Microsoft CEO Satya Nadella said during an interview in Redmond, Washington, on March 15, 2023.
Chona Kasinger | Bloomberg Getty Images
Microsoft there was reported earnings and revenue beat for the first fiscal quarter, as a software maker whose Azure cloud infrastructure business grew faster than expected. But the company issued a call for slower-than-expected growth for the current quarter, sending shares down 4% after hours.
Here’s how the company did, compared to what Wall Street expected based on a survey of analysts by LSEG:
- Earnings per share: $3.30 vs $3.10 expected
- result: $65.59 billion vs $64.51 billion expected
Microsoft’s revenue rose 16% year over year in the quarter, which ended on September 30, according to a statement. Net income, at $24.67 billion, increased from $22.29 billion in the year-ago quarter.
Regarding guidance, Microsoft asked for fiscal second quarter revenue in the range of $68.1 billion to $69.1 billion. This means a 10.6% growth in the middle of the range. Analysts surveyed by LSEG were looking for $69.83 billion in revenue.
In August, Microsoft said it would revise its reporting on business segments to reflect management’s approach. Mobility and security services, along with some Windows revenue, are now part of the productivity and business processes unit, which includes Office software.
Revenue from productivity and business processes reached $28.32 billion in the quarter. That number was up 12% and above the $27.90 billion consensus among analysts surveyed by StreetAccount. It is 38% higher than the $20.45 billion midpoint of the forecast that management gave in July, because the actual total accounts for the change.
Investors received a clearer picture of cloud computing consumption at Microsoft, because for the first time, revenue growth metrics for Azure and other cloud services do not include mobility and security and Power BI data analytics sales. Azure growth for the quarter was at 33%, with 12 points from artificial intelligence services. CNBC’s consensus for Azure growth is 32.8%, while StreetAccount’s is 29.4%.
“Demand continues to be higher than available capacity,” said Amy Hood, Microsoft’s chief financial officer, on a conference call with analysts.
The complete intelligent cloud segment including Azure, Windows Server and enterprise services generated $24.09 billion in revenue. That’s up 20% and slightly more than the $24.04 StreetAccount consensus.
On Tuesday, Google reported 35% annual growth in cloud business competing for $11.35 billion. Amazonwhich leads the cloud infrastructure market, is scheduled to report results Thursday.
Microsoft has reduced the size of the segment it calls “more personal computing” through reporting changes. In the first fiscal quarter contributed $ 13.18 billion in revenue. That’s up about 17% and above the StreetAccount consensus of $12.56 billion.
The company experienced 2% growth in device sales and sales of Windows operating system licenses to device manufacturers. Industry researcher Gartner estimates monthly PC shipments fell 1.3%.
During the quarter, Microsoft worked to help customers recover from flawed updates CrowdStrike security software brought down Windows PCs globally. Microsoft said it will collaborate with BlackRock on an artificial intelligence infrastructure investment fund, targeting $30 billion in initial capital.
Microsoft’s AI investments continue to be a key focus for investors, as the company builds infrastructure and increases chip spending to handle greater workloads. Microsoft is a major investor in OpenAI creator ChatGPT, which was valued at $157 billion in a funding round earlier this month.
As of September 30, Microsoft had raised more than $108 billion in unfunded leases, which UBS analysts said may include third-party cloud spending to meet AI demand.
At the same time, Microsoft has been spending more money on property and equipment. In the first fiscal quarter, it increased by 50% year-on-year to $14.92 billion. The consensus among analysts polled by Capital IQ is $14.58 billion.
As of Wednesday’s close, Microsoft was up about 15% for the year, while the Nasdaq gained about 24% over the same period.
This is new news. Please check back for updates.
Correction: An earlier version of this story had an incorrect date for the end of the quarter. It’s September 30th.
