Microsoft (MSFT) earnings Q2 2023

Microsoft CEO Satya Nadella speaks at the company’s Ignite Spotlight event in Seoul on Nov. 15, 2022. Nadella gave a keynote speech at an event hosted by the company’s Korean unit.

SeongJoon Cho | Bloomberg | Getty Images

Microsoft will report fiscal second-quarter results after the close of regular trading on Tuesday.

Here’s what analysts are expecting:

  • Earnings: $2.29 per share, adjusted, according to Refinitiv.
  • Revenue: $52.94 billion, according to Refinitiv.

Sales growth is expected to come in at just 2.3% year over year, which would be the weakest expansion for Microsoft in any period since 2016.

The company faces concerns across the board. When CEO Satya Nadella announced 10,000 job cuts last week, he noted that clients in every industry around the world have taken a more cautious approach because of recession concerns.

As of Monday’s close, Microsoft shares were down 18% over the past year, slightly underperforming the Nasdaq.

The growth engine of Microsoft’s Intelligent Cloud unit is the Azure public cloud. In October, executives said the company’s engineers were busy helping customers be more efficient with their Azure infrastructure services. Last week Nadella wrote that “we’re now seeing them optimize their digital spend to do more with less.”

Analysts polled by CNBC and StreetAccount are expecting revenue growth for the Azure and other cloud services category of close to 31%. In the previous quarter, the business grew 35%.

Microsoft’s Windows business, housed inside the More Personal Computing unit, is reckoning with a pullback in the PC market. Technology industry researcher Gartner estimated that during the fourth quarter of 2022 the PC business had its slowest growth since the company started keeping track of the market in the mid-1990s.

The third unit, Productivity and Business Processes, contains the Microsoft 365 productivity suite formerly known as Office. In recent days some analysts have said they expect slower growth in seats purchased by business customers.

The decision to reduce headcount “shows a commitment to margin defense despite top-line shakiness,” analysts at Raymond James wrote in a note to clients on Monday. They recommend buying Microsoft shares.

Microsoft said the layoffs, along with hardware lineup changes and lease consolidation fees, will result in a $1.2 billion charge and a negative impact on earnings of 12 cents per share.

In the quarter the U.S. Federal Trade Commission sued Microsoft to block its pending $69 billion acquisition of game publisher Activision Blizzard, while the U.S. Defense Department awarded Microsoft and three other companies a cloud contract worth up to $9 billion combined. Also, Microsoft introduced Designer, an application in which people can craft documents such as social media posts and event invitations.

Executives will discuss its quarterly results with analysts on a conference call starting at 2:30 p.m. ET.

WATCH: Longer term, Microsoft has a massive secular growth story, says Oppenheimer’s Horan

Longer term, Microsoft has a massive secular growth story, says Oppenheimer's Horan

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