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Microsoft’s FY23 Q1 earnings report tripped up by declines in PC shipments and elsewhere
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Published onOctober 25, 2022
published onOctober 25, 2022
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Despite PC shipments riding higher than they had been in pre-pandemic levels, the cliff they dropped off over the past couple of quarters was too steep to overcome for Microsoft’s bottom line.
Thestart of the fiscal year 2023is a relatively bumpy one as company investors navigate Microsoft earning $17.6B in net income off of $50.1B in revenue. For the quarter, Microsoft’s revenue is up almost 11% but net income decreased by 14% (down 8% in constant currency).
AMD and Intel sent out warning flares of an imminent jolt to the PC market earlier this month as they lowered their projections for shipments ahead of their own earnings calls this week and Microsoft is also signaling to that softer demand as partial reason for its relatively poor showing this quarter.
“Windows OEM revenue declined 15% with continued deterioration in the PC market, partially offset by 5 points of positive impact from the prior year Windows 11 revenue deferral.”
So, while things could have looked a bit worse this quarter,Microsoft as a whole still has highlightsthis earnings report that include Xbox hardware being up 13% for the quarter alongside gaming revenue growth of 4%. Unfortunately, Xbox content services lagged behind with a 3% decline as Microsoft cites the lack of engagement hours and monetization from 1st party content, all of which was offset by the growth of Xbox Game Pass.
Search was another positive highlight during the earnings report with Search and News Advertising revenue growing by 16% and device revenue showing a modest 2% gain in the quarter when no new Surface devices were available for purchase.
Per usual, Microsoft’s Server Products and Cloud services revenue grew by 22%. Azure and other cloud services tacked on 35% revenue growth for the quarter that Microsoft is attributing to its “consumption-based services.”
Prior to the rebrand, Office 365 Commerical products and cloud services showed 7% revenue growth while Microsoft’s LinkedIn purchase continues to pay dividends with its own 17 revenue growth driven by “Talent Solutions.” Microsoft 365 is now sitting on 61.4 million Consumer subscribers representing a 13% growth and expected to increase further as the company shifts its naming convention to incorporate Office 365 seats as well.
Business Highlights
Productivity and Business Processes was $16.5 billion
Revenue in Intelligent Cloud was $20.3 billion and increased 20%
Revenue in More Personal Computing was $13.3 billion
with the following business highlights:
Microsoft returned $9.7 billion to shareholders in the form of share repurchases and dividends in the first quarter of fiscal year 2023, a decrease of 11% compared to the first quarter of fiscal year 2022.
The company warns of the typical industry trade winds, competition, COVID-19 related setbacks to manufacturing, shipping and logistical issues. As for other risks and uncertainties, we’ll have to wait until the investors call later today to see how the company handles questions about layoffs, an impending recession and its looming $68B Activision acquisition.
Xbox revenues postCheck out our for more on the latest numbers for Xbox and gaming.
Kareem Anderson
Networking & Security Specialist
Kareem is a journalist from the bay area, now living in Florida. His passion for technology and content creation drives are unmatched, driving him to create well-researched articles and incredible YouTube videos.
He is always on the lookout for everything new about Microsoft, focusing on making easy-to-understand content and breaking down complex topics related to networking, Azure, cloud computing, and security.
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Kareem Anderson
Networking & Security Specialist
He is a journalist from the bay area, now living in Florida. He breaks down complex topics related to networking, Azure, cloud computing, and security
