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Microsoft earns less, sales forecasts are not met – Microsoft shares limit losses on Nasdaq

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Software giant Microsoft struggled at the end of the year amid rising inflation and fears of a recession, earning much less. In the three months ending in December, net income fell 12 percent year-on-year to $16.4 billion. Sales increased 2% to $52.7 billion, the weakest growth in more than six years.

Overall, the quarterly numbers were in line with expectations. Earnings in the critical cloud business were also slightly higher than Wall Street analysts had expected.

After the forecast for the current quarter, the trajectory turned negative. Among other things, Microsoft expected the Azure cloud platform’s growth to slow by four to five percentage points. Azure is a central growth driver for the group and was a glimmer of hope last quarter with a good 30 percent increase.

Microsoft announced last week that it would lay off about 10,000 employees. After other tech companies like the Meta group, Twitter and Amazon’s Facebook already resorted to massive job cuts, the wave of layoffs has reached the Windows group. Cuts and other restructuring measures cost Microsoft $1.2 billion. However, the group wants to broaden its commitment to the developer of its ChatGPT artificial intelligence software, OpenAI, with “billion dollar” investments.

Microsoft President Satya Nadella stressed the importance of software with artificial intelligence in the future. “Over time, every application will be an application of AI,” he said on a conference call with analysts after the quarterly numbers were presented. Microsoft wants to embed OpenAI technology deep into its cloud platform.

Meanwhile, on its Windows leg, Microsoft is getting sluggish in the PC market. Business shrank with the sale of the operating system to PC manufacturers up 39 percent in the past quarter. And in the current quarter, the group again considers the potential for a decline of the same magnitude.

There has also been a decline in the Xbox console-related game business. But Microsoft has surpassed 120 million active users on its Game Pass subscription service, which allows playing video games over the Internet.

Goldman leaves Microsoft on ‘accused buy list’

US investment bank Goldman Sachs left Microsoft shares on the “reserved buy list” with a price target of $315, according to quarterly numbers. In a study published Wednesday, analyst Kash Ranjan emphasized the strength of the cloud business. Otherwise, sales and profits were roughly in line with his expectations. Overall, the software group is well positioned to win more orders and boost the customer base, even in a slow growth environment.

Microsoft drops to the bottom of the Dow after a poor outlook

Bad business numbers and a disappointing outlook weighed on stocks in software giant Microsoft on Wednesday. In the end, however, the paper closed on the Nasdaq Stock Exchange only 0.59 percent lower, at $240.61. However, losses were sometimes as large as 4.6 percent. The entire US tech sector was affected.

This means that the most recent attempt to recover in the new year is over for the time being. After a weak start to the year, dropping below $220, the stock has recently made its way above the $245 level. Now it has fallen back below the 21-day moving average, which is a popular short-term trend indicator. Since the end of 2021, the long-term trend has already been downward. At that time, $332 was the previous record at a time when the technology sector was still considered the winner in the Corona pandemic.

Microsoft struggled last quarter in the face of rising inflation and fears of a recession. Overall, it was the weakest sales growth in more than six years and the marked decline in profits was in line with expectations. However, the outlook for the current quarter was disappointing: growth in Azure’s recently robust cloud division is expected to slow significantly.

Analyst Mark Murphy of US bank JPMorgan wrote that consensus estimates threatened to decline. In addition, the sales forecast for the third business quarter is also lower than expected. However, Microsoft’s stock valuation premium over the industry is justified due to its broader strategic product portfolio, faster organic revenue growth, and good cash generation.

finanzen.net / dpa-AFX editorial office

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