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Microsoft results show impact of tech-driven business resilience

While economies are set to shrink, businesses are leaning on tech to support operations, says Microsoft CEO Satya Nadella

Microsoft has reported fourth-quarter 2020 revenue of $38.0bn, an increase of 13% over Q4 2019, although its income for the quarter dropped by 15% to $11.2bn.

Looking at Microsoft’s product offerings, the company’s Productivity and Business Processes business reported revenue of $11.8bn, an increase of 6% from the previous year. Office 365 commercial revenue grew by 19%, Dynamics increased revenue by 13% and LinkedIn saw revenue growth of 10%. The Microsoft Intelligent Cloud business grew revenue by 17% to $13.4bn and Azure revenue increased by 47%.

In the transcript of the earnings call posted on the Seeking Alpha financial blogging site, CFO Amy Hood said Microsoft’s commercial cloud business had increased revenue by 30% to $14.3bn.“Our commercial cloud surpassed $50bn in annual revenue for the first time this year,” she said. “And this quarter, our commercial bookings were better than expected, growing 12% year-over-year. As we drive growth across the company, we remain committed to investing in long-term strategic opportunities.”

Hood attributed a 7% growth in Windows PC earnings to improvements in the PC supply chain. Commercial Windows revenue also increased. She said: “Windows commercial products and cloud services revenue grew 9%, driven by Microsoft 365 and the continued demand for our advanced security solutions. In Surface, revenue grew 28%, with strength across consumer and commercial segments.”

Satya Nadella, chief executive officer of Microsoft, said: “The last five months have made it clear that tech intensity is the key to business resilience. Organisations that build their own digital capability will recover faster and emerge from this crisis stronger. We are the only company with an integrated, modern technology stack – powered by cloud and AI and underpinned by security and compliance –  to help every organisation transform and reimagine how they meet customer needs.”

Asked whether Microsoft was seeing demand for big-deal IT projects given that gross domestic product is set to decline this year because of the Covid-19 pandemic, Nadella said: “The things that at least we have learned, I would say in the last five months, is that digital technology is no longer viewed as just new projects start, but it’s becoming perhaps the most key for business resilience and business continuity.”

According to Nadella, using digital technology to enable business resilience has been elevated to the number one priority in many organisations. “When I think about digital transformation now, I break it into two things,” he said. “I think about resilience and what Microsoft can do to help any business be more resilient – whether it’s remote everything, whether it’s about the ability to simulate anything or to automate everything. Those are the things that I think are going to increase.”

He said the other part of digital transformation is how organisations readjust to what is going to be an increased e-commerce, contactless reimagined world and reconfigure their supply chains.

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