In full bleeding in the workforce of Gafam, the slowdown in the growth of its “M”, namely Microsoft, is confirmed. Amy Hood, the group’s chief financial officer, warned not to expect miracles for the fourth quarter of 2022, and she had the right numbers.
Microsoft’s nominal revenue, which rose 11% in the third quarter, rose only 2% for the last three months of 2022, to $52.7 billion. The Redmond firm’s net income fell 12% to $16.4 billion. The announcement of these quarterly results was received negatively on Wall Street, where the group’s share price quickly fell by nearly 4% at the opening of the New York Stock Exchange, this Wednesday, January 25.
Slow growth hailed… by a breakdown in services
Ironically, while Microsoft’s growth is slowing down, outages disrupted access to several company services, such as Teams, Outlook, LinkedIn and Xbox Live, a few hours after the announcement of the financial results. Difficulties have been reported in Europe, the United States and India. The current period is decidedly turbulent for Microsoft, which announced a few days ago the elimination of 10,000 positions, or nearly 5% of its workforce.
To compensate for the decline of several business lines, such as sales of computers for individuals, Microsoft can count on the cloud, its cash cow. The second global player in this market behind Amazon, the company led by Satya Nadella saw its cloud revenues increase by 22% in the fourth quarter of 2022, to 27.1 billion dollars. In detail, the Intelligent Cloud division, which includes the Azure platform, recorded revenue of $21.5 billion, up 18%. As for Azure revenues alone, they climbed 31%, down from the third quarter (35%).
Upcoming changes in product lines
In a less favorable economic climate than during the Covid-19 pandemic, Microsoft plans to make several important changes to its product lines to counter the currently pessimistic financial outlook. Among the fairly obvious things, it appears that the HoloLens division will suffer the full brunt of budget cuts and layoffs, especially after the shutdown of the HoloLens 3 project.
In the same way, the projects of the Surface division could be turned upside down. Surface Hub 2X and Windows 10X (which was supposed to run innovative devices like the Surface Neo) have a priori been set aside. Similarly, it is rumored that Microsoft wanted to launch a Surface Duo 3 with a folding screen, but that, given the context, the firm would have finally decided to cancel this product. As for the prospect of seeing a possible Surface Phone return to the market, it would be completely nil today.
“Do more with less”
More generally, Microsoft will tighten its belt to try to regain double-digit growth. “We are committed to helping our customers use our platform and tools to do more with less and innovate for the future in the new era of artificial intelligence”said the group’s boss, Satya Nadella, on the occasion of the publication of quarterly results.
This approach recently resulted in a multi-billion dollar investment in OpenAI, the US company behind the ChatGPT chatbot. This type of operation aims to offer new artificial intelligence technologies to Azure customers, which should be the growth engine of the Redmond company for the next few years.