Microsoft revenue up 2%, but profit drops 12%

The technology giant said revenue increased 2% from a year earlier to $52.7 billion for the three months that ended in December

Microsoft on Tuesday reported its slowest growth in six years and cautioned that a broader slump will continue as both consumers and businesses put the brakes on spending.

The technology giant said revenue increased 2 per cent from a year earlier to $52.7 billion for the three months that ended in December. Profit fell 12 per cent to $16.4 billion.

Both were below Wall Street expectations, according to FactSet. Microsoft’s share price initially shot up more than 4 per cent in after-hours trading, thanks largely to its cloud-computing business, but it lost those gains after Amy Hood, Microsoft’s chief financial officer, said in a call with investors that new business slowed in December. The company also said that it expects growth to continue to slow in the current quarter, which ends March 31, as business customers continue to be cautious about buying new products.

Also Read: Microsoft to invest more in OpenAI as tech race heats up

Investors have been closely watching Microsoft’s cloud computing business and Azure, its flagship cloud product, because of their importance to the company’s future. In October, the company told investors to expect Azure’s growth to slow 5 percentage points in the quarter. But Azure sales growth slowed slightly less, to 31 per cent, which was better than analysts feared, and the overall segment it calls Intelligent Cloud was up 18 per cent, roughly in line with expectations.

The past several months have been turbulent for Microsoft. In December, its $69 billion deal to acquire the video game maker Activision was challenged by regulators in the United States, and last week it began laying off about 10,000 workers.

On Monday, Microsoft announced a major new investment in OpenAI, the startup behind ChatGPT and other generative artificial intelligence breakthroughs, and signaled plans to include AI in an array of Microsoft products.

Satya Nadella, Microsoft’s chief executive, emphasized the urgency with which the company is pursuing AI. “We fundamentally believe that the next platform wave is going to be AI,” he said on a call with Wall Street analysts, while adding that Microsoft is moving aggressively to “catch the wave.”

The biggest slowdown came from Microsoft’s personal computing business, where sales fell 19 per cent and operating income fell 47 per cent. The business boomed during the first part of the pandemic. But shipments of new PCs globally have been in a near free fall for months, and sales of the Windows operating system installed on new computers declined 39 per cent.