Microsoft drives cloud, Office and Windows to sustained growth in the third quarter of 2022

Microsoft drives cloud, Office and Windows to sustained growth in the third quarter of 2022

Microsoft’s third quarter 2022 financial results are here and the company is once again posting double-digit growth – revenues of $ 49.4 billion and net income of $ 16.7 billion. Revenue increased 18% and profit represents an 8% increase year-over-year. Microsoft attributes a portion of this quarter’s growth to the cloud, with server and cloud services revenue growing by 29% in particular and Microsoft Cloud by 32% to $ 23.4 billion.

There were plenty of reasons to suspect that Microsoft would still be wearing a smile this quarter. As the PC industry began to decline from its pandemic highs, it was slowing sales of Chromebooks, not Microsoft Windows machines, which were responsible for the entire recent decline. Meanwhile, the Xbox just had its best sales in 11 years, easily beating the relatively supply-limited PS5.

Sure enough, Microsoft says its “more personal computer” business, including Windows and Xbox, was up 11% to $ 14.5 billion in the third quarter and “Windows OEM revenue growth,” which should include the Price that manufacturers pay to put Windows 11 on purchased laptops and desktops has increased by 11 percent in particular. “Businesses are adopting [Windows 11] at a faster pace than any previous release, ”CEO Satya Nadella said during the earnings call.

Xbox hardware revenue increased 14%, with a 4% increase for Xbox content and services revenue “driven by growth in Xbox Game Pass subscriptions and first party titles,” for an overall increase of 6%. in gaming revenue to $ 3.74 billion. Nadella boasted that she gained market share for games in the earnings call as well and says 10 million people have now streamed games from Microsoft’s cloud, one of the first hard numbers we’ve had for the popularity of cloud gaming. , since Google Stadia doesn’t share the numbers, and Nvidia’s GeForce Now numbers include anyone who has ever used its free trial. PlayStation Now had 3.2 million subscribers last May, but Sony recently decided to turn it into a broader subscription service.

Xbox Game Pass subscribers have also played 45% more in the past twelve months, Nadella said, adding up “billions of hours” over the year.

We were also eager to see if the large Microsoft Office and cloud businesses also remained rosy with some employees returning to physical offices, and the answer is definitely yes: 17% revenue growth in the “Productivity and Business Processes” segment in this quarter, with Office up 12%. per cent and 11 per cent respectively in the commercial and consumer divisions. Office 365 now has 58.4 million consumer subscribers, 2 million more than last quarter and 8 million more than last year. The revenue of “Intelligent Cloud” increased overall by 26% to $ 19.1 billion.

And LinkedIn is still experiencing dramatic growth, up 34% this quarter, following growth of 37%, 42% and 46% in the previous three quarters, respectively.

Microsoft’s Surface devices are also doing well with a 13% increase in revenue after their revenue jumped a surprising 8% in the last quarter (surprising because the company previously warned of a decline). 2022 is Microsoft Surface’s 10th anniversary, and we expect the company to have more tricks up its sleeve than the lackluster Surface Laptop SE and this glamorous and sophisticated conference camera.

Here is a picture with all the related gains (and losses) for individual Microsoft businesses:

And here’s what each of the named companies did in the last quarter in dollar terms (note: measured in millions):

Microsoft’s purchase of Activision Blizzard, which is expected to make Microsoft the “third-largest games company by revenue, behind Tencent and Sony”, was not included in these earnings: the deal is likely not to close until next time. year.

Next quarter, Microsoft says it expects more revenue growth, albeit now single-digit growth in some companies, with “an impact of about $ 110 million on revenue and minimal impact on operating expenses” from the war in Ukraine. , and a note that Chinese manufacturing shutdown could affect Windows, Surface, and Xbox hardware. Revenue from games is actually expected to decline, said Amy Hood, Microsoft’s CFO, due to “lower engagement hours year over year and limited console supply.”

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