Microsoft's results last quarter exceeded expectations, and regulators are worried about the sky-high deal to buy Activision Blizzard

On January 26, Microsoft released its fiscal second quarter of fiscal 2022. According to the earnings report, Microsoft's revenue for the quarter was $51.7 billion, up 20% year-on-year, exceeding Wall Street's previous expectation of $50.9 billion.

Under U.S. GaAP, Microsoft's net profit for the quarter was $18.8 billion, up 21% year-over-year, and under non-GAAP, Microsoft's net profit for the quarter was $18.8 billion, up 21% year-over-year.

By division, Microsoft's Productivity and Business Processes division generated fiscal first-quarter revenue of $15.9 billion, up 19% year-over-year. Revenue from Office commercial products and cloud services increased 14 percent, which was attributed to a 19 percent increase in Office 365 business revenue. LinkedIn revenue grew 37% in the quarter. Office consumer product and cloud services revenue increased 15 percent, and Microsoft 365 consumer users increased to 56.4 million. Dynamics product and cloud services revenue increased 29 percent, driven by a 45 percent increase in Dynamics 365 revenue.

Revenue from Microsoft's Smart Cloud division was $18.3 billion, up 25 percent year-over-year. Server products and cloud services revenue increased 29 percent, driven by a 46 percent increase in Azure and other cloud services revenue.

More Personal Computing revenue was $17.5 billion, up 15% year-over-year. Windows business products and cloud services grew 13 percent, and search and news advertising revenue, regardless of traffic acquisition costs, grew 32 percent. Surface, which is affected by the tight global chip supply chain, increased revenue by 8% in the quarter, after two consecutive quarters of Continuous Decline in Surface revenue, as Surface revenue increased, Microsoft may have come out of the impact of supply chain decline.

In addition, the recently mentioned Xbox content and services revenue increased by 10%, compared with a 40% increase in the Xbox business due to the impact of the home economy in the same period last year.

Satya Nadella, Chairman and CEO of Microsoft, said in her earnings report, "As technology continues to grow as a share of global GDP, we are innovating and investing in diverse and growing markets through a common foundational technology stack and an operating model that reinforces a common strategy, culture, and mission." ”

Investments and acquisitions are Microsoft's long-term strategy. On January 19, Microsoft announced a $68.7 billion acquisition of Call of Duty maker Activision Blizzard, the largest ever gaming industry deal. Activision Blizzard develops games including Call of Duty, World of Warcraft, and Overwatch, as well as a large back-up catalog. In response, Satya Nadella said, "Games are the most dynamic and exciting category of entertainment for all platforms today and will play a key role in the development of metaverse platforms." ”

After the announcement, Microsoft's stock price has fallen slightly in recent days, and as of press time, Microsoft's stock price is $288.49, with a market value of $2.17 trillion, down from last year's high price of $310.

For the gaming industry, Microsoft has maintained a long-term investment interest. In September 2020, Microsoft announced the acquisition of interactive entertainment company ZeniMax and its game studio Bethesda for $7.5 billion. This news was a bombshell in the gaming world at the time. The acquisition of Activision Blizzard costs 9 times more than the acquisition of Bethesda. Last year, Microsoft negotiated an acquisition with game chat company Discord for more than $10 billion, but Discord subsequently terminated acquisition negotiations with Microsoft.

At the same time, the largest acquisition in the history of the gaming industry has raised concerns that Microsoft may face regulatory investigations. Andre Barlow of Doyle Law Firm said Microsoft has so far avoided the scrutiny faced by Google and Facebook, but the deal will make it the third-largest gaming company in the world, which will put it on the radar of lawmakers.

The Bethesda deal was announced in September 2020 and won't actually be completed until March 2021, while Activision Blizzard expects to be completed sometime in the company's fiscal year 2023 after clearing the required regulatory hurdles. But as the acquisition makes Microsoft the third-largest gaming company in the world by definition, the acquisition could come under regulatory scrutiny for potential antitrust violations.