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Microsoft sees strong earnings on cloud computing

SAN FRANCISCO (AFP) – Microsoft beat market expectations on Tuesday with strong quarterly performance in cloud computing and software, still benefitting from the pandemic’s online shifting of work, play, shopping and learning.

The United States (US) tech colossus, which announced last week a blockbuster deal to buy gaming giant Activision Blizzard, said profit jumped to USD18.8 billion in the final three months of last year.

“Digital technology is the most malleable resource at the world’s disposal to overcome constraints and reimagine everyday work and life,” Chief Executive Officer Satya Nadella said in announcing revenue of USD51.7 billion.

Microsoft investments include pouring money into the booming video game market and by extension the metaverse, the virtual reality vision for the Internet’s future.

On an earnings call, Nadella pointed to the tens of millions of people playing games such as Forza, Halo and Minecraft, many investing in “avatar” proxies for online worlds, saying that the metaverse is a natural extension.

Microsoft is also meshing virtual gathering components with non-game offerings, such as Teams online collaboration software, according to executives.

A man passing by a Microsoft office in New York. PHOTO: AP

“We feel very well positioned to be able to catch what I think is essentially the next wave of the Internet,” Nadella said on the call.

The Redmond, Washington-based tech company last week announced a landmark deal to buy scandal-hit Call of Duty maker Activision for USD69 billion.

This would be the largest buyout ever for Microsoft, well ahead of LinkedIn in 2016 for USD26.2 billion.

Revenue at the career-focussed social network was up 37 per cent when compared with the same quarter a year earlier, according to the earnings report. Acquiring the troubled but highly successful Activision will make Microsoft the third-largest gaming company by revenue, behind Tencent and Sony, Microsoft said.

The proposed merger faces regulatory approval at a time when Europe and the US are seeking to rein in Big Tech.

Revenue in the Microsoft division which makes Xbox consoles and video game content grew 10 per cent in the recently ended quarter, according to the earnings report. “Redmond is continuing to see strength in the field as more enterprises continue to move to the cloud with Nadella and Co,” Wedbush analyst Dan Ives said in a note to investors.

Ives saw the strong earnings from Microsoft as a “broader indication of strength we expect to see across the enterprise cloud software landscape throughout this earnings season”.