October 25, 2022
Microsoft is on track to report its slowest quarterly revenue growth in more than five years, owing to a slowing PC market that has forced consumers and businesses to cut back on spending on computers and laptops, a strong dollar, rising inflation and a global economic slowdown.
To make matters worse, the dollar has risen by more than 17%, squeezing earnings of companies with large global operations.
According to Refinitiv, Microsoft’s revenue is expected to rise 9.5% in the first quarter to $49.61 billion, the first increase below 10% since the third quarter of fiscal 2017. Earnings per share are expected to be $2.30.
PC shipment fell 19.5% in the third quarter of this year, indicating a slowdown in cloud adoption. Piper Sandler predicts total revenue for the 100 largest software companies will grow by 22% in 2022 and 20% in 2023, down from 33% in 2021. This will affect not only Microsoft, but also other software companies. Software companies are the largest users of cloud platforms, and their growth is used as a proxy for the cloud services sector.
Windows licenses account for about 12% to 13% of Microsoft’s revenue, with the decline in the PC market expected to reduce revenue by 100 basis points. Microsoft’s cloud services unit Azure is expected to grow by 20% in the first quarter, slightly offsetting the setback, according to Refinitiv data.
The sources for this piece include an article in Reuters.
