Microsoft Earnings Fall Short As Computer Sales Drop
Microsoft reported on Tuesday that its profitability for the most recent quarter fell short of forecasts as sluggish demand and supply delays in China hurt sales of personal computers.
The US technology behemoth beat market expectations with a $16.7 billion profit on $51.9 billion in revenue, but fell short of the same quarter a year earlier.
Wedbush analyst Dan Ives wrote to investors, “While the headline minor miss may generate agita on (Wall) Street with a knee jerk reaction, this is mostly foreign exchange and China shutdown related (PC driven).”
“The core DNA of the Microsoft growth story is cloud and core Azure growth which was healthy this quarter and appears to have momentum into 2023 despite economic headwinds.”
Following the revelation of the earnings statistics, Microsoft shares increased by about 4%.
Amy Hood, chief financial officer at Microsoft, said, “In a volatile market we saw high demand, took share, and enhanced customer commitment to our cloud platform.
Microsoft said that its sales were harmed by the high US currency, which made its products more expensive in overseas markets.
The earnings report stated that Microsoft lost out on $300 million in income that it would have generated from Windows operating systems purchased to power the machines due to shutdowns at computer production facilities in China in May and a declining demand for personal computers.
Prior to the pandemic, the personal computer market had been steadily declining as more people switched to smartphones and tablets.
The prevalence of online commerce, employment, socializing, and entertainment has rekindled demand for desktop computing capacity, but it is unclear whether this trend will continue beyond the epidemic.
According to Microsoft, corporations’ reduced marketing expenditures as a result of the general economic downturn hurt ad income at the company’s online news, search, and career social network LinkedIn.
The US state of Washington-based IT veteran also racked up $126 million in operating costs connected to reducing its operations in Russia as a result of that nation’s invasion of Ukraine.
Customers spent less money on Xbox gaming content during the quarter compared to the same time last year, which may indicate that more people are playing outside as pandemic restrictions loosen.
Microsoft’s cloud, enterprise, and productivity solutions, however, kept growing.
Microsoft CEO Satya Nadella said, “We see tremendous opportunity to assist every customer in every industry leverage digital technology to solve today’s difficulties and emerge stronger.”
