Lockdowns and other COVID measures may well have put paid to a whole slew of industries, but for Microsoft, it’s been a windfall.
The massive surge in the number of people either working from home or forced to stay at home through work closures saw a boom for many-core Microsoft businesses. PC sales have soared, video gaming revenues have increased, and the uptick in user-time on the Microsoft Cloud infrastructure have all combined to generate a seventeen percent increase in revenue to over $43 billion.
2020 was primarily a year of panic buying as customers were forced to make emergency plans to keep their workforce connected and productive. That has morphed into a new normal with an increasing number of businesses making the transition to distance work part of their business model, rather than a stop-gap measure.
Microsoft CEO Satya Nadella pointed to the changing environment of IT sales and infrastructure seen since the start of the Covid pandemic as a critical driver in the company’s increased sales, calling it:
That change in attitude means more business for Microsoft, with the software giant forecasting increased revenue for the current quarter of $41.25 billion against the $40.35 billion forecast initially. That represents a second consecutive quarter with over seventeen percent growth. By way of comparison, Wall Street analysts had been forecasting an eleven percent growth.
Microsoft has been in an extended battle against the other 800lb gorilla of the Cloud world, Amazon, with their AWS (Amazon Web Services) infrastructure. Microsoft’s cloud services, including Office 365 and their Azure cloud hosting, combined for $16.7 billion in revenue for the last quarter of 2020. That was over thirty-four percent up on the corresponding figures for 2019 and a three percent increase over the third quarter of 2020.
The numbers point to a trend among Microsoft customers to upgrade and modernize their IT, which started in 2019 but came to the forefront with the forced changes due to the Coronavirus pandemic.
The trend was enough to beat Wall Street’s earnings expectations of $1.64 per share, with Microsoft reporting earnings of $2.03 per share.
All core divisions at Microsoft outperformed expectations, including demand for the Windows operating system. Sales of Windows 10 rose after Microsoft ended support for Windows 7 a year ago, and the expectation was of flat sales for 2020. As more and more people were forced to work from home, demand for new PCs drove the numbers for Windows 10 as well.
Increasing numbers of people working from home also meant increased sales for Microsoft 365, with the Productivity and Business Processes division reporting revenue of over $13 billion.
The new Xbox gaming system’s launch lifted console sales by eighty-six percent to over $15 billion. That’s hardware only and doesn’t include any software sales as new titles come to market.
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