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Microsoft earnings: What to watch amid layoffs, OpenAI investment

Yahoo Finance's Dan Howley previews what investors are focusing on ahead of Microsoft earnings.

Video Transcript

RACHELLE AKUFFO: All right, well, Microsoft earnings set to kick off tech earnings this week as layoffs sweep throughout the industry. With Microsoft among the tech giants with the largest job cuts, could this be a sign of what's to come?

Well, here to break it all down is Yahoo Finance's Dan Howley. So, Dan, a lot of expectations people are looking at here.

DAN HOWLEY: That's right, Rachelle. This is the first earnings, obviously, since Microsoft announced that it was cutting 10,000 jobs across a number of different businesses. And so this particular earnings call is likely going to be one where CEO Satya Nadella is peppered with questions regarding the decision behind those layoffs. And then, oh yes, they just invested $10 billion in OpenAI for that ChatGPT action.

So, you know, there's a lot going on at Microsoft, but just to break down some of the numbers here, according to-- analysts on the Street are expecting $52.9 billion this quarter. That's up from 51.7 in the prior quarter last year but only by about a little more than 2%. So you can see that growth is slowing here.

We're also looking at $2.30 for EPS. That's down from $2.48 in Q2 last year. Business and productivity and business processes, that's stuff like Office and things along those lines. That's going to be $16.8 billion expected, up from $15.9 billion.

This is where things start to get a little cloudier, no pun intended. The intelligent cloud is going to be $21.4 billion expected. That's up from $18.3 billion. The problem is that growth is slowing significantly there. What we're looking at is a potential 16.9% year-over-year growth there. That's down from the 26% growth we had seen in the same quarter last year.

And then finally we have more personal computing. This is where you get Windows sales, things like that. That's going to be expected to come in at $14.7 billion. That's down from $17.4 billion in the prior quarter.

So obviously, you know, this narrative of Microsoft struggling with slowing PC sales and slowing cloud sales is holding true as far as these earnings go. You know, especially with these layoffs and then that huge investment in OpenAI and ChatGPT, this is going to be a very interesting call for Satya Nadella and company.