Microsoft missed earnings expectations on Tuesday as the tech giant cited “evolving macroeconomic conditions and other unforeseen elements” for the unfavorable results.
The company reported fourth-quarter revenue of $51.90 billion, missing estimates of $51.94 billion and $52.74 billion. Adjusted earnings per share were $2.34, below the expected range of $2.24 to $2.32.
Microsoft has already adjusted its fourth-quarter earnings outlook, citing the unfavorable impact of exchange rates.
In the earnings release, the company also cited a “reduction in ad spend” that negatively impacted LinkedIn, as well as search and news ad revenue of more than $100 million.
Added to that were production closures in China, reduced operations in Russia due to the war in Ukraine and $113 million in termination costs.
Microsoft was selected this month as an advertising partner for Netflix’s upcoming ad-supported offering, which the company plans to launch in early 2023. Ad support will likely come from Microsoft’s recently acquired video ad platform Xandr. Microsoft closed the acquisition of the company last month, touting it as “one of the world’s biggest markets for premium advertising.”
“All media and consumer internet companies now have a trusted platform to innovate and monetize their advertising. Just two weeks ago, Netflix selected us as their exclusive technology and sales partner for their first ad-supported subscription, confirming the differentiated value we bring to any publisher looking for a flexible partner willing to create and innovate with them,” said the CEO. from Microsoft Satia Nadela.
Microsoft did not provide further details about the offer or partnership with Netflix.
For the quarter ended June 30, Xbox content and services revenue declined 6% year-over-year due to fewer hours of engagement and monetization of owned and third-party content. Overall gaming revenue was down 7%.
Meanwhile, the company highlighted the growth of its cloud business, a core component of Microsoft, which generated more than $25 billion in revenue for the first time, up 28% year-over-year.
While shares initially fell following the earnings announcement on Tuesday afternoon, shares rose after the company’s outlook for the first quarter. If Microsoft says that it expects the trends of the first quarter to continue into the second, with a negative impact on its ad-based segments, as well as a slowdown in games, the company says that it expects an additional boost in its business in the cloud. Business with its Azure product grew by 43%.
Source: Hollywood Reporter
Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.
