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Cloud Stocks: Microsoft Rides High on Teams and Gaming

Posted on Friday, Jul 24th 2020

Earlier this week, Microsoft (NASDAQ: MSFT) reported its fiscal fourth quarter results that surpassed all market expectations. Growth in Teams, Cloud, and Gaming segments helped drive growth for the quarter. But the market was not too impressed as Cloud revenue growth was slower than expected.

Microsoft’s Financials

Fourth quarter revenues grew 13% to $38 billion, significantly ahead of the market’s forecast of $36.5 billion. EPS fell 15% to $1.46 as the company continued to invest in cloud technologies. The market was looking for an EPS of $1.38.

By segment, revenues from Productivity and Business Processes grew 6% to $11.8 billion driven by 5% increase in Office Commercial products and cloud services revenue. Office 365 Commercial revenue grew 19% over the year. Revenue in Intelligent Cloud improved 17% to $13.4 billion driven by a 19% increase in Server products and cloud services revenue. Azure’s revenues grew 47% over the year in the quarter. Revenue from More Personal Computing grew 14% to $12.9 billion with Windows OEM revenue growing 7% over the year. Xbox content and services revenue increased 65% as more locked down users accessed the gaming console.

Despite the impressive results, the market was not very impressed. Azure revenues grew 47% in the quarter, missing expectations of 49% growth and significantly lower than the 59% growth reported a quarter ago.

Microsoft ended the fiscal year 2020 with revenues of $143 billion, up 14% and net income of $44.3 billion, up 13%.

For the first quarter, Microsoft forecast revenues of $36.1 billion. The market was looking for earnings of $1.48 per share on revenues of $35.9 billion for the Q1 2021 and earnings of $6.24 on revenues of $155.5 billion for fiscal year 2021.

Microsoft’s Growth Areas

Microsoft continues to drive growth in Azure and the hybrid environment. It is accelerating its innovation to meet customers’ needs. Azure Arc was released to be the first control plane built for a multi-cloud, multi-edge world. They are expanding its capabilities by adding Azure Arc-enabled Kubernetes. The new capabilities in Azure Stack HCI will allow organizations to bring the cloud to their very own datacenters.

It continues to add new capabilities in Azure Cognitive Services that make it easier to build applications that speak naturally in 49 languages and variants. The Cognitive solution is able to generate insights from unstructured data including the information provided in paper-based forms and medical records. With Azure Machine Learning, it is enabling organizations to deploy AI more responsibly and safely.

Within its Power Platform, Microsoft is enabling anyone in the organization to rapidly create an application, build a virtual agent, automate a workflow, or analyze data. Non-technical developers and business decision makers can now use the Power Platform to create queries and get data insight. According to recent reports, 96% of the Fortune 500 now use Power BI to find insights in their data. It continues to drive usage of the platform by adding new capabilities. For instance, it recently added an end-to-end return to the workplace solution in Power Platform that will allow organizations to keep employees safe and healthy when they go back to the office.

The global conditions have spurred the usage of digital collaboration tools and Microsoft is clearly benefitting from that growth. For instance, Microsoft Teams is helping people work together by providing an integrated experience for meetings, calls, chat, content collaboration, and business process workflows.

Microsoft recently added new capabilities like Together Mode and Dynamic Stage within meetings to help teams feel more connected. It expanded the gallery view in Teams so that people can now interact with up to 49 participants at a time. It introduced Breakout Rooms and Live Reactions to help people connect with each other better even when working remote. Teams is a rapidly growing application that generated more than 5 billion meeting minutes in a single day this quarter. 69 organizations now have more than 100,000 users of Teams, and more than 1,800 organizations have more than ten thousand users of Teams.

Microsoft continues to work on expanding Teams beyond the workplace and has simplified the process of adding a personal Teams account on mobile so that users can stay connected with friends and family across work and life. It is also working with educational institutions to help them prepare for remote, and blended in-person scenarios using solutions like Teams.

Microsoft is also verticalizing its cloud, and the new Microsoft Cloud for Healthcare is helping providers schedule, manage, and conduct virtual visits using Teams and engage with patients using Dynamics 365. Within the vertical, there were more than 46 million Teams meetings in June alone.

Xbox also had a record quarter. Xbox Game Pass had record subscriber growth across both console and PC. It is expanding xCloud to Xbox Game Pass, so that subscribers can stream games to a phone or tablet and play along with over 100 million Xbox Live players around the world. Microsoft is working on launching Xbox Series X this fall which is expected to have the largest launch lineup for any console ever.

Its stock is trading at $202.54 with a market capitalization of $1.54 trillion. It had climbed to a record high of $216.38 earlier this month. It hit a 52-week low of $130.78 in March this year.

This segment is a part in the series : Cloud Stocks

. Smartsheet Acquiring Bootstrapped Startups to Drive Growth
. Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups
. Netflix Price Hike Ruffles Competition
. How Will Carbon Black Differentiate?
. ServiceNow Grows Through Addition of Capital-Efficient Startups
. Zendesk and Freshworks Follow Different Acquisition Strategies
. Tableau Grows Through Small Acquisitions
. Open Platform Strategy Stands Intuit in Good Stead
. Will GoDaddy Follow the PaaS Route?
. Adobe Delivers Via PaaS
. A Look at Oracle’s 2018 M&A Activity
. What Apps Will Drive More Traction for Cloudera?
. Slack's App Focus Will Be Key to Post-IPO Success
. IBM Counts on its Cloud and Platform for the Turnaround
. Atlassian Acquires From its PaaS Marketplace
. What Should SAP Acquire to Triple its Value by 2023?
. Expect ServiceNow to Acquire From App Marketplace
. Should Follow a PaaS Strategy?
. How Upwork Can Leverage the Virtual Company Trend
. Qualys Scouting For Acquisitions
. Should SAP Acquire Zendesk or Freshworks?
. HubSpot Counts on its API Strategy
. SurveyMonkey Eyes Acquisitions for Growth
. Workday Wants to Disrupt Cloud Computing Using Machine Learning
. Einstein and Open-Source Platform Lead the Charge for Salesforce
. DocuSign Prepares to Beat Rival Adobe
. Veeva Soars, But Dassault Acquires Medidata for $5.8 Billion
. Tableau Acquisition Signals Massive Analytics Push for Salesforce
. Oracle Joins Hands with Microsoft to Take on Amazon
. GoDaddy is Making Strategic Acquisitions for the Next Level of Growth
. Alteryx Sees Strong Momentum
. Adobe Leveraging Magento and Marketo to Deliver Blockbuster Performance
. Is Slack Overvalued?
. How Will Cloudera Address the Competition?
. Zoom is Not Bothered by Cisco or Microsoft
. Domo Counts on Enterprise Revenue for Growth
. Netflix Plays with Pricing and Games to Attract Subscribers
. CrowdStrike Has a Successful IPO
. Atlassian Crosses the Billion Dollar Revenue Milestone
. ServiceNow Believes Strength Lies in Tie-ups
. Partnerships are the Mantra for BlackLine
. SurveyMonkey Counts on Enterprise Segment for Growth
. HubSpot Soars to a New High
. Intuit Pushes AI to Simplify Tax Filing
. Splunk Sees Strong Cloud Momentum
. Forescout Partners with Big Names
. Smartsheet Tapping into the Government Sector
. Salesforce Continues its Shopping Spree
. Palo Alto Networks Targets the IoT Security Market
. DocuSign Focuses on the Mortgage Sector
. Oracle Brags About Autonomous Database
. Blackbaud Acquires YourCause to Grow Addressable Market
. The Market Expects a Lot More from Adobe
. Anaplan Makes its First Acquisition Post IPO
. Activist Investor Drives Market Interest in Box
. MongoDB's Formula for Success
. Coupa Aims for $1B Revenue
. Dropbox on a Rocky Road
. Medallia Banks on Acquisitions
. IBM Banks on AI
. Time For Skepticism with Netflix
. SAP Riding High on the Cloud
. Amazon's Faster Shipping Hurting its Earnings
. ServiceNow CEO Change Signals Focus on Acquisitions
. Will Google Acquire Fitbit?
. HubSpot Focuses on Its Platform
. BlackLine Partners with Google Cloud
. Rapid7’s Focus on Cloud SIEM Pays Off
. Splunk Bets Big on Data Streaming
. Intuit's QBO Scores Big
. VMware Builds Up With Acquisitions
. Palo Alto Targets $5B Revenue by 2022
. Workday Targeting Procure-to-Pay Cycle
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. Okta Targets Enterprise Customers
. MongoDB Eyeing China With Alibaba Partnership
. Twilio Counts on API Upgrades for Growth
. Adobe Revs up its Experience Platform
. Top 20 for 2020
. Anaplan Sees Expanding Use Cases
. Dropbox Gears Up to Regain Lost Valuation
. Forescout Fails to Deliver
. Enterprise Bet Pays Off for SurveyMonkey
. SAP Bets Big on Experience Management
. Twilio Steps up Investment in 2020 to Preserve Growth Momentum
. Zendesk, Freshworks Focus on Marketplaces and Integrations
. Proofpoint Targets Insider Threats Through Acquisition
. RingCentral's Powerful Partner Strategy Would Augment with PaaS
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. HubSpot Believes in the Importance of PaaS
. BlackLine Remains Focused on SAP Integration
. Recently Public Cloudflare has New Edge
. GoDaddy is on a Shopping Spree
. Intuit Targets Online User Base Through Acquisition
. Should Palo Alto Networks Acquire ZScaler?
. Why Salesforce Buying Vlocity Proves the Growing Importance of PaaS
. Datadog Performing Well Post Recent IPO
. Workday Should Open Up About its PaaS Success
. Anaplan Focuses on API Connectors for its Platform
. Veeva
. Five9 Strengthens its PaaS Focus
. RealPage Brings AI and SaaS to Real Estate
. Splunk Should Open up About its PaaS Metrics
. Okta Benefiting from App Diversity
. Oracle Sees Growth Momentum
. Xero Focuses on a PaaS Strategy
. DocuSign Resilient to COVID-19
. Smartsheet Looking up to Enterprise Customers for Growth
. Paylocity Delivers Solid Results
. Q2 Holdings Expands TAM with Acquisitions
. New Relic Focuses on PaaS
. AppFolio Leverages AI for Product Enhancement
. Will Adobe Open Up About its PaaS Statistics?
. Change Healthcare Pushes APIs
. Dropbox Needs to Share API Metrics
. Upwork Improves Monetization
. MongoDB has Miles to go
. Nutanix Needs to Define a PaaS Strategy
. Cloudera Focuses on Hybrid Cloud
. Atlassian Gears Up for Growth, Unfazed by Covid-19
. Shopify Helps Merchants Pivot to Online Stores
. ServiceNow Steady in Turbulent Seas
. RingCentral Sees Strong Traction
. Twilio Hits 52-Week High Amidst COVID Crisis
. HubSpot Lowers Outlook Amidst Virus Concerns
. Proofpoint Acquiring Even Amidst Crisis
. BlackLine Looks Solid At The Face of Covid-19
. GoDaddy Continues to Acquire
. Qualys Expands Cloud Offerings to Soar to New Highs
. Zendesk Struggling Amidst the Downturn
. Alteryx Bounces Back Despite Low Outlook
. Palo Alto Networks Continues to Acquire
. Workday Extends its PaaS Strategy
. Splunk Rides High on Cloud Initiatives
. Salesforce Partners with Workday to Address the New Normal
. Veeva Scales New Highs
. Is Smartsheet’s Pullback a Buying Opportunity?
. MongoDB Soars Even in the Crisis
. Okta Reiterates Outlook
. Is Anaplan a Prospect for Oracle, SAP?
. Oracle Relies on Autonomous Offerings
. Adobe Shifts its Focus
. Paycom Confident Under Current Conditions
. DocuSign Soars to Record Highs
. Paylocity Acquires Amid Crisis
. Datadog's Integrations and Upgrades Help it Soar
. AppFolio Improves Offerings for Current Conditions
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. Model N Soars to a Record High
. Appian Focuses on RPA for Growth
. Slack Beefs up its Portfolio
. Coupa Expands into Treasury Services
. CrowdStrike Soars to Record Highs
. Guidewire Expands Cloud Offerings
. Dropbox Should Focus on PaaS
. Talend Expands Data Offering Through Partners
. IBM Expands Cloud Partners
. One Medical Supports COVID-19 Care Digitally
. Microsoft Rides High on Teams and Gaming
. Investors Say Yes to nCino’s IPO
. Nutanix Focuses on Government and Media Verticals
. SAP Rethinks Qualtrics Acquisition
. Tenable Expands Into Industrial Cyber-Security
. ServiceNow Expands Ties with Zoom
. Cloudera Powers its Data Platform with Partnerships
. Atlassian Continues to Acquire from PaaS Ecosystem
. Shopify Soars to an All-Time High
. The PaaS Landscape
. HubSpot Focuses on the Enterprise Segment
. GoDaddy Restructures During COVID
. Akamai's Security Solutions Thriving
. Blackline Needs a PaaS Strategy
. Twilio - A Successful PaaS Story
. Zendesk Invests in the Future
. Qualys Continues to Acquire Indian Startups
. ZoomInfo Lists Despite COVID-19
. Analysis of Alteryx PaaS Strategy
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. Analysis of Five9's PaaS Strategy
. Okta Expands Alliances to Attract Enterprises
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. Analysis of Splunk's PaaS Strategy
. BigCommerce Goes Big with IPO
. Analysis of Workday's PaaS Strategy
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. Analysis of MongoDB's PaaS Strategy
. Analysis of Wix's Platform Strategy
. New Relic Product Upgrades Deliver Growth

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