Microsoft Takes $800M Layoff Charge, Revenue Growth Slows To Lowest Rate Since 2016

Microsoft reported its slowest top-line growth in six years, with revenue up 2% for the December 2022 quarter, and took an $800 million charge related to the layoff of 10,000 employees.

Last week, the tech giant announced it was cutting 10,000 positions, about 5% of its global workforce, amid signs of an economic slowdown. In total, Microsoft assumed a charge of $1.17 billion for severance, “hardware-related impairment” and lease consolidation costs for the quarter ended December 31, 2022.

Microsoft announced revenue of $52.7 billion, up 2% year-over-year, and adjusted earnings of $2.32 per share for the quarter, which is the company’s second quarter of fiscal 2023. On average, analysts expected that The Redmond, Washington-based company will post revenue of $52.96 billion and EPS of $2.29, according to financial data provider Refinitiv.

The bright spot for Microsoft’s quarter: Its intelligent cloud segment brought in revenue of $21.51 billion, up 18%. On the pace of EPS and growth in the cloud business, Microsoft shares were up 4% in after-hours trading.

Windows OEM and devices revenue decreased 39%, while Windows commercial products and cloud services revenue decreased 3%. Xbox content and services revenue decreased 12%. Microsoft news and search ads revenue (excluding traffic acquisition costs) increased 10%.

Earlier this week, Microsoft announced plans to invest billions over several years in OpenAI, the company that created the bustling artificial intelligence chatbot ChatGPT, to “accelerate advances in AI” and “ensure these benefits are widely shared.” with the world”. Microsoft has committed to investing $10 billion total in OpenAI, the New York Times reported, following its investment of $1 billion in 2019 and another $2 billion in 2021. Under the deal, Microsoft’s Azure serves as OpenAI exclusive cloud provider.

β€œThe next great wave of computing is dawning as Microsoft Cloud turns the world’s most advanced artificial intelligence models into a new computing platform,” Microsoft CEO Satya Nadella said in announcing the earnings. β€œWe are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new era of AI.”

Meanwhile, Microsoft is facing an antitrust lawsuit filed by the FTC in December seeking to block its $69 billion deal to acquire Activision Blizzard. The agency alleges that owning Activision Blizzard would allow Microsoft to “suppress competitors” in the video game industry.

Pictured above: Microsoft CEO Satya Nadella

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