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Microsoft issued a bleak prediction for sales growth in its Azure cloud computing division, a key indicator of corporate demand. The forecast left the stock tumbling in late trade.

According to CFO Amy Hood during a conference call Tuesday, Azure revenue growth will drop 5 percent in the current quarter compared to the previous quarter.

Azure sales increased 42 percent in fiscal Q1. Microsoft now predicts a 37 percent increase in Q2, which ends in December.

Earlier this month, Microsoft reported its worst quarterly sales increase in five years, hampered by a rising US currency, falling PC demand and dwindling advertising income.

Azure has been crucial to Microsoft’s growth

As the global economy approaches a recession, Windows software sales to PC makers fell 15 percent in the most recent quarter. Hood expects ongoing difficulty in the PC and ad sectors for the rest of the fiscal year.

Hood stated that major clients’ demand for Azure and new contract commitments remains robust. Still, the software giant increasingly has to assist customers in running applications and tasks more effectively at a reduced cost.

This has fueled new fears that demand for Azure, which drove Microsoft’s revival as a tech giant in recent years, could get even slower.

Tough times all around

The tone has unmistakably shifted, according to Dan Morgan, senior portfolio manager at Synovus Trust Co. He added that Synovus has seen a significant shift in software expenditure surveys, with many analysts agreeing that the economy is slowing down.

Microsoft, like its contemporaries, is reducing its expenses. Following the company’s projection, shares fell 8.1 percent to $230.39 in extended trade. Shortly after, the stock was back up to $250.66.

While the share price rose 51 percent in 2021, it dropped 25 percent this year amid a sell-off in prominent technology firms. During the last quarter, the company’s shares fell 9.3 percent while the S&P 500 Index fell 5.3 percent.

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