Microsoft Q4 earnings report.
On Tuesday, Microsoft (MSFT) released fiscal Q4 earnings, falling short of analyst estimates. The company's shares jumped 5% in extended trading on Tuesday as the software company provided a bullish earnings estimate for the year ahead, despite reporting quarterly results that fell short of Wall Street expectations.
Microsoft announced adjusted earnings per share of $2.23 in the fourth quarter, which was slightly below analyst’s estimates of $2.29.
For the first time since 2016, the company's earnings per share fell short of the consensus. However, the company's net income remained relatively steady at $16.7 billion, with only a 2% rise.
Microsoft's entire revenue in the fourth quarter was $51.87 billion, falling short of analyst’s estimates of $52.44 billion which is up 12% year-on-year. Despite the failure in the company's Intelligent Cloud division, Microsoft stated revenue from Azure and other cloud services was up 40% year on year.
The company claimed a variety of circumstances that impacted its financial results, including the Ukraine conflict, an adverse foreign exchange rate environment, and extended COVID shutdowns in China. Microsoft also observed that advertisers were spending less money, which had an impact on its search business and LinkedIn, the professional network it controls.
Microsoft's Russian businesses were also scaled back, resulting in $126 million in operational expenditures for bad debt charges, asset impairments, and severance.
Microsoft's Intelligent Cloud division earned $20.91 billion in sales, which included the Azure public cloud for application hosting, SQL Server, Windows Server, and corporate services. This was a 20% increase but fell short of analyst’s estimate of $21.10 billion.
Server products and cloud services sales climbed by 22% to $3.4 billion, revenue from Azure and other cloud services increased by 40%, compared to 46% in the previous quarter, according to the business. CNBC polled analysts who projected a 43.1 percent, while StreetAccount's average prediction was 43.4 percent.
Microsoft's Productivity and Business Processes sector generated $16.60 billion in sales, which included Office productivity software, Dynamics, and LinkedIn. This was an increase of approximately 13% and just less than the StreetAccount average of $16.66 billion. The premium E5 tier now accounts for 12% of all business Office 365 subscriptions, up from 8% a year ago. However, she stated that "some deceleration in new deal volume outside of E5, notably in the small and medium company client group," had occurred.
Sales from Office Commercial products and cloud services climbed by 9% to $807 million, while revenue from Office 365 Commercial jumped by 15%. Revenue from Office Commercial Products fell 32%, owing to a sustained client move to cloud-based alternatives.
LinkedIn revenue increased by $768 million, or 26%, while Dynamics CRM product and cloud service sales increased by 19%, led by a 31% increase in cloud-based Dynamics 365.
While Microsoft's other sectors did well this quarter, its personal computing segment underperformed, with sales growing by only 2% to $270 million. The once-thriving PC market has been plagued by issues in the past year, with factory shutdowns contributing to a sharp drop in PC sales.
Xbox content and services revenue dropped 7%, while hardware sales dropped 11%.
Microsoft's earnings come on the heels of the announcement that it will be the technology supplier for Netflix's impending ad-supported membership tier. Needham and Goldman Sachs analysts, however, are wary of the move, with Needham's Laura Martin suggesting that the collaboration is part of a long-term Netflix effort to convince Microsoft to purchase the streaming service.
Microsoft shares are down 23% year to date, closely in line with cloud computing competitor Amazon. The stock price of the Seattle-based technology corporation has dropped by 27%. Meanwhile, the S&P 500 is down 17% year to date.
