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Microsoft revenue grows 17% YoY; gaming revenue shot up 51% to $5 billion

Microsoft posted revenues of $43.1 billion and a net income of $15.5 billion for the quarter ended December 31, 2020, up by 17% and 33% respectively on an annual basis. The tech-giant’s growing during the second quarter of the financial year was driven by the persistent demand for cloud services as well as the Xbox launches boosting the gaming segment.

Key takeaways 

  • Revenue stood at $43.1 billion in Q2FY21 and grew by 17% YoY
  • Net income stood at $15.5 billion in Q2FY21 and grew by 33% YoY
  • Operating income stood at $17.9 billion in Q2FY21 and grew by 29% YoY
  • respectively in the quarter ended December 31, 2020 ()
  • Xbox Series X and Series S saw record sales in a month after launch, demand exceeded supply this quarter and is likely to do so in Q3 as well
  • Azure revenue grew 50% YoY
  • LinkedIn, with 740 million users, posted 23% YoY growth
  • Teams has 60 billion daily active users on mobile alone

Gaming revenue touched $5 billion

While the company released the Xbox Series X and Series S consoles towards the end of the second quarter (November 10), both saw record sales during the launch month. Gaming revenue surpassed $5 billion for the first time, registering a 51% YoY growth. Xbox’s content and services revenue increased by 40% YoY. 

During the earnings call, Microsoft’s chief financial officer Amy Hood said the company saw “record engagement and monetization across our platform, as well as console demand that significantly exceeded supply” after the launch of the two consoles. She added that “significant demand” is expected for both consoles in Q3, but supply will be constrained.  

  • Microsoft also exceeded $2 billion in revenue from third-party titles for the first time this quarter
  • Xbox Live has more than 100 million monthly active users, while Game Pass now has 18 million subscribers
  • Microsoft 365 Personal and Family has 47 million subscribers 

Cloud growth driven by Azure, server products

The company’s commercial cloud service saw a record quarter with 34% YoY increase in revenue to $16 billion, driven by the demand for “differentiated offerings” and a 50% YoY growth in Azure revenue. Investments in Azure continue, with the company announcing seven new data centre regions in Asia, Europe, and Latin America. Revenue from server products and cloud services increased by 26% YoY as more businesses shifted to the cloud,  server products revenue grew by 4% YoY driven by hybrid and premium solutions. Revenue in Intelligent Cloud stood at $14.6 billion in Q2FY21 and increased by 23% YoY. 

I think one of the things that we’re seeing is the COVID impact has put a lot of constraints on all our customers. But the one structural change is the digital technology is becoming critical even for core resilience and business continuity, and to deal with what is going to be a structurally changed customer behavior and expectations. — Satya Nadella, chief executive officer, Microsoft

Revenues for Productivity and Business Processes segment grew by 13% YoY to $13.4 billion at the end of the second quarter. This segment includes the Office suite, which was driven by a 21% YoYgrowth in Office 365 commercial revenues and a 21% YoY growth in Dynamics products and cloud services revenue, including a 39% annual growth Dynamics 365’s revenue. 

  • Office Commercial products and cloud services revenue increased 11% driven by Office 365 Commercial revenue growth of 21% YoY, driven by Office 365 commercial growth which is up 15% YoY, and growth in revenue per user 
  • Office Consumer products and cloud services revenue increased 7% YoY
  • Microsoft 365 Consumer subscribers increased to 47.5 million

Personal computing grew 14% YoY

Microsoft’s More Personal Computing segment grew 14% YoY to $15.1 billion. 

  • Windows OEM revenue increased 1% YoY
  • Windows Commercial products and cloud services revenue increased 10% YoY
  • Surface revenue increased 3%  YoY
  • Search advertising revenue (from Bing) excluding traffic acquisition costs increased 2%  YoY

LinkedIn has over 700 million members, Teams has 60 billion DAUs

LinkedIn: revenue increased 23% YoY, driven by strong advertising demand; sessions grew 30% YoY with record levels of engagement. LinkedIn has 740 million members, with conversations increasing 48% YoY and a 2x growth from a year ago in the number of hours spent on LinkedIn Learning.

Teams: Over 117 organisations with over 100,000 employees use Teams, and another 2,700 organisations with 10,00 employees use Teams. It has 60 billion daily active users on mobile alone and 200 million students and teachers using Microsoft Education products for remote learning. Power Platform monthly average usage on Teams has grown 4X YoY. 2

GitHub: 56 million developers and 3 million organizations including Plaid, Buzzfeed, Oracle, and Volvo Car are on the platform

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Power Platform: Over 11 million monthly active users, up 95% YoY. Microsoft’s Vaccine Registration and Administration Solution, built on the Power Platform, enables governments to manage vaccine doses delivery – from screening, scheduling, administration, and follow ups. It is being used in Australia’s Victoria to vaccinate 6 million people and in three states in the United States. New capabilities are being added to ensure people have verifiable access to their vaccination records. 

Security business: Revenues crossed $10 billion in Q2FY21, up by 40% YoY. Identity platform Azure Active Directory has 425 million monthly active users, and Microsoft Defender blocked nearly 6 billion threats last year alone. 

Earnings Call Transcript | Investor Presentation | Release 


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