Microsoft to report Q2 earnings amid declining PC sales, cloud growth

Microsoft (MSFT) is set to announce its second-quarter earnings after the bell on Tuesday, a day after it revealed it’s investing in OpenAI in an effort to better deal with competitors ranging from Amazon (AMZN) . -year, engages in multi-billion dollar investments. ) to Google (GOOG, GOOGLE). The announcement also follows the company’s decision to cut some 10,000 jobs as it combats cloud growth and a slowdown in PC sales.

Here’s what analysts are expecting from this quarter, versus how the company performed in the same quarter last year, as compiled by Bloomberg.

  • Revenue: $52.9 billion expected versus $51.7 billion in Q2 last year

  • Adjusted EPS: $2.30 expected vs $2.48 in Q2 last year

  • Productivity and Business Processes: $16.8 billion expected versus $15.9 billion in Q2 last year

  • Intelligent Cloud: $21.4 billion expected versus $18.3 billion in Q2 last year

  • More personal computing: $14.7 billion expected versus $17.4 billion in Q2 last year

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Microsoft made a splash on Monday by announcing that it would invest billions in the maker of the Buzzy ChatGPT chatbot: OpenAI. Microsoft also invested $1 billion in the company in 2019.

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

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

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

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But Microsoft is also dealing with flagging PC sales compared to the explosive growth the company saw during the pandemic.

Analysts expect revenue for Microsoft’s greater personal computing segment to be up 15.5% year-over-year. PC sales fell off a cliff in Q4, falling 28.5% year-over-year and 16.2% for all of 2022, according to Gartner.

Cloud sales are also slowing as businesses hold back on spending amid high inflation and interest rates. Microsoft’s Intelligent Cloud division growth is expected to slow to 16.9% from 26% in the second quarter of last year.

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

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“On the per-user side of the business in F1Q, weakness was SMB related, while Azure’s weakness was broader. We expect these trends to eventually seep into enterprise. This appears to be validated by CEO Nadella’s recent comments related to two Years of tech headwinds.”

The company is also continuing in its effort to buy video game giant Activision Blizzard for $69 billion. Until now, the Federal Trade Commission, U.K. The UK’s Competition and Markets Authority, and the EU’s European Commission have either filed complaints, or are working directly to sabotage the deal.

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