January 29, 2023

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Microsoft Posts Sales, Profit Gain; Shares Drop on Azure Concern

Microsoft Corp. reported sales and profit that exceeded analysts’ estimates for a 10th straight quarter, though investor optimism was tempered by concern about slowing growth in the software giant’s Azure cloud-computing business. Shares slipped in late trading.

Sales in the fourth quarter, which ended June 30, climbed 21% to $46.2 billion, the Redmond, Washington-based software maker said Tuesday in a statement. That compared with the $44.3 billion average estimate of analysts polled by Bloomberg. Net income rose to $16.5 billion, or $2.17 a share, while analysts had predicted $1.92.

The software giant’s market value now tops $2 trillion, and the high-flying shares have led investors to expect Microsoft’s results to outdistance projections by a wide margin, said Brent Thill, an analyst at Jefferies, in a note before the numbers were released. Azure sales increased 51% in the period, and some investors hoped for a faster rate of growth, especially because that revenue rose 45% when accounting for currency fluctuations. While Azure has been growing steadily, it faces steep competition for big deals from Amazon.com Inc., the dominant cloud service, and Google, which ranks third in the market but is pouring resources into the business as it works to catch up.null

“People are not happy if Azure decelerates — they’re worried the good days are over,” said Mark Moerdler, an analyst at Sanford C. Bernstein. “People seem to worry Azure will never be as big as Amazon.”

Microsoft shares dropped about 2.7% in extended trading following the report, after declining to $286.54 in New York. The stock rose 15% in the fiscal fourth quarter, compared with 8.2% for the S&P 500 Index, reflecting investor optimism about growth prospects for Azure, Office, artificial intelligence and gaming. Azure revenue had gained 50% from a year earlier for the two prior quarters, not taking into account currency fluctuations.

Source: Bloomberg