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The strong advertising revenue comes from Microsoft’s LinkedIn social network. This also indicates a strong uptick in advertisers’ activity leaving the pandemic woes behind.
On Tuesday, January 26, Microsoft Corporation (NASDAQ: MSFT) announced its Q4 2020 results exceeding analysts’ expectations. The company announced a solid $2.04 earnings per share against the expected $1.64. Also, the revenue of Microsoft during Q4 2020 was $43.08 billion against $40.18 billion expected.
Microsoft’s revenue has grown at 17% on annualized basis against 12% growth in the previous quarter. The Azure cloud revenue grew by a stellar 34%. Amy Hood, executive vice president and chief financial officer of Microsoft said:
“Accelerating demand for our differentiated offerings drove commercial cloud revenue to $16.7 billion, up 34% year over year. We continue to benefit from our investments in strategic, high-growth areas.”
Revenue of Microsoft and Other Results
However, the most interesting thing about the result is Microsoft’s advertising business did better than expected. Also, this was majorly from the LinkedIn social network whose Marketing Solutions division drives revenue from ads. During the December 2020 quarter, this division delivered revenue of $2.58 billion.
This is a massive 23% surge on an annualized basis. This was surprising as Microsoft expected growth to be the same as the previous quarter i.e. 15.6%. During the conference call with analysts, Microsoft CEO Satya Nadella said:
“LinkedIn’s advertising business had a record quarter accounting for more than a third of LinkedIn’s total revenue. LinkedIn’s Marketing Solutions was up over 50% as advertisers increasingly turned to the platform as the trusted way to reach professionals ready to do business”.
LinkedIn has managed to stay away from all the political controversies around platforms like Twitter Inc (NYSE: TWTR) and Facebook Inc (NASDAQ: FB). Apart from advertising, LinkedIn’s revenue also comes from premium subscriptions and tools used by recruiters and salespeople.
Expecting Better Business from Search-Advertising and LinkedIn
“Our search and LinkedIn businesses should benefit from the improving advertising market,” said Amy Hood. Microsoft’s search advertising business has also jumped 1% to $2.15 billion during the December quarter.
The recent surge in Microsoft’s advertising revenue reflects an overall surge in advertising activity. It means that as global businesses begin to pick up once again from the pandemic woes, we can see a similar outcome for other companies.
The MSFT stock at $232 on Tuesday with a market cap of $1.76 trillion. The stock price is already 3.64% up today in the pre-opening session. Besides, Microsoft’s strong advertising revenue has fueled hope among Alphabet Inc (NASDAQ: GOOGL) and Facebook Inc (NASDAQ: FB) investors. Both Alphabet and Facebook are relating their earnings report this week. Both these stocks ended up in green on Tuesday.
Other platforms like Snapchat and Twitter, which majorly depend on advertising also surged on Tuesday.