We delivered a strong start to the fiscal year with our Microsoft Cloud generating $20.7 billion in revenue for the quarter, up 36% year over year,” said Amy Hood https://bit.ly/3CdmwfL, executive vice president and chief financial officer of Microsoft.
Revenue at the firm’s two smaller business units that house Windows software, Teams messaging service and LinkedIn professional social networking platform also beat analyst expectations.
Overall, revenue rose 22% to $45.32 billion in the first quarter ended Sept. 30 also helped by strong sales of its Xbox consoles, beating expectations of about $43.97 billion.
Video gaming has gained in popularity since the pandemic forced millions to seek entertainment at home. Companies hamstrung by a global chip shortage have not been able to produce enough gaming consoles, however.
Hood told Reuters the company expects Xbox demand to continue to exceed supply.
Net income rose to $20.51 billion, or $2.71 per share. The company said its results included a $3.3 billion net income tax benefit.
On an adjusted basis it earned $2.27 per share, trumping analyst expectations of $2.07 per share.
Shares of the company rose nearly 1% in extended trading.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.