Microsoft reported earnings for the quarter ended December 31, 2022 after market close today. Revenue was $52.75 billion, vs. $52.94 billion expected. EPS was $2.32 vs. $2.29 expected. Revenue only grew 2% YoY, the slowest revenue growth since June 2016 while the net income fell 12% YoY. Revenue was still up for their business services but was down 19% for consumer oriented services. It appears there’s a global slowdown in computer device sales, which drove down the sales of windows operating systems.
With the slowing revenue growth, Microsoft laid off 10,000 people in the past week. At the same time, Microsoft just made a staggering $16.4B of profits in the most recent quarter. Microsoft obviously could afford to keep the 10,000 people on the payroll and the layoff is definitely not out of financial necessity. From a short-term efficiency perspective, I could understand why they laid off people . But I do wonder if there are better solutions than mass layoffs to unwind the over-hiring mistake made by the top management. Recruiting and developing talent takes a lot of time and money. Disposing talent through layoffs unnecessarily seems counter productive in the long run.
Regardless, we are seeing a lot of consolidation inside the big tech companies. Many ambitious projects are being scaled back or shut down. There will be less competition in the *innovative fields* and teams who can get more done with less will be the ultimate winners.