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Microsoft uses Q2 2022 earnings to delve into metaverse

Company’s CEO sees a role for Microsoft that takes the metaverse beyond gaming and into the business sphere

In Microsoft’s second-quarter 2022 earnings call, company CEO Satya Nadella discussed his vision for the metaverse.

Overall, the company’s Q2 2022 filing shows strong growth in its cloud-based services. Microsoft reported revenue of $51.7bn, an increase of 20% over the previous year. Revenue in its Intelligent Cloud business was $18.3bn, which represents an increase of 26% over the previous year. Server products and cloud services revenue increased by 29% driven by Azure, and other cloud services saw revenue growth of 46%.

Among the trends Nadella spoke about during the earnings call is what he described as “a structural shift in PC demand”.

The company reported that Windows revenue from PC manufacturers increased by 25%, which, according to Microsoft CFO Amy Hood, was “significantly ahead of expectations”. She said demand was being driven by the strong PC market, particularly in the commercial segment.

According to a transcript of the earnings call, posted on the Seeking Alpha financial blogging site, Nadella sees the metaverse as the next wave of the internet. “Just like the first wave of the internet allowed everybody to build a website, I think the next wave of the internet will be a more open world where people can build their own metaverse world, whether they are organisations or game developers or anyone else,” he said.

Touching on the company’s plans to acquire games developer Activision Blizzard for $68.7bn, Nadella discussed its strategy to become part of the metaverse and described Microsoft’s position both in terms of platform infrastructure and applications.

“The first place where we see this is the increasing digitisation of people, places and things to be able to really help businesses automate processes to the next level,” he said. “And so today, between Azure IoT, Digital Twins and Mesh, we have many examples where customers are engaged with us. So that’s what will show up in Azure and we’re investing significantly there.”

Further up the software stack, Nadella said he saw opportunities for Dynamics 365 Connected Spaces. The technology, which is in preview, is being designed to manage physical processes in physical spaces such as a shop, connected factory or building. “We now have a suite which is all driven by connected spaces,” he said. The goal for Microsoft is about automating physical processes, he added.

For collaboration tools, Nadella described how Teams is supporting Mesh meetings on 2D screens and also 3D VR (virtual reality) and AR (augmented reality) googles. “On the devices side, one of the things we are very excited to be doing is what we’re doing with HoloLens, on the silicon side and all the way to the cloud in terms of some of the foundational services driven by all the HoloLens use cases in the enterprise,” he said.

From a gaming perspective, Nadella said: “We are investing to make it easier for people to play great games wherever, whenever and however they want, and also shape what comes next for gaming as platforms like the metaverse develop.”

Read more about the metaverse

  • Will the metaverse create a $1tn revenue market? Who knows? How long will it take to reach this lofty potential? Who can tell? Will people invest across this emerging landscape of speculative riches? You bet.
  • The metaverse promises to create an immersive, interactive and shared digital world that brings together mixed reality – augmented reality and virtual reality – along with 3D holograms.

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