Microsoft reported higher results for its fiscal third quarter to end March, but growth was tempered by the coronavirus pandemic, and numbers lower than in the previous quarter. The company said net impact was minimal and that cloud usage increased. There was a slowdown, especially in the last weeks of the quarter, in transactional licensing, particularly among SMEs, and a reduction in advertising spend in LinkedIn. In the More Personal Computing segment, Windows OEM and Surface benefited from increased demand for remote work and learning, but supply chain constraints in China offset that rise, though these improved late in the quarter. Gaming benefited from people stuck indoors but Search was negatively impacted by less ad spend. Microsoft noted that the full effects of the pandemic may not be fully felt until later in the future.
Revenue for the quarter climbed 15 percent from the year before to USD 35.0 billion, the operating profit increased 25 percent to USD 13.0 billion and the net profit rose 22 percent to USD 10.8 billion or USD 1.40 per share. Commercial Cloud helped lift results, generating USD 13.3 billion worth of revenues, up 39 percent.
Total Intelligent Cloud revenues went up 27 percent to USD 12.3 billion, with server products and cloud services going 30 percent higher and Azure leaping 59 percent. Enterprise Services revenue increased 6 percent.
Productivity and Business Processes was the next largest division, with revenues rising 15 percent to USD 11.7 billion. These included Office Commercial products and cloud services revenue up 13 percent, driven by Office 365 commercial revenue growth of 25 percent. Office Consumer products and cloud services revenue strengthened 15 percent, also helped Office 365, with consumer subscriber numbers growing to 39.6 million. LinkedIn revenue went up 21 percent while Dynamic products and cloud services had revenues rising 17 percent, driven by Dynamics 365 revenue growth of 47 percent.
Revenues at the Personal Computing division came in within Microsoft’s last guidance, going 3 percent higher to USD 11.0 billion, with Windows OEM revenue unchanged year-on-year. Windows Commercial products and cloud services revenue climbed 17 percent, search advertising revenue excluding traffic acquisition costs advanced 1 percent, Xbox content and service revenue increased 2 percent and Surface revenue went up 1 percent.
Microsoft said it returned USD 9.9 billion to shareholders in the quarter, in the form of share buybacks and dividends, an increase of 33 percent from the year earlier.
User numbers rise
The use of Microsoft Teams jumped in the quarter: the service now has over 75 million daily active users. Over 183,000 educational institutions now use the service, as well as 20 organisations such as Continental, Ernst & Young, Pfizer, SAP, Accenture and the NFL.
Meanwhile, Microsoft Office 365 now has 258 million paid seats. Microsoft 365 Personal and Family now has more than 39 million subscribers. Use of the Windows Virtual Desktop tripled in the quarter and Windows 10 now has over 1 billion monthly active devices, an increase of 30 percent year-on-year. Demand is also growtin for Windows 10 PCs, from small and large screens to dual-screens.
Looking at gaming, the company saw an all-time record engagement in the quarter, with nearly 90 million active users of Xbox Live. Xbox Game Pass has over 10 million subscribers, with increased monetisation of in-game content and services. Microsoft said its Project xCloud gaming service now has "hundreds of thousands" of users in preview across 7 countries, with 8 more launching in the coming weeks.
Security remains a priority, Microsoft said, with the company adding new capabilities to protect consumer data. Microsoft Defender ATP now supports Linux, in addition to Windows and MacOS, with iOS and Android to come soon.
