Microsoft Reports $35Bn Revenue in Q3 2020 as Pandemic Hardly Affected Sales

Avatar
Microsoft Makes a Grand Re-entry into the Smartphone Market with the Unveiling of its Foldable Surface Duo

Microsoft in its recently released Q3 fiscal 2020 quarter earnings which ended in March, reported a revenue generation of $35 billion, up 15% from the same period last year. This period corresponds to Q1 2020 on a regular calendar.

Satya Nadella, chief executive officer of Microsoft

According to the company, profit during the period rose to $10.8 billion buoyed by the increasing demand for internet-based software and cloud services. The results bested analyst forecast of $33.7 billion in sales during the quarter.

Microsoft saw $1.40 in earnings per share in the quarter more than the $1.28 earning per share estimated by analysts. Following the report, the company’s stock rose 4% in regular trading, followed by another 3% increase in after-hours trading.

Microsoft returned $9.9 billion to shareholders in the form of share repurchases and dividends during the quarter.

Impact of COVID-19

The pandemic had minimal impact on the company’s revenue as remote working increased the earnings of cloud services. Although advertising sales significant declined, it is not a major revenue generator for the company, unlike Google and Facebook.

Meet Damilare Akano, Africa’s Youngest Microsoft Specialist

We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning to sales and customer service, to critical cloud infrastructure and security – we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything, Our durable business model, diversified portfolio, and differentiated technology stack position us well for what’s ahead.

Satya Nadella, chief executive officer of Microsoft

Revenue generated by Azure infrastructure services rose by 59% in the quarter but slowed in growth as it rose by 62% in Q2 2020. The commercial cloud revenue rose 39% to generate $13.3 billion, while the Intelligent Cloud division increased sales to $12.3 billion. This is above the average forecast of  $11.7 billion.

The Windows PC-software did better than the company had projected due to the easing in supply-chain disruptions in China just as workers began to stock up for remote working in March.

Microsoft’s revenue from selling copies of Windows to computer makers and the overall PC market really benefited from the faster-than-expected improvement in the supply chain in China as well as increased demand to support the remote scenarios we are all so familiar with.

Amy Hood, executive vice president and chief financial officer of Microsoft

The pivot of Microsoft to Office 365 was largely a success as it reported a 25% growth in Office 365 commercial incomes. For cloud and traditional sales of Office, software revenue climbed to $11.7 billion. The number of monthly active Office 365 business users also exceeded 258 million, up from 200 million in the last quarter

Microsoft Surface Duo
Microsoft Surface Duo

Microsoft Teams

 Also, Microsoft’s report noted that Teams grew exponentially in the quarter as customers shifted to work and learn from home. The number of daily active users on Teams have increased to about 75 million.

LinkedIn

Apart from growth in Office, LinkedIn also saw double-digit growth in the third quarter, as its revenue jumped a solid 21%. Although the company reported a reduction in advertising spending in LinkedIn towards the final weeks of the quarter.

“In the final weeks of the quarter, there was a slowdown in transactional licensing, particularly in small and medium businesses, and a reduction in advertising spend in LinkedIn.”

Surface and Gaming

Microsoft’s Surface gadgets recorded a flat Q3, which is probably good news following the drop in global PC shipment due to the pandemic. The quarter showed a fair sale in the Surface Laptop 3, Surface Pro 7, Surface Pro X, and the Surface Earbuds released in October last year.

Apple Had to Redesign the Mac App Store So Microsoft's Hugely Awaited Office 365 Could Arrive

For gaming, Q3 showed a better result than the previous two quarters as
Xbox content and services revenue increased by 2%, due to the stay home directive. Although gaming revenue as a whole declined by 1%, the continued lockdown should boost better numbers in the next quarter.

Also, the number of active monthly users on Xbox Live is now nearly 90 million. Xbox Game Pass has more than 10 million subscribers, while Project xCloud has hundreds of thousands of active users.

Microsofts Q4 forecast

According to Microsoft’s forecast, the next quarter ending in June will see a productivity division revenue between $11.65 billion and $11.95 billion. However, analysts predict that the revenue will be around $12.1 billion.

Sales in the More Personal Computing unit is forecasted between $11.3 billion to $11.7 billion, and the Intelligent Cloud division is predicted to generate between $12.9 billion to $13.15 billion in revenue.

In Summary, the third fiscal quarter was a good one for Microsoft considering the crisis the world is facing. Investors will be pleased with the numbers. However, Hood said for the next quarter the company plans to continue aggressive cloud infrastructure expansion and keep up significant investment in its strategic priorities.



If you’d like to get featured on our Entrepreneur Spotlight, click here to share your startup story with us.


Technext Newsletter

Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!


Technext Newsletter

Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!