Microsoft’s sales and profit beat expectations as pandemic drives device and cloud demand

Microsoft’s third-quarter net profit grew by 43.7 per cent annually, driven by a strong performance in its cloud, gaming and personal computing businesses and a tax benefit.

Net profit surged to $15.5 billion in the three months to March 31 while revenue rose by 19 per cent to more than $41.7bn, exceeding the company’s own guidance and analysts’ average estimate of $41.03bn.

The company also registered a tax benefit of $620 million that helped it to deliver its 15th straight quarter of double-digit revenue growth.

Microsoft’s shares opened 3.3 per cent lower in early trading yesterday to $253.20 at 5.50pm UAE time.

However, the stock is up more than 50 per cent over the past year, giving the technology company a market value of $1.9 trillion.

“Over a year into the pandemic, digital adoption curves are not slowing down ... they are accelerating, and it is just the beginning,” said chief executive Satya Nadella.

“We are building the cloud for the next decade, expanding our addressable market and innovating across every layer of the tech stack to help our customers be resilient and transform.”

Microsoft’s operating income grew by 31 per cent to $17bn during the period, compared with a year ago.

In its guidance for the fourth quarter, the company expects revenue to be between $43.6bn and $44.5bn, which is higher than a $42.9bn consensus among analysts polled by Refinitiv.

Sales in its PC business – which includes Xbox content, services and revenue from sales of its Surface device and search advertising – grew by 19 per cent, compared with a year ago, to $13bn.

PC sales have picked up as buyers upgrade their devices with the rise of remote working and home learning.

The industry braved “significant ongoing constraints in the supply chain”, including a global shortage of chips, said Amy Hood, executive vice president and chief financial officer of Microsoft.

The company’s revenue from its intelligent cloud business rose by 23 per cent from a year ago to $15.1bn.

“The Microsoft Cloud, with its end-to-end solutions, continues to provide compelling value to our customers,” said Ms Hood.

Revenue from the productivity and business processes division, which includes Microsoft Office and LinkedIn, grew by 15 per cent to $13.6bn during the period.

LinkedIn’s revenue was up by about 25 per cent annually but Microsoft did not give a dollar figure or disclose the number of users.

The technology company returned $10bn to investors through share repurchases and dividends in the third quarter, a yearly increase of 1 per cent.

Investment in research and development stood at $5.2bn, $317 million more than in the same period last year.