HomeLatest FeedsTechnology NewsYou wouldn't imagine what drags down Microsoft's profits

You wouldn’t imagine what drags down Microsoft’s profits



The slowing growth of one of the most important lines of business is giving Redmond residents a headache.

Microsoft said revenue growth at its Azure cloud computing business would slow in the current period and warned of a further slowdown in enterprise software sales, raising concerns about a steeper decline in demand for the products that have fueled the company in recent years.

CFO Amy Hood said that Azure sales in the current period are slowing by 4-5 percentage points compared to the end of the second fiscal quarter. That business was the bright spot in Microsoft’s lackluster earnings report, whose other divisions were hampered by declining sales of personal computer software and video games.

The company’s dismal forecast has drawn attention once again to the software giant’s challenges as enterprise customers rein in spending. Second-quarter revenue growth of 2 percent was the slowest in six years, and Microsoft said last week it would lay off 10,000 workers.

Earlier, the company said adjusted earnings for the period ended Dec. 31 were $2.32 per share on revenue of $52.7 billion. Analysts on average had expected earnings of $2.30 per share and revenue of $52.9 billion, according to a Bloomberg survey. Excluding exchange rate effects, Azure’s revenues grew 38 percent in the full quarter, slightly beating analysts’ forecasts, reported the Bloomberg.

After years of double-digit revenue growth thanks to Microsoft’s accelerating cloud business and strong growth during the tech spending wave of the COVID-19 pandemic, CEO Satya Nadella acknowledged that the industry is going through a period of slowdown and needs to adapt.

“During the pandemic, there was a strong acceleration. I think today we are going through a phase where demand is somewhat normalizing. We will have to do more with less, we will have to show our own productivity growth with our own technology,” said Nadella at the World Economic Forum in Davos, Switzerland. At the beginning of the month.

Azure has been Microsoft’s best-performing business for years, fueling a surge in revenue since Nadella took over in 2014 and steered the company toward the cloud computing market. Now Microsoft is turning to AI applications to generate even more demand for Azure. According to Nadella, revenue from Azure Machine Learning has more than doubled for five consecutive quarters.

Even as Microsoft looks to cut personnel and real estate expenses, the company will continue to invest in long-term opportunities, Hood said in an interview. As part of its focus on artificial intelligence, Microsoft said it will increase its stake in OpenAI, with the new investment amounting to $10 billion over several years.

“We fundamentally believe that the next big platform wave is going to be AI. And we also strongly believe that a lot of the company value is created by being able to catch those waves, and those waves affect every part of our technology stack, and they create new solutions and new opportunities,” Nadella said. He said it was too early to quantify what this would mean for demand for Azure.

The software maker also plans to continue spending to expand data centers that provide cloud services. Hood forecast an increase in capital spending in the third quarter on a call with analysts.

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Mr.Mario
Mr.Mario
I am a tech enthusiast, cinema lover, and news follower. and i loved to be stay updated with the latest tech trends and developments. With a passion for cyber security, I continuously seeks new knowledge and enjoys learning new things.

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