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Microsoft Reports Growth In Its Cloud Business But Warns Of Continued Supply Woes For Xbox

Microsoft Reports Growth In Its Cloud Business But Warns Of Continued Supply Woes For Xbox
Global supply chain issues will continue to plague critically important business divisions of Microsoft Corp like those that manufacture its Surface laptops and Xbox gaming consoles, warned the company even while anticipating a solid end to the calendar year driven by its burgeoning cloud business.
For the first quarter ended Sept. 30, the company surpassed Wall Street projections, with pandemic-induced demand for the software giant's cloud-based services driving sales.
Since last year, after the Covid-19 pandemic closed down offices and schools and brought more physical activities to online platforms, deals for the cloud services from Microsoft, Inc's AWS, and Alphabet Inc's Google Cloud have increased.
Azure, the company's core cloud-computing operation, reported a 48 per cent growth in revenue in constant currency in the first quarter, which was more than the analysts' projections of 47.5 per cent according to Visible Alpha's consensus statistics.
“Wide based growth" for the division in the fiscal second quarter was predicted by Microsoft's senior vice president and chief financial officer, Amy Hood.
Since Microsoft does not provide a breakdown of income from its cloud-computing business, the growth rate of Azure is the best direct measure of rivalry with competitors of the business such as AWS and Google Cloud.
Microsoft appeared to be fending off the growing threat of Google Cloud. There was a 45 per cent surge in its revenue to $4.99 billion, Google Cloud said, but was unable to meet up to analysts’ estimates of $5.2 billion.
Analyst forecasts were also exceeded by revenue at the company's other business areas, which include Windows software, the Teams messaging service, and the LinkedIn professional social networking site.
There were mixed results for Microsoft from the global supply chain issues which apparently impacted most of the global computer industry. Despite rising data centre building expenses, Microsoft has continued to raise its cloud computing profits, according to Hood, since it keeps adding more profitable services to those data centres.
During its first quarter, the company was able to ship more Xbox S and X gaming consoles than expected, Hood also stated, as the company reported a 166 per cent rise in sales of its gaming consoles and accessories. The company also reported witnessing continued strong demand for new models following the pandemic which forced millions of people to look out of indoor entertainment.
However, due to the global chip shortage, Microsoft as well as its competitors have been unable to meet demand.
Microsoft bow expects demand for its Xbox to continue to outstrip supply during the company's second quarter, which includes the Christmas holiday season, Hood said.
She also forecast a continued drop in the sale of Microsoft’s Surface laptops in the company’s second quarter after it reported a drop of 17 per cent in the first quarter. She blamed this fall on issues of the global supply chain. 
According to IDC data, there was a 10 per cent rise in Microsoft's revenue from selling Windows to PC makers, outpacing the overall PC market, which rose only 3.9 per cent in the same period because of supply issues.
Microsoft’s expertise in selling Windows licenses to corporate customers was the main reason for the company's ability to outperform its rivals and the wider PC market, Hood said.

Christopher J. Mitchell

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