The tech giant said its sales for the quarter ended June 30 were $51.9 billion, up 12% from a year earlier. Profit rose 2% to $16.7 billion.
The results exceeded even Microsoft’s own low expectations. In early June, the company lowered its guidance for the quarter due to the growing strengthening of the US dollar.
“Obviously we’re incredibly optimistic about everything else we have,” Chris Capossela, the company’s chief marketing officer, said after the revised guidance was released. “That’s one thing we can’t control.”
Since then, conditions seem to have deteriorated further. Foreign exchange problems caused by the war in Ukraine and wider economic uncertainty cost Microsoft $595 million in the quarter as it converted sales in Europe, Japan and elsewhere back into US dollars. And a slowdown in PC production in China and a drop in consumer demand have led to more than $300 million in sales of the Windows operating system preinstalled on new PCs.
Slowdown in advertising spending LinkedIn and Microsoft’s search products resulted in more than $100 million in revenue losses.
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If not for currency issues, Microsoft’s flagship cloud computing platform Azurewould increase by 46%. Instead, it rose by 40%, which is less than investors’ expectations. Without the strength of the dollar, the company’s two core business lines, which it calls “Performance and Business Processes” and “Intelligent Cloud,” would be in line with the initial guidance it provided to investors in April.
“Commercial demand seemed pretty good overall,” Brett Iversen, Microsoft’s head of investor relations, said in an interview Tuesday. “The long-term thesis that people want to move to the cloud to digitize their business, to be able to do more, or to be able to save money still seems to hold true.”
He said this was reflected in strong long-term booking commitments, including a record number of more than $1 billion in Azure deals.
Total revenue from Microsoft’s commercial cloud offerings, which also includes Office 365 subscriptions, increased 28% to $25 billion.
“We are not immune to what is happening at the macro level in general,” CEO Satya Nadella said in a conversation with Wall Street analysts. But he said that the continued interest of businesses in using cloud services, which are billed in part based on consumption, reflects the desire of companies to get by with less.
“Moving to the cloud is the best way to plan your spending in the face of demand uncertainty,” he said.
Microsoft’s personal computer business rose 2% to $14.4 billion due to a 2% decline in sales of its Windows operating system preinstalled on personal computers. Investors were ready to see some weakness due to supplies
declined due to weakening demand and supply chain problems caused by the coronavirus lockdown in China.
Income from Xbox content and services fell 6% as consumers spent less time playing video games.
As unemployment remains at its lowest level in 50 years, LinkedIn, the professional social network bought by Microsoft in 2016, is up 26% from a 34% rise in the previous quarter.
The company said it has $126 million in costs associated with curtailing its operations in Russia and another $113 million in severance pay costs for laid-off employees.
Iversen said the layoffs were for “a small number of positions” and the company expected to increase headcount in the new fiscal year, which began on July 1.
Speaking to Wall Street analysts, Nadella and Amy Hood, Microsoft’s chief financial officer, said that in addition to a strong dollar, the company expects some problems to persist, such as declining demand for personal computers, fewer paid job postings on LinkedIn, and lower demand from small businesses. companies. – and medium-sized businesses.
But they said Microsoft will continue to invest in markets where it has an advantage and expect double-digit revenue growth next year even if the counter-exchange rate continues. The company’s share price increased by about 5% after the close of trading.
This article originally appeared in New York Times.