SEATTLE — Uncertainty and challenges in the global economy have hit Microsoft, it reported Tuesday quarterly results that fell short of Wall Street’s expectations and its own.
The tech giant said it had revenue of $51.9 billion in the quarter ended June 30, up 12 percent from a year earlier. Profits rose 2 percent to $16.7 billion.
“We’re obviously incredibly optimistic about just about everything else we have,” said Chris Capossela, the company’s chief of marketing. said after the revised guideline was released. “That’s something we have no control over.”
Since then, conditions appear to have deteriorated further. Currency challenges from the war in Ukraine and broader economic uncertainty cost Microsoft $595 million in the quarter as it reverted sales in Europe, Japan and elsewhere to US dollars. And China’s production delays of personal computers and declining consumer demand caused a more than $300 million drop in sales of the Windows operating system preinstalled on new computers.
A slowdown in ad spend on LinkedIn and on Microsoft’s search products caused a drop in revenue of more than $100 million.
Without currency issues, Azure, Microsoft’s flagship cloud computing platform, would have grown by 46 percent. Instead, it grew 40 percent, less than what investors expected. Without the strengthening dollar, the company’s two main businesses, which it calls Productivity and Business Processes, and Intelligent Cloud, are would have met the first guidance it gave investors in April.
“Commercial demand generally felt pretty healthy,” Brett Iversen, Microsoft’s chief of investor relations, said in an interview Tuesday. “The long-term thesis of people looking to move to the cloud to digitize their business, do more, or save money – all of that still feels intact.”
He said this was reflected in strong long-term booking commitments, including a record number of Azure deals worth more than $1 billion.
Total revenue for Microsoft’s commercial cloud computing offering, which also includes Office 365 subscriptions, increased 28 percent to $25 billion.
“We’re not immune to what’s happening in the macro in general,” Satya Nadella, the company’s CEO, said in an interview with Wall Street analysts. But he said the continued interest companies have in using cloud services, which bill partly based on consumption, is a reflection of companies’ efforts to do with less.
“Moving to the cloud is the best way to shape your spending with uncertainty about demand,” he said.
Microsoft’s personal computing business grew 2 percent to $14.4 billion, trailed by the 2 percent drop in sales of the Windows operating system preinstalled on PCs. Investors were willing to see some weakness because PC shipments are down weakened demand and supply chain problems caused by the coronavirus lockdowns in China.
Xbox content and services revenues fell 6 percent as consumers spent less time playing video games.
with unemployment still near its lowest level in 50 years, LinkedIn, the professional social network that Microsoft acquired in 2016, grew 26 percent, up from 34 percent in the previous quarter.
The company said it had $126 million in costs related to winding down its operations in Russia, and an additional $113 million in costs to pay severance payments to laid-off workers.
Mr Iversen said the layoffs were for “a small number of positions” and the company expected to increase its workforce in the new fiscal year, which began July 1.
Speaking to Wall Street analysts, Mr. Nadella and Amy Hood, head of finance at Microsoft, said that in addition to the strong dollar, the company expected a number of challenges to continue, such as reduced demand for personal computers, lower-paid job openings on LinkedIn and lower demand. of small and medium-sized companies.
But they said Microsoft would continue to invest in markets where it has benefits and expects double-digit revenue growth in the coming year, even if the currency headwinds continue. The share price rose about 5 percent in after-hours trading.