Wednesday, Jan 27th 2021

Microsoft's Q2: Growth at hyperscale


"What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry.” - Satya Nadella

On Tuesday after hours, Microsoft rose +4% after posting a great quarterly report and financial outlook.

The company exceeded revenue and profit estimates by +7% and +24% respectively, and also posted Q3 guidance that came in well ahead of analyst expectations, particularly on the personal computing side.

We were very impressed with the broad-based strength demonstrated across all business lines, and believe it pointed to Microsoft's underappreciated ability to innovate and grow businesses that already are massive in scale.

From cloud computing, to productivity software, to consumer products, each of the company's main business segments grew double digits year-over-year - a very impressive feat when you're already starting off a $10B+ base.

We were particularly impressed with Azure's standout quarter, and believe it is steadily closing its gap vs. Amazon's AWS after seeing growth accelerate to +50% year-over-year.

While a smaller business line for Microsoft, we were also impressed to record levels of engagement come out of LinkedIn, which saw conversations and session counts surge upwards by +48% and +30% respectively.

LinkedIn is often left out of the picture as far as discussions around the social media business go, but it's important to keep in mind that it's actually a bona fide behemoth of a social network that's rapidly encroaching on 740 million users.

Overall, we were pleased with Microsoft's quarter and believe it augurs well for the onslaught of enterprise tech earnings reports to come in over the next couple of weeks.

For the latest on those developments, be sure to stay tuned in the app.

As of this writing, MSFT was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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