Results above expectations | Microsoft prepares its investments in video games

(San Francisco) The IT veteran returned to strong sales and profits on all fronts at the end of 2021, and intends to use it to invest in video games and the construction of the famous “metaverse”.

Posted yesterday at 7:30 pm

julie jammot
France Media Agency

“We feel very well positioned to ride what is essentially, I think, the next wave of the Internet,” Microsoft chief Satya Nadella said Tuesday at the group’s quarterly earnings call.

Last week he announced his plan to take over the Activision Blizzard studios (Call of Duty, Candy Crush) with, in his sights, the metaverse, those parallel universes where human, augmented and virtual reality must merge, through the screens , augmented reality (AR) glasses and virtual reality (VR) headsets.

The $69 billion deal would be the largest technology M&A deal ever to take place.

Microsoft, which has the second largest market capitalization in the world, seems to have the means for its ambitions.

From October to December, it had $51.7 billion in revenue and posted $18.8 billion in net profit, results that beat analysts’ average forecasts.

The cloud, its engine, has been running at full speed. Azure, its remote computing platform, saw revenue increase 46% in one year. They had already increased by half in the previous quarter.

“Paying bets”

By contrast, Xbox (content and services) posted weaker 10% revenue growth.

The game console is the second most used in the world, behind Sony’s PlayStation, which held 64.5% of the global market share in 2021, according to Statista.

But “the bets we’ve made on content, (player) communities and the cloud in recent years are paying off,” said Satya Nadella. “We had record levels of viewership and revenue in the last quarter.”

He pointed out in particular that 18 million people have played Forza Horizon 5 (car racing game) and more than 20 million Halo infinite (shooting game), the franchise launched twenty years ago that has greatly contributed to the success of Xbox.

“With our planned acquisition of Activision Blizzard, we’re investing to make it easier for people to play great games where they want, when they want, and how they want,” the boss added.

His group hopes to integrate Activision titles into its Xbox Game Pass monthly subscription service. The operation would make Microsoft the third largest group in the video game industry by billing, behind China’s Tencent and Japan’s Sony.

In late October, Microsoft also announced the acquisition of Two Hat, a content moderation company, which was already involved in removing problematic content on Xbox.

However, video games are considered the forerunners of the metaverse. The game is just one of the components of platforms like Roblox or Minecraft (which belongs to Microsoft), which users, especially teenagers, also use simply to find themselves.

“Players are already investing in their avatars and building worlds in Minecraft,” said Satya Nadella.

“Fallen angels”

It is also supported by the group’s more “traditional” activities, both to generate income and to create bridges with new immersive universes.

During the last quarter, the Office office suite and associated data processing and storage services improved sales by 14% on the corporate side and 15% on the personal side. And LinkedIn, his professional social network, grew by 37%.

“In Teams there will be meetings via Mesh”, the collaboration platform in augmented or virtual reality, the leader mentioned. “These meetings will start on screens, computers or mobile phones, and will become increasingly immersive” with the right equipment.

But some analysts express doubts about the Redmond group’s ability to move so quickly.

First, because the acquisition of Activision Blizzard will take time. Then because the end of the pandemic could translate into a drop in demand and therefore in income.

“We’ve seen a lot of stars since the start of COVID-19 become fallen angels,” said Third Bridge expert Scott Kessler, unsure whether the digital growth linked to lockdown measures is “sustainable.”

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