LinkedIn and Microsoft’s search and news advertising divisions were among the several annual growths in Microsoft’s performance for the quarter ended September 30, 2022, but despite clocking an annual growth in revenue, the tech giant reported its slowest growth in five years and a drop in its quarterly profits.
In the earnings for the most recent quarter, the Redmond-headquartered behemoth reported a strong growth of 11% in its revenue, which rose to $50.1 billion, and exceeded analyst expectations of $49.61 billion. Its EPS (earnings per share) beat the estimated $2.30/share to reach $2.35 per share, an annual fall of 13%. Its operating income rose by 6% year-over-year (YoY) to reach $21.5 billion, while its net income dropped clocked a YoY decline of 14% to drop to $17.6 billion.
“In a world facing increasing headwinds, digital technology is the ultimate tailwind,” said Satya Nadella, chairman and chief executive officer of Microsoft. “In this environment, we’re focused on helping our customers do more with less, while investing in secular growth areas and managing our cost structure in a disciplined way.”
Microsoft’s shares dropped in after-hours trading after the company reported the earnings for the September quarter, but later rallied to rise by 1.38% to reach $250.66. The company is eyeing to bag revenue in the range of $52.35-53.35 billion in the fiscal second quarter, and returned $9.7 billion to shareholders in the form of share repurchases and dividends in the recently-ended quarter.
Delving deeper into the earnings of the September quarter, we find that the Productivity and Business Processes arm of the company brought in $16.5 billion in revenue, a YoY increase of 9% and barely exceeding analyst expectations. Growth of the Office 365 Commercial revenue led the overall increase in the 7% increase in revenue from Office Commercial products and cloud services, while revenue from LinkedIn rose by 17% YoY.
Revenue from Azure, Microsoft’s cloud computing product, rose by 35% during the quarter, slightly below what the company had told investors to expect, while the overall revenue from server products and Microsoft’s cloud services increased by 22%. The company’s Intelligent Cloud business generated $20.3 billion for the quarter, a rise of 20%.
“This quarter Microsoft Cloud revenue was $25.7 billion, up 24% (up 31% in constant currency) year-over-year. We continue to see healthy demand across our commercial businesses including another quarter of solid bookings as we deliver compelling value for customers,” said Amy Hood, executive vice president and chief financial officer of Microsoft.
The company’s More Personal Computing arm saw a decline in revenue at a time of falling PC shipments worldwide – sales of the Windows operating system fell by 15% (driven by what Microsoft describes as a “continued deterioration in the PC market”) alongside the drop of 3% in Xbox content and services revenue – a sign that the pandemic-induced boost received by the gaming industry over the past two years has been waning. Revenue from its search and news advertising divisions increased by 16% as well.