Microsoft’s revenue climbed 17% to more than $43 billion for the December quarter, and profits rose 33% to $15.5 billion, eclipsing Wall Street’s expectations amid growing demand for the company’s cloud services as the pandemic continues to accelerate technology adoption.
Key takeaways from the results:
- Among the company’s three main business divisions, the biggest revenue increase came in the Intelligent Cloud segment, up 23% from the prior year to $14.6 billion. That was driven by a 50% increase in revenue for Microsoft’s Azure cloud computing platform and related services.
- Microsoft’s largest division by revenue was More Personal Computing, including Windows and Xbox, which posted $15.1 billion in revenue, up 14%. Microsoft’s gaming revenue topped $5 billion for the quarter, up 51%, due to the launch of the Xbox Series X and S consoles.
- Windows revenue rose 2% to $5.7 billion, despite strong demand for PCs amid the pandemic. That modest growth rate is deceiving, however: Last year’s results set a high bar due to Windows PC sales ramping up in advance of the end of support for Windows 7 a year ago.
- LinkedIn was a standout in the company’s Productivity and Business Processes division. Revenue from the business social network increased $475 million, or 23%, to nearly $2.6 billion, which the company attributed to increased advertising demand in LinkedIn’s Marketing Solutions business.
- Overall revenue in the Productivity and Business Processes division was $13.3 billion, up 13%, making it Microsoft’s smallest division by revenue. (This division includes Office and related products, including Microsoft Teams.) Office 365 Commercial revenue rose 21%, which Microsoft attributed to user growth and higher revenue per user.
- Microsoft’s Surface revenue grew modestly, by slightly more than 3%, to a little more than $2 billion, despite the peak holiday shopping season occurring during the quarter.
- Search advertising revenue increased just 2%, to $2.1 billion. The company said higher search volume was offset by lower revenue per search.
“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” said Microsoft CEO Satya Nadella in a news release announcing the results.
On a conference call with investors, Nadella called the recent SolarWinds attacks a “stark reminder” of the critical role of security technology, and disclosed that Microsoft’s security business revenue surpassed $10 billion for the past 12 months, up more than 40% compared to the prior year.
This is the clearest way to see major trends in @Microsoft's business, compiled from data disclosed in SEC filings. Server products and cloud services, including @Azure, pulling away from Office and Windows as the company's biggest line of business. More: https://t.co/R9KDeGhvF7 pic.twitter.com/ZIbQRyLC7c
— toddbishop (@toddbishop) January 27, 2021
Microsoft shares increased more than 6% in after-hours trading.
The company’s earnings per share were $2.03, up 34%, for the three months ended Dec. 31, its second quarter of fiscal 2021. Analysts expected Microsoft’s revenue for the December quarter to top $40 billion, up 8.9%, with profits of $1.64/share, vs. $1.51/share a year ago.
Related Story: Xbox Series X/S launch and Game Pass push Microsoft’s quarterly gaming revenue past $5 billion
