Microsoft Azure growth to slow, 10,000 job cuts, AI investments to continue.
Microsoft Corp. reported a 2% growth in revenue for the second quarter of the fiscal year, the slowest growth in six years. The company’s cloud-computing business, Azure, was a bright spot, with revenue growth in the mid-30s. However, Microsoft warned that Azure sales in the current period will slow by 4 or 5 points. The company also reported a slump in sales related to personal computer software and video games.
To address the slowdown, Microsoft announced last week that it is firing 10,000 workers, which will include severance, changes to hardware portfolio, and the cost of consolidating real estate leases. The company reported an adjusted profit of $2.32 a share and sales of $52.7 billion, which compared with average analysts’ projections of $2.30 a share in earnings and $52.9 billion in revenue.
In an effort to stay competitive, Microsoft is turning to artificial intelligence applications to fuel more Azure demand. The company is also investing in OpenAI, with a new investment amounting to $10 billion over multiple years. Microsoft CEO Satya Nadella believes that the next big platform wave is going to be AI, and that the company needs to show its own productivity gains with its own technology.
Microsoft is also continuing to invest in long-term opportunities and expanding the data centers that deliver cloud services. The company plans to continue spending on capital, as it continues to see strong demand for cloud services.
Overall, Microsoft is facing a period of deceleration and must adjust to the slowdown in demand. The company is focusing on artificial intelligence applications, investing in OpenAI, and continuing to invest in long-term opportunities in order to stay competitive. Microsoft is also cutting costs by firing 10,000 workers and consolidating real estate leases.