Home Cloud Computing Microsoft says cloud demand waning, plans to infuse AI into products

Microsoft says cloud demand waning, plans to infuse AI into products


Microsoft on Tuesday said it expects the growth across its cloud business to temper down through 2023 as enterprises brace for economic headwinds.

The Windows-maker reported 29% growth in total cloud revenue to $21.5 billion for the second quarter of fiscal year 2023, slowing from Q1, 2023 where the company posted 31% growth for the segment. These numbers exclude the impact of currency fluctuations. Microsoft said it expects its third quarter cloud gross margin to decrease by one percentage point, driven by Azure.

Microsoft Azure and other cloud services grew 38% in constant currency terms on a year-on-year basis, slowing down by 4% from the previous sequential quarter. 

“As I noted earlier, we exited Q2 with Azure growth in the mid-30s in constant currency. And from that, we expect Q3 growth to decelerate roughly four to five points in constant currency,” Amy Hood, chief financial officer at Microsoft, said during an earnings call.

The growth in cloud number is expected to slow down further through the year, warned Microsoft Chief Executive Satya Nadella.

“As I meet with customers and partners, a few things are increasingly clear. Just as we saw customers accelerate their digital spend during the pandemic, we are now seeing them optimize that spend,” Nadella said during the earnings call, adding that enterprises were exercising caution in spending on cloud.

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