Microsoft profits soar as cloud demand continues in pandemic

Microsoft’s business beat Wall Street expectations for the first three months of 2021 (Thibault Camus/AP)

Microsoft’s profits soared during the first three months of 2021, thanks to ongoing demand for its software and cloud computing services during the pandemic.

The company on Tuesday reported fiscal third-quarter profit of 14.8 billion dollars (£8.26 billion), up 38% from the same period last year.

“Over a year into the pandemic, digital adoption curves aren’t slowing down. They’re accelerating, and it’s just the beginning,” CEO Satya Nadella said in a statement.

Net income of 1.95 dollars per share beat Wall Street expectations. Analysts were expecting Microsoft to earn 1.78 dollars per share on revenue of 41 billion dollars (£23 billion) for the fiscal quarter ending in March, according to FactSet.

Microsoft came through the pandemic with relatively little damage

Analyst Andrew Bartels

The software maker based in Redmond, Washington, posted revenue of 41.7 billion dollars (£23.28 billion) in the January-March period, up 19% from last year.

Revenue from Microsoft’s productivity segment, which includes its Office suite of workplace products such as email, grew by 15% over the same time last year, to 13.6 billion dollars (£7.59 billion). Its cloud computing business segment grew 23% to 15.1 billion dollars (£8.43 billion).

Microsoft’s personal computing business segment grew by 19% to 13 billion dollars (£7.26 billion), buoyed by last year’s release of a new Xbox gaming console and an unusually strong season for PC sales across the industry. Microsoft gets licensing revenue for computers made by other manufacturers running its Windows operating system.

Xbox sales contributed strongly to Microsoft’s results (Sean Dempsey/PA)

The first quarter of 2021 was a gold mine for the sale of personal computers in part due to unfulfilled demand because of a components backlog, according to separate reports from Gartner and IDC. The sharp rise across the industry was also due to an unusually weak first quarter of 2020, when the coronavirus outbreak began disrupting supply chains in Asia.

Pent-up demand for supply-constrained consoles during the holiday season also contributed to the 34% rise in sales of Xbox content and services in early 2021 from the same time last year.

But it is the cloud growth that has been Microsoft’s focus as the company tries to tap into a pandemic-caused shift in big businesses, governments and other organisations doing more of their essential work online.

“Microsoft came through the pandemic with relatively little damage,” said Forrester research analyst Andrew Bartels.