Microsoft misses Q4 estimates with $51.87B in revenue, vs. $52.44B estimated, citing changing exchange rates plus challenges in the advertising and PC markets
Good morning! The downturn is coming for Big Tech … Peter Cohen / RCR Wireless News : Microsoft promises continued cloud growth, despite missing estimates Ibukun Ogundare / Coinspeaker : Microsoft (MSFT) Stock Advances 5% on Impressive Financial Guidance Despite Missing Estimates in Q4 2022 Results Leigh Mc Gowran / Silicon Republic : Microsoft and Google fall short of expectations as revenues slow Transistori : Microsoftin tulos jäi odotuksista, mutta ohjeistus nosti osaketta Richard Waters / Financial Times : Microsoft reassures investors with confident full-year forecast Reuters : Microsoft earnings hurt by slowing PC sales, stronger dollar Dina Bass / Bloomberg : Microsoft Shares Rise on Upbeat 2023 Sales Growth Forecast Aaron Tilley / Wall Street Journal : Microsoft Earnings Dented by Cloud Slowdown, Videogame Sales Drop Tweets: @toddbishop : Microsoft recorded $113 million in severance expenses in Q4-FY22, vs. $330 million when it cut 5,000 jobs in 2009. That implies ~1,700 jobs this time, in line with statement that cuts were <1% of its 181,000 employees. More on $MSFT results: https://www.geekwire.com/... @cnbcnow : EARNINGS: Microsoft Q4 EPS $2.23 vs. $2.29 Est.; Q4 Revs. $51.87B vs. $52.44B Est. • $MSFT https://cnbc.com/... https://twitter.com/...
Context & Ripple Effects
Microsoft had already lowered its Q4 sales range in a currency-driven guidance cut, so the reported result landed within that revised outlook rather than representing a fresh deterioration. Management’s upbeat full-year forecast shifted the market’s attention toward cloud growth even as advertising, PCs and videogames weakened.
That contrast became central to Microsoft’s subsequent results: Intelligent Cloud revenue grew 19% year over year in 2024, underscoring the separation between its enterprise-cloud engine and more cyclical consumer-facing businesses.
First-order effects
- Microsoft’s full-year growth guidance lifted its shares by about 5% despite the revenue miss, while exchange rates and weak PC, advertising and videogame demand weighed on the quarter.
- The $113 million severance charge, implying roughly 1,700 cuts, makes cost control an immediate part of Microsoft’s response to softer demand.
Second-order effects
- Microsoft’s investor case becomes more dependent on cloud growth offsetting weakness in PC, advertising and gaming businesses, raising the importance of cloud guidance in subsequent earnings reports.
- A softer PC market reduces near-term support from Windows-linked demand, increasing pressure on Microsoft to protect margins through spending and staffing discipline.
Third-order effects
- If the split between enterprise cloud growth and cyclical consumer markets persists, Microsoft’s valuation and operating priorities will increasingly be set by cloud execution rather than broad-based demand across its portfolio.
The trend: Big Tech is becoming more bifurcated between resilient enterprise-cloud businesses and consumer segments exposed to device cycles, advertising demand and currency swings.