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Microsoft’s forecast suggests that the gloomy tech environment will continue

by SuperiorInvest

Microsoft CEO Satya Nadella leaves the Elysee Palace after a meeting with French President Emmanuel Macron in Paris on May 23, 2018.

Aurelien Morissard | IP3 | Getty Images

Microsoft executives told analysts on Tuesday that they expect a continuation of the weak pace of business seen in December, which has hurt the software maker. fiscal second quarter results.

“In our commercial business, we expect the business trends we saw at the end of December to continue into the third quarter,” Amy Hood, Microsoft’s chief financial officer, said on a conference call.

His company saw less-than-expected growth, particularly in Microsoft 365 productivity software subscriptions, identity and security services and business-oriented Windows products.

Growth in consumption of the company’s Azure cloud service has also slowed, she said.

The company sells products such as Xbox consoles and Surface PCs to consumers, but most of its revenue comes from commercial clients such as companies, schools and governments. That’s where the impact will be felt. A metric called Microsoft Cloud — including Azure, commercial Microsoft 365 subscriptions, LinkedIn commercial services and Dynamics 365 enterprise software — now accounts for 51% of total revenue.

Large organizations are optimizing their spending on cloud services, a key growth area for Microsoft, CEO Satya Nadella said. This behavior was also manifested in fiscal first quarterand in October, Amazon also talked about how it helped cloud customers optimize your costs.

Microsoft made the product changes to highlight where customers could lower their cloud bills, Nadella said.

Hood said Azure’s growth will slow even further. For the full December quarter, revenue from Azure and other cloud services grew 42% in constant currency. But in December, Hood said, growth was in the mid-30% range in constant currency, and she forecast a further slowdown of 4-5 percentage points in the current quarter, which ends in March.

The slowdown that began in December should also be reflected in Q3 results for Windows commercial products and cloud services, a category that includes Windows volume licensing for businesses, Hood said. Its forecast included flat sales for Windows commercial products and cloud services, compared with a 3% decline in the fiscal second quarter.

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