By Aaron Tilley 

Microsoft Corp. posted another quarter of strong earnings fueled by pandemic-era demand for cloud-computing services and videogaming.

The software company on Tuesday said sales rose 12% to $37.2 billion, generating a net profit of $13.9 billion in the first quarter of its fiscal year. The results surpassed Wall Street expectations on revenue and profit for the quarter ending in September.

Revenue from Azure, the company's massive cloud-computing service that has underpinned its financial success in recent years, increased 48% from the year-ago period. Sales from Commercial Cloud, a broader metric of its cloud business, reached $15.2 billion, compared with $11.6 billion in the year-ago quarter.

"Demand for our cloud offerings drove a strong start to the fiscal year, " Microsoft Chief Financial Officer Amy Hood said.

Microsoft's personal computing business -- which includes licensing revenue from PC sales, the Xbox gaming platform and Surface laptops -- saw sales advance 6% to $11.8 billion. The gaming content business saw a 30% jump in sales over the previous year. The business is also expected to further benefit later this year with the release of the new Xbox Series X gaming console.

Chief Executive Satya Nadella is doubling down on the company's gaming effort. Microsoft last month said it would spend $7.5 billion to acquire ZeniMax Media Inc., the owner of game developer Bethesda Softworks as well as the Doom videogame franchise. The deal came shortly after Mr. Nadella's failed bid to buy parts of the popular short-form video app TikTok from Beijing-based ByteDance Ltd.

Throughout the pandemic, Microsoft has enjoyed a boost to its cloud services, including its workplace-collaboration software package Teams that offers features that compete with Slack Technologies Inc. and video-teleconferencing service Zoom Video Communications Inc.

"The next decade of economic performance for every business will be defined by the speed of their digital transformation," Mr. Nadella said

With the increase in demand, the company has at times struggled to keep its cloud services running smoothly. An outage last month resulted in its cloud software tools being inaccessible for hours.

Microsoft also could see its search-engine business, Bing, gain momentum after the Justice Department filed an antitrust case against Alphabet Inc.-owned Google for its practices in search and advertising. Bing has less than 7% market share in the U.S. search-engine market, little changed since it launched in 2009. The Google case, though, is expected to take years to play out. Microsoft's ad businesses, meanwhile, remains under pressure as companies cut back on spending during the pandemic. Ad sales, the company said, fell 10%.

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

 

(END) Dow Jones Newswires

October 27, 2020 17:08 ET (21:08 GMT)

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