Microsoft shares rose as much as 5% in prolonged trading on Tuesday after the corporate reported fiscal second-quarter earnings that topped analysts’ estimates.
Here’s how the corporate did:
- Earnings: $2.32 per share, adjusted, vs. $2.29 per share as expected by analysts, in line with Refinitiv.
- Revenue: $52.75 billion, vs. $52.94 billion as expected by analysts, in line with Refinitiv.
Microsoft’s total revenue increased by 2% yr over yr within the quarter ending Dec. 31, the slowest rate since 2016, in line with a statement. Net income fell to $16.43 billion from $18.77 billion within the year-ago quarter. The corporate took a $1.2 billion charge within the quarter in reference to its decision to chop 10,000 jobs, revise its hardware lineup and consolidate leases. The charge includes $800 million in worker severance costs.
“We’re focused on operational excellence as we proceed to speculate to drive growth,” Amy Hood, Microsoft’s finance chief, said within the statement.
Revenue in Microsoft’s Intelligent Cloud segment amounted to $21.51 billion, up 18% and barely above the $21.44 billion consensus amongst analysts polled by StreetAccount. The unit includes the Azure public cloud, Windows Server, SQL Server, Nuance and Enterprise Services. Revenue from Azure and other cloud services, which Microsoft doesn’t report in dollars, grew by 31%, barely above the estimate of just below 31% that analysts polled by CNBC and StreetAccount had expected. Within the previous quarter, the category grew 35%. Amazon shares rose 3% in after-hours trading following Microsoft’s announcement.
The Productivity and Business Processes segment, containing Microsoft 365 — formerly generally known as Office 365 — productivity software, LinkedIn and Dynamics, delivered $17 billion in revenue, up 7% and greater than the StreetAccount consensus of $16.79 billion.
The More Personal Computing segment featuring Windows, Xbox, Surface and search promoting contributed $14.24 billion, representing a revenue decline of 19%. Sales of Windows licenses to device makers declined some 39% yr over yr, decelerating from a decline of 15% within the fiscal first quarter. Technology industry researcher Gartner estimated that through the fourth quarter of 2022 the PC business had its slowest growth for the reason that company began keeping track of the market within the mid-Nineteen Nineties.
The corporate said its devices group handled execution challenges for product launches through the quarter.
Microsoft’s report kicks off earnings season for the mega-cap tech firms with the Nasdaq coming off its worst yr since 2008 and its first four-quarter slump for the reason that dot-com crash. Together with Microsoft’s layoffs, Amazon, Alphabet and Meta all announced significant job cuts recently after they juiced hiring through the Covid pandemic and prolonged bull market in tech. Meta is scheduled to report results next Wednesday, followed a day later by Alphabet, Amazon and Apple.
The choice to scale back headcount at Microsoft “shows a commitment to margin defense despite top-line shakiness,” analysts at Raymond James wrote in a note to clients Monday. They recommend buying Microsoft shares.
Within the quarter, the U.S. Federal Trade Commission sued Microsoft to dam its pending $69 billion acquisition of game publisher Activision Blizzard, while the U.S. Defense Department awarded Microsoft and three other firms a cloud contract value as much as $9 billion combined. Also, Microsoft introduced Designer, an application through which people can craft documents resembling social media posts and event invitations.
Excluding the after-hours move, Microsoft stock is flat up to now this yr, while the S&P 500 stock index is up 4%.
Executives will discuss its quarterly results with analysts and issue guidance on a conference call Tuesday starting at 5:30 p.m. ET.
That is breaking news. Please check back for updates.
Correction: This story has been updated to reflect that Microsoft’s conference call with analysts will start Tuesday at 5:30 p.m. ET. A previous version gave an incorrect time.
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