Microsoft says supply issues will continue for Xbox

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Microsoft forecast a healthy end to the year on Tuesday thanks to its booming cloud business, but said supply chain issues will continue to weigh on key units such as those that produce its Surface laptops and its Xbox game consoles.

The company beat Wall Street expectations for its first quarter ended September 30, with pandemic-induced demand for the software giant’s cloud services driving sales.

Contracts for cloud services provided by Microsoft, Amazon’s AWS, and Alphabet-owned Google Cloud have increased since last year, when the COVID-19 pandemic closed offices and schools, pushing more people online activity.

Q1 revenue growth for Azure, the company’s flagship cloud computing business, reached 48% in constant currency, beating analyst estimates by 47.5%, data shows consensus of Visible Alpha. Amy Hood, executive vice president and chief financial officer of Microsoft, said the company also expected “extensive growth” for the unit in the second fiscal quarter.

Azure’s growth rate is the best direct measure of competition with competitors such as AWS and Google Cloud, as Microsoft does not split the cloud computing unit’s revenue.

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Microsoft appeared to resist the growing challenge from Google Cloud. Google Cloud said on Tuesday that its revenue jumped 45% to $ 4.99 billion (roughly Rs 37,430 crore), but fell short of the estimate of $ 5.2 billion (roughly Rs 39,000 crore). Rs.).

Revenue from the company’s other business units that host Windows software, the Teams messaging service, and the professional social networking platform LinkedIn also exceeded analysts’ expectations.

Supply chain issues affecting much of the global tech industry have had mixed consequences for Microsoft.

Hood said Microsoft has continued to increase its cloud computing margins despite higher data center construction costs as it continues to add more profitable services to those data centers. Hood also said the company was able to ship more Xbox S and X game consoles than expected in the first quarter – sales of game consoles and accessories were up 166% as the company continued to see a decline. high demand for new models after the pandemic forced millions to seek home entertainment.

But Microsoft and its competitors have been unable to meet demand due to the global chip crisis. Hood told Reuters the company expects demand for Xbox to continue to exceed supply in the company’s second quarter, which includes Christmas.

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She also said sales of the company’s Surface computers, which fell 17% in the fiscal first quarter, are expected to continue to decline in the second quarter, as supply chain shortages hit high-end items in the line. .

Microsoft’s revenue from the sale of Windows to PC makers grew 10% year-over-year, beating the overall PC market, which grew only 3.9% over the same period due to business constraints. supply, according to IDC data.

Hood said the company is able to outperform the PC market because of its strength in selling Windows licenses to businesses, where it gets more revenue per license and has a better market share.

Overall, revenue rose 22% to $ 45.32 billion (roughly Rs. 3,39,990 crore) in the first quarter ended September 30, beating expectations by roughly $ 43.97 billion ( approximately Rs. 3,29,800 crore).

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Net profit reached $ 20.51 billion (about Rs.153,840 crore), or $ 2.71 (about Rs.200) per share. The company said its results included a net tax benefit of $ 3.3 billion (roughly Rs 24,750 crore).

On an adjusted basis, it earned $ 2.27 (around Rs. 170) per share, beating analysts’ expectations of $ 2.07 (around Rs. 155) per share.

For the second fiscal quarter, Microsoft predicted median revenue of $ 18.23 billion (roughly Rs.136,720 crore) from its smart cloud business for the fiscal second quarter, above estimates of $ 17.84 billion (roughly Rs.133,770 crore), according to data from Refinitiv.

Intelligent Cloud’s first quarter revenue jumped 31% to $ 17 billion (about Rs. 1,27,470 crore). Analysts had expected a figure of $ 16.58 billion (about Rs. 1,24,325 crore), according to data from Refinitiv.

Microsoft’s forecast for its software applications and Windows-centric segments with midpoints of $ 15.83 billion (roughly Rs. 1,18,700 crore) and $ 16.55 billion (roughly Rs. 1,24,090 crore) , respectively, were also higher than Refinitiv’s estimate of $ 15.40 billion (roughly Rs. 1,15,470 crore) and $ 15.51 billion (roughly Rs. 1,16,290 crore).

© Thomson Reuters 2021


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