There is light at the end of the tunnel for Microsoft (MSFT) as a global economic slowdown weighs on the tech giant’s growth, argues Piper Sandler analyst Brent Bracelin.
Microsoft growth rates are “going to bottom here either this quarter, the current quarter they reported, or the next quarter,” Bracelin said on Yahoo Finance Live (video above). “So we are close to saying the worst declines are over for these non-cloud segments like Windows and devices and advertising.”
While that may provide some comfort for many Microsoft bulls, at least in the short term, investors are likely to stay focused on the caution indicated by the company’s numbers and commentary from execs delivered late Tuesday.
Microsoft reported its Intelligent Cloud segment grew 18% in the quarter, while its Azure services grew 31%. That’s down from Q2 last year, during which Intelligent Cloud and Azure saw growth of 26% and 46%, respectively.
In the earnings call, CEO Satya Nadella and CFO Amy Hood struck an upbeat tone on the long-term impact of Microsoft’s partnership with OpenAI maker ChatGPT but were noticeably less positive from an economic standpoint — and, by extension, a demand standpoint.
That tone went a long way in explaining why Microsoft fired 10,000 employees last week in a major cost-cutting exercise.
“The macro backdrop certainly is having an impact here,” Guggenheim analyst John Difucci wrote in a note to clients.
Shares fell by less than 1% during Wednesday’s session, reversing losses of more than 4% at one point. The company had the most active ticker page on Yahoo Finance.
Piper Sandler’s Bracelin thinks investors were prepared for the weak outlook and now may be looking toward growth reacceleration later this year as the economy stabilizes and cost cuts boost profits.
“I think we are closer to a growth bottom in Microsoft than people appreciate,” Bracelin added.
Yahoo Finance’s Dan Howley contributed to this story.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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