Author: Qian Tongxin
Growth in Azure, the key cloud business that drives Microsoft's results, slowed to 31% as customers cut spending on the cloud.
On January 24 local time, Microsoft Corporation released its second fiscal quarter report for 2023 (October 1, 2022 ~ December 31, 2022).
Microsoft’s revenue in this fiscal quarter was US$52.75 billion, a year-on-year increase of 2%, the lowest growth rate since 2016; profits fell from US$18.77 billion in the same period last year to US$16.43 billion, a year-on-year decline of 12%.
The growth rate of Azure, Microsoft's cloud business, has slowed down, and the company expects this trend to continue in the next few quarters.
Shares of Microsoft fell more than 1 percent after hours.
In the past quarter, Microsoft announced 10,000 layoffs in response to a slowdown in business growth.
Microsoft CEO Satya Nadella told analysts on an earnings call that the company's core Windows and Office businesses are down.
Investment bank Raymond James wrote in a note to clients on Monday that Microsoft's decision to cut jobs shows the company's focus on maintaining profit margins despite an uncertain revenue outlook.
The financial report shows that Microsoft's personal computing business, including Windows, Xbox, Surface and search advertising, contributed $14.24 billion in the second quarter, a year-on-year decrease of 19%, of which Windows license sales for PC equipment manufacturers fell year-on-year 39%, worse than the 15% decline in the first fiscal quarter.
According to a recent report released by research firm Gartner, in the fourth quarter of 2022, the growth of the global PC business hit a record low.
Growth in Azure, Microsoft's key cloud business, also slowed to 31% in the fiscal second quarter as customers cut spending on the cloud.
Nadella said that large organizations are optimizing their spending on cloud services. In order to help cloud customers optimize costs, Microsoft has also adjusted its product line to adapt to customers' fee reduction trends.
Microsoft expects third-quarter revenue range of $50.5 billion to $51.5 billion.
Microsoft Chief Financial Officer Amy Hood said on the earnings call that the company's Windows commercial products and cloud services business may continue to experience slowdowns in the fiscal third quarter.
At the same time, Microsoft is devoting more resources to keep itself at the forefront of artificial intelligence through so-called generative AI technology.
On January 23, Microsoft announced an additional multi-billion-dollar investment in OpenAI, an American artificial intelligence research company. OpenAI’s chat robot ChatGPT launched at the end of last year detonated the technology circle. With its investment in OpenAI, Microsoft is expected to compete more with Google in search .
Microsoft's earnings also kicked off the earnings season for big U.S. technology companies.
This past year, the Nasdaq had its worst year since 2008 and posted its first four-quarter losing streak since the dot-com bust.
On January 25, Tesla followed Microsoft's financial report.
Analysts expect Tesla to post its weakest sales growth in 10 quarters after a global price cut.
Analysts from research firm Refinitiv expect Tesla's fourth-quarter revenue to rise 36 percent to $24 billion.
Refinitiv also said it expects Tesla's fourth-quarter net profit to post its slowest growth rate in three years.
Visible Alpha's data predicts that Tesla's gross profit margin on cars in the fourth quarter of last year will drop from 30.6% a year ago to 28%, and the gross profit margin is expected to further drop to 25% in 2023.
In recent months, Tesla has been offering deep discounts in auto markets around the world to boost sales.
Tesla has cut prices by as much as 20% in some markets so far this month.
Next week, including Meta, Google, Amazon and Apple will also report earnings.
With the exception of Apple, these technology companies have recently announced major layoffs.
So far, Meta, Google, Microsoft and Amazon have laid off more than 50,000 employees.