UPDATE 2-Microsoft's strength in cloud computing boosts earnings, shares rise

27 Jan 2021 / 05:22 H.

    (Adds commercial cloud gross margins, revenue, updates shares)

    Jan 26 (Reuters) - Microsoft Corp beat Wall Street estimates for Azure revenue growth on Tuesday, as the software giant continued to benefit from a global shift to working and learning from home.

    The company's shares, which gained about 41% in 2020 as one of the "stay-at-home" winners, rose 6% in extended trading.

    The shift to work from home due to the COVID-19 pandemic has accelerated enterprises' switch to cloud-based computing, benefiting Microsoft and rivals such as Inc's cloud unit and Alphabet Inc's Google Cloud.

    Microsoft said revenue in its "Intelligent Cloud" segment rose 23% to $14.6 billion, with 50% growth in Azure. Analysts had expected a 41.4% growth in Azure, according to consensus data from Visible Alpha. Last quarter Azure grew 48%.

    The company bundles several sets of software and services such as Office and Azure into a "commercial cloud" metric that investors watch closely to gauge the company's progress in selling to large businesses.

    Commercial cloud gross margins - a measure of the profitability of its sales to large businesses - were 71% in the quarter, compared with 67% a year earlier.

    Revenue from its personal computing division, which includes Windows software and Xbox gaming consoles, rose 14% to $15.1 billion, driven by strong Xbox content and services growth, beating analysts' estimates of $13.5 billion, according to IBES data from Refinitiv.

    Microsoft in November released two new Xbox consoles, its most visible non-work and non-school brand, but the hardware proved difficult to find as a global semiconductor shortage contributed to tight stocks as many retailers.

    The software giant's overall revenue rose to $43.08 billion in the second quarter ended Dec. 31, from $36.91 billion a year earlier, beating analysts' estimates of $40.18 billion, according to IBES data from Refinitiv. (Reporting by Akanksha Rana in Bengaluru and Stephen Nellis in San Francisco; Editing by Sriraj Kalluvila and Lisa Shumaker)

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