Microsoft’s shares have outperformed the broader market over the past two years as the pandemic played to its work-from-home and cloud computing strengths.
Its latest results showed double digit growth in revenue and profits and it has launched the takeover of gaming rival Activision Blizzard Inc., the largest in Microsoft’s history.
Here’s an update:
Microsoft Inc. (NDQ:MSFT) is the world’s largest software company, best known for its Windows operating system, which runs about 90% of the world’s personal computers. Microsoft also owns LinkedIn, Skype, and markets the Xbox gaming system. It continues to benefit from its strategic shift to cloud computing which offers companies a way to store and access information remotely.
The stock gained 40% in 2021, but amid a general tech stock retreat year-to-date they are down 14%.
Microsoft delivered strong fiscal 2022 second quarter earnings that surpassed expectations for revenue and profits. Revenue increased 20% from a year earlier to US $51.7 billion. (all figures in US dollars.) Net income rose 21% to $18.77 billion, or $2.48 per share, adjusted. The company expects the third quarter to be as strong.
Microsoft is offering $68.7 billion cash for video game Activision and although it faces anti-trust scrutiny, Microsoft is confident it will close early next year.
The gaming component of Microsoft’s business is almost 11% of revenue and grows considerably with the acquisition, bolstering Microsoft’s position in a market where it competes with Tencent and Sony. (Sony’s stock dropped 13% on the news.)
The acquisition is also a way to enhance Microsoft’s presence in the metaverse. As discussed in a recent article, the metaverse refers to shared environments which are created on the internet, or through software that simulates the real world. Gaming is one area of growth.
Activision Blizzard has major gaming franchises, including Call of Duty, a first-person game where the player is a soldier who advances through different campaigns. Another is World of Warcraft, an online role-playing game. Microsoft has its own successful franchises including Halo, a military science fiction game.
Microsoft’s dividend last increased in November to $0.62 per share quarterly. It yields 0.80% at current prices.