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Slow Growth in Azure to Impact Microsoft's (MSFT) Q2 Earnings
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Microsoft’s (MSFT - Free Report) second-quarter fiscal 2023 results, scheduled to be reported on Jan 24, are likely to be driven by the continued yet slow growth in its cloud platform, Azure.
For the fiscal second quarter, Microsoft expects Intelligent Cloud revenues (Azure falls under the segment) to increase between 22% and 24% to $21.25-$21.55 billion.
Microsoft warned that revenue growth from Azure, the cloud computing platform that has become one of the main engines of its business, would slow by 5 percentage points in the fiscal second quarter, leaving aside the effects of currency movements.
The Zacks Consensus Estimate for Intelligent Cloud revenues is pegged at $21.4 billion, indicating 16.7% growth from the figure reported in the year-ago quarter.
Declining yet Continued Growth in Azure to Drive Top line
The increasing migration of workloads to the cloud is fueling the demand for cloud infrastructure monitoring, web-based application performance management and human capital management solutions. This has been driving the demand for Microsoft’s cloud service.
Microsoft’s cloud computing business segment has been closely watched after its last quarter saw Azure’s growth slowing to 35% from 50% a year prior. For the fiscal second quarter, Microsoft guided a slowdown in its cloud computing business, as large customers pause their spending in the face of a slowing economy.
Growth could slow but the longer-term upward trend remains intact, as companies may prioritize digital transformation in their reduced budget to prepare for subsequent recovery.
Microsoft’s Azure has a presence in more than 60 regions worldwide and is available in 140 countries. Azure’s increase is anticipated to have bolstered its cloud business and strengthened its competitive position against Amazon’s (AMZN - Free Report) Amazon Web Services ("AWS") and Alphabet’s (GOOGL - Free Report) Google Cloud.
In the last reported quarter, the operating income for Amazon’s AWS was $5.4 billion, up 10.6% year over year. The expansion of its AWS portfolio is helping Amazon maintain its dominance in the cloud domain by gaining more customers.
Alphabet recorded a 37.6% year-over-year jump in Google Cloud revenues to $6.9 billion, which contributed 9.9% to its quarterly revenues.
Microsoft Joins Other Tech Giants to Cut Jobs
Microsoft has been slowing down the hiring for its Office, Windows and Teams groups to better prepare itself for fiscal 2023 and contend with the current economic environment.
In October, it was reported that this Zacks Rank #3 (Hold) company laid off less than 1,000 employees across several divisions. Those cuts impacted less than 1% of the software giant’s workforce of more than 200,000. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Many top tech companies, including Unity Software (U - Free Report) , have been announcing layoffs as they feel the effects of inflation, rising interest rates and currency headwinds. The company is laying off more than 200 employees, followed by a round of 225 job cuts in June.
Microsoft is reportedly ready to cut more positions from its global workforce, as tech giants continue paring headcount to ride out rough economic conditions. The company is expected to cut 11,000 jobs in a fresh round of mass layoffs, which amounts to around 5% of the workforce being fired.
Image: Bigstock
Slow Growth in Azure to Impact Microsoft's (MSFT) Q2 Earnings
Microsoft’s (MSFT - Free Report) second-quarter fiscal 2023 results, scheduled to be reported on Jan 24, are likely to be driven by the continued yet slow growth in its cloud platform, Azure.
For the fiscal second quarter, Microsoft expects Intelligent Cloud revenues (Azure falls under the segment) to increase between 22% and 24% to $21.25-$21.55 billion.
Microsoft warned that revenue growth from Azure, the cloud computing platform that has become one of the main engines of its business, would slow by 5 percentage points in the fiscal second quarter, leaving aside the effects of currency movements.
The Zacks Consensus Estimate for Intelligent Cloud revenues is pegged at $21.4 billion, indicating 16.7% growth from the figure reported in the year-ago quarter.
Microsoft Corporation Price and EPS Surprise
Microsoft Corporation price-eps-surprise | Microsoft Corporation Quote
Declining yet Continued Growth in Azure to Drive Top line
The increasing migration of workloads to the cloud is fueling the demand for cloud infrastructure monitoring, web-based application performance management and human capital management solutions. This has been driving the demand for Microsoft’s cloud service.
Microsoft’s cloud computing business segment has been closely watched after its last quarter saw Azure’s growth slowing to 35% from 50% a year prior. For the fiscal second quarter, Microsoft guided a slowdown in its cloud computing business, as large customers pause their spending in the face of a slowing economy.
Growth could slow but the longer-term upward trend remains intact, as companies may prioritize digital transformation in their reduced budget to prepare for subsequent recovery.
Microsoft’s Azure has a presence in more than 60 regions worldwide and is available in 140 countries. Azure’s increase is anticipated to have bolstered its cloud business and strengthened its competitive position against Amazon’s (AMZN - Free Report) Amazon Web Services ("AWS") and Alphabet’s (GOOGL - Free Report) Google Cloud.
In the last reported quarter, the operating income for Amazon’s AWS was $5.4 billion, up 10.6% year over year. The expansion of its AWS portfolio is helping Amazon maintain its dominance in the cloud domain by gaining more customers.
Alphabet recorded a 37.6% year-over-year jump in Google Cloud revenues to $6.9 billion, which contributed 9.9% to its quarterly revenues.
Microsoft Joins Other Tech Giants to Cut Jobs
Microsoft has been slowing down the hiring for its Office, Windows and Teams groups to better prepare itself for fiscal 2023 and contend with the current economic environment.
In October, it was reported that this Zacks Rank #3 (Hold) company laid off less than 1,000 employees across several divisions. Those cuts impacted less than 1% of the software giant’s workforce of more than 200,000. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Many top tech companies, including Unity Software (U - Free Report) , have been announcing layoffs as they feel the effects of inflation, rising interest rates and currency headwinds. The company is laying off more than 200 employees, followed by a round of 225 job cuts in June.
Microsoft is reportedly ready to cut more positions from its global workforce, as tech giants continue paring headcount to ride out rough economic conditions. The company is expected to cut 11,000 jobs in a fresh round of mass layoffs, which amounts to around 5% of the workforce being fired.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.