Insights Post

Microsoft Surpasses Earnings Expectations: What Can We Expect From MSFT?

| 14 February, 2022 at 06:00 GMT

Microsoft has been a household tech name for decades, having created ‘Windows’, one of the most used operating systems in the world, popular gaming console ‘Xbox’ as well as other products often deemed irreplaceable in both the professional and personal worlds of its consumers.

Despite bumps across the road to success, Microsoft reported “better-than-expected earnings and revenue for the fiscal second quarter.” The tech giant’s revenue grew by 20% from last year with most of the growth taking place last quarter. The company’s revenue was $51,73 billion, despite the global supply chain crisis that happened as a consequence of the COVID-19 pandemic.

Entering the World of Gaming

Earlier this year Microsoft dived into new waters following their acquisition of the gaming company Activision Blizzard. The deal, standing at $69 billion, is the biggest gaming acquisition to date and lands Microsoft a place as the third-largest gaming company in the world. It also highlights Microsoft’s ambition in dominating the gaming sector.

Microsoft was already a major player in the gaming industry, with a total market capitalization of $2.14 trillion. The company has shown its interest in the gaming industry back in 2001 when it launched the Xbox, and then with its acquisition of Mojang, the company that created Minecraft.

Microsoft’s chairman and CEO commented, “Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” 

“We’re investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all,” he added.

‘Meshing’ with the Metaverse

When the term ‘metaverse’ was initially introduced, the concept seemed like a far away futuristic notion that was very far away from our everyday lives. But Microsoft was one of the companies that risked investing in the concept and chose to integrate it into its existing offerings.

Earlier last year, Microsoft announced that it’s launching its mixed reality experience platform in 2022. The platform, “enables people to connect with a holographic presence, share across space, and collaborate from anywhere in the world.”

Mesh’s mission is to offer organizations the opportunity to enhance their virtual meetings by offering mixed reality experiences using 3D avatars that represent people in a shared space. Mesh will be integrated with Office 365 and become an extension of Microsoft Teams. The most appealing thing about the project is the fact that it can be used on a range of devices.

Head in the ‘Cloud’

Microsoft’s cloud-oriented business rose by 32% over the last year, most of the gains coming from Microsoft’s Intelligent Cloud segment which contains Microsoft Azure, GitHub and server products such as Windows Serves. Microsoft Azure is responsible for most of the sector’s growth, despite Microsoft not disclosing its revenue. The cloud service is second only to Amazon.com at this rate, and holds an 18% global cloud computing market share.

Azure is believed to be the primary growth driver for Microsoft’s revenue in the coming years. According to Gartner, “Worldwide end-user spending on public cloud services is forecasted to grow 23.1% in 2021 to total $332.3 billion, up from $270 billion in 2020.”

The reason behind Microsoft’s growth in the cloud division is credited to the company’s Satya Nadella, who since joining in 2014 focused on turning it into a core segment.

Microsoft’s Future

Overall, it looks like Microsoft’s business is going great and will only continue to grow based on the company’s plans. The company continues to demonstrate year-over-year growth and expansion, despite the fact that the company recently lowered its number of employees significantly following hardships over COVID-19. Despite that, the company’s stock still trades at 32 times forward earnings.

#MSFT is available as a stock CFD on all BDSwiss platforms.