Technology

Microsoft forecasts double-digit revenue growth on cloud strength

Company is building on pandemic sales boost

Photograph: iStock

Wed Apr 27 2022 - 10:14

Microsoft on Tuesday forecast double-digit revenue growth for the next fiscal year, driven by demand for cloud computing services, and its shares jumped about 4 per cent .

Microsoft forecast Intelligent Cloud revenue of $21.1 billion (€19.9 billion) to $21.35 billion for its fiscal fourth quarter, driven by strong growth in its Azure platform. That compared with a Wall Street consensus of $20.933 billion, according to Refinitiv data.

"If there is any macro headwind, where you have more value for less price means you win. In our case, when it comes to our commercial cloud offerings, we have significant advantages on that across the stack," Microsoft's chief executive, Satya Nadella, said when asked how the company was projecting double-digit growth for the next fiscal year.

Microsoft on Tuesday reported profit and revenue for its fiscal third quarter that beat Wall Street expectations, also benefiting from demand for its cloud-based services.

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Sales momentum

Microsoft results indicate that it can keep its pandemic-fuelled sales growing as economies reopen and businesses shift to a hybrid model of allowing staff to alternatively work from office and home.

That trend is also helping drive up revenue of Windows products, said Brett Iversen, Microsoft's general manager of investor relations. "Strength in the commercial PC market drove Windows OEM revenue up 11 per cent ," he told Reuters.

Third-quarter Azure annual growth of 46.0 per cent was steady from the previous quarter and in line with estimates of 45.6 per cent growth compiled by Visible Alpha. Still, Azure growth has showed a steady drop from fiscal 2020 when it was in the 60 per cent range.

In contrast, Google parent Alphabet on Tuesday reported that Google Cloud's growth rate in the first quarter fell slightly to 43.8 per cent , from 44.6 per cent in the 2021 fourth quarter. Alphabet's first-quarter revenue came in below expectations, and its shares were down 2 per cent in after-hours trading.

Microsoft’s Nadella said the number of $100 million-plus Azure deals more than doubled year-over-year in the third quarter.

Microsoft chief financial officer, Amy Hood, said the company's business could be impacted if China's shutdown over the pandemic extends into May, although the current impact of the shutdowns is already reflected in Microsoft's outlook.

“However, extended production shutdowns that reach into May would further negatively impact our outlook across Windows OEM, surface, and Xbox hardware,” she told investors.

The company reported revenue of $49.36 billion in the third quarter, compared with $41.7 billion a year earlier. Analysts on average had expected revenue of $49.05 billion, according to Refinitiv IBES data.

Net income rose to $16.73 billion, or $2.22 per share, in the quarter ended March 31st, from $15.46 billion, or $2.03 per share, a year earlier. That topped analyst targets of $2.19. – Reuters

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