Shares of the world's largest software company fell more than 4 percent after hours on Monday, as it forecast a slight sequential dip in commercial licensing sales this quarter, and only a modest increase in cloud-based revenue over the quarter just ended.
The shift from the old model of selling software to companies to install on their own computers - charged as a license fee - to a cloud-based model where customers pay a regular subscription, is generally viewed as a positive move for Microsoft. But the path to the promised land may not be smooth.
"The rotation from license to subscription is going to have pain points and they are starting to show," said Colin Gillis, an analyst at BGC Partners.
Microsoft's Chief Financial Officer Amy Hood said on Monday she expected sales from commercial licensing, which covers Windows, Office and server products for businesses, to be around $9.7 billion to $9.9 billion in the current quarter, a sequential dip from the $10.7 billion it reported for the last quarter.
Meanwhile, Microsoft is forecasting modest growth in its emerging cloud-based businesses. It now expects revenue of $2.6 billion to $2.7 billion from a bundle of commercial services, including its Azure cloud platform, compared to $2.6 billion in the latest quarter.