Microsoft reported its slowest growth in six years and warned that a broader slump would continue as consumers and businesses cut back on spending, while the company deals with a cooling economy and a slowing PC market at the same time.
After initially rallying on better-than-expected earnings for the December quarter, the stock price reversed due to the company’s revenue forecast for the current quarter in its earnings call.
Its revenue increased by 2% year on year to $52.7 billion for the quarter ended in December. Profit was also down 12% to $16.4 billion. Both fell short of Wall Street’s expectations. Meanwhile, earnings were rated $2.32 per share, compared to analysts’ expectations of $2.29 per share, according to Refinitiv.
Server product and cloud revenue increased by 20%, with Azure and other cloud services increasing by 31%. While commercial Office sales increased by 7%, consumer Office sales decreased by 2%. Revenue from PC makers and Microsoft’s own Surface devices both fell 39%. While revenue from search and advertising increased by 10%, revenue from LinkedIn increased by 10%. Revenue from Xbox content and services fell 12%. Xbox hardware fell 13%.
According to a statement, total revenue increased by 2% year over year in the fiscal second quarter ending Dec. 31, the slowest rate since 2016. Net income fell to $16.43 billion in the third quarter, down from $18.77 billion the previous year. In the quarter, Microsoft took a $1.2 billion charge in connection with its decision to cut 10,000 jobs, revise its hardware lineup, and consolidate leases. Employee severance costs amount to $800 million of the charge.
The sources for this piece include an article in Axios.