Microsoft: You're not out of love with cloud, you're just 'optimizing' it for a bit

Microsoft has posted modest growth for the quarter ended December 31, 2022, with its consumer-centric products recording marked revenue dips.

Quarterly revenue of $52.7 billion was a two percent year on year increase, and produced $16.4 billion of GAAP net income - a 12 point drop.

Nasty numbers from Satya Nadella's software-slingers included a 39 percent decline in Windows-related revenue paid by PC manufacturers, a 34 percent drop in device revenue, a 12 percent fall in Xbox content and services revenue, and a two percent drop in revenue from Office Consumer products and cloud services (although had exchange rates not changed the business would have posted three percent growth in that segment). The cost of acquiring search and advertising revenue rose ten percent.

Server products and cloud services revenue increased 20 percent, with Azure and other cloud services revenue growing by 31 percent. Office Commercial products and cloud services revenue increased seven percent, and Dynamics did very well, posting 13 percent growth.

But on the earnings call, execs warned of slowing growth for Azure and associated products - from 35 percent to four or five points lower.

CEO Nadella had a theory for that looming slowdown.

"Just as we saw customers accelerate their digital spend during the pandemic, we are now seeing them optimize that spend," he told investors.

"Also, organizations are exercising caution given the macroeconomic uncertainty," he added, before offering the observation that customers might be holding back because "the next major wave of computing is being born as we turn the world's most advanced AI models into a new computing platform."

Financial analysts on the call asked several questions about what "optimizing" cloud usage means. Nadella said "they are looking to back some savings on some workloads" and once they've done that, they'll start on new cloudy projects.

The CEO said Microsoft Teams has already shown increased post-pandemic usage, and expressed excitement for the imminent debut of Teams Premium that will shift some existing Teams features into a new and more expensive pricing tier and presumably grow revenue.

Nadella emphasized, as he did in Microsoft's previous results announcement, that securing customer loyalty is on the agenda. Or as he put it, "helping them realize more value from their tech spend and building long-term loyalty and share position."

He also spoke of "internally aligning our own cost structure with our revenue growth" - a nod to the recent sacking of 10,000 staff.

Some of the software leviathan's costs are incurred rebuilding Azure for AI.

Nadella said "the core of Azure or what is considered cloud computing fundamentally changes in its nature and how compute storage and network come together."

"That's, in some sense, under the radar, if you will. For the last three and a half years, four years, we have been working very, very hard to build both the training supercomputers and now, of course, the inference infrastructure. Because once you use AI inside of your applications, it goes from just being training-heavy to inference."

"Core Azure itself is being transformed," he said.

Once Azure is ready to deliver the AI customers want, cloudy growth will resume as customers take the savings from their optimizations and do more Azure. Microsoft will be well positioned to cash in on appreciative customers as they start adopting AI, Nadella hypothesized.

Nadella and CFO Amy Hood both acknowledged that macroeconomic conditions aren't brilliant, and that Redmond's consumer businesses suffered as a result.

"Windows OEM and devices will see continued declines as the PC market returns to pre-pandemic levels," Hood told investors. "And LinkedIn and search will be impacted as ad market spending remains a bit cautious."

But execs on the earnings call were bullish overall, suggesting that Microsoft's recent cost-cutting will leave its finances in fine shape, pointing out that Office365 is a profit-making machine - the Productivity and Business Processes segment produced $8.2 billion of operating income on $17 billion revenue - and that economic conditions are bound to improve.

If they don't, well, Microsoft's balance sheet for the quarter detailed $99.5 billion - yes, billion - in cash, cash equivalents, and short-term investments. That's a reasonably comfortable buffer for even the rainiest day - although it's down $5 billion over six months, for unspecified reasons. ®

Search
About Us
Website HardCracked provides softwares, patches, cracks and keygens. If you have software or keygens to share, feel free to submit it to us here. Also you may contact us if you have software that needs to be removed from our website. Thanks for use our service!
IT News
Jan 28
Microsoft squashes Windows 11, Server 2022 bugs with preview patches

Remote Desktop, domain controllers giving you gyp? Gamble on these fixes

Jan 27
Experts warn of steep increase in Java costs under changes to Oracle license regime

As per employee model replaces old subscription, user bills could soar

Jan 27
What is Google doing with its open source teams?

Opinion Nothing good - the recent layoffs hit its best and brightest leaders hard

Jan 27
User was told three times 'Do Not Reboot This PC' - then unplugged it anyway

Even with instructions staring them in the face, this genius couldn't get it right

Jan 27
Poor Meta. Technical debt and user training made its exabyte-scale data migration tricky

Welcome to the real world, kids. And for the rest of us, a future at which Meta is gulp! - better at large-scale analytics

Jan 26
Memory safety is the new black, fashionable and fit for any occasion

Calls to avoid C/C++ and embrace Rust grow louder