Microsoft Cloud and PC Sales Slow in Q1
Despite Microsoft increasing overall revenue in the first fiscal quarters of 2023, the company saw a slowdown in some of its core businesses.
The company, which released its Q1 financial figures on Tuesday, recorded $50.1 billion in total revenue – an 11% increase over the previous quarter. However, this is down from the previous month’s 14% and accounts for the slowest revenue growth since 2017.
Azure missed its projected revenue mark, despite the 35% increase, showing that overall usage of Microsoft’s cloud was not as strong as expected (revenue increases with overall usage of the technology).
While Microsoft is hot on Azure’s second-quarter earnings, Microsoft CFO Amy Hood said Microsoft is still betting big on the cloud infrastructure. “Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per-user business and from in-period recognition depending on the mix of contracts,” Hood said on a call discussing the quarterly results. . “We expect Azure’s revenue growth to be sequentially lower by approximately 5 points on a constant currency basis.”
Microsoft also saw less-than-stellar numbers for Windows OS. The company announced a 15% drop in Windows installs on new PCs and Hood said to expect a continued decline in this sector through June 2023.
The Q1 figures also saw its Xbox brand decelerate for the first time since the start of the pandemic, dropping 3% during the quarter – the first drop since the pandemic boosted the sector’s growth. Hood said she expects Xbox to continue to fall “in the low to mid-teens” as the company waits to close on the blockbuster $68.7 billion acquisition deal for Activision Blizzard.
Although Microsoft expects declines in many of its key businesses, the company said it hopes that Microsoft 365 subscriptions, which increased by 7% (11% in current currency rates), will maintain their same growth in the near future. “In Windows business products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive growth in the mid-single digits or low double digits in constant currency,” Hood said.
Here are some more highlights from the Q1 report:
- LinkedIn revenue increased 17% (21% in constant currency).
- Dynamic products and cloud services increased 15% (22% in constant currency).
- Office Business products and cloud services increased by 7% (13% in constant currency).
- Devices revenue increased 2% (8% in constant currency).
Even in the face of less-than-expected results, Microsoft said its main business sectors are strong, even as a potential recession looms. “In a world facing increasing headwinds, digital technology is the ultimate tailwind,” said Microsoft Chairman and CEO Satya Nadella. “In this environment, we are focused on helping our clients do more with less, while investing in secular growth areas and managing our cost structure in a disciplined manner.”