US software manufacturer: Microsoft’s profit collapses

The business of the tech group Microsoft has hardly grown recently, and profits have shrunk significantly. The US company is now hoping for a lot from software that uses artificial intelligence.

At the end of the year, the software giant Microsoft recorded its weakest growth in over six years. Revenue increased last quarter by a meager two percent to $52.7 billion. Net income fell 12 percent year-on-year to $16.4 billion. Microsoft missed the expectations of the analysts with both indicators.

Cloud business remains growth driver

Microsoft was hit particularly hard by the downturn in the PC market. Business with the sale of the Windows operating system to computer manufacturers shrank by 39 percent in the past quarter. And in the current quarter, the group believes another decline of a similar magnitude is possible.

Meanwhile, things were going better for the promising cloud business: Sales with the cloud service Azure grew by 31 percent. However, this was the smallest increase since 2015, when the figures for this business area were broken down separately for the first time.

ChatGPT is designed to advance Microsoft services

When presenting the quarterly figures, Microsoft boss Satya Nadella emphasized the importance of software with artificial intelligence for the future. “Over time, every app will be an AI app,” he said in a conference call with analysts after the quarterly figures were presented. Nadella referred to the partnership with the company OpenAI from San Francisco.

Microsoft wants to embed OpenAI’s technology deep into its cloud platform. The age of artificial intelligence has arrived and Microsoft is driving it forward.

Multibillion dollar investment

Microsoft announced on Monday that it would significantly expand its commitment to OpenAI. The Windows group announced a new multi-year “multi-billion dollar” investment without naming an exact amount. The financial service Bloomberg reported that it was about ten billion dollars. The news portal Semafor had previously reported this.

OpenAI is the developer of the chatbot ChatGPT: The software delivers texts that look like they were written by humans and has recently caused a stir – but also concerns. The DALL-E application also comes from OpenAI. The tool generates images based on text input.

Outlook disappoints investors

Investors initially reacted positively to the announcements by the Microsoft boss and the quarterly figures presented. The stock was up around 4 percent in after-hours trading last night. But in early Frankfurt trading, the paper has already turned negative.

The background is the forecast for the current quarter. Among other things, Microsoft predicted that the growth of the Azure cloud platform would slow by four to five percentage points.

Layoffs at tech companies

Since hitting a record high of $349.67 in late 2021, Microsoft stock has lost over 30 percent of its value. US tech companies, long favorites among investors, suffered on the stock market last year.

The deteriorating growth prospects were recently reflected in extensive job cuts: Microsoft announced just last week that it would lay off around 10,000 employees. Other tech companies such as Facebook group Meta, Twitter, Amazon and Google parent Alphabet had previously announced major job cuts.