Microsoft slips on sluggish revenue

Microsoft shares are slumping this morning after the software giant reported its slowest sales growth in six years. Here are the 5 biggest earnings reports from yesterday.

While Microsoft (NASDAQ: MSFT) Reported an EPS of $2.32, beating the consensus of $2.30, revenues of $52.7 billion – up only 2% year-over-year – came in worse than the consensus of $53.12B.

The key Intelligent Cloud revenue figure was up 24% year-on-year in constant currencies in the quarter, but Microsoft sees it edging up to around $21.85B in the current quarter, an implicit annualized growth rate of only 6.6%, according to Investing.com calculations. Analysts had expected around $22.14B.

Shares were recently trading 2.2% lower pre-market.

The firm said sales rose just 2% in the three months to December, to $52.7bn (£42.7bn), the smallest quarterly increase in more than six years.

The update came just days after the firm said it would reduce its workforce by roughly 5%, eliminating 10,000 jobs.

The tech industry has been hammered by job cuts in recent months, as advertising and other spending slows.

Businesses are worried about the economy, while households that splashed out on computers and other tech while stuck at home during the pandemic have been cutting back, especially as the cost of living rises.

Microsoft said revenue tied to the Xbox video game system fell 12%, while spending on its Windows products plunged 39%.

Sales growth in the firm’s Azure cloud computing unit – seen by analysts as a key growth driver for the firm – was better than expected, up 31%, helping to lift the firm’s shares in after-hours trade.

But overall profits sank 12% to $16.4bn.

Prior to the update from the company, Wedbush Securities analyst Dan Ives wrote in a note that he thought the slowdown for Microsoft would be temporary.