More Personal Computing (MPC) revenues declined 3% in cc, with Windows OEM revenue down 12% in cc and devices revenue down 18% in cc, as PC demand remains weak.
GCP growth stabilizing? Alphabet also reported its Q2/F23 results yesterday. Google Cloud revenues were US$8.0bln, up 28% y/y (similar to last quarter) and 8% q/q, boosted by its AI-optimized cloud platform and related GenAI offerings. GCP growth surpassed total Google Cloud revenue growth.
Our take. Although both companies seemed hesitant to state that workload optimization activity had peaked, Microsoft CEO Satya Nadella believes it could start declining in the next couple of quarters. That said, we believe the CQ2 results/ guidance suggest a stabilization in cloud growth rates with easier y/y comps and a resumption in net new cloud spend, including an expected AI-driven tailwind, possibly leading to a re-acceleration in cloud growth rates next year.
We believe Q2/F23 expectations for Softchoice look reasonable (consensus assumes ~3% y/y GP growth) and appropriately reflects near-term headwinds, including ongoing workload optimization, tough y/y comps, weaker enterprise and hardware spending, and FX headwinds.
We also believe Q2/F23 expectations for Converge are reasonable and reflect the ongoing hardware market challenges, as evidenced by PC shipment data/ Microsoft's MPC performance. These headwinds could soon abate, with some signs/ commentary of improving hardware demand (e.g., early back-to-school inventory builds helping boost Windows OEM).