Julie Hyman and Brian Sozzi of Yahoo Finance Live break down Microsoft’s second-quarter earnings, revenue growth from its cloud services and PC demand during the pandemic.
Video transcript
JULIE HYMAN: Well, kind of like maybe growth is slowing globally, but it’s still growing pretty well. Microsoft takes me to Microsoft and Azure, where the focus is on enterprise business. The shares are up 5% this morning. Azure of course grew its cloud services business last quarter by 46%, which sounds pretty good.
There was a bit of initial disappointment that it wasn’t as much as the 48% reported the previous quarter, but investors then took heart when the company released a sales growth forecast of 248 and 1/2 to 49. .3 billion in the current quarter. , which is ahead of what they had estimated. And you can see here too, of course, that we had a beat in the previous quarter. Really we’ve seen sales gains across the board, not just in the cloud services business but also in Windows actually due to the current demand for PCs which has been hot during the pandemic, gaming revenue has also up 8%, and of course that’s without the benefit of the Activision acquisition which is probably going to take a while to close anyway. So Brian Sozzi, it seems here that it’s interesting to see this kind of turnaround that you saw in stocks after the guidance was released, but there seems to be a relatively high degree of confidence here that Microsoft is continuing to have a relatively fast growth rate.
BRIAN SOZZI: After those earnings hit the sons, Julie, the stocks were trading and you thought, wow, the world was ending. Microsoft– Microsoft’s big growth story is slowing down. The stock will fall.
But there you have Microsoft and CEO Satya Nadella, you know, as you can imagine, it’s our…as you remember, I should say, it’s our company of the year the last year. He answered the call and said, hey, our growth is strong. People are rebuilding offices in this work-from-home environment, the activity of our teams is strong.
CFO Amy Hood answered the call and said, listen, we’re looking for a sequential or quarter-over-quarter acceleration in Azure Cloud Services that has allayed any concerns about peak growth. And a few notes that I jotted down, Julie, here’s one from this quarter from Microsoft, which was a high cost overall, pretty solid advice here from the company. Is it really helping establish a short-term bottom in tech stocks? Because immediately, the way one should think is that Salesforce – this stock has been selling very aggressively – will it come out and have a good quarter?
You got Satya Nadella talking about a great PC Renaissance during the earnings call last night. Well, does that mean HP is out and Dell is going to look strong enough? I would say they will look pretty strong.
And then secondarily, let’s get back to this Netflix neighborhood, Julie, Friday. Does Netflix now represent the outlier in tech where growth is slowing sharply and they’re coming out here with a cautious outlook? It’s something to think about.
JULIE HYMAN: Yeah, I think you’re making a good point about whether this represents at least a short-term bottom in this tech sales cycle, especially software sales. But I don’t know if you can put Microsoft and Netflix in the same basket in all cases, even though they’re large-cap tech companies, just because Netflix is so consumer-oriented and the business of Microsoft are much more business oriented. That said, Netflix is bouncing along with other tech stocks here this morning. So–
BRIAN SOZZI: Sure.
JULIE HYMAN: — it looks like, just as we’re seeing a lot of wholesale selling, we may be seeing a more broad-based rebound, particularly in the tech space this morning.
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