Microsoft sales slow down but cloud holds profits strong

2 days ago

Image: © Tobias Arhelger/Stock.adobe.com

CEO Satya Nadella said Microsoft is ushering in the ‘next major wave of computing’ as Microsoft Cloud turns advanced AI models into a new platform.

Microsoft has topped analysts’ expectations with its latest quarterly profits despite slow sales and a sharp drop in its Windows and Xbox businesses.

Published yesterday (24 January), the software giant’s latest quarterly earnings show a slow growth in revenue of 2pc to $52.7bn over the same period in the last fiscal year.

Windows OEM – the PC side of Microsoft’s business – saw a dramatic 39pc drop in revenue, largely owning to a broader ongoing PC sales slump. Revenue from its devices division also dropped 39pc while its Xbox content and services saw sales drop by 12pc.

However, these disappointments were offset by revenue from Microsoft Office, cloud and server products. Overall intelligent cloud revenue was up 18pc year-on-year while server products and cloud services revenues grew by 20pc. Azure and other cloud services revenue grew by 31pc.

“The next major wave of computing is being born, as the Microsoft Cloud turns the world’s most advanced AI models into a new computing platform,” said Satya Nadella, chair and CEO of Microsoft.

“We are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new era of AI.”

Nadella’s comments come just a day after Microsoft confirmed it is extending its partnership with OpenAI and will provide a multibillion funding boost to the makers of ChatGPT (which it will add to its Azure cloud services soon).

“The surprisingly strong performance in Microsoft’s key Azure cloud business was enough to ease worries surrounding a steeper deceleration path on cloud optimisations, sending the stock higher,” said Jesse Cohen, a senior analyst at Investing.com.

“Tech investors are relieved to see that the slowdown across Microsoft’s key cloud business was not as bad as feared.”

Last week, Nadella confirmed Microsoft will be laying off 10,000 employees – around 5pc of its global workforce – in order to “align our cost structure with our revenue and where we see customer demand”.

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Vish Gain is a journalist with Silicon Republic

editorial@siliconrepublic.com