MS Transformed into Cloud, Q4 Sales Last Year Reach 44 Trillion Won

Cloud-Based Performance High Growth... Operating Profit Up 35% YoY
MS Ranked No.1 Preferred Cloud Enterprise CIO... Further Growth Expected

[Image source=EPA Yonhap News]

[Asia Economy Reporter Minwoo Lee] In the fourth quarter of last year, Microsoft (MS) recorded strong earnings that exceeded Wall Street's expectations in the United States. This was due to the outstanding performance of its cloud business.

On the 1st, Shinhan Investment Corp. set MS's target stock price at a high of $210 (approximately 250,000 KRW) and gave a buy rating. They predicted there is more than 23% upside potential compared to the closing price of $170.23 on the 31st (local time). This outlook is based on the expectation that the performance driven by the cloud business will become even more prominent in the future.

MS announced on the 29th (local time) that it posted revenue of $36.9 billion and operating profit of $13.9 billion in the second quarter of fiscal year 2020 (fourth quarter of 2019 in Korea). This represents a 14% increase in revenue and a 35% increase in operating profit compared to the same period last year. Earnings per share (EPS) also rose 40% to $1.51.

This growth was led by the cloud business segment. Revenue from the Intelligent Cloud segment increased by 26.6% year-over-year to $11.9 billion. In particular, the core cloud service 'Azure' saw its revenue surge by 62%. This contrasts with the personal computing segment, which includes the Windows operating system (OS), Surface tablet PC series, and Xbox gaming console, where revenue only increased by 1.7% to $13.2 billion. MS is regarded as having transformed into a cloud-centric company. Additionally, the Productivity and Business Processes segment, which includes Office (document creation programs) and LinkedIn (SNS-based job recruitment service), posted revenue of $11.8 billion, up 17.1%.

The growth trend is expected to continue in the next quarter based on the cloud business. MS provided guidance for the next quarter with revenue of $34.5 billion and operating profit of $12.2 billion, exceeding market consensus by 1% and 6%, respectively. As global data volume is expected to grow at an average annual rate of 28%, increasing from 33 zettabytes (about 10 trillion times a gigabyte) in 2018 to 175 zettabytes by 2025, demand for cloud services, which are essential for processing and analyzing this data, is expected to rise further. Researcher Yongmin Cho of Shinhan Investment said, "There are various positive factors such as Azure being chosen as the preferred cloud service by CIOs of large corporations in a Goldman Sachs survey and MS securing a cloud project contract with the U.S. Department of Defense." He added, "Considering MS's continuous capital investment of $4.5 billion, it is expected to be the biggest beneficiary of the growth in the cloud industry."

This content was produced with the assistance of AI translation services.