All eyes are surely on advertising this quarter, as supply-chain challenges cause in-stock issues for brands.
And while some believe reports of supply constraints influencing the outcome of the holiday season across the advertising industry are exaggerated, Microsoft CFO Amy Hood told investors the company is keeping a close eye on the advertising market through the quarter.
“There are a few challenges this quarter, particularly in premium devices,” Hood said during the company’s Q3 2021 earnings call Tuesday, warning of possible disruption ahead. “We'll just need to watch the advertising market through the quarter, because obviously their willingness to spend is entirely connected to their supply as well.”
She said that in Search and News Advertising the company expects revenue growth in the low to mid 20s. If supply-chain uncertainty reduces advertising budgets, Microsoft’s results would be negatively impacted.
Microsoft reported 22% revenue growth -- reaching $45.32 billion in the quarter. Its More Personal Computing business drove performance. The category includes Windows devices, gaming and search advertising, which posted a 12% jump in revenue to $13.31 billion. Net income rose 48% to $20.5 billion.
It’s not typically a topic that Microsoft discusses during the company’s quarterly earnings call, but yesterday when reporting numbers from Q3 2021, executives mentioned advertising at least eight times.
LinkedIn advertising also drove revenue, rising 61% year-on-year. The company’s social network is a growing business for Microsoft, with sales expanding 42% in the quarter. All this despite its plans to scale back in China.
Cloud services, embraced by companies and consumers, also drove growth. Microsoft’s cloud business is one of the fastest-growing for the company because everything from games to business software is supported from the cloud.
Microsoft is the second-largest player with nearly a 20% worldwide market share, but Amazon dominates the industry more than a 40% share, according Gartner.
Worldwide end-user spending on public cloud services is forecast to grow 23.1% in 2021 to total $332.3 billion, up from $270 billion in 2020, according to Gartner.