Despite cloud struggles, tech giant beat revenue and EPS

Microsoft (MSFT) reported fiscal third-quarter results on Tuesday, beating Wall Street expectations, despite a continued slowdown in the company’s cloud revenue.

The tech giant reported revenue growth from Azure and other cloud services of 27% year-over-year for the quarter. That number has fallen every quarter since at least the third quarter of 2022, as companies cut capital spending amid rising interest rates.

Here are the most important numbers from the report compared to what analysts expected, as compiled by Bloomberg.

  • Income: $52.9 billion vs $51.1 billion expected

  • Adj. EPS: $2.45 vs $2.23 expected

  • Productivity and business process: $17.5 billion vs $17.1 billion expected

  • Smart cloud: $22.1 billion vs $21.9 billion expected

  • More personal computing: $13.3 billion vs $12.3 billion expected

Microsoft shares rose more than 4% after the announcement.

“The world’s most advanced AI models combine with the world’s most universal user interface – natural language – to create a new age of computing,” Microsoft CEO Satya Nadella said in a statement. .

“In the Microsoft Cloud, we are the platform of choice to help customers get the most from their digital spend and innovate for this next generation of AI. »

Microsoft helped kick-start Big Tech’s obsession with AI with its multi-billion dollar, multi-year investment in developer ChatGPT OpenAI.

The Windows maker has since implemented versions of OpenAI technology in its Edge browser, Bing search engine, Microsoft 365 productivity software and cybersecurity offerings.

Microsoft CEO Satya Nadella listens to a question during Microsoft's annual shareholder meeting, Wednesday, Nov. 30, 2016, in Bellevue, Washington.  (AP Photo/Elaine Thompson)

Microsoft CEO Satya Nadella listens to a question during Microsoft’s annual shareholder meeting, Wednesday, Nov. 30, 2016, in Bellevue, Washington. (AP Photo/Elaine Thompson)

This has given Microsoft a perceived leadership position in the AI ​​wars, leaving rival Alphabet’s (GOOG, GOOGL) Google (GOOG, GOOGL) to catch up. Amazon (AMZN), meanwhile, is scrambling to bring generative AI to its services, while Facebook parent company Meta (META) is tinkering with teams to launch its own efforts.

And while Microsoft shares have seemingly benefited from both the AI ​​hype and the overall market rebound after a tough 2022, the company’s main growth driver continues to be its cloud computing efforts. in its Azure unit.

But that growth has slowed markedly over the past year. In Q3 2022, Microsoft reported Azure growth of 46% year-over-year. But that has since fallen every quarter, landing at 27% in Q3 2023.

This decline was partly explained by the fact that large customers slowed their spending, as the increase in interest rates had a negative impact on global growth. Microsoft is also dealing with falling PC sales as demand from consumers and business customers falls from pandemic-era highs.

The company reported a 9% drop in revenue from its More Personal Computing segment, with a 28% drop in Windows OEM revenue. Microsoft sells Windows licenses and other software to third-party PC partners.

By Daniel Howley, technical writer at Yahoo Finance. follow him @DanielHowley

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