Cloud business guidance to promote stock price rebound, an article to understand what Microsoft's earnings meeting said?

Microsoft's fourth-quarter results announced last year were generally better than market expectations, but the stock price fell sharply after hours. During the earnings-related conference call after the earnings report, after disclosing higher than the market expectations for the cloud business revenue guidance, the stock price finally turned up, rising more than 3%.

The results guidance shows that in the third fiscal quarter of fiscal 2022, that is, the first quarter of this year of the Gregorian calendar year:

The "smart cloud" business, which includes Azure, GitHub, server products, enterprises and cloud services, is expected to have revenues of $18.75 billion to $19 billion, higher than the consensus estimate of $18.56 billion;

Productivity and Business Processing, which includes Office products for business and individual consumers, LinkedIn, Dynamics products, and cloud services, is expected to have revenues of $15.6 billion to $15.85 billion and market expectations of $15.76 billion;

"More Personal Computing," which includes Windows, search, the xbox and Surface computers, is expected to generate revenues of $14.15 billion to $14.45 billion and the market expects $13.65 billion.

For Microsoft's announcement last week of a huge acquisition of game giant Activision Blizzard, Amy Hood, Microsoft's chief financial officer and vice president, said that he would not provide a new statement around the acquisition. In addition to the performance guidance, what else was said on this conference call?

Azure cloud business

On Tuesday, Microsoft announced the largest merger deal in the company's history, saying that the acquisition would "provide the cornerstone for building a metacosm." As a result, the focus on Microsoft over the past week has focused on the gaming business, but this is only a long-term strategy, and it is expected that this merger may not be completed until mid-2023. Microsoft and Blizzard themselves have also set a deal deadline of 2023. This may acknowledge that Microsoft, as a tech giant, faces higher regulatory scrutiny challenges at a time when the ruling Democratic Party of the United States is intent on stepping up regulation of the tech industry and launching a blockbuster antitrust bill.

Returning to reality, one of the focuses of Microsoft's fourth-quarter earnings report is the cloud business, and another focus is how the sales performance of Windows, Surface computers and Xbox game consoles is affected by the supply chain, because in the holiday shopping season at the end of last year, the chip shortage limited shipments, and it was more difficult for customers to buy physical goods such as computers and game consoles.

According to the financial report, the operating income of Microsoft's largest revenue source intelligent cloud in the fourth quarter increased by 26% year-on-year, in line with expectations, of which the revenue of Azure and other cloud services, which was much concerned by the market, increased by 46%, and the growth rate was close to the level of the third quarter. Amy Hood, Microsoft's chief financial officer and vice president, said the robust business applications, reflected in strong growth in long-term Azure subscription service orders, drove Microsoft cloud revenue up 32 percent year-over-year to $22.1 billion.

On the post-earnings call, Microsoft CEO Nadella mentioned Azure's achievements, saying that Microsoft's digital centers are located in more regions than other cloud service providers, and that The customers of Azure Arc hybrid/multi-cloud solutions are three times the same as they were a year ago.

In addition, in the Microsoft data stack, the transaction volume of the Cosmos DB cloud database solution increased by more than 100% year-on-year; the monthly active users of the office collaboration tool Teams exceeded 270 million; LinkedIn has confirmed 110% year-on-year recruitment; LinkedIn freelancer services have also grown strongly; the devices of the application virtual meeting planning system Teams Rooms have more than doubled year-on-year, and the application equipment of Teams Phone has also grown strongly.

Windows

Last October, Microsoft launched Windows 11, a new operating system for Windows for the first time in a decade. Comments at the time suggested that the release of Windows 11 could further secure the future of the series and also benefit other Microsoft businesses such as Azure and Office.

On the Windows side, Nadella said on the conference call that the "PC renaissance" has gained a foothold, Windows won share in the fourth quarter, the number of devices running Windows 10 or 11 is currently more than 1.4 billion, the Windows 11 users using Windows apps are three times the number of Windows 10 users; more than 1 billion individual and business users currently logged in with Microsoft accounts, and more than 700,000 customers use Microsoft's advanced security solutions.

Game

In terms of games, Nadella said that Xbox Game Pass subscribers currently have more than 25 million, and believes that Activision Blizzard will help shape the future of the game industry.

Negative impact of currency exchange rates on performance The performance guidance does not take into account the impact of the acquisition of Nuance

Amy Hood said that the strengthening of the us dollar in the fourth quarter created a negative impact of 1 percentage point more than expected on Microsoft's performance growth; commercial orders increased far more than expected year-on-year (Wall Street Insight Note: DOLLAR-denominated orders increased by 32%); as expenses shifted to the next quarter, operating expenses grew at a lower-than-expected, 16% year-on-year increase in employees in the quarter; and Office 365's commercial paid accounts increased by 16% due to strong demand from small and medium-sized enterprises and frontline employees. Including Dynamics, app revenue increased 161% year-over-year.

For "productivity and business processing" businesses, including Office products for businesses and individual consumers, LinkedIn, Dynamics products, and cloud services, Hood said they faced a negative fx exchange rate impact of 1 percentage point compared to expectations, otherwise the revenue of such businesses would be more than just slightly higher than market expectations.

For the "more personal computing" business, which includes Windows, search, the xbox and Surface computers, Hood said their revenue was driven by higher-than-expected revenue from Windows OEMs, Surface and search ads. Xbox hardware revenue growth benefited from better-than-expected supply.

For the performance guidance, Hood said that it did not take into account the impact of the $19.7 billion acquisition of voice technology giant Nuance. The Nuance acquisition is the third largest acquisition in Microsoft's history after Blizzard and LinkedIn and is scheduled to close in the first quarter of this year.