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Microsoft revenue beats estimates after Teams surge

Tech giant reports 75 million active Teams users, with gains in Windows and Surface hardware

Microsoft beat Wall Street expectations on Wednesday following increased demand in its cloud-based services during the coronavirus pandemic, as more and more people are tapping into Teams and Xbox gaming while in lockdown.

Teams, in particular, saw another massive spike in daily active users, jumping up to 75 million, according to CEO Satya Nadella, which is almost double what the company reported a month ago

For its fiscal fourth quarter, the tech giant gave business forecasts that were below analyst estimates, suggesting hardware sales and services like LinkedIn would struggle.

But strong sales of its Windows operating services and also Surface hardware helped buoy the company, with shares rising 5% for the quarter. This was matched by "all-time-high" engagement on Xbox live, which Microsoft said had 19 million active users.

Since the pandemic took hold, demand for Microsoft's cloud-services had put a strain on its data centres, forcing the tech giant to limit usage for new customers. The company has prioritised healthcare organisations and governments instead.

While the active Teams users were up, Microsoft's CFO Amy Hood said some of the increased usage came from subscribers with access to the software as part of Office 365 that had simply turned it on for the first time. She also added that a large number came from the service being rolled out for free during the pandemic.

"In those instances, you also won't see revenue, but seeing great usage obviously is terrific for us longer term if people want to convert that to a paying seat," Hood said to Reuters.

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"While I'm really excited about the long-term potential for revenue, you won't see it in this (fiscal third) quarter, or really even in Q4. It's more about people being more and more engaged with Microsoft products."

Despite the increased demand for cloud service, Azure growth actually dropped from 62% to 58% compared to the same period last year, which company officials said was a result of how large the business had become.

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