Microsoft reported on July 26 that its profitability for the most recent quarter fell short of forecasts as sluggish demand in China and supply delays affected sales of personal computers. The company missed market expectations with a profit of $16.7 billion on revenue of $51.9 billion, but topped the same quarter a year ago.
Microsoft said a strong US dollar hurt its sales, making its products more expensive in overseas markets. The earnings report said Microsoft lost $300 million in revenue in May arising from the Windows operating system it bought to power machines due to the shutdown of computer production facilities in China and declining demand for personal computers. .
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Wedbush analyst Dan Ives said in a note to investors, “While the headline slight miss will cause movement on (Wall) Street with a knee-jerk reaction, it is largely forex and China shutdown driven (PC driven). “
“The core DNA of Microsoft’s growth story is cloud and core Azure growth which was healthy this quarter and appears to be gaining momentum in 2023 despite economic constraints.”
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Shares of the US technology giant rose nearly 4 percent in after-market trading after earnings data was released.
“In a dynamic environment we see strong demand, share and customer commitment for our cloud platform,” said Amy Hood, Microsoft’s Chief Financial Officer.
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Before the pandemic, the personal computer industry was in steady decline as consumers shifted to smartphones and tablets. The spread of online commerce, employment, socializing and entertainment has rekindled demand for desktop computing capability, but it is unclear whether this trend will continue beyond the pandemic.
According to Microsoft, a reduction in companies’ marketing spending as a result of the general economic downturn affects advertising revenue on the company’s online news, search and careers social network LinkedIn. The Washington-based IT giant of the US also racked up $126 million in operating costs associated with reducing its operations in Russia as a result of that country’s invasion of Ukraine.
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Customers spent less money on Xbox video game content during the quarter than at the same time last year, which could indicate that more people are playing outside as pandemic restrictions loosen. However, Microsoft’s cloud, enterprise and productivity solutions continued to grow.
“We see a real opportunity to help every customer in every industry use digital technology to overcome today’s challenges and become stronger,” said Microsoft Chief Executive Satya Nadella.
(with agency input)
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