In the most recent quarter, cloud-computing revenue growth for Microsoft Corporation (MSFT stock) slowed, indicating that even large technology corporations are not immune to the present storm in the financial environment. In the aftermath of Microsoft’s disclosure, a number of software equities, including Snowflake, Salesforce, and ServiceNow, have dropped.
MSFT Stock Decline
In premarket trading on Wednesday, shares of Microsoft (NASDAQ:MSFT) fell by more than 6%. The signals from the company’s most recent report appeared to put pressure not only on the stock of cloud-computing competitor Amazon.com Inc. but also on the stock of other companies in the software industry as a whole. Shares of Snowflake Inc. Shares of ServiceNow Inc. and Shares of Salesforce Inc. were among the most significant premarket decliners.
According to Cowen & Co. analyst Derrick Wood, Microsoft’s performance in its Azure cloud-computing division and elsewhere suggested that the company is having difficulty in the commercial industry. These difficulties are not limited to consumer-facing portions of the business. In a letter to clients, he stated, “We anticipate this might ignite new rounds of market worries for the larger software industry approaching earnings season.”
John DiFucci, an analyst at Guggenheim, shared a similar point of view. He wrote that Microsoft (MSFT stock) showed “increasingly weaker new business signings for all its recurring revenue businesses.” This, in his opinion, indicated that the company is coming under pressure from a wider variety of clients than just small and mid-sized businesses.
According to what DiFucci has written, “we view this as a generally poor macro environment having a meaningful influence on a broad-based firm that is well-run.” “And advice says it will grow worse. We are of the opinion that these results might have a negative impact on the shares of Microsoft Corporation (MSFT stock), as well as the shares of the whole software industry.
Other researchers attempted to provide a more granular analysis of the program read-throughs.
Citi Research analyst Tyler Radke wrote in a research note that “weaker Azure growth and outlook combined with optimization commentary is a negative read-through to cloud consumption models,” and he specifically mentioned Snowflake, MongoDB Inc. MDB, -4.29%, and Elastic N.V. ESTC, -3.13% in making this point. Radke also mentioned Elastic N.V. ESTC, -3.13%. However, he also mentioned that “gross margin/electricity expenses” appear to be “an MSFT stock-specific issue,” and because of this, he does not anticipate those “to get passed down.” (During its results call, Microsoft discussed the impact that increased energy prices would have on Azure’s profitability.)
Even though Microsoft’s commercial bookings growth came in at 16% on a year-over-year basis in constant currency, which marked a slowdown relative to recent quarters, Radke added that the growth was still “solid” for a fiscal first quarter. This was despite the fact that the growth marked a slowdown relative to recent quarters. According to what he stated, “We view this as largely neutral for other major deal-dependent software businesses” such as ServiceNow, Oracle Corporation ORCL, +2.98% and Salesforce.
Sterling Auty, an analyst at MoffettNathanson, offered a more optimistic take, stating that Microsoft’s results offered some encouraging read-throughs for cybersecurity companies such as CrowdStrike Holdings Inc. CRWD, +0.36%, Zscaler Inc. ZS, -2.93%, Cloudflare Inc. NET, -2.64%, “and maybe even Okta.” Auty was referring to companies such as CrowdStrike Holdings Inc. According to what he said, Microsoft (MSFT stock) saw a 33% rise in the number of customers using its security products during the quarter.
Featured Image- Megapixl @ Robert309
Author Valerie Remorosa 
