Microsoft reports a slump in profits – but cloud business is better than expected


The software company is clearly feeling the consequences of inflation.

(Photo: Reuters)

san francisco 14 years after Microsoft launched the Azure cloud service, the scope of the platform is becoming clear. At least that’s what CEO Satya Nadella thinks. “The age of artificial intelligence has dawned and Microsoft is driving it forward,” Nadella said on Wednesday when the quarterly figures were presented.

So far, Microsoft has steadily expanded its cloud services. After years of work in the background, Microsoft can now present completely new applications. “We have the most powerful AI supercomputing infrastructure in the cloud,” Nadella said. He specifically mentioned the partnership with the company OpenAI from San Francisco. The day before, Microsoft had announced a billion-dollar investment in the company.

With ChatGPT, OpenAI presented a language program that can understand natural language and generate complex texts on command. The DALL-E application generates images based on text input. Corporate customers are using these solutions directly in their business processes, Nadella said. “Already more than 200 customers from KPMG to Al Jazeera are using it.”

>> Read about this: This chatbot would pass an MBA exam – This is how Microsoft’s billion-dollar hope ChatGPT works

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Hargreaves Lansdown analyst Sophie Lund-Yates said the artificial intelligence business is still in its infancy, but Microsoft is well positioned. “The ChatGPT agreement could also be a game changer for Microsoft,” said Lund-Yates.


When presenting the quarterly figures, Nadella was clearly trying to present investors with a new growth story. Because the past quarter had been mixed for the software house.

Nadella posted the slowest growth in six years, with revenue growing 2 percent to $52.7 billion in the final quarter of last year. In the three months ended December, net income fell 12 percent year over year to $16.4 billion. With both values, Microsoft missed the expectations of analysts.

PC business weakens significantly after the Corona boom

Microsoft was hit particularly hard in the PC business, where revenue fell 19 percent and operating income fell 47 percent. During the corona pandemic, business had grown significantly when many people worked from home and bought new computers for it.

But this special effect is over. According to consultancy Gartner, global sales of laptops and desktop PCs, which had surged during the coronavirus pandemic, fell nearly 29 percent at the end of 2022.

This hits Microsoft directly. The company produces computers itself. At the same time, with Windows, it is the dominant operating system. The number of Windows licenses installed on new computers collapsed by 39 percent. And Microsoft voted its investors on continued weak sales figures.

In contrast, the cloud business was a growth driver. Microsoft’s intelligent cloud business, which includes cloud computing business Azure, grew 18 percent to $21.51 billion. Azure revenue grew 31 percent. Although this grew much more slowly than in the previous quarters, analysts had expected significantly weaker numbers.

Microsoft shares initially rose by around four percent in after-hours trading, but fell again when CEO Nadella presented an outlook for the current quarter. Accordingly, Microsoft expects sales growth of three percent year-on-year – to $51 billion.

Microsoft announced last week that it would lay off around 10,000 employees. After other tech companies such as Facebook parent Meta, Twitter and Amazon had announced major job cuts, the wave of layoffs reached the Windows group.

Microsoft is the first of the largest US technology groups to present its quarterly figures. Apple, Amazon, the Facebook group Meta and the Google group Alphabet will follow next week.

More: Microsoft is investing “multibillions” in ChatGPT maker OpenAI

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