Microsoft (MSFT) is set to report its Q2 results after the bell on Tuesday, a day after it announced it is participating in a multi-year, multi-billion dollar investment in OpenAI to compete from Amazon (AMZN ) to Google ( GOOG, GOOGL). The announcement also follows the company’s decision to cut around 10,000 jobs as it struggles with a slowdown in cloud growth and PC sales.
Here’s what analysts expect from the quarter compiled by Bloomberg compared to how the company performed in the same quarter last year.
Revenue: $52.9 billion expected versus $51.7 billion in the second quarter last year
Adjusted earnings per share: $2.30 expected versus $2.48 in the second quarter of last year
Productivity and business processes: $16.8 billion expected versus $15.9 billion in the second quarter last year
Smart cloud: $21.4 billion expected versus $18.3 billion in the second quarter last year
More Personal Computing: $14.7 billion expected versus $17.4 billion in the second quarter last year
Microsoft made a splash on Monday by announcing that it will invest billions in the creator of the lively ChatGPT chatbot OpenAI. Microsoft also invested $1 billion in the company in 2019.
FILE – In this October 6, 2015 file photo, Microsoft CEO Satya Nadella wraps up a presentation of new devices in New York. Microsoft announces quarterly financial results on Thursday, October 22, 2015. (AP Photo/Richard Drew, File)
The investment is intended to help Microsoft further differentiate its cloud offerings from competitors such as Amazon and Google. The company is also said to bring the technology to its Bing search engine, a move that could threaten Google’s search dominance.
But Microsoft is also grappling with slowing PC sales compared to the explosive growth the company has experienced during the pandemic.
Analysts expect revenue from Microsoft’s More Personal Computing segment to be up 15.5% year over year. According to Gartner, PC sales fell off a cliff in the fourth quarter, falling 28.5% year over year and 16.2% for all of 2022.
Cloud sales are also slowing as companies pull back spending amid high inflation and high interest rates. Growth at Microsoft’s intelligent cloud division is expected to slow to 16.9% from 26% in the second quarter of last year.
[Microsoft] saw deal moderation in the [small medium business] Customer segment in F1Q (also seen in F4Q),” Jefferies analyst Brent Thill wrote in a note ahead of Microsoft’s earnings.
The story goes on
“In F1Q, on the per-user side of the business, weakness was related to SMB, while Azure softness was prevalent. We expect that these trends will eventually seep into the company. This appears to be borne out by CEO Nadella’s recent comments on two years of technical headwinds.”
The company is also continuing its efforts to buy video game giant Activision Blizzard for $69 billion. So far, the Federal Trade Commission, the UK’s Competition and Markets Authority and the EU’s European Commission have either filed complaints about the deal or are working directly to nix it.
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