Microsoft, amid layoffs, says quarterly profit down 12%

REDMOND, Washington (AP) — Microsoft on Tuesday reported a 12% drop in profit for the October-December quarter, reflecting economic uncertainty it says has led to the decision to lay off 10,000 employees.

The company reported quarterly earnings of $16.43 billion, or $2.20 per share.

Excluding one-time items such as $800 million to pay layoffs, the Redmond, Washington-based company said it earned $2.32 per share, beating Wall Street’s expectations of an adjusted profit of 2.29 dollar per share. Microsoft shares rose more than 4% in extended trading after the earnings report was released.

The software maker reported revenue of $52.75 billion in the October-December fiscal second quarter, up 2% from the same period a year ago. Analysts polled by FactSet expected Microsoft to report revenue of $52.99 billion for the quarter.

Microsoft last week blamed “macroeconomic conditions and shifting customer priorities” for its decision to lay off nearly 5% of its global workforce. It is one of many tech companies including Google, Amazon, Salesforce and Meta, Facebook’s parent, to announce massive layoffs.

Microsoft’s PC division, focused on Windows software, was widely expected to continue the decline that began early last year due to economic uncertainty and limited demand. Quarterly sales from the segment fell 19% to $14.24 billion, the company said on Tuesday.

The company earns licensing revenue from PC manufacturers who install its Windows operating system on their products.

Research firm Gartner said global PC shipments in the October-December quarter fell 28.5% compared to the same period in 2021, the largest quarterly decline since Gartner began tracking the market in the 1990s.

Factors reducing consumer demand for PCs include elevated inflation, higher interest rates, the expectation of a global recession, and the fact that many people have already purchased new PCs during the COVID-19 pandemic, Gartner said.

With the PC market weak, analysts closely watched the performance of Microsoft’s other large business segments, namely its cloud computing division, where sales rose 18% to $21.51 billion. Revenue also rose from the company’s office software segment – which includes the Office suite of products – by 7% to $17 billion.

Aiming to further integrate the latest advances in artificial technology into its products, Microsoft on Monday announced a “multi-year, multi-billion dollar investment” in artificial intelligence start-up OpenAI, the creator of ChatGPT and other tools that can write readable text and computer code and generate new images.

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