Microsoft Q1FY23 earnings: Hit or Miss?

Microsoft reported its Q1FY23 earnings on Tuesday, and the share price of the software maker closed 1.38% higher. However, in the pre-market, Microsoft's share price was down nearly 6% in the aftermarket. In 2022, Microsoft's share fell 25%, and in the past five years, the company has given 200% returns to investors.

Microsoft Q2 earnings: Highlights

Let us look at all the details of Microsoft's September earnings:

Revenue above estimates: The company reported net revenue of $50.12 billion against street estimates of $49.61 billion. Compared to last year, in the same quarter, the revenue was up by 11%, as cyclical trends affected Microsoft’s consumer business.

The Intelligent Cloud computing platform generated revenue of $20.33 billion, a rise of 20% but marginally below estimates of $20.36 billion. Azure and other cloud services grew by 35%. Growth in Azure consumption continued to moderate, and higher energy costs in the quarter hurt the gross margin of Azure. Revenue from the More Personal Computing segment totaled $13.33 billion, down slightly. LinkedIn revenue increased 17% (up 21% in constant currency)

Decline in Net Income: Microsoft Corporation reported a Net Income of $17.56 billion, a decline of 14%. The company lengthened the useful lives of servers and networking equipment to six years from four years, resulting in an $859 million bump to the net income in the fiscal first quarter. The earnings per share reported was $2.35 per share against an estimate of $2.30 per share.

Cash and dividend: Microsoft has $107 billion in cash, cash equivalents, and short-term investments. 

Microsoft returned $9.7 billion to shareholders in the form of share repurchases and dividends in the first quarter of the fiscal year 2023, a decrease of 11% compared to the first quarter of the fiscal year 2022.

Guidance: Microsoft sees $52.35 billion to $53.35 billion in revenue for the fiscal second quarter, which implies 2% growth at the middle of the range. Analysts had been looking for revenue of $56.05 billion. Microsoft’s implied operating margin for the fiscal second quarter was about 40%, lower than the 42% estimated by analysts.

Management Commentary: "In this environment, we’re focused on helping our customers do more with less while investing in secular growth areas and managing our cost structure in a disciplined way.", Satya Nadella, Chairman and CEO of Microsoft.