Microsoft chief executive officer Satya Nadella talks at a Microsoft news conference in New York.
Don Emmert | AFP | Getty Images
Microsoft shares fell 1% in extended trading on Tuesday after the software maker reported fiscal fourth-quarter results that failed to reach Wall Street consensus.
Here’s how the company did:
- Earnings: $2.23 per share, adjusted, vs. $2.29 per share as expected by analysts, according to Refinitiv.
- Revenue: $51.87 billion, vs. $52.44 billion as expected by analysts, according to Refinitiv.
Microsoft turned in the slowest revenue growth since 2020, at 12% year over year in the quarter, which ended on June 30, according to a statement. The company’s earnings per share fell short of consensus for the first time since 2016, with net income rising 2% to $16.74 billion.
The biggest challenge in the quarter stemmed from worsening foreign-exchange rates. Microsoft said that reduced revenue by $595 million and earnings by 4 cents per share. In June, Microsoft reduced its quarterly income and revenue guidance guidance for income and revenue just because of rate fluctuations. Revenue and income for the quarter came in at the low end of the ranges that Microsoft had put forward in June.
Microsoft’s Intelligent Cloud segment, which includes the Azure public cloud for application hosting, SQL Server, Windows Server and enterprise services generated $20.91 billion in revenue. That was up 20% and below the consensus of $21.10 billion among analysts polled by StreetAccount.
The company said revenue from Azure and other cloud services grew by 40%, compared with 46% in the prior quarter. Analysts surveyed by CNBC had expected 43.1%, while the consensus estimate from StreetAccount was 43.4%. Microsoft does not disclose Azure revenue in dollars.
Microsoft’s Productivity and Business Processes segment including Office productivity software, Dynamics and LinkedIn posted $16.60 billion in revenue. That was up nearly 13% and slightly less than the StreetAccount consensus of $16.66 billion.
The More Personal Computing segment featuring the Windows operating system, Xbox video-game consoles, the Bing search engine and Surface devices delivered $14.36 billion in revenue for the quarter. Revenue was up 2% year over year and barely lower than the $14.65 billion StreetAccount consensus. Microsoft said search and news advertising, excluding traffic-acquisition costs, rose 18% thanks to stronger search volume and revenue per search. Still, a contraction in advertising spending resulted in a $100 million cut to revenue for the search and news advertising and LinkedIn categories.
Sales of Windows licenses to device makers fell by 2% in the quarter. Technology industry researcher Gartner said earlier this month that logistical disruptions in the quarter had contributed to a 12.6% decrease in quarterly PC shipments, a key input for that metric. The company said factory shutdowns in China in April and May and a worsening computer market in June reduced Windows revenue from device makers by $300 million.
Hurdles from exchange rates advertising spending and computer sales were relatively well understood among investors heading into the earnings report, said Peter Choi, a senior research analyst at Vontobel Asset Management, which held $1.11 billion in Microsoft stock at the end of March, according to a filing.
“The core franchises that represent what people are most excited about for owning Microsoft — those were the more resilient areas, and they continue to shine through maybe a touch of deceleration, but those parts of the business were certainly more reassuring,” Choi said.
Microsoft saw $126 million in operating expenses tied to its decision to stop selling products and services in Russia following the country’s invasion of Ukraine.
During the quarter, CEO Satya Nadella said employees will get pay increases, and the company introduced services to help customers deal with security incidents.
Excluding the after-hours move, Microsoft stock has tumbled 25% so far this year, compared with a roughly 18% decline in the S&P 500 index of U.S. stocks.
Executives will discuss the results with analysts and issue guidance on a webcast starting at 5:30 p.m. ET.
This story is developing. Please check back for updates.
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