Microsoft shares rose 5% in extended trading on Tuesday after the software maker issued a rosy income forecast for the year ahead, despite issuing quarterly results that failed to reach Wall Street consensus.

Here’s how the company did:

• Earnings: $2.23 per share, adjusted, vs. $2.29 per share as expected by analysts, according to Refinitiv.
• Revenue: $51.87 billion, vs. $52.44 billion as expected by analysts, according to Refinitiv.

Microsoft turned in the slowest revenue growth since 2020, at 12% year over year in the quarter, which ended on June 30, according to a statement. The company’s earnings per share fell short of consensus for the first time since 2016, with net income rising 2% to $16.74 billion.

With respect to guidance, Microsoft called for $49.25 billion to $50.25 billion in fiscal first-quarter revenue. The middle of the range, at $49.75 billion, implies about 10% revenue growth, reflecting worsening PC sales and slower cloud infrastructure growth. Analysts polled by Refinitiv had expected more, at $51.49 billion. The company’s implied gross margin, at 69.85%, was wider than the 69.30% consensus among analysts polled by StreetAccount.

And for the new 2023 fiscal year, the company reiterated its forecast from three months ago, despite the economic climate.

“We continue to expect double digit revenue and operating income growth in constant currency and U.S. dollars,” Amy Hood, Microsoft’s finance chief, said on a conference call with analysts. She said Microsoft would lengthen the useful life of server and networking equipment to six years from four years. The company made a similar move in 2020.

In the fiscal fourth quarter, the biggest challenge stemmed from worsening foreign-exchange rates. Microsoft said that reduced revenue by $595 million and earnings by 4 cents per share. In June, Microsoft reduced its quarterly income and revenue guidance guidance for income and revenue just because of rate fluctuations. Revenue and income for the quarter came in at the low end of the ranges that Microsoft had put forward in June.

Microsoft’s Intelligent Cloud segment, which includes the Azure public cloud for application hosting, SQL Server, Windows Server and enterprise services generated $20.91 billion in revenue. That was up 20% and below the consensus of $21.10 billion among analysts polled by StreetAccount.

The company said revenue from Azure and other cloud services grew by 40%, compared with 46% in the prior quarter. Analysts surveyed by CNBC had expected 43.1%, while the consensus estimate from StreetAccount was 43.4%. Microsoft does not disclose Azure revenue in dollars. The Azure result was one percentage point lower than management had expected because of slower growth in consumption, from services such as computing and storage resources, Hood said.

Still, CEO Satya Nadella boasted about Microsoft scoring lucrative Azure deals during the conference call.

“We are seeing larger and longer-term commitments and a record number of $100 million-plus and $1 billion-plus deals this quarter,” Nadella said.

Microsoft’s Productivity and Business Processes segment including Office productivity software, Dynamics and LinkedIn posted $16.60 billion in revenue. That was up nearly 13% and slightly less than the StreetAccount consensus of $16.66 billion. The premium E5 tier accounts for 12% of all commercial Office 365 subscriptions, up from 8% one year ago. But she said there was “some moderation in new deal volume outside of E5 particularly in the small and medium business customer segment.”

The More Personal Computing segment featuring the Windows operating system, Xbox video-game consoles, the Bing search engine and Surface devices delivered $14.36 billion in revenue for the quarter. Revenue was up 2% year over year and barely lower than the $14.65 billion StreetAccount consensus. Microsoft said search and news advertising, excluding traffic-acquisition costs, rose 18% thanks to stronger search volume and revenue per search. Still, a contraction in advertising spending resulted in a $100 million cut to revenue for the search and news advertising and LinkedIn categories.

Sales of Windows licenses to device makers fell by 2% in the quarter. Technology industry researcher Gartner said earlier this month that logistical disruptions in the quarter had contributed to a 12.6% decrease in quarterly PC shipments, a key input for that metric. The company said factory shutdowns in China in April and May and a worsening computer market in June reduced Windows revenue from device makers by $300 million.

Hurdles from exchange rates advertising spending and computer sales were relatively well understood among investors heading into the earnings report, said Peter Choi, a senior research analyst at Vontobel Asset Management, which held $1.11 billion in Microsoft stock at the end of March, according to a filing.

“The core franchises that represent what people are most excited about for owning Microsoft — those were the more resilient areas, and they continue to shine through maybe a touch of deceleration, but those parts of the business were certainly more reassuring,” Choi said.

Microsoft saw $126 million in operating expenses tied to its decision to stop selling products and services in Russia following the country’s invasion of Ukraine.

During the quarter, Nadella announced that employees will get pay increases, and the company introduced services to help customers deal with security incidents.

Excluding the after-hours move, Microsoft stock has tumbled 25% so far this year, compared with a roughly 18% decline in the S&P 500 index of U.S. stocks.