“Despite a precarious economic environment, Microsoft’s results show how AI continues to drive cloud computing growth and how there’s still legs left in this business,” Maribel Lopez, a tech industry analyst and founder of Lopez Research, told MarketWatch. which counts Microsoft as one of its 30 components - has declined 13.3%.Microsoft is targeting 26% to 27% constant-currency Azure revenue growth for its fiscal second quarter, and Chief Financial Officer Amy Hood said on the earnings call that she expected “roughly stable” growth in the second half relative to the current quarter, “assuming the optimization and new workload trends continue and with the growing contribution from AI.” Has dropped 20.3% and the Dow Jones Industrial Average Microsoft stock has declined 25.5% so far this year, as the S&P 500 index That segment includes Microsoft’s core cloud-software properties such as its Office suite of products - which is being officially renamed Microsoft 365 - as well as LinkedIn and some other properties. Microsoft’s other revenue segment, “Productivity and Business Processes,” reported revenue of $16.5 billion, up from $15.04 billion a year ago and higher than the average analyst estimate of $16.13 billion, according to FactSet. Report revenue and profit margin for their cloud-computing products. Azure’s 35% growth was the slowest Microsoft has reported in records dating back through the prior two fiscal years Microsoft only reports percentage growth for its Azure cloud-computing product, even as main rivals Inc. The “Intelligent Cloud” segment reported first-quarter revenue of $20.3 billion, up from $16.96 billion a year ago but slightly lower than the average analyst estimate tracked by FactSet of $20.46 billion. “Over time other businesses, especially Microsoft’s commercial Cloud, have grown fast while the Windows business has grown quite slower, decreasing the relative impact of Windows.” “Historically, Windows was a very large driver of Microsoft revenue and, given its strong margins, a disproportionate driver of earnings,” Bernstein analysts wrote in a preview of the report, while maintaining an “overweight” rating. While PCs have long been what consumers largely know Microsoft for, their importance to the company’s financials has declined in recent years as cloud computing has grown in importance. Microsoft reported PC revenue of $13.3 billion for the quarter, roughly flat from $13.31 billion a year before and beating the average analyst estimate of $13.12 billion, according to FactSet. Microsoft has also suffered from the strengthening dollar, as well as a sharp downturn in personal-computer sales, which spiked during the pandemic but are now showing record regression.įor more: The pandemic PC boom is over, but its legacy will live on Hood said that “Intelligent Cloud” revenue should land from $21.25 billion to $21.55 billion, while analysts on average were projecting $21.82 billion heading into the print Microsoft’s other revenue-segment forecasts were even further off analysts’ average expectations. Analysts on average were expecting earnings of $2.31 a share on sales of $49.66 billion, according to FactSet.įor the fiscal second quarter, Hood guided for revenue of $52.35 billion to $53.35 billion, while analysts on average were expecting sales of $56.16 billion, according to FactSet. Revenue increased to $50.1 billion from $45.32 billion a year ago. Microsoft reported fiscal first-quarter earnings of $17.56 billion, or $2.35 a share, down from $2.71 a share in the same quarter a year ago, when the tech giant disclosed a 44 cent-per-share tax benefit. stockįell more than 4% in after-hours trading. Shares closed with a 1.4% increase at $250.66.Ĭoncerns about cloud growth immediately spread to Azure’s biggest competitor, Amazon Web Services, as Inc. Microsoft shares slid to declines of more than 6% in after-hours trading following Hood’s forecast, which was provided in a conference call. “And you should expect to see our operating-expense growth moderate materially through the year while we focus on growing productivity of the significant head-count investments we’ve made over the last year.” “While we continue to help our customers do more with less, we will do the same internally,” she said. Hood also suggested that more cost cuts could be coming to Microsoft, after the company confirmed layoffs of fewer than 1,000 employees earlier this month. In the current quarter, Chief Financial Officer Amy Hood suggested a similar sequential decline is in store for Azure, saying percentage growth should decline by five points on a constant-currency basis. Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks
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