Microsoft warns of forex hit, cuts forecast – Reuters

June 2 (Reuters) – Microsoft Corp (MSFT.O) 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.
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 (KO.N) and Procter & Gamble (PG.N) to temper expectations for the rest of the year.
A stronger greenback typically eats into the profits of companies that have sprawling international operations and convert foreign currencies into dollars.
"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, which include Windows products, cloud services and personal computing.
Corporate hedging activity has increased as more companies try to guard their profits against the impact of currency fluctuations amid surging inflation.
It is common for companies to protect themselves from unexpected forex moves, but the urgency comes after years of muted forex volatility, during which currency fluctuations had limited impact on earnings.
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. read more
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.
Shares of the Redmond, Washington-based company were down 2.3% at $266.1.
Our Standards: The Thomson Reuters Trust Principles.
Malaysia is expected to spend 77.3 billion ringgit ($17.6 billion) in subsidies and cash aid this year, the largest amount in history, to help temper the effects of rising prices, its finance minister said on Saturday.
Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers.
Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology.
The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs.
The industry leader for online information for tax, accounting and finance professionals.
Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile.
Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts.
Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks.
All quotes delayed a minimum of 15 minutes. See here for a complete list of exchanges and delays.
© 2022 Reuters. All rights reserved

source