Microsoft missed revenue expectations on Tuesday, as the tech giant cited “developing macroeconomic conditions and other unforeseen entries” for unfavorable results.
The company reported fourth-quarter revenue of $51.90 billion, lower than the $51.94 billion and $52.74 billion it had predicted. Adjusted earnings per share were $2.34, well below the expected range of $2.24 to $2.32.
Microsoft revised down its fourth-quarter outlook ahead of earnings, citing an adverse impact from the exchange rate.
In the earnings release, the company also cited a “reduction in ad spend,” which had a negative impact on LinkedIn, as well as Search and news ad revenue of more than $100 million.
This combined with the shutdown of production in China, downsizing of operations in Russia, due to the war in Ukraine, and $113 million in employee severance costs.
This month, Microsoft has been selected as an ad partner for Netflix’s upcoming ad-supported service, which is slated to launch in early 2023. Ad support is expected to be made available. by Microsoft’s newly acquired video advertising platform, Xandr. Microsoft closed its acquisition of the company last month and touts it as “one of the world’s largest marketplaces for premium advertising.”
“Every consumer internet and media company today has a trusted platform for their own advertising innovation and monetization. Just two weeks ago, Netflix selected us as the exclusive technology and sales partner for its first ad-supported subscription, confirming the differentiated value we offer to any publisher who is looking for a flexible partner willing to build and innovate with them,” said Microsoft CEO Satya Nadella.
Microsoft did not provide further details on future offerings or partnerships with Netflix.
For the quarter ended June 30, revenue from Xbox content and services fell six percent from a year earlier due to lower engagement hours and monetization of third-party content. third and first party. Total revenue from the game fell seven percent.
Meanwhile, the company highlighted growth in its cloud business, a core component of Microsoft that brought in more than $25 billion in revenue for the first time, up 28% year-over-year.
While shares initially trended lower after earnings were announced Tuesday afternoon, shares rebounded following the company’s first-quarter outlook. Even as Microsoft said it expects the first-quarter trend to continue through Monday, leading to continued negative effects on ad-based segments, as well as a slowdown in gaming, The company said it expects to see further momentum in its cloud business, with Azure products up 43%.
