Microsoft shares fall amid forecasts of weak Azure growth

Microsoft shares fell due to weak sales of the Azure platform. Microsoft Chief Financial Officer Amy Hood estimates Azure revenue growth will be 37% in the current quarter, down 5% from the third quarter. Last quarter, Azure sales were up 42%.

In addition, Hood says, global issues are also affecting Microsoft's sales. As the global economy has almost entered recession, advertising doesn’t always bring the desired number of customers and demand for PCs is falling. For example, PC makers have become less likely to buy Windows software, software sales fell by 15%. It’s unlikely that the situation in the PC markets will change before the end of the fiscal year.

Another statement by Hood sparked a new round of concerns over Azure demand. She noted that demand for Azure among large customers is still high, but that Microsoft can help run applications and perform tasks more efficiently at lower costs. 

Thus, during extended trading, Microsoft shares fell by more than 8% to $230.39 per share. However, by the close of trading, the price per share rose to $250.66.

Microsoft is also affected by rising energy prices. As prices rise, especially in Europe, the company will have to spend another $800 million to provide electricity to European data centers. As a result, profit margins are also decreasing.

Microsoft CEO Satya Nadella said that the company doesn’t plan to severely limit spending, for example, investments in priority areas will continue. Restrictions will affect mainly the hiring of new employees. So, it’s reported that in the current quarter, hiring will be minimal, and open positions will be closed.

Sales for the third quarter of 2022 rose 11% to $50.1 billion. 17.6 billion was total net income and $2.35 was earnings per share. These numbers exceeded analysts' expectations. Sales were projected to be $49.6 billion, earnings per share were predicted to be $2.29. 

Hood notes that the level of demand for cloud services remains high. This is confirmed by the fact that Office 365 is selling better than expected, and users are opting for more expensive plans when they buy.

On the other hand, Hood doesn’t deny the risks; the company understands that macroeconomic influences are inevitable. However, the good growth rates and strong market positions of the companies in which Microsoft invests don’t give the Microsoft team any doubts about the successful future.