Microsoft slashes revenue and earnings outlook, citing ‘unfavourable’ exchange rate move

Microsoft stock fell in Thursday’s trading session after the tech giant cut its profit and revenue forecast for the fourth quarter of fiscal 2022, citing an unfavorable movement in exchange rates.

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Microsoft now expects net income of between $16.85 billion and $17.43 billion, or diluted earnings per share of $2.24 to $2.32, down from a previous forecast of $17.10 billion. to $17.67 billion, or diluted earnings per share of $2.28 to $2.35.

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Total revenue for the quarter is now expected to be in the range of $51.94 billion to $52.74 billion, down from $52.40 billion to $53.20 billion.

Productivity and business process segment revenue was revised to $16.48 billion from $16.73 billion, down from $16.65 billion to $16.90 billion, while revenue intelligent cloud were adjusted to $20.92 billion to $21.17 billion, down from $21.10 billion to $21.35 billion.

Microsoft is forecasting revenue between $14.54 billion and $14.84 billion for its more personal computing segment, down from $14.65 billion to $14.95 billion.

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The updated forecast comes as a hawkish Federal Reserve and heightened geopolitical tensions caused the dollar to gain 14% against a basket of currencies over the past year, forcing companies such as Salesforce, Coca-Cola Co and Procter & Gamble to temper expectations for the rest of the year.

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Microsoft chief financial officer Amy Hood previously warned that currency exchange rates could impact the company’s directions during its third quarter earnings call in April.

“We expect other income and expenses to be negative $50 million, reflecting the impact of the currency revaluation based on market conditions in April,” Hood said at the time. “As with the rest of our guidance, other movements in equities and currencies during the fourth quarter are not reflected in this figure.”

Analysts expect Microsoft to earn $2.33 per share on revenue of $52.87 billion, according to Refinitiv data.

Reuters contributed to this report.