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Microsoft's results - tech giant is preparing for a recession

13:01 25 January 2023

Microsoft yesterday announced a disappointing revenue forecast for Q1 2023, which sparked a sell-off ahead of the opening bell and overshadowed better-than-expected Q4 2022 results.

Revenue of its core business areas, i.e. Windows and Office decreased at the end of 2022. Highlights of the latest quarterly report:

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Adjusted earnings per share (EPS) $2.32 topped Refinitiv estimates of $2.29.

Revenue of $52.75 billion, came in below analysts' consensus of $52.94 billion, according to Refinitiv.

Microsoft expected approximately 3.0% revenue increase in the region between $50.5 to $51.5 billion in Q4 2022. Amy Hood, the company's chief financial officer, said the PC market continues to contract, which could lead to a 17.0% YoY decline of its Personal Computing business segment, which includes Windows.

Total revenue increased by 2% YoY, which is the slowest pace since 2016. Net income fell to $16.43 billion from $18.77 billion in the prior quarter.

In December Azure cloud business growth was lower than management expected for Microsoft 365 software subscriptions, Windows commercial products, and Enterprise Mobility and Security offerings, Hood said.

Microsoft's Smart Cloud revenue jumped 18.0% to $21.51 billion, slightly above market consensus of $21.44 billion.

Revenue from Azure and other cloud services that Microsoft does not report in dollars rose 31%, slightly above Wall Street projections. In the previous quarter, the growth of this segment amounted to 35%. The company's board expects the growth dynamics of the Azure segment to slow down.

Today Microsoft users are experiencing a huge cloud outage that affected several of its products, including Teams and Outlook.

Revenue form the Productivity and Business Process segment, which includes Microsoft 365 (formerly known as Office 365), LinkedIn and Dynamics rose 7.0% to $17 billion and topped the market consensus of $16.79 billion.

Revenue from More Personal Computing, which includes Windows, Xbox, Surface and Search Ads, fell 19.0% to $14.24 billion.

Sales of Windows licenses to device manufacturers decreased by 39% YoY.

Source: CNBC

One can notice that the top management does not share the optimism which prevails in the markets recently and are preparing for the upcoming recession.

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