Microsoft’s earnings have been hit by a slowdown in personal computing

The tech giant on Tuesday reported $17.6 billion in revenue for the quarter, down 14% from a year earlier. Microsoft (MSFT)‘s revenue, on the other hand, grew a modest 11% to $50.1 billion. Both results were better than analysts had expected.

Microsoft’s Azure cloud services unit posted a 35% increase in revenue from a year earlier, but growth was slower than some analysts expected in a division that has been one of the company’s bright spots in recent years.

Other parts of Microsoft’s business declined. Microsoft said revenue from its Windows OEM operations fell 15% from a year earlier, as demand for personal computers fell sharply amid a pandemic-fueled boom. Consulting firm Gartner reported earlier this month that worldwide PC shipments fell 19.5% in the third quarter of 2022 compared to the same period last year. It’s the sharpest market decline since Gartner began tracking the PC market in the mid-1990s.
Microsoft also said revenue from Xbox content and services was down 3%. The company is said to have recently laid off staff from its Xbox division, among other parts of the company, as it, like many other tech companies right now, looks to cut costs.

Microsoft shares fell 2% in after-hours trading on Tuesday after the earnings report.

Microsoft shares have fallen more than 25% since the start of the year amid a broader market decline as rising inflation, geopolitical uncertainty over the war in Ukraine and more macroeconomic headwinds continue to wreak havoc on the tech industry.

“In this environment, we are focused on helping our customers do more with less, while investing in secular growth areas and managing our cost structure in a disciplined manner,” said Satya Nadella, Microsoft’s CEO, in a statement announcing the quarter on Tuesday. profits

Haris Anwar, senior analyst at Investing.com, called Microsoft’s earnings report a “mixed bag” in a comment after the results were released on Tuesday.

“It shows that Microsoft is weathering the economic storm better than other tech players and that its diversified business model is playing a big role in that,” Anwar said. But he added that the slowing growth of cloud computing was cause for concern.

“If this deceleration in growth continues, it could damage an investment case in the company’s stock, which is considered a safe haven amid market turmoil, as such concerns send the company’s shares down in extended trading,” Anwar said.