Soft landing… Microsoft kicked off Big Tech earnings yesterday on an upbeat note. Shares of the software titan spiked 4% after it reported (slightly) better-than-expected earnings, courtesy of solid cloud growth. Microsoft’s cloud-computing unit — aka: the second-largest cloud biz after Amazon’s AWS — grew revenue by 31% from last year, a slowdown from previous quarters. Investors were uplifted by the small earnings beat, but Microsoft’s reality is not so suite:
Far from Excel-ent: Total sales grew at the slowest pace since 2016, and profit dropped for the first time in eight years (from $18.7B last year, to $16.4B).
Iffy Outlook: Last week Microsoft said it was slashing 10K workers to prepare for a recession as the remote-work boom wanes.
New year, new me… Microsoft is the first of the Big Tech Five (Apple, Amazon, Google, Microsoft, Meta) to report. In 2021, they demolished earnings with jaw-dropping records. In May of that year, Microsoft posted its strongest revenue growth since 2018, while Apple and Amazon delivered quarterly records. This year, it’s a different story:
- The remaining four of the Big Tech Five are also expected to release lower quarterly earnings as demand slows, recession fears grow, and layoffs abound.
When the going gets tough, get more going… Even as cloud and PC demand slows, Microsoft’s not backing down from big spending: it just announced a multiyear, multibillion-dollar investment in ChatGPT maker OpenAI — and is still aggressively trying to complete its $69B acquisition of gaming company Activision Blizzard. By doubling down on generative-AI tools and gaming, Microsoft’s hoping to energize growth with new tech.