Microsoft reported Q1 revenue of $50.1 billion, up 11% YoY. Although the number actually beat an estimate of $49.8 billion of the consensus estimate, investors' reception of Satya Nadella and Co’s conference call was less than welcoming. The main reason is lukewarm company’s guidance, but let’s review all the numbers first.

The company reported earnings of $2.35, which beat estimates of $2.32 from analysts. However, MSFT has reported 14% decrease in its Q1 FY2023 (July-September period). Revenue for the Microsoft Cloud segment was $25.7 billion in the first quarter, up 24%% YoY. Microsoft said that LinkedIn revenue increased 17% while revenue in Intelligent Cloud was $20.3 billion and increased 20%. Revenue in More Personal Computing was $13.3 billion and decreased slightly. Xbox content and services revenue decreased 3% while devices revenue increased 2%.

The sagging net profit was majorly due to decline in the traditional PC market, as global shipments totaled 74.3 million units during the July-September period, a YoY contraction of 15%. Nevertheless, the software giant’s shares initially lost a whopping 8.1% (its stock is additionally shed 7.72% yesterday, on October 26) following a disappointing revenue forecast.

With respect to guidance, Microsoft sees $52.35 billion to $53.35 billion in revenue for the fiscal Q2, which implies 2% growth at the middle of the range, while the consensus had been looking for revenue of $56.05 billion. Microsoft's implied operating margin for the fiscal Q2 was about 40%, narrower than the 42% consensus among analysts. At current P/E of around 27, MSFT doesn’t look particularly expensive, however, further monetary tightening by the Fed can incur pain on its counterparts and contractors, which strongly indicates further compression of margins.