# Microsoft offers strong forecast, lifting shares
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-01-26
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Microsoft Forecasts Strong Revenue Boost in Intelligent
Meta Description: Microsoft's positive outlook for the current quarter calms investor concerns, driven by solid growth in its Intelligent Cloud unit. Azure revenue expected
URL: https://financedigest.com/microsoft-offers-strong-forecast-lifting-shareshtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-01-25t222002z3lynxmpei0o10xrtroptp4microsoft-results-1736816278997-compressed.jpg)

By Nivedita Balu and Jane Lanhee Lee

(Reuters) -Microsoft Corp on Tuesday forecast revenue for the current quarter broadly ahead of Wall Street targets, driven in part by its Intelligent Cloud unit.

The outlook soothed concerns about growth sparked by results for the December quarter, which initially dragged on Microsoft’s shares in after-hours trade. But the [shares reversed course following the outlook](https://www.financedigest.com/ford-posts-lower-profit-issues-downbeat-outlook-shares-drop.html "Ford posts lower profit, issues downbeat outlook; shares drop"), trading 3% above the closing price.

[Investors were seeking assurances](https://www.financedigest.com/apollo-assures-investors-deposit-flight-wont-spill-over-to-athene.html "Apollo assures investors deposit flight won’t spill over to Athene") that the enterprise cloud business is still growing strongly and got it from Microsoft.

“So the quarter itself was, ho hum. Good, but not as great as we’ve seen past quarters,” said Brent Thill, an analyst at Jefferies. But then the guidance for the third quarter really [turned the tape around and saved](https://www.financedigest.com/ahold-turns-to-solar-panels-lowers-thermostats-to-save-energy.html "Ahold turns to solar panels, lowers thermostats to save energy") the Nasdaq, if you will.

Thill said Microsoft’s guidance that Azure revenue would be up sequentially was [strong assurance that cloud](https://www.financedigest.com/reckon-one-builds-momentum-with-strong-backing-from-accountants-joining-the-cloud-advisor-programme.html "Reckon One builds momentum with strong backing from accountants joining the Cloud Advisor Programme") demand was solid.

Microsoft [forecast Intelligent Cloud revenue](https://www.financedigest.com/shopifys-revenue-forecast-fails-to-impress-shares-fall.html "Shopify’s revenue forecast fails to impress, shares fall") of $18.75 billion-$19 billion for its fiscal third quarter, driven by “strong growth” in its Azure platform. That compared with a [Wall Street](https://www.financedigest.com/asian-stocks-edge-up-before-u-s-jobs-data-defying-wall-street-selloff.html "Asian stocks edge up before U.S. jobs data, defying Wall Street selloff") consensus of $18.15 billion, according to Refinitiv data.

Thill said the strong momentum for [cloud computing](https://www.financedigest.com/how-hybrid-cloud-computing-offers-the-best-of-all-worlds.html "How hybrid cloud computing offers the best of all worlds") benefiting Microsoft will likely also be reflected in upcoming results for rivals Amazon.com Inc and Alphabet Inc’s Google.

Microsoft delivered [strong outlooks](https://www.financedigest.com/tesco-raises-outlook-and-will-buyback-shares-after-strong-first-half.html "Tesco raises outlook and will buyback shares after strong first half") in other areas, too.

The More Computing unit expects revenue of $14.15 billion-$14.45 billion for the third quarter, ahead of the [Wall Street](https://www.financedigest.com/wall-street-seen-opening-higher-but-u-s-recession-priced-in.html "Wall Street seen opening higher but U.S. recession priced in") target of $13.88 billion, and Productivity and Business Processes of $15.6 billion-$15.85 billion compared with the consensus target of $15.72 billion.

Full-year operating margins are [forecast to be up slightly](https://www.financedigest.com/german-govt-to-slightly-raise-2023-gdp-forecast-sources.html "German govt to slightly raise 2023 GDP forecast – sources") from the previous year.

Microsoft’s total second-quarter revenue [beat expectations but Azure revenue growth](https://www.financedigest.com/uk-unemployment-edges-up-but-pay-growth-beats-forecasts.html "UK unemployment edges up but pay growth beats forecasts") of 46% was only in line with analyst expectations as compiled by Visible Alpha. The Azure growth showed a [steady](https://www.financedigest.com/experian-sees-annual-revenue-growth-on-steady-demand.html "Experian sees annual revenue growth on steady demand") drop from fiscal 2020 when growth was in the 60% range.

Microsoft has become one of the most valuable companies in the world https://www.reuters.com/technology/apple-set-hand-crown-worlds-most-valuable-company-microsoft-2021-10-29 by betting heavily on corporate software and services, especially its cloud services and the movement to the web of its Outlook email and calendar software, known as Office 365, which benefited from the switch to working and [learning from home during the pandemic](https://www.financedigest.com/3-investing-lessons-you-can-learn-from-still-evolving-pandemic.html "3 Investing lessons you can learn from still-evolving pandemic"). Demand for cloud services from Microsoft and rivals Amazon.com and Alphabet also [benefited from the pandemic-fueled shift online](https://www.financedigest.com/the-benefits-of-developing-online-stores-through-shopify.html "The Benefits of Developing Online Stores Through Shopify").

Revenue from Microsoft’s biggest segment, which offers cloud services and includes Azure, its flagship cloud offering, rose 26%, while the [business that houses its Office](https://www.financedigest.com/tips-for-choosing-the-right-chief-finance-officer-for-your-business.html "Tips for Choosing the Right Chief Finance Officer for Your Business") 365 services increased 19% in the quarter.

Net income rose to $18.77 billion, or $2.48 per share, from $15.46 billion, or $2.03 per share, a year earlier.

The company said revenue rose to $51.73 billion in the three [months ended Dec](https://www.financedigest.com/spanish-manufacturing-output-down-for-6th-straight-month-in-dec-pmi.html "Spanish manufacturing output down for 6th straight month in Dec -PMI"). 31, from $43.08 [billion a year](https://www.financedigest.com/over-150-new-business-jets-could-be-delivered-to-europe-this-year-worth-an-estimated-5-billion.html "Over 150 New Business Jets Could Be Delivered To Europe This Year Worth An Estimated $ 5 Billion") earlier. Analysts on average had [expected revenue of $50.88 billion](https://www.financedigest.com/factbox-big-banks-expected-to-rack-up-more-than-1-billion-in-fines-for-whatsapp-use.html "Factbox-Big banks expected to rack up more than  billion in fines for WhatsApp use"), according to Refinitiv data.

Investors are also focused on Microsoft’s proposed $69 billion acquisition of [Activision Blizzard](https://www.financedigest.com/bobby-kotick-leads-activision-blizzard-through-economic-turmoil.html "Bobby Kotick Leads Activision Blizzard Through Economic Turmoil") Inc https://www.reuters.com/technology/microsoft-buy-activision-blizzard-deal-687-billion-2022-01-18, announced on Jan. 18, a huge expansion for its gaming division. It also broadens the company’s efforts in the so-called metaverse, or the merging of [online and offline worlds](https://www.financedigest.com/jetlearn-the-worlds-first-web-3-0-online-academy-for-k-12-raises-e1-2m-in-seed-round-to-launch-its-platform-in-the-uk.html "JetLearn, the world’s first Web 3.0 online academy for K-12, raises €1.2m in seed round to launch its platform in the UK"), which will have corporate and consumer applications.

Microsoft said the Activision Blizzard deal would help [boost Xbox content and services revenue](https://www.financedigest.com/orpea-shares-jump-on-q4-revenue-and-cash-boost.html "Orpea shares jump on Q4 revenue and cash boost"). Growth has fallen sharply from a high in the fourth quarter of fiscal 2020 when Xbox [content and services](https://www.financedigest.com/the-importance-of-thought-leadership-content-in-the-financial-services-sector.html "The importance of thought leadership content in the financial services sector") grew 65%. In the past quarter, [revenue rose 10%](https://www.financedigest.com/soccer-european-revenues-rise-10-in-2020-21-despite-covid.html "Soccer-European revenues rise 10% in 2020-21 despite COVID"), while in the year-ago quarter it rose 40%.

“They have a ton of great content and franchises. And that’s where that revenue would eventually come in when the deal lands, for sure,” said Brett Iversen, general manager, investor relations at Microsoft, referring to the [Activision deal](https://www.financedigest.com/eu-wants-to-know-if-microsoft-will-block-rivals-after-activision-deal.html "EU wants to know if Microsoft will block rivals after Activision deal").

(Reporting by Nivedita Balu in Bengaluru, Jane Lanhee Lee in Oakland, California, and Danielle Kaye in New YorkEditing by Sriraj Kalluvila, Peter Henderson, Matthew Lewis and Leslie Adler)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---