3 ways COVID-19 impacted Microsoft’s latest earnings
Despite the coronavirus weakening the global economy, Microsoft managed to be relatively unscathed.
The technology giant said Wednesday that its overall revenue in its latest quarter jumped 15% year-over-year to $35 billion. Those results beat analyst expectations of $33.7 billion, fueling a 4.5% rise in the company’s shares during after-hours trading, to $177.43.
But while Microsoft continued its string of solid quarterly earnings, it wasn’t totally immune from financial troubles related to Covid-19, as company executives explained in a conference call. Here’s three ways the pandemic did impact the business.
Bing and LinkedIn took a hit
Chief financial officer Amy Hood said Microsoft experienced a “significant reduction” in ad spending, which affected its search business and LinkedIn professional network. The decline was part of a broader retrenchment in the online ad industry, which Facebook also highlighted on Wednesday.
With companies laying off thousands of workers and pausing hiring, they aren’t spending as much on LinkedIn as they were previously, Hood said without providing financial details. That said, LinkedIn’s revenue still grew 21% year-over-year from an unspecified amount.
Microsoft doesn’t typically reveal specific Bing and LinkedIn sales in its quarterly reports, which indicate that they are not big enough be significant. So any hit those businesses take due to the coronavirus are unlikely to have a big impact on Microsoft’s overall results.
On to personal computing
With more people at home because of shelter-in-place orders, the company’s Xbox gaming business benefited, Hood explained. The company said that overall Xbox content and services revenue grew 2% year-over-year, without providing specific numbers, reversing a trend of flat or declining quarterly sales as people wait for a new Xbox gaming console later this year.
As for Microsoft’s Surface computers, that business only increased 1% year-over-year from an unspecified number. While that growth seems small, Hood said that the Surface business grew along with the company’s Windows business because more people are working from home.
Overall the company’s personal computing business—which includes Surface, Windows, Xbox, and search—rose 3% year-over-year to $11 billion.
Bring on the cloud data centers
The coronavirus pandemic has led to more businesses and people using Microsoft’s cloud-related services like Azure. But the heavy use also caused some of Microsoft’s cloud services to experience some outages.
Hood explained that Microsoft expects more capital spending later this year, which means heavy investment in the data centers that provide cloud services.
Microsoft spent $3.9 billion in capital improvements in its latest quarter, a drop from the $4.5 billion it spent during the previous quarter. She said problems in the supply chain due to the coronavirus resulted in Microsoft having to pause some data center investments. With the supply chain looking healthier than expected, she noted, data center spending will increase.
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