Moderate growth: Nadella on his way to the takeover hearing of Activision Blizzard in San Francisco. Personal computer shipments are down for a sixth quarter in a row, eroding sales of Windows software and Surface devices. — Bloomberg
NEW YORK: Microsoft Corp reported tepid fourth quarter sales growth, held back by decelerating demand for cloud-computing services while the software maker waits for a revenue boost from new artificial intelligence-powered products.
Profit in the period ended June 30 was US$2.69 (RM12.27) a share and sales rose 8% to US$56.2bil (RM256.27bil), the software maker said in a statement.
While overall results topped analysts’ projections, Azure cloud services revenue growth slowed to 27%, excluding currency fluctuations, from 31% in the previous quarter.
Chief executive officer Satya Nadella has unveilled an array of new artificial intelligence (AI) programmes, based on models from partner OpenAI, for most of Microsoft’s major product lines, and demand is surging for Internet-based services that let customers use the OpenAI technologies.
Still, the company’s Office productivity suite including AI isn’t yet broadly available, and overall spending on Azure services and Office applications is easing after several years of rising corporate investments.
At the same time, personal computer shipments dropped for the sixth quarter in a row, eroding sales of Windows software and Surface devices.
“Clients who had been gung ho on cloud came back and said, ‘we’d better optimise what we bought,’ ” said Mark Moerdler, an analyst at Sanford C. Bernstein and Co.
“You won’t see huge tailwinds from AI. It will be incremental.”
Amy Hood, Microsoft’s chief financial officer, said the recent period’s Azure growth rate was at the high end of what she had forecast, noting that she was “quite pleased with that number”.
It’s typical for customers to try to get the most of cloud-based products they have already purchased, Hood said in an interview, but she expects less of an impact to Microsoft’s results in the coming quarters.
For the financial fourth quarter, analysts on average had estimated US$2.56 (RM11.67) a share in earnings and US$55.5bil (RM253bil) in sales, according to a Bloomberg survey.
Annual sales growth moderated to 7% in 2023, the company said, after five straight years of increases above 10%. Microsoft fired 10,000 workers in the March quarter, including in key businesses like Azure and security software.
The Washington-based company made a smaller number of additional layoffs in July, in areas like sales and support.
The company is increasing spending to expand data centres and purchase chips needed to run complex AI systems.
To make up for the hefty investments, Microsoft is rolling out ways to generate money from those products.
Earlier this month, the company set a price tag of US$30 (RM137) a month per user for its Office AI tools, called Microsoft 365 Copilot. — Bloomberg
