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The global PC market may be going through a shortage of chips right now, but it sure has not prevented top-tier companies like Microsoft from profiting. The US tech giant exceeded all expectations after it announced the third quarter of its 2021 financial results on Wednesday – however, its shares fell by 3%, indicating that investors had hoped for better performance.

In its third-quarter earnings, Microsoft reported revenue of $41.7 billion (an increase of 19%) and net income of $15.5 billion GAAP (an increase of 44%). This, incidentally, is the biggest quarterly increase for Microsoft since 2018. Operating income for the same period rose by 31% to come to $17 billion. The Washington-based company’s operating margin narrowed as its growth was steered by mainly Xbox and cloud-related services, and a rise in PC sales.

It has now become one of the most valuable companies in the world, with a valuation close to $2 trillion. Microsoft’s diluted earnings per share (EPS) came at $1.95 per share, which surpassed the estimated $1.78 per share.

“Over a year into the pandemic, digital adoption curves aren’t slowing down. They’re accelerating, and it’s just the beginning,” said Satya Nadella, Microsoft CEO. “We are building the cloud for the next decade, expanding our addressable market and innovating across every layer of the tech stack to help our customers be resilient and transform.”

“The Microsoft Cloud, with its end-to-end solutions, continues to provide compelling value to our customers generating $17.7 billion in commercial cloud revenue, up 33% year over year,” said Amy Hood, executive vice president, and CFO, Microsoft.

Microsoft also announced that its Azure public cloud has grown by 50%, exceeding the estimated rise of 46%. It is now expecting $43.6 billion to $44.5 billion in revenue in the fiscal fourth quarter, Hood said. Microsoft also forecasts fiscal fourth-quarter productivity segment revenue with a midpoint of $13.93 billion.

This is no surprise, since cloud services have taken off ever since the pandemic started, causing businesses to shift online to keep operating. Google Cloud too witnessed a massive growth in revenue, which was announced during Alphabet’s earnings call.

Microsoft Office performed remarkably well in the quarter, with Office Commercial products and cloud services revenue increasing by 14%, driven by Office 365 Commercial revenue growth of 22%. Revenue in Productivity and Business Processes was $13.6 billion, including inputs from Office, LinkedIn, and Dynamics. Revenue from Microsoft Cloud came up to $15.12 billion, an increase of 23%. Windows OEM revenue grew by 10%, reflecting the unprecedented demand for PCs by consumers during the pandemic. Windows non-pro OEM revenue grew by 44%, while Windows OEM Pro revenue declined by 2%. Microsoft Surface grew by 12% during the same period.

This, much like Azure Cloud’s performance, was already being expected, since tools like Microsoft Office and 365 have become necessary for businesses, as physical offices remained shut for this quarter as well.

“That’s the fourth consecutive quarter of 15% growth on a very large base,” Hood said, describing the Office 365 results for commercial customers. Office consumer products and cloud services revenue grew 5%, thanks to the Microsoft 365 Consumer subscription revenue and a big jump in subscribers to 50.2 million.

Microsoft’s More Personal Computing segment earned $13.04 billion in revenue (an increase of 19%). Xbox content and services revenue increased by 34% during the same period to come to $739 million.