MS Posts Strong Growth in Q4... Net Profit Increases by 21% (Comprehensive)

(Photo by Reuters)

[Asia Economy Reporter Yujin Cho] Microsoft (MS), the world's largest software company, continued its strong performance in the fourth quarter, driven by robust growth in its cloud business. However, despite the strong earnings, the stock price showed a weak trend due to deteriorating investor sentiment toward technology stocks overall.

According to MS IR materials on the 25th (local time), MS reported fourth-quarter revenue (MS's own fiscal second quarter) of $51.7 billion (approximately 62 trillion KRW), a 20% increase compared to the same period last year, and net income of $18.8 billion, up 21%.

This exceeded Wall Street consensus estimates compiled by financial information provider FactSet, which forecast revenue of $50 billion and net income of $17.4 billion.

On a per-share basis, earnings were $2.48, a 22% increase compared to the same period last year, and also higher than Wall Street's expected $2.31.

The cloud business, MS's main source of revenue, drove the strong performance due to high demand, and the gaming entertainment segment, boosted by the acquisition of Activision Blizzard, also showed an upward trend.

Revenue from 'Azure' and other cloud services increased by 46% compared to the same period last year, and video game Xbox content and services revenue grew by 10%.

MS expects the favorable trend in the cloud business, driven by the expansion of remote work and non-face-to-face culture following the COVID-19 pandemic, to continue for the time being. MS is the world's second-largest cloud service provider after Amazon, with a market share of 20%.

The cloud service market is one of the fastest-growing sectors in IT. According to market research firm International Data Corporation, the market is expected to grow from $385 billion last year to $809 billion by 2025.

MS made a bold move in the gaming entertainment business by agreeing to acquire North America's largest game company, Activision Blizzard, for $68.7 billion, the highest price in MS's acquisition history.

Once the acquisition is completed, MS will become the world's third-largest game company, following China's Tencent and Japan's Sony. MS plans to release many popular Activision Blizzard games, including the three major PC online games Diablo, Warcraft, and StarCraft, on its game subscription service 'Game Pass,' aiming to become the 'Netflix of gaming.'

Satya Nadella, MS CEO, said in the earnings report, "Digital technology has become the most flexible resource available worldwide to overcome the constraints of the pandemic era and reinvent everyday work and life."

He added, "As the share of technology in global GDP continues to increase, we will innovate the market and continue investing through an operating model that strengthens technology, strategy, and purpose."

According to MS, the share of technology in global GDP is expected to double from the current 5% to 10% by 2030.

Meanwhile, despite the strong earnings, MS shares listed on the US Nasdaq closed down 2.66% at $288.49 due to worsening investor sentiment toward technology stocks overall.

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