Microsoft CEO Satya Nadella speaks during an interview in Redmond, Washington, on March 15, 2023.
Chona Kassinger | Bloomberg | Getty Images
Microsoft The company reported earnings and revenue beats for the fiscal first quarter on Wednesday, but the stock fell 4% in extended trading after company forecasts called for slower-than-expected growth.
Here's how the company performed, compared to analyst expectations based on a survey conducted by LSEG:
Earnings per share: $3.30 vs. $3.10 expected Revenue: $65.59 billion vs. $64.51 billion expected
Revenue rose 16% year over year in the quarter that ended Sept. 30, according to a statement. Net income rose 11% to $24.67 billion from $22.29 billion in the same quarter last year.
For the current quarter, Microsoft is calling for revenue between $68.1 billion to $69.1 billion. This means growth of 10.6% in the middle of the range. Analysts surveyed by LSEG were looking for revenue of $69.83 billion.
Third-party suppliers are late in delivering data center infrastructure to Microsoft, meaning the company will not be able to meet demand in the fiscal second quarter.
“I feel pretty good that going into the second half of this fiscal year, some of the supply and demand will match,” CEO Satya Nadella said on a conference call with analysts.
In August, Microsoft said it would revise its business segment reporting to reflect its management approach. Mobility and security services, along with some Windows revenue, are now part of the Productivity and Business Operations unit, which includes Office software.
Revenue from productivity and business operations rose 12% to $28.32 billion in the quarter, beating the consensus of $27.9 billion among analysts surveyed by StreetAccount. It's 38% higher than the midpoint of $20.45 billion given by management in July, because the actual total represents changes.
Investors got a clearer picture of cloud computing consumption at Microsoft. For the first time, the revenue growth measure for Azure and other cloud services excludes mobility, security, and Power BI data analytics sales. Azure growth for the quarter came in at 33%, or 34% in constant currency, with 12 points coming from AI services. CNBC's consensus for Azure growth was 32.8%, while StreetAccount's forecast was 29.4%.
“Demand continues to be higher than our available capacity,” Amy Hood, Microsoft's chief financial officer, said on the phone call.
Hood called for Azure growth of 31% to 32% in constant currency for the fiscal second quarter.
The entire Intelligent Cloud segment, including Azure, Windows Server, and enterprise services, generated $24.09 billion in revenue. That's up 20% and slightly more than the StreetAccount consensus of $24.04.
Tuesday, Google It reported 35% annual growth in its competing cloud business to $11.35 billion. Amazonwhich leads the cloud infrastructure market, is scheduled to announce its results on Thursday.
Microsoft has downsized its segment called More Personal Computing through reporting changes. Last quarter, it contributed $13.18 billion in revenue, up about 17% from a year earlier and above the StreetAccount consensus of $12.56 billion.
The company saw 2% growth in hardware sales and Windows license sales to device manufacturers. Industry researcher Gartner estimated that quarterly PC shipments fell 1.3%.
Microsoft's investments in artificial intelligence remain a key focus for investors, as the company builds out its infrastructure and increases spending on chips to handle heavy workloads. Microsoft is the lead investor in ChatGPT creator OpenAI, which was valued at $157 billion in a funding round earlier this month.
As of September 30, Microsoft had raised more than $108 billion from financing leases that had not yet commenced, which UBS analysts said could include third-party cloud spending to meet demand for artificial intelligence.
At the same time, Microsoft was spending more money on property and equipment. In the first quarter, spending grew 50% year-over-year to $14.92 billion. The consensus among analysts polled by Capital IQ was $14.58 billion.
As of Wednesday's close, Microsoft shares were up about 15% for the year, while the Nasdaq was up about 24% over the same period.
Correction: An earlier version of this story contained an incorrect end-of-quarter date. It was September 30th.
