Jan 24 (Reuters) – Microsoft Corp ( MSFT.O ) posted results on Tuesday that beat Wall Street targets by the end of 2022, showing some strength in the face of a weak economy, hampered by its cloud business, but could miss expectations. In the current quarter.
A relatively calm outlook helped ease fears that the cloud division, which is profitable for big tech companies, could be hit hard as customers look to cut spending, and cloud revenue offset some weakness in the PC division in the fiscal second quarter on Tuesday.
“The slight miss on Microsoft’s cloud revenue forecast is a reflection of the new economic reality businesses are facing, not the threat of something worse,” said Bob O’Donnell, chief analyst at Technics Research.
Microsoft announced last week that it is cutting more than 10,000 jobs, joining other big tech companies in switching to layoffs. It posted fiscal second-quarter earnings above Wall Street estimates.
In its so-called intelligent cloud business, it forecast third-quarter revenue of $21.7 billion to $22 billion, below the average analyst forecast of $22.14 billion, Refinitiv said. In the second quarter, that segment’s revenue slightly beat expectations by $21.5 billion.
Following the viral success of chatbot ChatGPT, which answers general questions using artificial intelligence in simple language, the cloud business is in the spotlight once again. Bot is an OpenAI startup that Microsoft has invested heavily in and needs powerful cloud computing services.
“There are different ways we can bring this technology to certain offerings or enhance existing offerings,” Brett Iverson, Microsoft’s head of investor relations, said of OpenAI.
During the earnings call, CEO Satya Nadella said it was too early to distinguish the contribution of AI from Azure cloud workloads.
Azure cloud product revenue grew 31 percent in the second quarter, according to estimates compiled by Visible Alpha. It held steady market share from leader Amazon.com Inc’s ( AMZN.O ) Amazon Web Services (AWS).
Azure in 2010 It will end up with a 30% share of the cloud computing market in 2022, up from 20% in 2018, according to BofA Global Research estimates. AWS dropped from 71% to 55%.
Refinitiv IBES reported that Microsoft’s revenue rose 2% to $52.7 billion. Net income fell 12 percent to $16.4 billion, but adjusted earnings of $2.32 per share topped the Wall Street consensus estimate of $2.29, according to Refinitiv calculations.
Microsoft’s additional personal computing division, including Windows, device and search revenue, fell 19 percent to $14.2 billion as the PC market shrank. The company expects revenue for the third quarter of the current fiscal year to fall to $11.9 billion to $12.3 billion.
Reporting by Yuvraj Malik in Bengaluru and Jane Lanhi Lee in Oakland, California, Editing by Sriraj Kalvilla, Peter Henderson, Matthew Lewis and Leslie Adler
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