By
Godfrey Benjamin
April 18th, 2024
The company’s revenue forecast for the fiscal third quarter is between $50.5 billion and $51.5 billion.
Tech giant Microsoft (NASDAQ: MSFT) offered a disappointing revenue forecast for the current quarter, triggering a decline in the company’s share price. Meanwhile, the technology company exceeded analysts’ expectations in its earnings for the last quarter, which ended in December. In reaction to the better-than-expected earnings result for the fiscal second quarter, MSFT grew. According to the FY23 Q2 report, total revenue jumped 2% YoY.
Microsoft Corp’s Revenue Forecast
Microsoft CEO Satya Nadella spoke on the weak revenue forecast in an earnings call on the 24th of January. He explained that businesses in core Windows and Office areas dropped towards the end of the year. The company’s revenue forecast for the fiscal third quarter is between $50.5 billion and $51.5 billion. Meanwhile, analysts polled by Refinitiv expected $52.43 billion.
Chief financial officer Amy Hood noted that the PC market would diminish, leading to about 17% YoY loss in the More Personal Computing business segments that include Windows. The CFO reiterated that businesses contracted in December, featuring Azure cloud services in growth consumption. At the same time, new businesses grew slower than the company’s expectations. The management has higher expectations for Windows Commercial products and Enterprise Mobility, Microsoft productivity software subscriptions, and Security offerings. Hood added that Microsoft expects the business trend to extend to the current quarter, hence the revenue forecast.
The CFO continued with her projections for the current quarter, adding that may be slower Azure cloud growth. While it was around the mid-30% in constant currency, Hood sees it reduce by 3-4% points in the FY23 Q3. Despite showing some strength amid a weak economy in the last quarter that ended in December, Microsoft announced a weak revenue forecast for the current. In a comment, the chief analyst at TECHnalysis Research, Bob O’Donnell, wrote:
“The small miss on Microsoft’s cloud earnings forecast is likely just a reflection of the new economic reality that businesses are facing and not a harbinger of something worse.”
Microsoft is one of the tech giants that announced fresh headcount reductions in 2023. The company said it would lay off as many as 10,000 employees across various divisions, particularly in the human resources and engineering departments. This comes after an initial dismissal of about 1,000 people in October 2022. Regarding the next staff cut, Microsoft said the exit would happen through the 31st of March, mostly impacting workers in the sales and marketing departments. Nadella explained:
“As we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less. We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one.”
Microsoft stock currently trades down 1.02% to $239.58.