Microsoft shares dropped almost 7 per cent in after-hours trading on Tuesday after the company reported softer earnings from its cloud division in its fiscal 2024 fourth quarter.
Revenue in Microsoft’s intelligent cloud division, which includes Azure public cloud, increased 19 per cent annually to $28.5 billion in the three months ending June 30, lower than the $28.6 billion consensus of analysts surveyed by StreetAccount.
Industry analysts said that the smaller-than-expected cloud revenue growth figures indicate that “Azure may have limited growth potential in the short term”.
Without substantial revenue from Azure, Microsoft's ability to invest and grow in all areas is limited, particularly in emerging technologies such as artificial intelligence, said Thomas Monteiro, senior analyst at Investing.com.
“Despite Microsoft's best-in-breed product offering and unmatched revenue diversification, it still can't grow fast enough to garnish the capital needed to grow across all segments, AI included, without a significant boost from Azure,” Mr Monteiro told The National.
“That's even more important when we consider the current pressure on the company's margins, which has led it to halt head-count growth and invest only in top-level talent.”
Sales from Azure and other cloud services, which Microsoft does not report in dollars, grew by about 29 per cent.
Since 2016, Microsoft has committed to building Azure into an AI supercomputer for the world, serving as the foundation of its vision to democratise AI as a platform.
“Considering that Apple has now joined the AI race and Alphabet is taking significant steps towards a diversified AI offering similar to Microsoft's, the company's unchallenged leadership in the segment up until now may be growing thin,” Mr Monteiro said.
After the earnings announcement, Microsoft’s stock was trading 6.25 per cent down at $396.50 a share at 5.40pm New York time.
Earlier, it closed 0.89 per cent down at $422.92, giving the company a market cap of $3.14 trillion.
Its net profit jumped 10 per cent on an annual basis to $22 billion in the June quarter. Microsoft’s financial year ends in June.
Revenue during the April-June period jumped 15 per cent to nearly $64.7 billion, exceeding analysts' expectations of $64.3 billion.
For the full financial year, the company’s net income surged 22 per cent to $88.1 billion, while revenue increased 16 per cent to $245.1 billion.
Microsoft projects its revenue for the first quarter of the 2025 fiscal year, ending on September 30, to be between $63.8 billion and $64.8 billion, representing a 13.8 per cent increase at the midpoint of the range.
It expects the first-quarter Azure revenue growth between 28 per cent and 29 per cent and a faster growth in the second half of the fiscal year, Amy Hood, executive vice president and chief financial officer of Microsoft, said during the earnings call.
“Our strong performance this fiscal year speaks both to our innovation and to the trust customers continue to place in Microsoft," said Satya Nadella, chairman and chief executive of the company.
“As a platform company, we are focused on meeting the mission-critical needs of our customers across our at-scale platforms today, while also ensuring we lead the AI era."
The company's productivity and business processes division, which includes its Microsoft Office business and revenue from LinkedIn, surged 11 per cent to $20.3 billion in the June quarter.
LinkedIn revenue increased almost 10 per cent annually. Microsoft did not give a dollar figure for its LinkedIn revenue and did not disclose the number of users.
Subscribers to Microsoft 365 Consumer – a bundle of various apps – increased to 82.5 million at the end of the last quarter, up 2.1 per cent on a quarterly basis, the company said.
Sales in the personal computing division surged 14 per cent to $15.9 billion in the quarter.
Search and news advertising revenue excluding traffic acquisition costs increased 19 per cent, while devices revenue decreased 11 per cent.
Microsoft also returned $8.4 billion to shareholders in the form of share repurchases and dividends in the last quarter.
The company spent more than $8 billion on research and development, about 12.4 per cent of its total sales in the quarter.
Read more about the coronavirus
EA Sports FC 26
Publisher: EA Sports
Consoles: PC, PlayStation 4/5, Xbox Series X/S
Rating: 3/5
It's up to you to go green
Nils El Accad, chief executive and owner of Organic Foods and Café, says going green is about “lifestyle and attitude” rather than a “money change”; people need to plan ahead to fill water bottles in advance and take their own bags to the supermarket, he says.
“People always want someone else to do the work; it doesn’t work like that,” he adds. “The first step: you have to consciously make that decision and change.”
When he gets a takeaway, says Mr El Accad, he takes his own glass jars instead of accepting disposable aluminium containers, paper napkins and plastic tubs, cutlery and bags from restaurants.
He also plants his own crops and herbs at home and at the Sheikh Zayed store, from basil and rosemary to beans, squashes and papayas. “If you’re going to water anything, better it be tomatoes and cucumbers, something edible, than grass,” he says.
“All this throwaway plastic - cups, bottles, forks - has to go first,” says Mr El Accad, who has banned all disposable straws, whether plastic or even paper, from the café chain.
One of the latest changes he has implemented at his stores is to offer refills of liquid laundry detergent, to save plastic. The two brands Organic Foods stocks, Organic Larder and Sonnett, are both “triple-certified - you could eat the product”.
The Organic Larder detergent will soon be delivered in 200-litre metal oil drums before being decanted into 20-litre containers in-store.
Customers can refill their bottles at least 30 times before they start to degrade, he says. Organic Larder costs Dh35.75 for one litre and Dh62 for 2.75 litres and refills will cost 15 to 20 per cent less, Mr El Accad says.
But while there are savings to be had, going green tends to come with upfront costs and extra work and planning. Are we ready to refill bottles rather than throw them away? “You have to change,” says Mr El Accad. “I can only make it available.”
Karwaan
Producer: Ronnie Screwvala
Director: Akarsh Khurana
Starring: Irrfan Khan, Dulquer Salmaan, Mithila Palkar
Rating: 4/5
Fanney Khan
Producer: T-Series, Anil Kapoor Productions, ROMP, Prerna Arora
Director: Atul Manjrekar
Cast: Anil Kapoor, Aishwarya Rai, Rajkummar Rao, Pihu Sand
Rating: 2/5
Red Joan
Director: Trevor Nunn
Starring: Judi Dench, Sophie Cookson, Tereza Srbova
Rating: 3/5 stars
F1 line ups in 2018
Mercedes-GP Lewis Hamilton and Valtteri Bottas; Ferrari Sebastian Vettel and Kimi Raikkonen; Red Bull Daniel Ricciardo and Max Verstappen; Force India Esteban Ocon and Sergio Perez; Renault Nico Hülkenberg and Carlos Sainz Jr; Williams Lance Stroll and Felipe Massa / Robert Kubica / Paul di Resta; McLaren Fernando Alonso and Stoffel Vandoorne; Toro Rosso TBA; Haas F1 Romain Grosjean and Kevin Magnussen; Sauber TBA
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
Tips for SMEs to cope
- Adapt your business model. Make changes that are future-proof to the new normal
- Make sure you have an online presence
- Open communication with suppliers, especially if they are international. Look for local suppliers to avoid delivery delays
- Open communication with customers to see how they are coping and be flexible about extending terms, etc
Courtesy: Craig Moore, founder and CEO of Beehive, which provides term finance and working capital finance to SMEs. Only SMEs that have been trading for two years are eligible for funding from Beehive.
COMPANY PROFILE
Name: Lamsa
Founder: Badr Ward
Launched: 2014
Employees: 60
Based: Abu Dhabi
Sector: EdTech
Funding to date: $15 million
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Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
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