© Reuters. FILE PHOTO: A Microsoft logo is seen in Los Angeles, California, U.S., November 7, 2017. REUTERS/Lucy Nicholson
By Yuvraj Malik and Jane Lanhee Lee
(Reuters) – microsoft corporation (NASDAQ:) reported better-than-expected quarterly profit on Tuesday as strong performance in its cloud services business helped offset a slump in the personal computer market, sending its shares up 4%. in the extended negotiation.
Upbeat results from Microsoft, whose business spans cloud services, software, games and computer hardware, are likely to allay fears of a collapse in the tech industry that has laid off tens of thousands of employees this year in anticipation of an economic downturn.
Second-quarter net income fell 12% to $16.4 billion in the quarter, but adjusted earnings of $2.32 per share beat the Wall Street consensus estimate of $2.29, according to Refinitiv calculations.
Microsoft said revenue from Azure cloud products rose 31% in the quarter, in line with estimates compiled by Visible Alpha, while its broader Intelligent Cloud division posted revenue of $21.5 billion, versus Wall Street consensus. Street of $21.4 billion compiled by Refinitiv.
Azure could get a boost from cloud spending due to the growth of artificial intelligence. “There are a variety of ways we can bring that technology, either in specific offerings or to enhance existing offerings,” said Brett Iversen, Microsoft’s head of investor relations, referring to OpenAI, which the company is investing in. strongly.
OpenAI is behind the chatbot sensation ChatGPT, which can spit out a Shakespearean-style love story or other prose with a text command. That model has also been created with compute time in Azure.
“Given the challenges of the current macroeconomic environment and concerns that things could have been much worse, I think these Microsoft gains should be viewed as a reasonably positive sign for technology in general,” said Bob O’Donnell of TECHnalysis Research. .
Still, Microsoft has also joined other big tech companies in resorting to layoffs to weather tougher times, announcing last week that it would cut more than 10,000 jobs.
Azure has also steadily captured market share from leader Amazon.com Inc (NASDAQ:) Amazon Web Services (AWS).
Azure ended 2022 with a 30% share of the cloud computing market, up from 20% in 2018, according to estimates by BofA Global Research. AWS fell from 71% to 55% during the same period.
CHART: Azure gains market share, but AWS maintains top position (https://www.reuters.com/graphics/TECH-PREVIEW/klpygzrgwpg/chart.png)
Azure’s growth has slowed steadily from around 50% just over a year ago, but investors feared worse. Amazon shares rose 3.25% after Microsoft’s results.
Microsoft’s revenue rose 2% to $52.7 billion in the three months ended December 31, compared with analysts’ median estimate of $52.94 billion, according to Refinitiv IBES.
Sales in Microsoft’s most personal computing segment, which includes Windows, devices and search revenue, declined 19% to $14.2 billion as the PC market continued to shrink.