Microsoft’s fiscal third-quarter went better than expected. For the period ended March 31, the software giant reported revenue of $35 billion, up 15%, and ahead of the Wall Street analyst consensus estimate of $33.66 billion. Profits were $1.40 a share versus a Street estimate of $1.26 a share.
BARRON'S, By Eric J.Savitz


© Denis Charlet/AFP via Getty Images | Microsoft Says Covid-19 Had Minimal Impact On Revenue In Its Latest Quarter. Its Stock Is Rising.
The company said that the Covid-19 pandemic had “minimal net impact on total company revenue.”
“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,” CEO Satya Nadella said in a statement. “Our durable business model, diversified portfolio, and differentiated technology stack position us well for what’s ahead.”
CFO Amy Hood added that the company’s sales teams and partners “executed a solid third quarter, with Commercial Cloud revenue-generating $13.3 billion, up 39% year over year.”
Microsoft said that in its Productivity and Business Processes and Intelligent Cloud segments, cloud usage increased in the quarter, “particularly in Microsoft 365 including Teams, Azure, Windows Virtual Desktop, advanced security solutions, and Power Platform, as customers shifted to work and learn from home.”
For the final weeks of the quarter, Microsoft noted “a slowdown in transactional licensing, particularly in small and medium businesses, and a reduction in advertising spend in LinkedIn.”
The company also said that in its More Personal Computing segment, “Windows OEM and Surface benefited from increased demand to support remote work and learn scenarios, offset in part by supply chain constraints in China that improved late in the quarter.”
Microsoft said its gaming segment “benefited from increased engagement following stay-at-home guidelines.” And the company said its Search business “was negatively impacted by reductions in advertising spend, particularly in the industries most impacted by Covid-19.”
Revenue in its productivity and business processes segment was $11.7 billion, up 15%, at the high end of guidance. Intelligence Cloud revenue was $12.3 billion, up 27%, including 59% growth at Azure. More Personal Computing revenue was $11 billion, up 3% in the middle of the guidance range that the company had withdrawn in February because of Covid-19 concerns.
The strong performance in “more personal computing” was due in part to strength in the company’s gaming business. Xbox content and services revenue, which had been expected to be down double-digits in the quarter, was actually up 2%.
The company said it returned $9.9 billion to holders in the quarter in dividends and stock repurchases, up 33% from the December quarter. The stock repurchases totaled $6 billion.
For the June quarter, Microsoft sees Productivity and Business Processes revenue of $11.65 billion to $11.95 billion; for Intelligent Cloud, $12.9 billion to $13.15 billion, and for More Personal Computing, $11.3 billion to $11.7 billion.
Microsoft shares were up 2.4% in late trading Wednesday to $181.60. The stock was up 12.5% so far this year heading into the earnings report.

This article was originally published in BARRON'S.
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