Microsoft profits down 14% as Windows hit by weak PC sales

Microsoft on Tuesday reported a 14% decline in profit for the July-September quarter compared to the same period last year, reflecting a weak market for personal computers affecting its Windows business.

The company reported quarterly net income of $17.6 billion, or $2.35 per share, still slightly beating Wall Street expectations despite posting weaker results than a year ago.

The Redmond, Wash.-based software maker posted revenue of $50.1 billion in the quarter, up 11% from a year ago, also topping expectations.

Analysts had expected Microsoft to earn $2.31 a share on revenue of $49.7 billion for the quarter.

Microsoft’s personal computing business, centered on its Windows software, was expected to be hit given economic uncertainties such as inflation. Additionally, many consumers purchased new devices during the pandemic, which helped reduce demand.

The company derives licensing revenue from PC makers who install its Windows operating system on their products. Revenue from those licenses fell 15% in the quarter, Microsoft said.

Global personal computer shipments were down nearly 20% in the quarter from the same period last year, according to market research firm Gartner, which said it was the steepest decline since it began tracking the PC market in the mid-1990s. A disappointing back-to-school sales season for new computers also contributed to a fourth straight quarter of a year-over-year, Gartner said.

Microsoft shares slid more than 6% in after-hours trading on Tuesday. Microsoft Chief Financial Officer Amy Hood said on a conference call with investors that some of the negative factors affecting the last quarter could carry over into the near future. Alluding to recent layoffs and the last year of new hires, she said net headcount growth “will be minimal” heading into the current quarter.

Microsoft has offset some of the Windows-related losses with the power of its cloud computing services provided to large enterprises and other institutions.

Revenue from this segment increased 20% from the same period last year to $20.3 billion, making it Microsoft’s main source of sales and growth during the period. But growth for the company’s flagship Azure cloud-computing platform has been lower than analysts had expected, in part due to what Hood described as a continued rise in the cost of the energy needed to do so. operate powerful data centers.

The second-largest business segment, made up of productivity-related software such as the Office suite of work products, grew 9% to $16.5 billion in revenue.

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