Cloud Division Saves Microsoft From Weak Xbox and Windows Performance


Bottom line: Microsoft reported positive year-on-year revenue growth of $52.7 billion for the three-month period ended December 31, 2022, largely due to the high performance of its cloud computing services.

The $52.7 billion haul represents a modest two percent increase over the same period a year earlier. Net income, however, fell 12 percent year-on-year to $17.37 billion, and diluted earnings per share was $2.32 (11 percent less than in the fourth quarter of 2021).

The revenue of Microsoft’s productivity and business processes division (Office, LinkedIn, Dynamics) totaled $17 billion, up 7 percent from the previous year, while its intelligent cloud computing division grew by 18 percent to $21.5 billion, which helped offset losses in other areas.

The revenues of Windows OEMs decreased by 39%, as well as in the Microsoft device category. Revenue from Xbox content and services also fell 12% compared to the 2021 holiday season.

Microsoft has recently expanded its partnership with OpenAI, building on a partnership that was first concluded in 2016 and confirmed in 2019 and 2021. Microsoft described the new deal as a multi-year, multibillion-dollar investment that will accelerate breakthroughs in artificial intelligence. According to Bloomberg, Redmond allocates an additional $10 billion.

Last week, the Washington-based tech giant announced it would cut its total workforce reserve by 10,000 jobs. Thanks to the cuts, Microsoft joins a host of other major tech companies that are reducing their workforce after significant hiring during the pandemic.

Looking ahead, Microsoft expects revenue in the third quarter of fiscal year 23 to be between $50.5 billion and $51.5 billion. The biggest takeaway here is that Microsoft expects revenue from the “More Personal Computing” division (Windows OEM, Xbox, Devices and Search) to fall to $11.9–$12.3 billion from $14.2 billion in the last quarter.

As for related news, Xbox and Bethesda are currently streaming their Developer Direct demo, which promises an inside look at some of the biggest games coming to Xbox, PC and Game Pass.


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