For an answer to the headline question, look no further than the latest earnings reports from Intel and Microsoft.
Intel reported its Q4 and full-year financial results last Thursday, and Microsoft released its Q2 results yesterday. Their reports were full of impacts from the pandemic, including a rise in cloud, work-from-home PCs, and gaming.
Both companies are still making plenty of money from the traditional PC business. But even that is being affected by the pandemic.
Here are some highlights from the Intel and Microsoft earnings, showing the impact by technology:
With so many people still working from home, demand for PCs keeps rising. To be sure, many home workers have had time to either buy new systems or replace older ones. But market watcher IDC finds that demand, at least in EMEA, is still strong: shipments in the fourth quarter of last year rose nearly 17% year-on-year, for a total of 24.1 million units.
“Extended lockdowns and increased restrictions have translated into an even stronger urgency for devices that support entertainment and remote learning, drilling home the necessity of one device per-person rather than per-household,” says IDC researcher Liam Hall.
One big takeaway from the Intel numbers if that while the number of PCs has risen, their average selling price (ASP) has fallen pretty sharply. That’s due to an increase in both entry-level sales and those for education, Intel says. The company says its PC-related volumes in Q4 rose 33%. But during the same quarter, the ASP for notebooks fell by a 15%, and that for desktops, by 1%.
Still, Intel’s Client Computing Group had a good quarter, with revenue of $10.9 billion, a year-on-year rise of 9%. Yet all that growth came from notebook PCs. Intel’s desktop-related revenue actually dropped, and by 6% for the quarter and 10% for the full year.
Over at Microsoft, Windows OEM revenue increased by 1%, which was higher than the company expected. And quarterly sales of the company’s Surface PCs rose 3%, topping $2 billion for the first time.
The pandemic didn’t launch the move to the cloud, but it sure has given the cloud a boost. Microsoft’s commercial cloud revenue rose in the company’s Q2 by a solid 34%, reaching $16.7 billion. Similarly, the company’s sales of “intelligent cloud” server products and services rose in the quarter by 26%. And its Azure revenue grew by an even more impressive 50%.
“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” said Microsoft CEO Satya Nadella. “Building their own digital capability is the new currency driving every organization’s resilience and growth. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”
With basically the entire world on lockdown, it’s no surprise that PC gaming has taken off. People have a lot of time on their hands. What might be surprising is the degree to which Microsoft is benefitting.
Xbox is the name of the game. For the most recent quarter, Microsoft’s Xbox content and services revenue rose 40%. Looking at just Xbox hardware, sales rose 86%. That's huge.
As you may know, this past November, Microsoft released 2 gaming consoles, the Xbox Series X and Series S. They’re selling like proverbial hotcakes. CEO Nadella says the company sold more of these devices in the first month than it has ever done before.
For the quarter, Microsoft’s overall gaming revenue, which includes Xbox but also other gear, rose by an impressive 51%.
Wondering how the pandemic is changing tech? These 2 industry leaders point the way.
UPDATE: Several hours after this blog was posted, Facebook and Apple both reported strong quarterly earnings that reflect rising pandemic demand. Apple reported all-time record revenue for a quarter, thanks in part to pandemic-driven demand for its laptops and tablets. Facebook reported record revenue and profit due in part to increased use of its platforms during the pandemic.