Microsoft reports slowing Azure cloud revenue growth
Microsoft shares slipped 1% in extended trading on Tuesday after the software maker issued fiscal fourth quarter earnings.
Here’s how the company did:
- Earnings: $2.69 per share, vs. $2.55 per share as expected by Refinitiv.
- Revenue: $56.19 billion, vs. $55.47 billion as expected by Refinitiv.
Revenue rose 8% year over year in the quarter, which ended on June 30, according to a statement. Growth has come in under 10% for three consecutive quarters for the first time since 2017. Net income totaled $20.08 billion, compared with $16.74 billion in the year-ago quarter.
Microsoft’s Intelligent Cloud segment contributed $23.99 billion in revenue, up 15% and above the $23.79 billion consensus of analysts surveyed by StreetAccount. The unit comprises the Azure public cloud, SQL Server, Windows Server, Visual Studio, Nuance, GitHub and enterprise services.
Azure revenue grew 26% during the quarter, compared with 27% growth in the previous quarter. Analysts polled by CNBC and by StreetAccount had expected 25% growth from Azure, which competes with Amazon Web Services and Google Cloud Platform. Microsoft doesn’t report Azure revenue in dollars. Google parent Alphabet said Tuesday that revenue from its cloud products, which includes Google Workspace productivity apps in addition to Google Cloud Platform, increased by 28%.
Prompted by concerns about a worsening economy, organizations using cloud services from Microsoft, Amazon and Google have taken time to adjust their existing workloads to reduce costs in the past several months. At the same time, these three prominent U.S. cloud providers have trimmed their own expenses.
For the first time since 2016, Microsoft’s research and development costs declined year over year. In May Microsoft CEO Satya Nadella told employees that the company won’t lift salaries this year. On July 10 Nadella issued a memo about a fresh round of job cuts separate from the round of layoffs affecting 10,000 workers that kicked off in January.
Microsoft’s Productivity and Business Processes segment that contains Office productivity software, LinkedIn and Dynamics delivered $18.29 billion in revenue, up 10% and more than the StreetAccount consensus of $18.06 billion.
The company’s More Personal Computing business, which contains the Windows operating system, devices, gaming and search advertising, posted $13.91 billion in revenue. That figure indicates a decline of about 4%, yet it still topped the $13.58 billion StreetAccount consensus.
Sales of Windows licenses to device makers decreased by 12%. Consumers and companies rushed to buy PCs after the onset of Covid, making comparisons difficult for the past year. Technology industry researcher Gartner estimated that PC shipments, including Apple’s MacBooks, fell about 17% during the quarter.
Microsoft and Alphabet kicked off earnings season for the mega-cap tech companies. Investors will be looking at the big tech companies for updates on cost-cutting measures implemented earlier in the year and the impact of artificial intelligence investments on profitability. Alphabet on Tuesday surpassed estimates, lifting the stock in after-hours trading. Meta reports results on Wednesday, followed by Amazon and Apple next week.
Investors are eager for resolution in Microsoft’s arrangement to buy Activision Blizzard for almost $69 billion, which was agreed upon in January 2022. Earlier this month, an appeals court denied the Federal Trade Commission’s motion to stop the transaction. Activision shares have climbed past $92.50, close to the $95 that Microsoft agreed to pay, reflecting optimism that the deal is on track to close.
The company said its operating expenses rose about 2% in the quarter, partly because of a charge to pay a fine from Ireland’s Data Protection Commission after the authority looked at whether the company’s LinkedIn unit violated the European Union’s General Data Protection Regulation.
During the quarter, Microsoft built on its broad alliance with OpenAI to capitalize on fresh interest in artificial intelligence, following the November launch of the startup’s ChatGPT chatbot. Microsoft introduced a chatbot powered partly by OpenAI language models to help workers make sense of their employers’ data, and it told developers they’ll be able to build plugins that people can access through ChatGPT, the Bing search engine’s chatbot, and other tools.
Excluding the after-hours move, Microsoft shares have gained 46% year to date, while the S&P 500 is up 19%.
Executives will discuss the results with analysts and issue guidance on a conference call starting at 5:30 p.m. ET.
This is breaking news. Please check back for updates.
— CNBC’s Todd Haselton contributed to this report.
Chris Martin of Coldplay performs live at San Siro Stadium, Milan, Italy, in July 2017.
Mairo Cinquetti | NurPhoto | Getty Images
Astronomer‘s interim CEO said in his first public comment since unexpectedly taking over the role on Saturday that he hopes to move the tech startup past the viral moment that captured national attention last week.
Pete DeJoy was appointed to the top job due to the resignation of CEO Andy Byron, days after he was caught on video in an intimate moment with the company’s head of human resources at a Coldplay concert. Astronomer said over the weekend that it would begin a search for a new CEO.
“The events of the past few days have received a level of media attention that few companies — let alone startups in our small corner of the data and AI world — ever encounter,” DeJoy wrote in a LinkedIn post on Monday. “The spotlight has been unusual and surreal for our team and, while I would never have wished for it to happen like this, Astronomer is now a household name.”
Byron was shown on a big screen at the concert in Boston on Wednesday with his arms around Chief People Officer Kristin Cabot. Byron, who is married with children, immediately hid when the couple was shown on screen. Lead singer Chris Martin said, “Either they’re having an affair or they’re just very shy.” A concert attendee’s video of the affair went viral.
DeJoy helped start Astronomer in 2017, according to his LinkedIn profile, and had been serving as chief product officer since earlier this year.
In May, Astronomer announced a $93 million investment round led by Bain Ventures and other investors, including Salesforce Ventures.
“I’m stepping into this role with a wholehearted commitment to taking care of our people and delivering for our customers,” DeJoy wrote. He added that “our story is very much still being written.”
Astronomer is commercializing the open-source data operations platform Astro. DeJoy wrote that customers “trust us with their most ambitious data & AI projects” and that “we’re here because the mission is bigger than any one moment.”
Dylan Field, co-founder and CEO of Figma Inc., after the morning sessions at the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on July 11, 2024.
David Paul Morris | Bloomberg | Getty Images
Design software company Figma on Monday published an updated prospectus for its initial public offering.
The company said it expects to sell about 37 million shares at $25 to $28 each. That would generate as much as $1 billion in proceeds, between the company and selling shareholders.
The IPO could value Figma, led by co-founder Dylan Field, a fully diluted valuation of $14.6 billion to $16.4 billion. Field plans to sell 2.35 million shares, which could be worth as much as $65.8 million.
In a 2024 tender offer, investors valued the company at $12.5 billion. In 2022, Adobe had agreed to acquire Figma for $20 billion, but the deal was scrapped after regulators objected.
The flow of technology companies joining U.S. exchanges has slowed since late 2021. Concerns over inflation and a recession made some investors less interested in backing fast-growing but money-losing companies.
But a few technology stocks have become available in recent months. CoreWeave went public in March, and Circle and Chime shares started trading in June.
Figma filed to go public on July 1, announcing plans to trade on the New York Stock Exchange under the symbol “FIG.”
On Monday, it provided preliminary results for the second quarter, showing $9.0 million to $12.0 million in operating income on $247 million to $250 million in revenue. That would imply year-over-year revenue growth of 39% at the low end and 41% at the high end. Growth in the first quarter exceeded 46%.
During the second quarter, Figma added clients and expanded business with existing ones. The company’s operating margin would be ticking up to 4% to 5%, up from 3% in the same quarter a year ago, based on the preliminary results.
Figma said it has authorized the issuance of “blockchain common stock” in the form of “blockchain-based tokens.” So far, though, Figma said it isn’t planning to issue this type of stock. In July, Figma disclosed investments in a stablecoin and a Bitcoin exchange-traded fund.
Mike Krieger, a co-founder of Instagram who is now chief product officer of artificial intelligence model developer Anthropic, has joined the board. Luis von Ahn, co-founder and CEO of Duolingo, is also joining the board, according to the filing.
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