Microsoft reported its slowest growth in five years for the first quarter of its fiscal year 2023, largely due to a strong US dollar and a continued decline in personal computer sales, leading to lower net income by a 14% to €17,560 billion compared to the same previous period. year.
However, the company was still able to post an overall increase in revenue, up 11% to $50 billion for the three months ended September 100, driven by the continued strength of its cloud computing services, that exceeded $30 billion in quarterly revenue, on the raise. 25%.
Following the announcement, Microsoft's share price fell 5,65% in morning trading on the Nasdaq stock exchange on Wednesday.
Speaking to analysts after the release of its financial results, Microsoft CFO Amy Hood said the company had started its fiscal year well and the results were "in line with our expectations, although we've seen a lot of macroeconomic trends." since the end of the fourth quarter. It continued to weaken during the first quarter,” according to a Seeking Alpha transcript.
Hood also noted that foreign exchange rates had an impact on the company's results and that, due to the strengthening of the US dollar, the translation of other currencies had reduced the company's total revenue by five percentage points.
Microsoft segment results
Microsoft saw its productivity and business process segment, which includes Office productivity software, grow 9% in the quarter to €16.5 billion.
Office Commercial cloud products and services revenue increased 7%, driven by Office 365 Commercial revenue growth of 11%, while Office Consumer cloud products and services revenue also increased down 7%, the number of Microsoft 365 Consumer subscribers to 61,3 million.
Elsewhere in this segment, LinkedIn revenue grew 17%, while Dynamics products and cloud services revenue grew 15%, largely driven by Dynamics 365 revenue growth of 24%. % This trimester.
The company's intelligent cloud segment also saw growth in the quarter, rising 20% to €20,3 billion. The segment includes the Azure public cloud for application hosting, SQL Server, Windows Server, and business services.
Azure and other cloud services saw a 35% increase in revenue, leading to an overall 22% increase in revenue for Microsoft's server products and cloud services.
Speaking on the same analyst call, Microsoft CEO Satya Nadella said moving to the cloud is the best way for organizations to do more at a time when budgets and resources are tight.
“It helps them align spend with demand and mitigate the risk of rising energy costs and supply chain constraints,” Nadella said, adding that Microsoft has also seen more customers turn to business services in the cloud to build and innovate with the infrastructure they already have.
In a trend that mimics Microsoft's Q2022 13,3 results, the company's More Personal Computing segment saw a slight decline in revenue, totaling €XNUMX billion.
Although revenue from commercial Windows products and cloud services grew 8% and Nadella told analysts that Microsoft was seeing nearly 20% more active Windows devices per month than before the pandemic, revenue from Windows OEM products were down 15%, due to lower PC and tablet shipments as highlighted by IDC last month.
PC demand expected to weaken
The IDC report forecasts that the combined PC and tablet market will contract 2,6% in 2023, driven by inflation, a weakening global economy, and increased purchases over the past two years. Consumer demand has slowed, education demand has been largely met, and business demand is shrinking due to deteriorating macroeconomic conditions, IDC said.
Microsoft's gaming revenue outlook also faces challenges, as Xbox content and services revenue fell 3% in the quarter. This could potentially get worse over the next year, with the US Federal Trade Commission (FTC) and the UK Competition and Markets Authority (CMA) announcing that they are investigating the acquisition for potential antitrust violations.
"In a world facing increasing headwinds, digital is the latest tailwind...we are innovating across the technology stack to help every organization, while focusing intensely on our operational excellence and business discipline . execution," Nadella said.
Microsoft's earnings reflect the company's role as an indicator of the US and global economy, said Lee Sustar, a senior infrastructure and operations analyst at market research firm Forrester. "However, it's difficult for Microsoft's enterprise-class IT customers to parse exactly what the earnings numbers mean for them," Sustar said, noting, for example, that Microsoft's cloud reports combine disparate companies and that the Azure results are generally reported in terms of growth, not hard numbers.
However, the results point to general trends, Sustar said. "Azure's slowing growth rates reflect the faltering IT spending, but Microsoft is well positioned to capture that spending over time as more IT infrastructure moves to the public cloud."
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