Microsoft CEO Satya Nadella speaks at the company’s Ignite Spotlight event on November 15, 2022 in Seoul. Nadella delivered a keynote address at an event hosted by the company’s Korean unit.
SeongJoon Cho | Bloomberg | Getty Images
Microsoft will report second quarter results after the close of regular trading on Tuesday.
What analysts expect:
- Merits: $2.29 per share, adjusted, according to Refinitiv.
- Revenue: $52.94 billion according to Refinitiv.
Revenue growth is expected to be just 2.3% year over year, which would be the weakest expansion for Microsoft since 2016.
The company faces concerns across the board. When CEO Satya Nadella announced 10,000 job cuts last week, he noted that recession concerns have prompted customers across all industries around the world to act more cautiously.
As of Monday’s close, Microsoft shares were down 18% over the past year, slightly underperforming the Nasdaq.
The growth engine of Microsoft’s Intelligent Cloud unit is the Azure public cloud. In October, executives said the company’s engineers are busy helping customers make their Azure infrastructure services more efficient. Last week Nadella wrote that “we’re now seeing them streamline their digital spend to do more with less.”
Analysts polled by CNBC and StreetAccount expect revenue growth for the Azure and other cloud services category to be nearly 31%. In the previous quarter, the business grew 35%.
Microsoft’s Windows business, located in the More Personal Computing area, expects a retreat in the PC market. Technology industry researcher Gartner estimated that the fourth quarter of 2022 saw the PC business post its slowest growth since the company began tracking the market in the mid-1990s.
The third unit, Productivity and Business Processes, contains the Microsoft 365 productivity suite, formerly known as Office. In recent days, some analysts have said they expect slower growth in business seat purchases.
The decision to reduce headcount “demonstrates a commitment to margin defense despite fluctuations in revenue,” analysts at Raymond James wrote in a note to clients on Monday. They recommend buying Microsoft stock.
Microsoft said the layoffs, along with hardware lineup changes and lease consolidation fees, will result in a $1.2 billion charge and a negative earnings impact of 12 cents per share.
During the quarter, the US Federal Trade Commission sued Microsoft to block its pending $69 billion acquisition of a game publisher Activision Blizzard, while the US Department of Defense awarded Microsoft and three other companies a cloud contract totaling up to $9 billion. Also, Microsoft has introduced Designer, an application where users can create documents such as social media posts and invitations to events.
Executives will discuss the quarterly results with analysts in a conference call Tuesday starting at 5:30 p.m. ET.
Correction: This news item has been updated to reflect that Microsoft’s conference call with analysts will begin Tuesday at 5:30 p.m. ET. An earlier version gave an incorrect time.
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