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July 20, 2017

Microsoft results: Here’s what to look out for today

Microsoft will be announcing its second quarter results later today and it looks like changes are afoot at the global tech company.

Here’s what the corporation’s results may reveal later today.

1. New accounting rules = higher sales

The tech industry is going through a period of change right now thanks to new accounting rules. The Financial Times reports that an update to generally accepted accounting principles (GAAP) for US companies will mean corporations will have to change the way they report revenues and costs.

Microsoft has said that the impact on its revenues will be seen in the sales of its Windows 10 licenses. These are currently treated as a rateable licence fee spread over a few years, whereas under the changes, they will be all recognised upfront. This means Microsoft could be reporting higher sales this quarter.

2. Don’t forget those layoffs

Whilst its sales may be up, the company has been undergoing a massive reorganisation and confirmed earlier this month that it was laying off thousands of staff. It is anticipated that around three-quarters of the cuts will occur outside the US.

A spokesperson told Tech Crunch:

“Microsoft is implementing changes to better serve our customers and partners… Like all companies, we evaluate our business on a regular basis. This can result in increased investment in some places and, from time-to-time, re-deployment in others.”

3. Cloud services are the big winner

Like Amazon with its Amazon Web Services, Microsoft is increasingly seeing revenue growth in its cloud service, Azure. Earlier this year, its so-called intelligent cloud revenue was $6.76bn compared to the $6.60bn expected, according to CNBC. This is expected to grow to around $7.2bn – $7.4bn.

In fact, one of the reasons for the layoffs is so the remaining sales team can redirect focus to Azure. This is the aspect of the business that is helping Microsoft stay relevant and ready to compete with the likes of Google and Amazon.

4. Computer sales are falling

Microsoft will always be known for the PC but it is this part of the business which doesn’t deliver the way it used to. Last quarter, its Personal Computing segment saw revenues fall seven percent to $8.84m, with its Surface range taking the biggest hit as revenues fell 26 percent.

It announced two new Surface laptops earlier this year, which could go some way to helping this aspect of the business to recover.