Microsoft warns of forex hit, cuts forecast

MICROSOFT on Thursday (Jun 2) cut its fourth-quarter forecast for profit and revenue, making it the latest US company to warn of a hit from a stronger greenback and sending its shares down 3 per cent.

A hawkish Federal Reserve and heightened geopolitical tensions have driven a 14 per cent gain in the US dollar against a basket of currencies over the last year, forcing companies such as Coca-Cola 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 US 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 3 segments, including Windows products, cloud and personal computing.

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

It cut the profit view to between US$2.24 and US$2.32 per share from a prior expectation of between US$2.28 and US$2.35 per share.

Analysts are forecasting earnings of US$2.33 per share on revenue of US$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. REUTERS