Microsoft’s shares are up 4.1 per cent in after hours trading, despite the company posting its slowest revenue growth in over six years.
Microsoft signposted a bad December quarter just days before its financials were due by laying off 10,000 employees, but strength in its Azure cloud-computing service business saw the company beat analysts’ estimates.
Overall sales rose just 2 per cent during the quarter, to A$74.8 billion.
The company posted adjusted profits of A$3.29 a share, beating Wall Street forecasts of A$3.27.
Operating income was A$29 billion, down 8 per cent year-on-year, while net income was A$23.3 billion, down 7 per cent.
The Azure cloud-computing business saw a massive 38 per cent leap in sales, making up for a historic fall in the PC market, which slashed sales of Windows software to computer makers.
Revenue from all commercial cloud products, including Office and 365 software, rose 22 per cent to A$38.5 billion.
Conversely, sales of Windows to PC makers plummeted 39 per cent in the period, while sales in Microsoft’s ‘More Personal Computing’ unit, which includes Xbox, fell 19 per cent to $20.1 billion.
Devices revenue decreased 39 per cent for the period, while Xbox content and services revenue decreased 12 per cent.
These results suggest Microsoft was wise to invest A$14 billion into OpenAI, to further plug the technology into its Azure offering.
“The next major wave of computing is being born, as the Microsoft Cloud turns the world’s most advanced AI models into a new computing platform,” said Satya Nadella, chairman and CEO of Microsoft.
“We are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new era of AI.”
“We are focused on operational excellence as we continue to invest to drive growth. Microsoft Cloud revenue was up 22 per cent (up 29 per cent in constant currency) year-over-year as our commercial offerings continue to drive value for our customers,” added. Amy Hood, executive vice president and chief financial officer of Microsoft.
Microsoft recorded a charge of A$1.7 billion, with $1.13 billion of that related to the 10,000 severance payouts, and the rest to do with lease consolidation, and “changes to our hardware portfolio”.