Technology

Microsoft sales up 12% despite weakened PC market

Investors concerned as growth slows and demand for cloud services dissipate

Microsoft shares slipped about 2.5 per cent in extended trading after the report. Photograph: Mike Blake/Reuters

Thu Jan 31 2019 - 01:00

Microsoft Corp reported second-quarter sales that met analysts’ projections, though slowing growth in the company’s cloud-computing division and a weak PC market raised investor concerns that overall demand is decelerating.

Shares declined in late trading. Adjusted profit in the quarter that ended December 31st rose to $8.58 billion, or $1.10 a share, compared with the $1.09 average estimate of analysts polled by Bloomberg. Sales climbed 12 per cent to $32.5 billion, Microsoft in a statement on Wednesday, matching the $32.5 billion analysts expected.

Microsoft claimed the title of biggest company by market value during the quarter – even as many of its peers sank – as investors bet its cloud and enterprise-software business was more stable than other parts of the technology market. Still, the company posted 76 per cent growth in Azure services for storing data and running applications in the cloud, same as the previous quarter, in a unit where revenue had been about doubling. The company’s failure to exceed revenue estimates may be heightening concerns that broader demand for cloud services is petering out.

“You have this thematic concern that’s been building because chip results were bad,” said Daniel Morgan, a fund manager at Synovus Trust Co. “We knew things would be choppy because of China, and now all of a sudden the area we thought would be safe – cloud – is also a concern.”

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Microsoft shares slipped about 2.5 per cent in extended trading after the report. They had closed up 3.3 per cent at $106.38 in regular New York trading. The stock fell 11 per cent in the three months ended in December, hitting a low point late in the year, as concerns emerged that tech spending was slowing, particularly in areas such as PCs. Still, the stock’s decline was smaller than the 14 per cent drop in the S&P 500 Index, as investors bet Microsoft’s revenue was more insulated from any potential weakness in spending on technology devices and internet ads.

– Bloomberg

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