Microsoft reported a 14% drop in profit due to weak sales of Windows PCs | Job Binary

REDMOND, Wash. — Microsoft on Tuesday reported a 14% drop in profit for the July-September quarter compared to the same period last year, reflecting a weak PC market affecting its Windows business.

The company reported quarterly earnings of $17.6 billion, or $2.35 per share, which slightly beat Wall Street expectations despite missing last year’s results.

The Redmond, Washington-based software maker posted revenue of $50.1 billion in the quarter, up 11% from last year, beating expectations.

Analysts expected Microsoft to earn $2.31 per share on revenue of $49.7 million for the quarter.

Microsoft’s personal computing business, centered on its Windows software, was widely expected to take a hit given economic uncertainties such as inflation. Also, many consumers bought new devices during the pandemic, helping to reduce demand.

The company derives revenue from licenses from computer manufacturers who install the Windows operating system on their products. Revenue from those licenses fell 15% in the quarter, Microsoft said.

Worldwide shipments of personal computers fell nearly 20% in the quarter from the same period last year, according to market research firm Gartner, which it said was the biggest decline since it began tracking the PC market in the mid-1990s. A disappointing back-to-school sales season for new computers also led to a fourth straight quarter of year-over-year declines, Gartner said.

Microsoft shares fell more than 6% in after-hours trading on Tuesday. Microsoft Chief Financial Officer Amy Hood said in a conference call with investors that some of the negative factors impacting the last quarter may extend into the near future. Citing recent layoffs and the last year of new hires, net headcount growth “will be minimal” heading into the current quarter.

Microsoft offset some of its Windows-related losses through the strength of its cloud computing services offered to large businesses and other organizations.

Revenue from that segment grew 20% from the same period last year to $20.3 billion, and was Microsoft’s biggest source of sales and growth during the period. But growth in the company’s flagship Azure cloud computing platform fell short of analysts’ expectations, in part because of what Hood described as the continued rise in the cost of energy needed to run powerful data centers.

The second-largest business segment, made up of productivity-related software such as the Office suite of work products, grew 9% to $16.5 billion in revenue.

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