Microsoft Earnings: Q4 Was Most Profitable Quarter

With the pandemic accelerating the turn to cloud computing, Microsoft continued its string of strong financial results.

Sales in the three months ending in June hit $46.2 billion, up 21 percent from a year earlier, and profits rose 47 percent to $16.5 billion, producing its most profitable quarter, Microsoft said on Tuesday. The results surpassed analyst expectations.

Investors have become so accustomed to the company beating estimates that shares of the stock fell about 2.5 percent in aftermarket trading.

“Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing markets, we generate growth,” Satya Nadella, the company’s chief executive, said in a statement.

With the pandemic moving people online to a greater extent and the economy rebounding, companies have accelerated their spending in key areas where Microsoft has invested, including security and cloud services. Sales of Azure, the company’s flagship cloud-computing product, were up 51 percent.

Almost 250 million people use Teams, Microsoft’s workplace collaboration tool, each month, according to Kyle Vikstrom, a director of investor relations. It was the first time the company had disclosed how many people use that tool, which it introduced in 2016 to compete with Slack.

Revenue in its commercial cloud business, which includes Office 365, Azure and other offerings, grew 36 percent in the quarter to $19.5 billion. While the pandemic battered some industries more than others, bookings for future commercial cloud business were up 30 percent, with commitments across industries and geographic markets.

Microsoft has been moving customers to subscription services for Office products like Word, Excel and Teams. The products produce recurring revenue and opportunities for the company’s sales people to meet with customers on upgrades and other services. The company recently unveiled Windows 11, the first update to Microsoft’s flagship operating system in six years; it also follows a subscription model.

That strategy has paid off during the pandemic, with more people relying on their computers for work and school. Revenue from Microsoft’s personal computing business grew 9 percent to $14.1 billion. Sales of new Windows installations fell slightly, as chip and supply chain shortages have impeded the number of new computers entering the market. While Xbox console sales increased, revenue from gaming content decreased by 4 percent, reflecting how a year ago customers stayed home and played more online.