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Microsoft has strong quarter, fueled by Cloud computing and Office 365 subscriptions

  • October 28, 2020

Microsoft saw steady gains in quarterly earnings, thanks to cloud computing and gaming.

The Windows software maker said its revenue was $37.2 billion, up 12% from the year-ago quarter, with $13.9 billion in earnings.

“The next decade of economic performance for every business will be defined by the speed of their digital transformation,” Microsoft CEO Satya Nadella said in a statement. “We are innovating across our full modern tech stack to help our customers in every industry improve time to value, increase agility, and reduce costs.”

Microsoft said demand for its cloud offerings generated $15.2 billion, up 31% from the year ago quarter.

Microsoft says the Labor Department is investigating if its commitment to increase Black representation in its U.S. workforce is discriminatory.

Sales for Office 365 subscriptions rose, with some 45.3 million subscribers now, and revenue for its LinkedIn business social network increased 16%.

However, revenue from computer makers to license Windows software, which long had been the bread and butter for the company, fell 5%, as new computer sales took a hit from COVID.

With more people at home, gaming rose 30% for Microsoft’s Xbox content and services revenue.

Daniel Ives, an analyst with Wedbush Securities, says the “strong numbers” from Microsoft shows how well the company has transitioned to cloud computing and subscriptions.

“This is a stark contrast to the earnings debacle we saw from mature software stalwart SAP earlier this week which highlights the clear winners and losers in this cloud shift,” he said in a research note.

With 33% of workloads in the cloud today and poised to hit 55% by 2022, Ives says the work from home shift from COVID “could clearly accelerate the cloud trend by roughly a year,” as more IT departments are “now being forced to face the new normal/reality for their respective organizations looking ahead.”

Follow USA TODAY’s Jefferson Graham (@jeffersongraham) on Twitter

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