Microsoft Earnings Likely to Show Strong Growth From Cloud Usage

Microsoft Corp.

MSFT 0.61%

is expected to report strong earnings growth Tuesday as the pandemic continued to boost adoption of its cloud services.

The Redmond, Wash.-based company is scheduled to announce financial results for the past quarter after the market closes. It has benefited from a sustained surge in demand for its cloud-computing services after Covid-19 started spreading globally and forced businesses and governments to quickly adapt to remote work.

Microsoft will likely announce revenue of around $44 billion for the three months through Sept. 30, according to analysts surveyed by FactSet. That would be up roughly 18% from a year earlier. Profit for what is Microsoft’s fiscal first quarter is estimated to have risen nearly 13% to $15.7 billion, or $2.07 a share.

Microsoft has been among those businesses enjoying big gains from the shift to working-from-home and remote schooling. Companies and consumers embracing digital services that run on the cloud have been at the center of Microsoft’s growth. Personal computers have been flying off the shelf, many using the company’s Windows software, and its latest videogame Xbox consoles have been in hot demand.

Investors will be studying the quarterly results to see how Microsoft’s Azure cloud-computing service is faring against that of cloud leader

Amazon.com Inc.

Microsoft’s Teams collaboration software has also been important for the company’s push to make its products the centerpiece in the workplace. In July, the company said Teams—which is a chat and videoconferencing application that competes with

Zoom Video Communications Inc.

and

Salesforce.com Inc.’s

Slack—had 250 million monthly active users, up from 145 million daily active users in April.

Microsoft could get a boost in its Windows business with the release of Windows 11 earlier this month. The new operating system features a visual makeover, a deeper integration with Teams and a new digital store featuring Android apps for the first time.

Another area where Microsoft is trying to make a push is security. In August, it hired longtime Amazon cloud executive

Charlie Bell

to lead a new security group. Microsoft’s annual security sales surpassed $10 billion, the company announced earlier this year.

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In August, Microsoft and other companies met with President Biden at the White House to highlight the importance of cybersecurity. At the time the company committed to investing $20 billion in its security tools over the next five years. In recent months, it has been ramping up its investment in security firms, including CloudKnox Security Inc., RiskIQ Inc. and ReFirm Labs Inc.

Microsoft may also give some indications of what it expects will happen after scaling back plans for its LinkedIn social network in China. Earlier this month, LinkedIn announced it was pulling back from China in response to escalating compliance requirements from the government.

China was LinkedIn’s third-largest country by user count and the retreat could detract from the success the unit has had recently, analysts said. Last quarter, Microsoft said LinkedIn had reached more than $10 billion in annual revenue for the first time.

Windows 11 is full of new features, including a new Start menu that’s been moved to the center and a Microsoft Store with Android apps. In an exclusive interview, WSJ’s Joanna Stern spoke with Microsoft CEO Satya Nadella about the software, the influence of the pandemic and his strategy of competing with Google and Apple. Photo illustration: Alex Kuzoian/The Wall Street Journal An earlier version of the closed captions incorrectly transcribed Mr. Nadella’s name.

Write to Aaron Tilley at aaron.tilley@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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