Microsoft’s fiscal fourth-quarter earnings report showed an 8% year-over-year increase in revenue, reaching $20.08 billion in net income, compared to $16.74 billion in the same period last year. Despite these positive numbers, the growth rate has fallen below 10% for three consecutive quarters, a trend not seen since 2017. The slower growth raised concerns among investors, leading to a 1% dip in Microsoft shares during extended trading.
One significant contributor to the biggest software maker’s revenue was its Intelligent Cloud segment, generating $23.99 billion, up 15% from the previous year and surpassing analysts’ consensus of $23.79 billion. The segment includes various services such as Azure public cloud, SQL Server, Windows Server, Visual Studio, Nuance, GitHub, and enterprise services. Azure revenue, a key metric for Microsoft’s cloud business, grew by 26% during the quarter, although this was slightly lower than the expected 25%.
The pandemic-induced economic uncertainty prompted organizations to reevaluate their cloud usage, leading to a period of adjustment and cost reduction. This affected not only Microsoft but also cloud providers like Amazon and Google. To adapt, the prominent U.S. cloud providers implemented cost-cutting measures.
Interestingly, the second most valuable company in the world’s research and development costs declined year over year for the first time since 2016. The company’s CEO, Satya Nadella, informed employees that salaries would not increase this year, and there were recent rounds of job cuts. These efforts to control expenses have likely contributed to the company’s financial performance.
Microsoft’s Productivity and Business Processes segment, which includes Office productivity software, LinkedIn, and Dynamics, reported $18.29 billion in revenue, up 10% and beating analysts’ expectations. However, the More Personal Computing business, encompassing Windows operating systems, devices, gaming, and search advertising, experienced a 4% decline in revenue. The decrease was mainly due to a drop in sales of Windows licenses to device makers by 12%, reflecting the spike in PC purchases during the height of the pandemic.
As earnings season progresses, investors will closely watch Microsoft’s plans to acquire Activision Blizzard for nearly $69 billion. The appeals court recently denied the Federal Trade Commission’s motion to stop the transaction, and optimism about the deal’s closure has driven Activision shares close to the agreed-upon price.
Despite the slower revenue growth and after-hours share dip, Microsoft’s stock has performed impressively, gaining 44% year-to-date. The company continues to invest in artificial intelligence, expanding its partnership with OpenAI and introducing new chatbot-powered services to help workers navigate data. With more big tech companies reporting earnings in the coming days, investors will be eager to understand the impact of cost-cutting measures and artificial intelligence investments on profitability across the industry.
Paul Balo is the founder of TechBooky and a highly skilled wireless communications professional with a strong background in cloud computing, offering extensive experience in designing, implementing, and managing wireless communication systems.
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behaviour or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
