Microsoft relies on the cloud to compensate for the slowdown in its historical activity

Microsoft’s turn to return to normal. On the occasion of its quarterly results, the company presented its weakest growth in two years, like Google. With 51.9 billion dollars in turnover, it only progressed that » 12%, a rate considered all the lower as it follows two particularly prosperous years, driven by the generalization of teleworking linked to Covid. Its net profit, at 16.7 billion dollars, only increased by 2%.

Turbulence without medium-term consequences?

Like the entire tech sector, the computer giant has not escaped the consequences of the macroeconomic situation (withdrawal from Russia, factory closures in China, processor crisis, etc.) and the repercussions the strong dollar, which is cutting into its profits outside the United States. Either a shortfall of $ 585 million according to figures from Microsoft.

But no sooner was this disappointing report presented than Microsoft immediately announced that it was still planning double-digit growth for the year. As a result, its stock price climbed 5% as soon as Wall Street opened. “IT spending will continue to rise as every business tries to somehow tech-strengthen itself to weather these macro conditions.”said CEO Satya Nadella.

The cloud is slowing down, but still driving growth

Among the reasons for Microsoft’s slowdown is the slowdown in its cloud business [l’informatique dématérialisée, ndlr] for two quarters. While the growth rate of its dedicated platform, Microsoft Azure, remains impressive at +40%, it is still more than 10 points below the standards of the past two years. The pandemic had led to a rush on these services, as companies had to equip their confined employees with software, and provide access to corporate data outside the office. Microsoft took the opportunity to consolidate its position as number 2 in the market (with about 22% of the shares), far behind the leader Amazon Web Services (more than 33%), but well ahead of the third, Google Cloud (10%).

More generally, Microsoft Cloud, which includes the activity of Azure but also the sale of other services (such as Microsoft 365 office software), generated 25 billion dollars, or 28% more than last year. This is almost half of the company’s turnover for the semester, which will be a milestone in the transformation of the historic IT giant into a cloud company. It could also happen very quickly, given the rate of growth of the cloud and the difficulties encountered by Microsoft on its other products and services.

Microsoft struggles with its historical activity

Indeed, on its historical activity – the sale of the Windows operating system among other software – the group must deal with the drop in PC deliveries and the closure of Chinese factories due to Covid. It estimates the lost potential revenue at $300 million. With 14.4 billion dollars made in the quarter, its historical activity only brought in 2% more than last year at the same period.

Another point of tension: the video game market. Physical sales of its home console, the Xbox, fell 11%, while sales of content and services fell 6%. Microsoft says these trends are mainly due to lower user engagement, which had been boosted by furloughs and the closure of many physical locations. The company therefore maintains these ambitions in the market, and it has specified that it hopes to conclude its acquisition of the publisher Activision Blizzard (for 68.7 billion dollars) before June 30, 2023. This agreement would put Microsoft at the very top of the market.

These difficulties, coupled with fears of a worsening macroeconomic situation, prompted Microsoft to lay off about 1% of its workforce (costing it $113 million in fees in the quarter) and to freeze hiring in some divisions. , especially for teams that deal with its Office IT suite or its Windows operating system history.