Microsoft Q2 2023: Windows, devices, and Xbox down as cloud holds strong

Microsoft has just posted the second quarter of its 2023 fiscal financial results. The software maker made $52.7 billion in revenue and a net income of $16.4 billion during Q2. Revenue is up 2 percent, but net income has dropped by 12 percent. The results come just days after Microsoft announced 10,000 layoffs.

Microsoft previously forecast a tough quarter for Windows OEM revenue and hardware, and the results are clear on the state of the PC industry right now. PC shipments fell by 16 percent in 2022, according to analysis by Canalys, and Gartner reported a nearly 29 percent year-over-year drop in Q4 — the largest quarterly shipment decline since it began tracking the PC market in the mid-1990s. Microsoft’s Windows-related revenue has been hit hard as a result.

Windows OEM revenue, the price PC manufacturers pay Microsoft to put Windows on machines, fell by a massive 39 percent in Q2. Microsoft says this was driven by “continued PC market weakness and a strong prior year comparable.”

The Surface Pro 9 in laptop mode.

Surface Pro 9.
Photo by Amelia Holowaty Krales / The Verge

Gartner says the total amount of PC shipments in 2022 was close to pre-pandemic levels, so it’s clear the boom of laptop purchases is well and truly over. “Since many consumers already have relatively new PCs that were purchased during the pandemic, a lack of affordability is superseding any motivation to buy, causing consumer PC demand to drop to its lowest level in years,” says Mikako Kitagawa, director analyst at Gartner.

“While the number of PCs shipped declined during the quarter, returning to pre-pandemic levels, usage intensity of Windows continues to be higher than pre-pandemic, with time spent per PC up nearly 10 percent,” says Microsoft CEO Satya Nadella in an earnings call today.

This deterioration in the PC market has

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Truist Analysts Like these 3 ‘Strong Buy’ Internet and Digital Media stocks for 2023

We are now in 2022’s last trading sessions, bracketed by the Christmas and New Year holidays. The majority of investors will no doubt be happy to bid farewell to 2022 as it has been a rough ride for most segments of the market.

Looking at the year ahead, Truist Securities’ 5-star stock expert Youssef Squali reminds investors of the need for caution, saying “many uncertainties remain.”

He goes on to mention several of these, such as the extent and length of a potential recession, the size and duration of rate hikes and the resultant effects on cost of capital, currency headwinds, and industry changes such as cookie deprecation, which could “disrupt the growth trajectory of several verticals.”

The last refers specifically to Squali’s area of expertise – Internet and Digital Media stocks. And here, despite these potential difficulties, Squali sees reason for investors to take an upbeat outlook. At least that is for specific names in the sector with the analyst noting that “not all Internet companies are created equal, making 2023 a year particularly suited for stock picking.”

So, let’s go stock picking – starting with three picks from a couple of top analysts, including Squali, at Truist. Checking these stocks against the TipRanks data, we find that they are all Strong Buy-rated, featuring ample upside potential even in today’s unstable market environment. Here are the details.

NerdWallet, Inc. (NRDS)

We’ll start with a small-cap online personal financial company, NerdWallet. This company entered the public markets through an IPO held in November of 2021, and it offers its customers a wide range of online banking solutions, including personal loans and mortgages, credit cards, insurance products, personal and small business banking, and even student loan management. The company also provides personalized, unbiased, and actionable advice for customers

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