Microsoft said the coronavirus pandemic has increased demand for its flagship products, reporting quarterly earnings Wednesday that beat Wall Street expectations.

The software giant said an ongoing trend of working and learning from home has fueled increased demand for its cloud computing services and workplace productivity products, such as email and video conferencing.

But the pandemic has also slowed sales of those products to smaller businesses, and eaten into the advertising revenue that powers its LinkedIn career networking service.

Microsoft on Wednesday reported a fiscal fourth-quarter profit of $11.2 billion, or $1.46 per share, beating Wall Street expectations of $1.34 a share.

It posted revenue of $38 billion in the April-June period, up 13% from last year. Analysts had been looking for revenue of $36.5 billion, according to FactSet.

The company said its commercial cloud business surpassed $50 billion in annual revenue for the first time. But its LinkedIn service was hit by a weak job market and less money being spent on advertising.

LinkedIn announced Tuesday, it is laying off nearly 1,000 employees, approximately 6% of its workforce globally. The job cuts take effect in August and will hit global sales and hiring sections of the company.

The pandemic has made other parts of Microsoft’s business more appealing, including Xbox games and its workplace videoconferencing service known as Teams. One of its rivals, workplace chatting service Slack, filed a complaint against Microsoft on Wednesday in the European Union, accusing the software giant of anti-competitive behavior.

Slack said Wednesday that Microsoft illegally bundles its Microsoft Teams messaging product, which is similar to Slack, into Office 365, its package of email and other widely used business software. Slack says Microsoft forces companies to install it and blocks its removal.

Microsoft has said its competitive advantage over Slack stems from Teams capabilities for connecting people using video. Microsoft said Wednesday that it looks forward to providing the European Commission with more information and answering its questions about the Slack complaint.

Microsoft said Friday it is permanently closing nearly all of its physical stores around the world.

Like other retailers, the software and computing giant had to temporarily close all of its stores in late March due to the COVID-19 pandemic. According to its website, Microsoft has 83 stores worldwide, including 72 stores in the U.S., and several others abroad where it showcases and sells laptops and other hardware. Friday’s announcement reflects what the company calls a “strategic change” for its retail business as sales increasingly shift online.

Microsoft said it would “reimagine” the physical spaces at its four high-profile Microsoft Experience Centers in New York, London, Sydney, Australia and at the company’s headquarters in Redmond, Washington.

All employees will have the opportunity to remain with the company, Microsoft said.

Microsoft Corp. said the closures would result in a pretax charge of about $450 million, or 5 cents per share, taken in the current quarter ending June 30.

China became the first major economy to grow since the start of the coronavirus pandemic, recording an unexpectedly strong 3.2% expansion in the latest quarter after anti-virus lockdowns were lifted and factories and stores reopened.

Growth reported Thursday for the three months ending in June was a dramatic improvement over the previous quarter’s 6.8% contraction — China’s worst performance since at least the mid-1960s. But it still was the weakest positive figure since China started reporting quarterly growth in the early 1990s.

“We expect to see continuous improvement in the upcoming quarters,” Marcella Chow of JP Morgan Asset Management said in a report.

China, where the coronavirus pandemic began in December, was the first economy to shut down and the first to start the drawn-out process of recovery in March after the ruling Communist Party declared the disease under control.

“The national economy shifted from slowing down to rising in the first half of 2020,” the National Bureau of Statistics said in a statement.

Economists say China is likely to recover faster than some other major economies due to the ruling Communist Party’s decision to impose the most intensive anti-disease measures in history. Those cut off most access to cities with a total of 60 million people and suspended trade and travel — steps later imitated by some Asian and European governments as the virus spread.

Manufacturing and some other industries are almost back to normal. But consumer spending is weak due to fear of possible job losses. Cinemas and some other businesses still are closed and restrictions on travel stay in place.

“The pandemic is creating winners and losers,” said Bill Adams of PNC Financial Services Group in a report. “Manufacturing is leading China’s recovery.”

Private sector analysts say as much as 30% of the urban workforce, or as many as 130 million people, may have lost their jobs at least temporarily. They say as many as 25 million jobs might be lost for good this year.

The ruling party promised in May to spend $280 billion on meeting goals including creating 9 million new jobs. But it has avoided joining the United States and Japan in rolling out stimulus packages of $1 trillion or more due to concern about adding to already high Chinese debt.

China reported 4,634 coronavirus deaths and 83,611 confirmed cases. It has not reported any domestically transmitted cases since an outbreak in Beijing that infected more than 330 people before it faded early this month.

On Tuesday, the government eased some curbs on domestic tourism after China reported no new locally acquired infections in nine days. The Ministry of Culture and Tourism said tourist sites can allow 50% of their daily visitor capacity, up from 30%, and tours from one province to another can resume.

In the three months ending in June, factory output rose 4.4%, rebounding from the previous quarter’s 8.4% contraction after factories that make the world’s smartphones, shoes, toys and other goods reopened.

Retail sales shrank by 3.9%, but that was a marked improvement over the previous quarter’s 19% contraction while millions of families were confined to their homes and shopping malls were shut down. Online retail sales rose 14.3%, up from the previous quarter’s 5.9%.

June exports grew by an unexpectedly strong 0.4% but still are off 3% for the first half of the year. Imports rose 3% — including a 10.6% jump in purchases of U.S. goods despite a tariff war — but are down 3.3% so far this year.

Forecasters warn exporters are likely to face another decline in demand as sales of masks and other medical supplies taper off and U.S. and European retailers cancel orders.

“This suggests sustained pressure on employment, currently the government’s foremost policy priority,” said JP Morgan’s Chow.

A potential stumbling block is worsening relations with the United States, China’s biggest national export market, over disputes about trade, technology, human rights and Hong Kong.

The two governments signed an agreement in January to postpone further tariff hikes in their fight over Beijing’s technology ambitions and trade surplus. But most increases already imposed remained in place.

Source: apnews

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