Microsoft (MSFT) Q4 2022 Earnings

Microsoft CEO Satya Nadella at a Microsoft press conference in New York.

Don Emmert | AFP | Getty Images

Microsoft The stock first fell in extended trading but then rebounded on Tuesday after the software maker reported fourth-quarter financial results that fell short of the Wall Street consensus.

Here’s how the company did it:

  • Income: $2.23/share adjusted against $2.29/share, as analysts had expected, according to Refinitiv.
  • Income: $51.87 billion vs. $52.44 billion, as expected by analysts, according to Refinitiv.

Microsoft posted the slowest revenue growth since 2020, up 12% year-on-year in the quarter ended June 30, according to data statement. Net income rose 2% to $16.74 billion.

The biggest problem in the quarter is related to the deteriorating exchange rates. Microsoft said it cut $595 million in revenue and 4 cents per share in earnings. In June, Microsoft reduced its quarterly earnings and earnings recommendations for earnings and earnings only due to rate fluctuations.

The Microsoft Intelligent Cloud segment, which includes the Azure public cloud for hosting applications, SQL Server, Windows Server, and enterprise services, generated $20.91 billion in revenue. This is 20% more and lower than the $21.10 billion forecast by analysts polled by StreetAccount.

The company said revenue from Azure and other cloud services was up 40% from 46% in the previous quarter. Analysts polled by CNBC had expected 43.1%, while StreetAccount’s consensus estimate was 43.4%. Microsoft does not disclose revenue from Azure in dollars.

The Microsoft Productivity and Business Processes segment, including Office productivity software, Dynamics and LinkedIn, generated $16.60 billion in revenue. This is nearly 13% more than StreetAccount’s consensus estimate of $16.66 billion.

The More Personal Computing segment, which includes the Windows operating system, Xbox game consoles, Bing search engine, and Surface devices, generated $14.36 billion in revenue for the quarter. Revenue was up 2% year-over-year and just below StreetAccount’s consensus estimate of $14.65 billion. Microsoft said that search and news advertising, excluding traffic acquisition costs, grew 18% due to higher search volume and revenue per search. However, the reduction in advertising spending resulted in a $100 million reduction in revenue from search and news ads, as well as LinkedIn categories.

Sales of Windows licenses to device manufacturers fell 2% in the quarter. Gartner Technology Industry Researcher said earlier this month, logistical disruptions this quarter contributed to a 12.6% decline in quarterly PC shipments, a key driver for this metric. The company said factory closures in China in April and May and a worsening PC market in June cut Windows’ revenue from device makers by $300 million.

Microsoft saw $126 million in operating expenses associated with its solution stop the sale of goods and services in Russia after the country’s invasion of Ukraine.

During the quarter CEO Satya Nadella said employees will receive a pay raise, and the company introduced services that help customers deal with security incidents.

Excluding after-hours movement, Microsoft stock is down 25% this year, compared to a roughly 18% drop in the US S&P 500 stock index.

Executives will discuss the results with analysts and release recommendations during a webcast starting at 5:30 pm ET.

This story is evolving. Please stay tuned for updates.

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