The officials at Microsoft have just shared disappointing forecasts for revenues for the ongoing quarter. The teams revealed to the analysts and shareholders in Tuesday’s meeting that their revenue forecast is weak.
As a result of sharing a disappointing revenue forecast, the share prices for Microsoft have recorded a downtrend. Initially, the share prices for the tech giant experienced an uptrend.
The surge in the share prices was due to the better-than-expected earnings that the executives shared for the quarter that ended in December.
However, the forecast the teams shared was something that the shareholders did not want to see at all. It ended up reversing the surge that the share prices for Microsoft had witnessed earlier.
Drop in Business and Earnings
The officials at Microsoft revealed that they have witnessed a drop in their business and growth in two major revenue-generating segments.
These segments include Office and the Windows areas, where a significant drop has been witnessed. The conference call was reportedly conducted by Satya Nadella, the CEO at Microsoft.
For the quarter ending in December, Microsoft reported that they have generated earnings worth $2.32 per share. The expectations that the analysts had set for the same quarter were $2.29 per share.
The revenue that the analysts had expected for the December quarter was $52.94 billion. The actual revenue that the company has generated in the respective quarter is $52.75 billion.
The estimations were reportedly made by Refinitiv analysts.
Earnings Forecast
As for the fiscal third quarter, Microsoft officials have set the revenue forecast to $50.5 billion at the bottom and $51.5 billion at the top level.
The revenue forecast shared by the officials suggests that Microsoft expects a 3% growth in revenue. As for the Refinitiv analysts, they have set the forecast for revenue to $52.43 billion.
Predictions Made by Amy Hood
The chief financial officer at Microsoft, Amy Hood issued a statement pertaining to the decline in the ongoing quarter.
According to Hood, they are seeing a massive decline in their business and revenue from the PC market.
The reason why they are expecting the decline is that they can clearly see the PC market moving towards a contraction.
This is not the first time the PC market has contracted so they can see a trend. If their predictions are right, then they will be experiencing a contraction in the ongoing quarter.
This is going to cause a 17% YoY decline in their business growth and revenue generation from the PC market.
Revenue Growth in the Fiscal 2nd Quarter
For the fiscal second quarter, Microsoft has revealed that the year-over-year growth they recorded for revenue was just 2%.
Their net income also experienced a downtrend, going down to $16.43 billion. In the same quarter of the past year, the company’s net income was $18.77 billion.
In addition to the above, Microsoft has taken another major charge costing them $1.2 billion in the fiscal second quarter. The charge they incurred was due to the company cutting down on 10,000 jobs.
Out of the $1.2 billion, $800 million went straight to the severance packages that they issued to the employees.
Slow Growth for the Cloud Services
In addition to the above, Microsoft has witnessed a decline in demand for Azure, the cloud-based service. It is one of the most demanded and highly adopted cloud-based services Microsoft has to offer.
It is among the highest revenue-generating segments that Microsoft has alongside the Microsoft Office software.
The company is facing a lot of competition from rival tech giants such as Google and Amazon as they are introducing great optimization in their cloud-based services.
After the announcement, the share prices for Microsoft recorded a dip in the trading market. The tech giant’s shares dropped by 0.22% and the share is now trading at $242.04.
On the other hand, the share prices for Amazon pushed up by 3% after Microsoft talked about slow growth in their cloud business.