Monday, October 3, 2022

Microsoft warns of impact on earnings, sales as dollar strengthens

Microsoft on Thursday cut its fourth-quarter forecast for profit and revenue, making it the latest US company to warn of a hit from a strong greenback and send its shares down 1.5% in afternoon trading.

A buoyant Federal Reserve and heightened geopolitical tensions have prompted the dollar to gain 14% against a basket of currencies over the past year, raising expectations for the rest of the year by companies such as Coca-Cola and Procter & Gamble. forced to reduce.

A strong greenback usually eats into the profits of companies that convert foreign currency into dollars and adds to corporate concerns over rising inflation.

“Software companies, including Microsoft, have significant operations outside the US and I think Microsoft is prudent here to exceed (market) expectations and be transparent to currency effects,” said Steve Koenig, managing director of SMBC Nikko Securities.

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Microsoft gets about half of its revenue from outside the United States.

Microsoft, which derives nearly half of its revenue from outside the United States, lowered its revenue forecast for all three segments, including Windows products, cloud and personal computing.

The tech giant expects revenue for the quarter to be between $51.94 billion and $52.74 billion, up from its prior range of $52.40 billion to $53.20 billion.

This cut the profit view to between $2.24 and $2.32 per share from an earlier expectation of between $2.28 and $2.35 per share.

Analysts are forecasting earnings of $2.33 per share on revenue of $52.87 billion, according to Refinitiv data.

In April the company forecast double-digit revenue growth for the next fiscal year, thanks to demand for its office software and cloud services, as economies reopen and business workers are allowed to alternate work from the office and home. Let’s move to a hybrid model of permitting.

Nation World News Desk
Nation World News Desk
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