Microsoft Corp said revenue growth in its cloud-computing business Azure would decelerate this quarter and warned of a further slowdown in corporate software sales, fueling concern about a steeper decline in demand for products that have driven its momentum in the past few years.
Shares erased earlier gains in late trading after Microsoft chief financial officer Amy Hood said Azure sales would this quarter slow by 4 or 5 percentage points from the end of the fiscal second quarter, when gains were at a mid-30s percentage.
That business had marked a bright spot in a lackluster earnings report for Microsoft, whose other divisions were held back by a slump in sales related to personal computer software and video games.
Shareholders had earlier sent the stock up more than 4 percent, encouraged by signs of resilience in Microsoft’s cloud business even in a weaker overall market for software and other technology products.
The firm’s downbeat forecast brought the focus back to the software giant’s challenges as corporate customers hit the brakes on spending.
Revenue growth of 2 percent in the second quarter was the slowest in six years, and Microsoft last week said it is firing 10,000 workers.
Earlier on Tuesday, the company said adjusted profit in the quarter ended Dec. 31 was US$2.32 a share, while sales rose to US$52.7 billion.
That compared with average analysts’ projections for US$2.30 a share in earnings and US$52.9 billion in revenue, a Bloomberg survey showed.
Excluding currency impacts, Azure revenue gained 38 percent for the full quarter, slightly topping analyst predictions.
Microsoft said it recorded a charge of US$1.2 billion, or US$0.12 per share, in the latest quarter, with US$800 million of that related to the job cuts, which would affect fewer than 5 percent of its workforce.
The Redmond, Washington-based company last week said the charge would include severance, “changes to our hardware portfolio” and the cost of consolidating real-estate leases.
The company’s shares declined about 1 percent after executives gave their forecast on the conference call.
Earlier, they rose as high as US$254.79, after closing at US$242.04 in regular New York trading. The stock dropped 29 percent last year, compared with a 20 percent slide in the S&P500 index.
After years of double-digit percentage revenue gains fueled by Microsoft’s accelerating cloud business, and robust growth during the technology spending spree of the COVID-19 pandemic, CEO Satya Nadella said that the industry is going through a period of deceleration and would need to adjust.
“During the pandemic there was rapid acceleration. I think we’re going to go through a phase today where there is some amount of normalization in demand,” Nadella said in an interview at the World Economic Forum in Davos, Switzerland, earlier this month. “We will have to do more with less — we will have to show our own productivity gains with our own technology.”
Azure has been Microsoft’s most closely watched business for years, and has fueled a resurgence in revenue since Nadella took the helm in 2014 and oriented the company around the burgeoning cloud-computing market, in which it competes with Amazon.com Inc, Alphabet Inc’s Google and others.
Microsoft is turning to artificial intelligence applications to fuel more Azure demand.
Revenue from the Azure machine learning service has more than doubled for five quarters in a row, Nadella said.
The London Metal Exchange (LME) discovered bags of stones instead of the nickel that underpinned a handful of its contracts at a warehouse in Rotterdam, the Netherlands, in a revelation that would deliver another blow to confidence in the embattled exchange. The amount of metal represents just 0.14 percent of live nickel inventories on the LME, worth about US$1.3 million at current prices, so the immediate effect on the metals markets is limited. However, the shock announcement has much wider implications. In an industry riddled with scandals, the LME’s contracts are viewed as unquestionably safe. The news that even a few of
Oil on Friday posted its worst weekly loss since the early months of the COVID-19 pandemic as banking turmoil poisoned investor sentiment. West Texas Intermediate for April delivery dropped 2.36 percent to US$66.74 per barrel, falling 12.96 percent for the week, the largest drop in almost three years. Brent crude for May delivery fell 2.32 percent to US$72.97, posting a weekly loss of 11.85 percent. The failure of Silicon Valley Bank and troubles at Credit Suisse Group AG drove investors from risk assets, with oil-options covering accelerating the sell-off. “Crude action this week reminded many of how quickly the commodity can be decimated by
US-based mobile chip designer Qualcomm Inc yesterday opened a manufacturing engineering and testing center in Hsinchu, expanding its presence in Taiwan. Qualcomm also expects to accelerate its purchases in Taiwan, which already rose to NT$240 billion (US$7.9 billion) last year, up from NT$90 billion five years earlier, and should hit NT$300 billion next year. The center is to provide services for the supply chain in the semiconductor industry, Roawen Chen (陳若文), senior vice president and chief supply chain and operations officer of Qualcomm, said at the facility’s inauguration ceremony. It is Qualcomm’s largest and most advanced engineering testing center outside of the company’s
Huawei Technologies Co (華為) has replaced more than 13,000 parts in its products that were hit by US trade sanctions, the Chinese tech giant’s founder said, according to a speech transcript from last month posted on Friday by a Chinese university. Ren Zhengfei (任正非) said Huawei had over the past three years replaced the 13,000 components with domestic Chinese substitutes, and had redesigned 4,000 circuit boards for its products, the transcript posted by Shanghai Jiao Tong University said. “As of now, our circuit board [production] has stabilized, because we have a supply of domestically produced components,” Ren said. He did not give details