Tech giant Microsoft’s second-quarter earnings are somewhat lower than previously forecast by analysts. In the earnings report disclosed to the public on July 26th, Microsoft earned $51.9 billion in revenues and $16.7 billion in profit as of the end of June 2022.
While these are respectively 12% and 2% higher than the company’s earnings at the same time last year, they are significantly lower than the amount projected by several analysts earlier this year.
The company’s share value also fell by 1% in after-hours trading following the disclosure.
Lockdowns and Conflict
Microsoft claims that its lower-than-expected earnings resulted from recent incidents in China and Russia.
In the case of the former, extended lockdowns in major cities like Shanghai to prevent the further spread of COVID-19 were to blame for the drop in earnings. These led to extensive production shutdowns, which resulted in a loss of approximately $300 million for the tech company.
Meanwhile, the latter’s ongoing armed conflict with Ukraine also took its toll. Microsoft claims it has spent $126 million to scale down its operations in Russia because of the war.
But these global incidents aren’t the only reason for Microsoft’s Q2 losses. LinkedIn, the company’s proprietary job search platform and corporate-centric social media platform, reduced its advertising expenditures for this year. The company’s online search engine and news platform did likewise. This resulted in a decline of more than $100 million in revenues.
The recent downturn in the global tech industry also had its part to play, as Microsoft spent nearly $113 million throughout its global network as employee severance compensation following a strategic realignment of its corporate structure. However, Microsoft’s offices in Russia were not part of the realignment.
Growing in the Cloud
But there was some good news, particularly from Microsoft’s cloud business.
Microsoft Azure posted total revenue of $24 billion for the second quarter, rising by 28% from its earnings in the same quarter last year.
Amy Hood, the company’s executive vice-president and chief financial officer, declared that investments in the cloud sector are certainly paying off. She stated that the company saw strong demand for cloud services in an increasingly dynamic online environment, made the most of its market share, and significantly improved its commitments to customers.
For his part, Investing.com senior analyst Haris Anwar opines that the growth of Microsoft’s cloud services arm reflects its durability. Anwar stated that the cloud business’ revenues reflect how the company has adapted to the challenges of a changing economic environment. Likewise, the sector’s performance shows that Microsoft is set to benefit from ongoing initiatives by both large- and small-scale enterprises to improve their IT infrastructure.