(Bloomberg) — Rising energy prices in Europe are eroding profitability at Microsoft Corp., which is paying more to deliver cloud-computing services to customers in the region, the software giant’s chief financial officer said.
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The company on Tuesday posted its weakest quarterly revenue growth in five years, sending shares down more than 4%. In an interview after the company released fiscal first-quarter results. CFO Amy Hood said Microsoft was seeing a steeper-than-expected jump in expenses to power, heat and cool the company’s servers and data centers across Europe. On a conference call later, she estimated the company will pay $800 million in extra energy costs this fiscal year.
“A lot of it is in Europe,” she said. “And it’s not just for the winter.”
Power prices have been soaring in much of the world since economies started recovering from pandemic lockdowns and as Russia’s war in Ukraine forces Europe to find new sources of natural gas, driving up the price of a key fuel for generating plants. Over the summer, several tech companies had services shut down in London as data centers overheated during a record heat wave in the city.
Microsoft is working with customers to help them find ways to save money, Hood said, which they may be able to do by shifting applications to the cloud and out of their out corporate data centers.
Although there are still risks, for the time being European gas prices have fallen back sharply, and are less than a third of their summer peak, thanks to efforts to import gas to fill up storage and unusually warm weather.
–With assistance from Joe Ryan.
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