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Microsoft warns of forex hit, cuts forecast
Global Banking & Finance Review®
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(Reuters) -Microsoft Corp on Thursday cut its fourth-quarter forecast for profit and revenue, making it the latest U.S. company to warn of a hit from a stronger greenback and sending its shares down 3%.
(Reuters) -Microsoft Corp on Thursday cut its fourth-quarter forecast for profit and revenue, making it the latest U.S. company to warn of a hit from a stronger greenback and sending its shares down 3%.
A hawkish Federal Reserve and heightened geopolitical tensions have driven a 14% gain in the dollar against a basket of currencies over the last year, forcing companies such as Coca-Cola Co and Procter & Gamble to temper expectations for the rest of the year.
A stronger greenback typically eats into the profits of companies with sprawling international operations that convert foreign currency into dollars and has added to corporate worries over soaring inflation.
“Software companies including Microsoft have significant operations outside the U.S. and I think Microsoft is being prudent here to get ahead of (market) expectations and be transparent around currency impacts,” said Steve Koenig, managing director at SMBC Nikko Securities.
Microsoft, which gets about half 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, down from its prior range of $52.40 billion to $53.20 billion.
It cut the profit view to between $2.24 and $2.32 per share from a prior 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.
The company in April forecast double-digit revenue growth for the next fiscal year, thanks to demand for its office software and cloud services as economies reopen and businesses shift to a hybrid model of allowing staff to alternatively work from office and home.
A Microsoft executive is scheduled to speak at Jefferies Software Conference later in the day.
(Reporting by Nivedita Balu and Yuvraj Malik in Bengaluru; Editing by Aditya Soni and Anil D’Silva)
Foreign currency refers to any currency that is not the domestic currency of a country. It is used in international trade and can fluctuate in value based on market conditions.
Monetary policy is the process by which a central bank manages the supply of money and interest rates in an economy to achieve specific goals, such as controlling inflation and stabilizing the currency.
A financial crisis is a situation in which the value of financial institutions or assets drops significantly, leading to a loss of confidence and potential economic downturn.
Corporate profits are the earnings that a company generates after all expenses, taxes, and costs have been deducted from its total revenue.
A stronger dollar can make exports more expensive for foreign buyers, potentially reducing sales for companies with international operations and impacting their profits.
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