Microsoft posted a 22% jump in earnings for the third quarter of 2020 helped by higher revenue. Analysts surveyed by FactSet expected $1.28 of per-share earnings and sales of $33.76 billion for the quarter. The firm rallied 4.5% during regular trading hours on the back of a strong day of trading for technology equities.
"As COVID-19 impacts every aspect of our work and life, we have seen two years' worth of digital transformation in two months", Nadella said during the earnings call in a reference to customers' scramble to set up remote teamwork, sales and customer service, while setting up cloud infrastructure and security for their altered environments.
In an interview, Microsoft Chief Financial Officer Amy Hood said some of the increased Teams usage came from subscribers with access to the software as part of a broader package and turned it on for the first time. That compares with the $11.5 billion average Wall Street prediction.
Microsoft's other two main business areas saw sales grow from the year-ago period.
In the Productivity and Business Processes and Intelligent Cloud segments, the biggest increases in cloud usage were seen in Teams, Azure, Windows Virtual Desktop advanced security solutions and Power Platform with the shift to working from home.
Google’s growth slows as pandemic infests advertising market
Google's cloud computing division, which includes G Suite, earned $2.8 billion, up 55 percent from the first quarter of 2019. Alphabet is the first of the tech giants to report earnings this week, revealing the first signs of the pandemic's toll.
Microsoft this week also disclosed that Teams-which includes group chat and instant messaging, along with video and audio calling-is now up to 75 million daily active users. The software giant also revealed that the number of daily active users for Teams increased by 110 per cent in the last four months.
In the final weeks of the quarter, there was a slowdown in transactional licensing, particularly in small and medium businesses, and a reduction in advertising spend on LinkedIn.
Microsoft's Surface division was a mixed bag. The quarter showed a fair sale in the Surface Laptop 3, Surface Pro 7, Surface Pro X, and the Surface Earbuds released in October past year.
Xbox content and services revenue increased 2%. Although gaming revenue as a whole declined by 1%, the continued lockdown should boost better numbers in the next quarter.
Nadella confirmed Xbox Live subscriptions grew to nearly 90 million during Q3.
In the fall, Microsoft's cloud-computing business beat Amazon for a controversial $10 billion, 10-year cloud contract from the Pentagon. However, analysts predict that the revenue will be around $12.1 billion. Its shares have jumped almost 12 percent since the beginning of the year even as the overall Nasdaq composite index has fallen 1 percent, helping secure Microsoft's spot as the most valuable public company in the world with a market capitalization of $1.35 trillion.
Microsoft shares were unchanged for the fiscal third quarter, a volatile period when global markets were buffeted by worries about the virus' spread.