There is light at the end of the tunnel for Microsoft (MSFT) as the global economic slowdown weighs heavily on the growth of the tech giant, according to Piper Sandler analyst Brent Bracelin.
Microsoft’s growth rates “are going to fall here either this quarter, the current quarter, or the next quarter,” Bracelin told Yahoo Finance Live (video above). “So we’re close to saying the worst of the declines in those non-cloud segments like Windows, devices and advertising are over.”
While this may offer some comfort to many Microsoft bulls, at least in the short term, investors are likely to remain focused on the caution indicated by the company’s figures and directors’ comments provided late Tuesday.
Microsoft said its Intelligent Cloud segment grew 18% this quarter, while its Azure services grew 31%. This is less than last year’s second quarter, where Intelligent Cloud and Azure saw growth of 26% and 46%, respectively.
In an earnings call, CEO Satya Nadella and CFO Amy Hood were optimistic about the long-term impact of Microsoft’s partnership with OpenAI developer ChatGPT, but were noticeably less optimistic from an economic point of view – and by extension, a demand point of view.
That tone went a long way to explaining why Microsoft laid off 10,000 employees last week in a major cost cut.
“The macro background certainly plays a role here,” Guggenheim analyst John Difucci wrote in a note to clients.
The stock fell less than 1% during Wednesday’s session, reversing losses of more than 4% at one point. The company had the most active stock page on Yahoo Finance.
Piper Sandler’s Bracelin believes investors were prepared for the poor outlook and can now expect growth to pick up again later this year as the economy stabilizes and cost cuts boost profits.
“I think we’re closer to the bottom of Microsoft’s growth than people realize,” added Bracelin.
Dan Howley of Yahoo Finance contributed to this story.
Brian Sozzie is the editor-in-chief and anchor at Yahoo Finance. Follow Sozzie on Twitter @BrianSozzi and next LinkedIn.
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