Microsoft weathers financial storm with 12% revenue growth

Despite some tricky global headwinds, Redmond continues to post strong results, buoyed by its cloud business, which surpassed $25 billion in quarterly revenue for the first time.

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Microsoft announced its fourth quarter 2022 results yesterday, posting revenue of US$52 billion, up 12 per cent year-on-year. However, the company’s net income was relatively flat at $16.7 billion, at a much more modest increase of just two per cent.

In a call with analysts, Microsoft chief financial officer, Amy Hood, said unfavourable foreign exchange rate movement within the quarter negatively impacted revenue and diluted earnings per share, while extended production shutdowns in China and a deteriorating PC market had contributed to a negative Windows OEM revenue impact of more than $300 million.

The scaling down of Microsoft’s operations in Russia also led to the company recording operating expenses of $126 million related to bad debt expense, asset impairments, and severance.

Microsoft’s cloud business continued to go from strength to strength however, surpassing $25 billion for the first time in a quarter and growing at 28 per cent year-on-year.

Segment results

Microsoft’s intelligent cloud segment — which includes Azure public cloud services, SQL Server, Windows Server, and enterprise services — was the primary beneficiary of that growth, up 20 per cent for the quarter, at $20.9 billion.

Server products and cloud services revenue also increased 22 per cent to $3.4 billion, driven by Azure and other cloud services, which saw revenue grow by 40 per cent. Microsoft also saw its productivity and business processes segment, which includes Office software, increase 13 per cent this quarter to $16.6 billion.

Office Commercial products and cloud services revenue increased nine per cent to $807 million, while Office 365 Commercial revenue grew 15 per cent. Office Commercial products revenue declined 32 per cent, driven by a continued customer shift to cloud-based offerings.

LinkedIn revenue increased $768 million, or 26 per cent, while Dynamics CRM products and cloud services revenue increased 19 per cent, driven by its cloud-based Dynamics 365 growth of 31 per cent.

While the other segments have performed well this quarter, Microsoft’s personal computing segment struggled, with revenue increasing by only two per cent, totalling $270 million. The once-thriving PC market has been blighted with problems in the last 12 months, due to manufacturing shutdowns leading to a steep decline in PC shipments.

Gaming revenue also decreased to $259 million or seven per cent, with Xbox content and services revenue decreasing by six per cent and Xbox hardware revenue decreasing by 11 per cent.