Microsoft Corp. gave a lackluster forecast for sales growth in its Azure cloud-computing services business, a closely watched measure of corporate demand, sending the shares reeling in late trading.
According to Chief Financial Officer Amy Hood, revenue growth for Azure, which enables businesses to execute and store software applications, will drop by five in the current quarter. Without taking into account the effects of currency exchange rates, Azure sales increased by 42% in the first fiscal quarter. This implies a 37% increase in second quarter sales, which ends in December.
Earlier, Microsoft posted its weakest quarterly sales growth in five years, which the surging U.S. dollar controls, declining PC demand and dwindling advertising revenue.
Sales of Windows software to PC manufacturers fell 15% recently as the world economy teeters on the verge of a recession; and Hood predicted that issues in the PC and advertising sectors would persist for the remainder of the fiscal year.
However, the software provider is assisting clients in running applications and jobs more effectively and affordably, according to Hood. He further stated on the call that demand for Azure and new contract signings both remain robust among large clients.
The Azure commentary hit particularly hard with shareholders who look to that business as a barometer of Microsoft’s future growth prospects. A few years ago, the division was doubling sales every quarter. Hood said the company is reaching out “proactively to customers and making sure we are helping them optimize their workloads”; especially as the weakening economy causes customers to worry about spending. Growth rates have slowed as total revenue has grown sufficiently to make gains of that magnitude more difficult.