Best of Times, Worst of Times for Microsoft, Starbucks

By Glenn Dyer | More Articles by Glenn Dyer

A tale of two very different results for two of America’s highest profile global giants – one tech-driven, the other consumer-facing – and both household names.

First up, Microsoft joined Netflix on Tuesday in doing its bit to provide support to the current US quarterly earnings season with a better than expected sales and earnings performance.

Netflix reported subscriptions, revenues, earnings and a financial position much better than the market had been expecting and Microsoft has more than matched that performance.

It said revenue topped $US40 billion for the first time for a quarter as sales in its rapidly growing Azure cloud computing business jumped more than 50%.

Net profit leapt 33% to $US15.5 billion for the quarter.

The shares were up more than 4% after hours after a 1.2% rise in normal trading 9in a market than ended with small losses on the day).

The company said in its quarterly report that revenue grew 17% to $US43.08 billion, sharply above market forecasts of $US40.18 billion.

Microsoft’s 17% growth rate was faster than the solid 12% reported in the prior quarter.

Analysts said the results reflected Microsoft again benefitting from the global shift to working and learning from home amidst the continuing grip of the pandemic in major economies in Europe, japan and the US.

Microsoft said revenue in its “Intelligent Cloud” segment rose 23% to $14.6 billion, thanks to the 50% growth for its Azure product.

Revenue from its personal computing division, which includes Windows software and Xbox gaming consoles, rose a solid 14% to $US15.1 billion, driven by strong Xbox content and services growth. It was well above analysts forecasts of $US13.5 billion.

Microsoft said its Productivity and Business Processes segment, including Office, Dynamics and LinkedIn, saw a 13% rise in sales to $US13.35 billion for the quarter.

Investors will be looking at Apple, facebook and Tesla tonight and tomorrow for further confirmation that the tech sector’s strength remains undiminished.

………………

Microsoft’s surge contrasted sharply with what was a weak quarterly report from Starbucks, the global coffee and convenience food chain.

Starbucks reported a bigger-than-expected fall in quarterly comparable sales as the rising number of coronavirus cases in the United States kept customers at home.

The world’s largest coffee chain said global same-store sales fell 5% in the first quarter, more than market estimates of a 3.4% decline.

Comparable sales fell 6% for the Americas region (which is dominated by the US), compared with a 5.2%estimate from the market.

The second wave of COVID-19 infections and accompanying restrictions dented traffic at the coffee chain’s stores, hampering its efforts to boost demand through product launches and wider online options.

China was a ray of hope as comparable sales rose 5% as the company benefited from the return of pre-coronavirus consumer habits in its fastest growing market.

Overall, net revenue fell 5% to $US6.7 billion, under market forecasts for $US6.93 billion.

Starbucks shares fell 1.6% in after hours trading after a rise of 1.2% in normal trading.

 

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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