Microsoft sales have slowed sharply as customers facing economic strains cut their spending on technology.

The firm said sales rose just 2% in the three months to December, to $52.7bn (£42.7bn), the smallest quarterly increase in more than six years.

The update came just days after the firm said it would reduce its workforce by roughly 5%, eliminating 10,000 jobs.

The tech industry has been hammered by job cuts in recent months, as advertising and other spending slows.

Businesses are worried about the economy, while households that splashed out on computers and other tech while stuck at home during the pandemic have been cutting back, especially as the cost of living rises.

Microsoft said revenue tied to the Xbox video game system fell 12%, while spending on its Windows products plunged 39%.

Sales growth in the firm’s Azure cloud computing unit – seen by analysts as a key growth driver for the firm – was better than expected, up 31%, helping to lift the firm’s shares in after-hours trade.

But overall profits sank 12% to $16.4bn.

Prior to the update from the company, Wedbush Securities analyst Dan Ives wrote in a note that he thought the slowdown for Microsoft would be temporary.

“Our recent conversations with customers and partners underscores our confidence that [Microsoft] can ride out this economic storm and ultimately be in a stronger position in the other side with cost cutting and strategic measures already in place,” he said.

Microsoft is removing Windows 10 Home and Pro downloads from sale later this month. The downloads include licence keys for Windows 10 (necessary to activate and use the download), and are being removed more than two years before Microsoft stops officially supporting Windows 10 on October 14th, 2025.

Microsoft updated its Windows 10 product pages recently to note the January 31st cutoff date for sales, but it’s not clear how the company will treat similar downloads and license keys available from retailers like Amazon. We asked Microsoft to comment on Windows 10 license keys and downloads from third-party retailers, but the company only confirmed its own plans to remove its own sales.

“An update was made to the Windows 10 product page to ensure customers have the latest information on purchasing options for Windows 10,” says Amy Bartlow, Windows marketing director, in a statement to The Verge. “Customers have until January 31, 2023 to purchase Windows 10 Home and Windows 10 Pro from this site.” Microsoft is naturally recommending Windows 11 instead, and points out that Windows 10 will continue to be supported until its end of life in October 2025.

While Microsoft is winding down its own Windows 10 sales to consumers, it’s likely that Windows 10 license keys and even laptops and PCs with the OS preinstalled still be available from third parties for quite some time before Microsoft stops supporting the OS.

Microsoft originally launched Windows 10 in July 2015, with a focus on feedback and fast iteration. The OS followed Windows 8, which was widely criticized for removing the traditional Start menu and button and embracing a touch-first interface throughout. Windows 10 was also Microsoft’s first version of Windows to be run like a service, continuously updated and was even said to be “the last version of Windows” at one point.

A group of former Oracle executives with roles across its software compliance teams have described the close links between Big Red’s auditing process and its drive to increase revenue.

Speaking during a webinar broadcast last week, Adi Ahuja, senior director of Palisade Compliance and former Oracle licence management services (LMS) manager, said that Oracle’s audit has become “a sales enablement tool.”

Oracle’s website says Oracle LMS “operates independently from any ongoing commercial discussions. Our services are delivered by a global team of highly experienced and knowledgeable consultants who collectively offer unrivaled knowledge on all aspects of Oracle’s licensing policy.”

However, in practice there was a close relationship between sales and licence audits, Ahuja said.

“There are sales goals that are based on audit numbers and how much revenue comes from auditing customers. It’s not like they’re just doing it in a vacuum. Typically, [auditors] get permission or approval from the [sales] team, so they’re aware; and sales has far more power within Oracle than the audit team. If sales want something done, they get their way. A lot of the time what the audit has become is a sales enablement tool. The auditor goes in, finds some leverages and hand that to the sales team and you negotiate with them.”

Ahuja was speaking at a webinar by Palisade Compliance, a company that advises and represents Oracle customers in issues and disputes around licensing Big Red’s software.

Speaking on the call, Craig Guarente, Palisade CEO and former Oracle veep in the LMS team, said the participants represented 50 years of experience in dealing with Oracle licensing practices.

He noted that there was nothing illegal about Oracle, or any company, using auditing to drive revenue.

However, Ryan Bendana, Palisade Compliance director of delivery, said Oracle’s LMS were there to help sales teams facilitate conversations.

“Oracle has a lot of sales reps and they’re all very hungry and they’re all chomping at the bit to try to sell something. A lot of customers tend to be annoyed with Oracle for good reason. LMS is actually a great facilitator to open up a dialogue, and that’s what sales is doing.”

The Register has asked Oracle for its point of view.

Oracle customers are also experiencing challenges over licensing in VMware environments, other Palisade experts claimed.

The issue dates back to 2015 after US confectionery giant Mars took Oracle to court in the US over its licensing terms following an audit. Mars was assisted by Palisade.

The Register found that similar issues had been affecting a number of customers. Oracle does not accept VMware’s worldview on licensing and its definition of hardware partitioning. An Oracle partitioning document showed how it only accepted Solaris containers, IBM’s LPAR, and Fujitsu’s PAR. VMware was not on the list of hard partitioning partners.

Ahuja said one of the biggest misconceptions on Oracle audits remained around the VMware issue. “That is in the middle of every audit and the driver of half their deals. I still find it outlandish.”

The panel also discussed challenges as Oracle users move to the cloud and the licensing pitfalls that transition might present.

Last year, Oracle failed to block a legal case that alleges it inflated cloud revenues with dubious sales practices, although the vendor succeeded in reducing its scope. Big Red denies the claim made by a group of investors led by the City of Sunrise Firefighters’ Pension Fund in 2020, which alleged Oracle misled investors about sales of its cloud products by threatening customers with expensive software licensing audits unless they agreed to use Oracle’s cloud software. The most recent amended complaint in the case was filed in June last year.

On the Palisade webinar, Max Shlopak, strategic delivery leader and former Oracle senior manager at LMS, said there was a general trend of Oracle wanting to create doubt over licensing during the transition to the cloud.

“Oracle wants all the customers, all of its customers, to move to Oracle Cloud, and they try to create all kinds of roadblocks that could scare customers from going to any other cloud provider. For example, [they might say] you need double the number of licenses, as they have in some white papers. They might say you can’t go to that cloud because you can’t get support from Oracle for deployments. The list goes on and on. Most of it – if not all of it – really amounts to fear, uncertainty and doubt that they’re trying to create.

“The reality for all the customers is that they need to really go back to what is in their contracts with Oracle. Not Oracle’s interpretation, especially interpretation of wisdom from their sales teams, but actual Oracle actual contracts in black and white.”