WSJ US BusinessMicrosoft Cuts Its Earnings, Revenue Forecasts

June 2, 20220
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Microsoft Corp. MSFT 0.79% cut sales and earnings guidance for the current quarter, citing the impact of foreign exchange rates as the stronger U.S. dollar takes a toll.

The software giant said in a securities filing Thursday that it now expects fiscal fourth-quarter sales of between $51.94 billion and $52.74 billion, down from its prior guidance of $52.4 billion to $53.2 billion. The quarter ends June 30.

Earnings are expected to be between $2.24 a share and $2.32 a share, down from prior guidance of $2.28 a share to $2.35 a share.

Microsoft shares fell 2.6% in early trading to $265.31. They are down around 21% year to date.

Economic weakness in other parts of the world has helped propel the U.S. dollar to multidecade highs against its trading partners, which comes as U.S. inflation is at or near its highest level in nearly 40 years. The U.S. Dollar Index, which tracks the currency against a basket of others, is up more than 6% so far this year and hit its highest level since 2002 last month. The greenback’s climb has sent the euro, British pound and Japanese yen tumbling.

The U.S. dollar in 2021 saw its largest increase in value since 2015. That’s good for many American consumers, but it could also put a dent in stocks and the U.S. economy. WSJ’s Dion Rabouin explains. Photo illustration: Sebastian Vega/WSJ

A strong dollar allows Americans to buy goods from other countries at lower prices. But it can also hurt U.S. manufacturers by making products more expensive for foreigners, and it means U.S. businesses receive fewer dollars for their exports.

The dollar has benefited from its status as a haven for investors during tumultuous financial markets and from the Federal Reserve’s promise to quell inflation by raising rates. Money managers typically buy currencies linked to countries where central banks are raising interest rates to rein in a hot economy.

Asset managers have also been scooping up the dollar, boosting its value, as a bet on the resilience of the U.S. economy compared with Europe and the U.K., where economic data has pointed to low growth. The British pound and the euro both have dropped over 6% so far this year.

Microsoft said in its April earnings report that a stronger dollar reduced the software company’s revenue and earnings by $302 million and 3 cents a share, respectively.

Microsoft is the latest multinational company to warn of the stronger dollar’s impact on financials. Salesforce Inc. CRM 7.00% earlier this week cited the stronger dollar in lowering its sales outlook for the year. The business-software company doubled the impact that it expects this year from the stronger dollar to $600 million from its $300 million forecast in March.

“I think the dollar might have even had a stronger quarter than we did,” Salesforce Co-Chief Executive Marc Benioff said on the company’s conference call Tuesday.

Microsoft has already sounded a note of caution because of the current economic environment. Last month, the Redmond, Wash., company said it would slow down the pace of hiring employees for its software group because of growing uncertainties, joining other tech companies such as Meta Platforms Inc., FB 5.42% Twitter Inc. TWTR 1.55% and Uber Technologies Inc. UBER 7.85% in scaling back hiring plans.

More Microsoft News

On Thursday, Microsoft also lowered its gross-margin guidance to a range of $35.45 billion to $36.05 billion, down from between $35.80 billion and $36.40 billion. Operating income is now expected to be between $20.60 billion and $21.30 billion, down from a range of $20.90 billion to $21.60 billion.

Write to Will Feuer at will.feuer@wsj.com

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Appeared in the June 3, 2022, print edition as ‘Microsoft Cuts Its Forecasts, Citing Effect of Strong Dollar.’

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