CNN
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Microsoft on Tuesday posted weaker-than-expected revenue and a double-digit percentage decline in profit for the last three months of last year amid broader economic uncertainty and reduced demand for personal computers. and software.
The tech giant reported revenue of $52.7 billion for the quarter, a modest 2% year-over-year increase but slightly below analysts’ expectations. It reported net income of $16.4 billion, down 12% from a year earlier.
The earnings results come at a turbulent time for Microsoft and the tech industry as a whole. Microsoft said last week it planned to lay off 10,000 employees as part of broader cost-cutting measures. In his explanation of the cuts, CEO Satya Nadella pointed to changing demand for digital services years after the pandemic as well as looming recession fears.
Demand for personal computers and the Microsoft operating systems that power them has retreated after booming at the start of the pandemic. Consulting firm Gartner said earlier this month that global PC shipments fell more than 28% in the fourth quarter of 2022 compared to the same period a year earlier. It’s the biggest quarterly decline in shipments since Gartner began tracking the PC market in the mid-1990s.
On Tuesday, Microsoft reported lower revenue from its Windows OEM operations and Xbox content and services lines. Microsoft also said it would incur $800 million in severance payments from layoffs announced this month, as well as charges related to “changes to our hardware portfolio and costs related to lease consolidation activities.” .
But the earnings report had some bright spots. Revenue from its cloud computing division, a key area for Microsoft in recent years, rose 22% from a year earlier. An Evercore analyst described the results as “a sigh of relief”.
Microsoft shares rose 4% in after-hours trading on the news on Tuesday.
“The next great wave of computing is being born, as Microsoft Cloud transforms the world’s most advanced AI models into a new computing platform,” CEO Satya Nadella said in a statement accompanying the results. “We are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new era of AI.”
Earlier this week, Microsoft confirmed it was making a “multi-billion dollar” investment in OpenAI, the company behind the viral AI-powered chatbot tool ChatGPT. The deepening partnership between the two companies – Microsoft was an early investor in OpenAI – could help catapult Microsoft as an AI leader and pave the way for integrating elements of ChatGPT into some of its flagship applications, such as Outlook and Word.
In his memo to employees announcing the job cuts, Nadella said the company would continue to invest in “strategic areas for our future” and pointed to advancements in AI as “the next big wave” of the industry. computer science.