Microsoft (MSFT) Q4 2023 Earnings Report

Microsoft CEO Satya Nadella appears at an event with senior officials and CEOs in the East Room of the White House in Washington on June 22, 2023.

Chris Klepanis | CNP | Bloomberg | Getty Images

Microsoft shares fell 1% in extended trading on Tuesday after the software maker posted earnings for its fiscal fourth quarter.

Here’s how the company did it:

  • income: $2.69 per share versus the $2.55 per share expected by Refinitiv.
  • income: $56.19 billion, versus the $55.47 billion expected by Refinitiv.

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Revenue rose 8% year over year in the quarter ended June 30, according to the statement. Net income was $20.08 billion, compared to $16.740 billion in the year-ago quarter.

Microsoft’s Intelligent Cloud segment posted $23.99 billion in revenue, up 15% and beating the $23.79 billion consensus of analysts polled by StreetAccount. The block consists of Azure public cloud, SQL Server, Windows Server, Visual Studio, Nuance, GitHub and enterprise services.

Azure revenue grew 26% for the quarter, compared with 27% growth in the previous quarter. Analysts polled by CNBC and StreetAccount expected 25% growth from Azure, which competes with Amazon Web services and Google Cloud platform. Microsoft does not report Azure revenue in dollar terms. Alphabet’s Google said on Tuesday that revenue from its cloud products, which include productivity apps Google Workspace in addition to Google Cloud Platform, rose 28%.

Microsoft’s Productivity and Business Process segment, which includes Office, LinkedIn and Dynamics productivity software, posted revenue of $18.29 billion, up 10% from the StreetAccount consensus of $18.06 billion.

The company’s More Personal Computing business, which includes the Windows operating system, devices, games and search advertising, generated $13.91 billion in revenue. That figure represents a decline of about 4%, but it’s still above the StreetAccount consensus of $13.58 billion.

Sales of Windows licenses to device manufacturers fell by 12%. Consumers and businesses have rushed to buy PCs since the start of the Covid pandemic, making comparisons with last year difficult.

Investors are eagerly awaiting resolution of Microsoft’s deal to buy Activision Blizzard for nearly $69 billion, which was agreed in January 2022. Earlier this month, an appeals court denied the Federal Trade Commission’s request to block the deal. Activision shares rose to $92.50, close to the $95 that Microsoft agreed to pay, reflecting optimism that the deal is on track to close.

Despite the after-hours shift, Microsoft shares are up 44% year-to-date, while the S&P 500 is up 19%.

The company said its operating expenses rose about 2% in the quarter, partly due to a fine by the Irish Data Protection Commission after the authority investigated whether the company’s LinkedIn unit violated the European Union’s General Data Protection Regulation.

Microsoft CEO Satya Nadella told employees in May that the company would not raise wages this year.

During the quarter, Microsoft relied on its broad alliance with OpenAI to capitalize on renewed interest in artificial intelligence following the November launch of the startup’s ChatGPT chatbot. Microsoft unveiled a chatbot based in part on OpenAI language models to help workers make sense of their employers’ data, and told developers they’ll be able to create plugins that people can access through ChatGPT, the Bing search engine chatbot and other tools.

Excluding the after-hours shift, Microsoft shares are up 46% year-to-date, while the S&P 500 is up 19%.

Executives will discuss the results with analysts and provide guidance during a conference call beginning at 5:30 p.m. ET.

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