Microsoft CEO Satya Nadella speaks during an interview in Redmond, Washington, March 15, 2023.
Chona Kassinger | Bloomberg | getty images
microsoft Shares fell 4% in extended trading after the company on Wednesday reported better revenue and earnings for its fiscal first quarter, but predicted slower-than-expected growth.
Here’s how the company performed compared to analyst expectations based on LSEG’s survey:
- Earnings per share: $3.30 vs $3.10 expected
- revenue: $65.59 billion vs. Expected $64.51 billion
Sales for the quarter ended Sept. 30 were up 16% year over year, according to the statement. Net profit increased 11% to $24.67 billion from $22.29 billion in the same period last year.
For this quarter, Microsoft called for revenue in the range of $68.1 billion to $69.1 billion. This represents a growth of 10.6% in the mid-range. Analysts surveyed by LSEG had expected revenue of $69.83 billion.
External vendors are late in providing data center infrastructure to Microsoft, meaning the company will not be able to meet demand in the second quarter of its fiscal year.
“I think supply and demand will partially match in the second half of this fiscal year,” CEO Satya Nadella said in a conference call with analysts.
In August, Microsoft said it would revise its business unit reporting to reflect its management approach. Mobility and Security services, along with some Windows revenue, are now part of the Productivity and Business Processes unit, which also includes Office software.
Productivity and business process revenue for the quarter rose 12% to $28.32 billion, surpassing the $27.9 billion consensus of analysts surveyed by StreetAccount. This is 38% higher than the median forecast of $20.45 billion that management gave in July, as actual totals account for the change.
Investors now have a clearer picture of Microsoft’s cloud computing consumption. For the first time, Azure and other cloud services revenue growth metrics exclude mobility and security and Power BI data analytics revenue. Azure growth for the quarter was 33% (34% at constant exchange rates), with 12 points coming from artificial intelligence services. CNBC’s consensus on Azure growth was 32.8%, while StreetAccount’s consensus was 29.4%.
“Demand continues to be higher than the capacity we have available,” said Amy Hood, Microsoft’s finance chief.
Hood called for Azure growth of 31% to 32% at constant exchange rates in the fiscal second quarter.
The entire Intelligent Cloud segment, including Azure, Windows Server, and enterprise services, generated $24.09 billion in revenue. This is a 20% increase, slightly above the StreetAccount consensus of $24.04.
On Tuesday Google Its rival cloud business grew 35% annually to $11.35 billion. Amazona leader in the cloud infrastructure market, is scheduled to announce its earnings on Thursday.
Microsoft has reduced the size of its segment called Personal Computing through reporting changes. In the most recent quarter, revenue was $13.18 billion, up about 17% year-over-year and surpassing the StreetAccount consensus of $12.56 billion.
The company saw a 2% increase in device sales and sales of Windows operating system licenses to device manufacturers. Industry researcher Gartner estimated quarterly PC shipments fell 1.3%.
Microsoft’s AI investments are becoming a major focus for investors as the company builds infrastructure and increases chip spending to handle more workloads. Microsoft is a major investor in ChatGPT creator OpenAI, which was valued at $157 billion in a funding round earlier this month.
As of September 30, Microsoft had secured more than $108 billion in financing leases that had yet to commence, which UBS analysts said could include third-party cloud spending to meet AI demand.
At the same time, Microsoft has been spending more cash on assets and equipment. First quarter spending increased 50% year-over-year to $14.92 billion. The consensus of analysts surveyed by Capital IQ was $14.58 billion.
As of Wednesday’s close, Microsoft was up about 15% this year, while the Nasdaq was up about 24% during the same period.
Correction: A previous version of this article had an incorrect quarter-end date. It was September 30th.
