Microsoft reports weaker-than-expected revenue and profit decline, announces layoffs, invests in OpenAI for AI advances.
Microsoft reported weaker-than-expected revenue and a 12% drop in profit for the fourth quarter of last year. This comes as the tech industry faces broader economic uncertainty and reduced demand for personal computers and software. Microsoft said it plans to lay off 10,000 employees as part of broader cost-cutting measures. Worldwide PC shipments fell 28% in the fourth quarter of 2022 compared to the same period the prior year. Microsoft reported revenue declines from its Windows OEM operations and from its Xbox content and services lines.
However, revenue from Microsoft’s cloud computing division increased 22% from the prior year, providing a bright spot in the earnings report. Microsoft also announced a “multibillion dollar” investment into OpenAI, the company behind the viral AI-powered chatbot tool ChatGPT. This deepening partnership could help Microsoft become an AI leader and pave the way for the company to incorporate elements of ChatGPT into some of its hallmark applications.
In his memo to staffers announcing the job cuts, CEO Satya Nadella said the company will continue to invest in “strategic areas for our future” and pointed to advances in AI as “the next major wave” of computing. Microsoft shares rose 4% in after-hours trading Tuesday on the news.
Overall, Microsoft’s earnings report highlights the challenges facing the tech industry amid broader economic uncertainty and reduced demand for personal computers and software. However, Microsoft is turning to AI and its cloud computing division to help propel the company forward. These strategic investments could help Microsoft remain a leader in the tech industry, despite the current economic climate.
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