Microsoft blames economic woes for missing profit targets |
REDMOND, Wash. (AP) — Microsoft on Tuesday reported fourth-quarter earnings of $16.7 billion, or $2.23 per share, below analysts’ expectations for $2.29 per share — a rare disappointment from the tech giant that has consistently exceeded Wall Street expectations over the past few years.
It posted revenue of $51.9 billion in the April-June period, up 12% from a year ago. Analysts were looking for revenue of $52.94 billion, according to FactSet.
The company blamed a number of “changing macroeconomic conditions and other unforeseen elements” for affecting its financial performance, including pandemic-related production shutdowns in China, the deterioration of the personal computer market, the decline advertising spending and the war in Ukraine, which led Microsoft to reduce its activities in Russia.
The company had already lowered its earnings and sales estimates in early June based on what it described as “unfavorable” changes in the exchange rate as the US dollar rose.
A tough PC sales season — attributed to supply chain disruptions and geopolitical instability — has put pressure on Microsoft’s personal computing business, which relies on licensing revenue from PC makers who install its Windows operating system on their products.
Sales of these licenses fell 2% compared to the same period last year, Microsoft reported on Tuesday. That, combined with a 6% drop in Microsoft’s Xbox game-related content sales, drove the company’s broader personal computing segment, which grew just 2% to 14.4 billion. dollars for the quarter.
Market research firm Gartner recently said global PC shipments fell 12.6% in the second calendar quarter of 2022 compared to the same period last year, the biggest drop in nine years. Another report from International Data Corp. estimates that PC shipments fell 15.3% in that April-June period, the second straight quarter of declining shipments after two years of growth.
The growth of Microsoft’s cloud computing business has made up for some of its shortcomings elsewhere. Microsoft’s cloud-based segment sold $20.9 billion for the quarter, up 20% from a year ago.
Microsoft’s work-related software segment, which includes its suite of Office products, grew 13% to $16.6 billion for the quarter. This included a 26% increase in revenue from its career-focused social network LinkedIn, despite a decline in ad spend on the service.
Microsoft is currently aiming to complete a $68.7 billion purchase of video game company Activision Blizzard, in what could be the biggest acquisition ever in the tech sector. The deal, announced in January, is awaiting approval from antitrust authorities in the United States and the United Kingdom.
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