Microsoft shares fall after quarterly report and weak outlook

The corporation expects revenue for its flagship cloud computing segment to decline in the current quarter from the previous quarter

Microsoft shares jumped 5.26% to $254.79 in aftermarket trading. However, the trend has changed since then. The IT giant’s shares fell 1.02% to $239.58, according to NASDAQ. The company released its financial report for the second fiscal quarter, which ended in December 2022. Whether you trade with broker etoro or another marketplace, we recommend following for the latest news about the company. 

Msft price target 2023 – Lower net income

Microsoft reported a 7% decline in adjusted net income to $17.4 billion. Earnings per share (EPS) fell 6% to $2.32. However, analysts had forecast EPS of $2.29. Microsoft’s total revenue rose 2% to $52.75 billion, while Wall Street had forecast $52.94 billion, the lowest quarterly revenue increase since 2016.

At the same time, revenue from Azure and other cloud products jumped 31%. Excluding the impact of currency exchange rates, revenue from this flagship segment rose 38%, slightly above analysts’ expectations, Bloomberg writes. The agency notes that it was cloud computing that drove the company’s overall revenue growth.

Microsoft is becoming increasingly cloud-based. The share of various cloud services already accounts for 40% of revenue and more than 40% of operating profit.

At the same time, in other segments, the corporation began to earn less. Thus, revenues from PC products, including the Microsoft Windows operating system and Office software, decreased by 19%, to $14.2 billion.

The corporation also gave a forecast that disappointed investors. Revenue in the fiscal third quarter is expected to be between $50.5 billion and $51.5 billion, up about 3% from a year earlier. Analysts had forecast revenue of $52.43 billion for the current quarter.

PC market to shrink again

CFO Amy Hood said that the PC market will shrink again, which will cause Microsoft’s revenue in that segment to decline by about 17%. This will affect Msft price target 2023. The top executive also expects revenue from Azure in the third fiscal quarter to be 4-5 p.p. lower than the previous quarter. Analysts polled by Street Account projected Azure revenue to grow 34% in the third quarter, compared with a 31% increase in the second quarter.

Microsoft CEO Satya Nadella acknowledged that the industry is going through a period of slowdown. “There was a rapid acceleration during the pandemic. I think today we’re going through a phase where demand is somewhat normalized,” Nadella said earlier in an interview at the World Economic Forum in Davos. – We’re going to have to do more with less — we’re going to have to demonstrate our own productivity gains with our own technology.”

Earlier, the U.S.’s big techs announced massive staff cuts. Microsoft, in particular, decided to lay off 10 thousand employees, which entailed costs of $800 million. In general, the company’s expenses in the last quarter of last year reached $1.2 billion.

MSFT price prediction 2030 – Conclusion

MSFT price prediction 2030 looks optimistic. Microsoft, like other large companies, is facing financial problems related to the economic slowdown and the strengthening of the dollar in the foreign exchange market, as more than half of its consolidated revenue comes from operations outside the United States.

Due to the cyclical nature of the PC market, Msft price prediction had a big advantage for several years during the pandemic, which was reflected in increased margins over that period. In Q4, we saw continued declines in the PC segment, and the company expects a slowdown in the Cloud and Azure segments next quarter.

The company sees great potential for the enterprise sector to move to the public cloud and sees it as the beneficiary of the developments, helping companies offset the following risks

  • Demand-side risk (from a customer perspective, the best way to align their spending with uncertain demand is to move to the cloud)
  • Supply chain or energy cost risk. And this is another way to hedge against energy costs.

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