Daily Brief: Microsoft Has Plenty Of Bases Covered, But Gaming Is Its Next Big Pitch

Daily Brief: Microsoft Has Plenty Of Bases Covered, But Gaming Is Its Next Big Pitch

about 2 years ago3 mins

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Microsoft reported better-than-expected quarterly earnings late on Tuesday, so just imagine what other achievements the tech giant will unlock when it brings out its inner gamer.

What does this mean?

Microsoft has now beaten analysts’ earnings expectations for the last 12 quarters straight, and all three of its main business segments – which each make up about a third of total revenue – played their part this time around. Revenue from the company’s cloud computing business and “productivity” segment – which includes Office 365 and LinkedIn – came in 26% and 19% higher than the same time in 2020 respectively, while sales in its personal computing business were up 15%. But a tech stock is still a tech stock: investors buy in based on the sheer potential of its future profits, which will only become less valuable as central banks raise interest rates this year. And that might be why, strong as these results were, investors initially sent its stock down 5% after.

Microsoft stock
Source: Google Finance

Why should I care?

Zooming in: Microsoft versus Meta.

Microsoft’s gaming segment only accounted for a small proportion of its revenue last quarter, but that might change after the company announced last week that it’s buying games developer Activision Blizzard. The acquisition will make Microsoft the third-biggest gaming company in the world, as it aims to build a metaverse fit to compete with Meta (née Facebook). Analysts, then, suspect its next move might be to buy companies in the VR space. But it might want to act fast: Meta added another two VR game developers – Supernatural and BigBox VR – to its roster last year.

Microsoft earnings

The bigger picture: Retail gets an update.

Microsoft also announced this week that it’d be rolling out a cloud-based shipping service in partnership with FedEx – one that’ll integrate into retailers’ existing ecommerce platforms and use AI to offer customers speedier shipping and real-time delivery updates. It could be a smart collaboration: FedEx puts 86% of its growth down to ecommerce logistics alone.

Keep reading for our next story...

Johnson & Johnson Reported A Bumper Quarter For Vaccine Sales

JJ image

Johnson & Johnson (J&J) revealed on Tuesday that it sold $1.6 billion worth of vaccines last quarter, so the controversy-hit healthcare giant must be glad it didn’t throw away its shot.

What does this mean?

J&J – which reported its quarterly results on Tuesday – has had its fair share of hiccups in the rollout of its one-shot vaccine, but the company surged back to make more than half of its 2021 vaccine sales in the last quarter alone. It sold more of its other medications too, which helped its drugs division grow by 17% last quarter versus the same time the year before. Not all its businesses were so lucky, mind you: revenue from its medical devices and consumer health businesses barely grew, which pushed up its overall revenue by a weaker-than-expected 10%.

Why should I care?

For markets: J&J wants to get back in the good books.

J&J’s consumer health division – which brought in just 16% of the company’s revenue across the whole of 2021– is by far its slowest-growing segment, which might be why the company’s planning to spin off the division into its own business. That should allow the firm to focus on its drugs and medical devices segments instead, as well as on winning investors back on side. Better late than never: J&J’s stock has underperformed the US stock market by 16% over the past year.

JJ stock

Zooming out: Splits are in vogue.

General Electric is planning to break up its business too, and the conglomerate’s quarterly update on Tuesday was a perfect example why: the company posted a $3.9 billion loss – a big drop from the $2.4 billion profit it made the same time in 2020 – on the back of supply chain disruptions and rising materials costs. General Electric’s outlook for the year came in worse than expected too, which might be why investors sent its shares down 8%.

GE earnings
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