Microsoft Cloud strength boosts second quarter results

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The company closes FY21 Q2 with over $40 billion in revenue.

Microsoft this week announced results for its second quarter in fiscal year 2021. The quarter ended on December 31, 2020, and compared to the same period last year, the results were spectacular. Revenue was $43.1 billion, which reflected an increase of 17%. Operating income increased 29% to $17.9 billion. And net income increased 33% to $15.5 billion.

“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” said Satya Nadella, chief executive officer of Microsoft. “Building their own digital capability is the new currency driving every organization’s resilience and growth. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”

Nadella said Microsoft has differentiated Azure with “integration at every layer of the stack, industry solutions leading to time to value, price differentiation, cost advantage and customer agility. That’s what you see in the acceleration around Azure. We see all the parts coming together.”

“Accelerating demand for our differentiated offerings drove commercial cloud revenue to $16.7 billion, up 34% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “We continue to benefit from our investments in strategic, high-growth areas.”

Highlights from the Cloud and other business sectors

Revenue in Intelligent Cloud was $14.6 billion and increased 22% in constant currency. Server products and cloud services revenue increased 24%, driven by Azure revenue growth of 48%.

Revenue in Productivity and Business Processes, including Microsoft Office suote of products, was $13.4 billion, an increase 11% in constant currency. Office Commercial products and cloud services revenue increased 9%, driven by Office 365 Commercial revenue growth of 20%.

Office Consumer products and cloud services revenue increased 6% and Microsoft 365 Consumer subscribers increased to 47.5 million. LinkedIn revenue increased 22% in constant currency.

Dynamics products and cloud services revenue increased 218%, driven by Dynamics 365 revenue growth of 37%.

PC sector also drives revenue growth

Revenue in More Personal Computing was $15.1 billion and increased 13% in constant currency. Windows OEM revenue increased 1% and Windows Commercial products and cloud services revenue increased 8%.

Xbox content and services revenue increased 38%, while Surface revenue increased 1%. Search advertising revenue excluding traffic acquisition costs increased 1%.

This quarter’s results also put Microsoft in a good position to fund future growth. Free cash flow grew $8.3 billion, an increase of 17%. This will give the company plenty of leverage to fund investments and acquisitions.