Microsoft said that its sales had been harmed by the strong US dollar, which made its products more expensive in overseas markets. The earnings report stated that Microsoft lost out on $300 million in income that it would have generated from Windows operating systems purchased to power the machines due to shutdowns at computer production facilities in China in May and a declining demand for personal computers.
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"While the headline slight miss will cause agita on (Wall) Street with a knee jerk reaction, this is largely foreign exchange and China shutdown driven (PC driven)," Wedbush analyst Dan Ives said in a note to investors.
"The core DNA of the Microsoft growth story is cloud and core Azure growth which was healthy this quarter and appears to have momentum into 2023 despite economic headwinds."
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The US technology behemoth’s shares were up some 4 percent in after-market trades that followed release of the earnings figures.
"In a dynamic environment we saw strong demand, took share, and increased customer commitment to our cloud platform," said Microsoft chief financial officer Amy Hood.
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Prior to the pandemic, the personal computer industry had been steadily declining as consumers shifted to smartphones and tablets. The prevalence of online commerce, employment, socialising, and entertainment has rekindled demand for desktop computing capacity, but it is unclear whether this trend will continue beyond the epidemic.
According to Microsoft, companies' reduced marketing expenditures as a result of the general economic downturn hurt ad income at the company's online news, search, and career social network LinkedIn. The US state of Washington-based IT veteran also racked up $126 million in operating costs connected to reducing its operations in Russia as a result of that nation's invasion of Ukraine.
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Customers spent less money on Xbox video game material during the quarter compared to the same time last year, which may indicate that more people are playing outside as pandemic restrictions loosen. Microsoft's cloud, enterprise, and productivity solutions, however, kept growing.
"We see real opportunity to help every customer in every industry use digital technology to overcome today's challenges and emerge stronger," said Microsoft chief executive Satya Nadella.
(With agency inputs)
