Microsoft reports Q2 earnings amid declining PC sales, cloud growth

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Microsoft ( MSFT ) is set to report its Q2 earnings after the bell on Tuesday, a day after announcing that it will participate in a multi-year, multibillion-dollar investment in OpenAI to better counter competitors from Amazon ( AMZN ). ) to Google (GOOG, GOOGL). The announcement follows the company’s decision to cut about 10,000 jobs as it struggles with cloud growth and slowing PC sales.

Here’s what analysts expect from the quarter, compiled by Bloomberg, and shows the company’s performance in the same quarter last year.

  • Income: In Q2 last year, it was expected to be 52.9 billion dollars from 51.7 billion dollars

  • Adjusted EPS: It is expected to be $2.30 compared to $2.48 in last year’s Q2

  • Production and business processes; $16.8 billion is expected compared to $15.9 billion in last year’s Q2.

  • Smart Cloud: It is expected to be 21.4 billion dollars compared to 18.3 billion dollars in Q2 last year

  • More personal calculations: In Q2 last year, it was expected to be $14.7 billion, up from $17.4 billion

Microsoft made a big splash on Monday by announcing that it would invest billions in OpenAI, the creator of ChatGPT’s chatbot. Microsoft invested $1 billion in the company in 2019.

FILE - In this Oct. 6, 2015 file photo, Microsoft CEO Satya Nadella closes a presentation of new devices in New York.  Microsoft reported its quarterly financial results on Thursday, October 22, 2015.  (AP Photo/Richard Drew, File)

FILE – In this Oct. 6, 2015 file photo, Microsoft CEO Satya Nadella closes a presentation of new devices in New York. Microsoft reported its quarterly financial results on Thursday, October 22, 2015. (AP Photo/Richard Drew, File)

The investment is expected to help Microsoft further differentiate its cloud offerings from competitors such as Amazon and Google. The company is reportedly bringing the technology to the Bing search engine, a move that threatens Google’s search dominance.

But Microsoft is pointing to the explosive growth in PC sales the company saw during the pandemic.

Analysts expect Microsoft’s additional personal computing division’s revenue to rise 15.5% year over year. According to Gartner, PC sales fell off a cliff in Q4, down 28.5% year over year, and 16.2% for all of 2022.

Cloud sales are slowing as businesses pull back amid high inflation and interest rates. Growth in Microsoft’s Intelligent Cloud division is expected to slow to 16.9 percent from 26 percent in Q2 last year.

[Microsoft] I saw in moderation [small medium business] consumer segment in F1Q (also seen in F4Q),” Jefferies analyst Brent Till wrote in a note ahead of Microsoft’s earnings.

“In F1Q, the weakness on the business side of the user was related to SMB, the softness of Azure was very broad. We expect these trends to eventually enter the organization. This seems to be confirmed by CEO Nadella’s recent comments about the two years of technology wind.”

The company is continuing its efforts to buy video game giant Activision Blizzard for $69 billion. So far, the Federal Trade Commission, the UK’s Competition and Markets Authority and the EU Commission have complained about the deal or are working to break it up entirely.

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