Microsoft Q4 Profits From Cloud Growth, But Misses Forecasts

Microsoft issued a surprisingly positive forecast of double digit revenue growth, thanks to strong demand for its cloud services.

This robust forecast helped offset investor concern over the slight miss of its fourth quarter results, which Microsoft blamed on “evolving macroeconomic conditions and other unforeseen items.”

The software giant has had to contend with supply chain challenges in China as that country experiences strict Covid-19 lockdowns again. Other problems include a decline in the PC market and the winding down of Redmond’s operation in Russia, over its illegal invasion of Ukraine.

Financial results

Despite these challenges, Microsoft actually delivered a impressive set of financial results in the past year. But a strong US dollar (it has risen 12 percent this year), slowing sales of PCs, and lower advertiser spending has impacted the firm.

For the three months ending 30 June, Microsoft posted a net profit up 2 percent at $16.7bn, from a net profit of $16.5bn in the same year-ago quarter.

Quarterly revenues rose 12 percent to $51.9bn from $46.2bn a year earlier.

However analysts had been forecasting a quarterly revenue of $52.4bn.

Meanwhile annual profit for the 12 months ending 30 June rose to $72.7bn from $61.3bn for 2021.

Annual revenues also rose to $198.3bn from $168bn the previous year.

“We see real opportunity to help every customer in every industry use digital technology to overcome today’s challenges and emerge stronger,” said Satya Nadella, chairman and CEO of Microsoft.

“No company is better positioned than Microsoft to help organisations deliver on their digital imperative – so they can do more with less,” said Nadella.

Divisional performance

Microsoft saw strong growth in most of its individual units. For example Productivity and Business Processes (which includes Office), posted revenue up at $16.6 billion for the quarter.

Intelligent Cloud (which includes Azure and server products) posted revenue of $20.9 billion, up 20 percent, ahead of the average Wall Street target of $19.1 billion.

The More Personal Computing (which includes Windows and Xbox) division saw revenues rise 2 percent to $14.4 billion, but Windows OEM revenue declined 2 percent, and Xbox content and service revenue fell 6 percent.

Job cuts

Microsoft has signaled recently it is readying itself for tougher economy challenges ahead.

Last week Microsoft expanded its hiring slowdown, after it began withdrawing job openings in a number of divisions, including in its Azure cloud business and its security software unit.

Then earlier this month Microsoft began cutting less than 1 percent of jobs as part of an annual structural adjustment, which it said was routinely carried out every summer.

All of that came after a senior executive warned the management of the Windows and Office divisions in May this year to adopt a more conservative approach to hiring new people.