(Bloomberg) — Microsoft Corp. pared its outlook for fiscal fourth-quarter earnings and revenue, citing the impact from foreign exchange fluctuations, sending the shares tumbling.
The software giant said it now expects earnings per share of $2.24 to $2.32, down from earlier estimates for $2.28 to $2.35 a share. The company sees a $460 million impact on fourth-quarter revenue from currency fluctuations, knocking revenue to $51.94 billion to $52.74 billion. The shares declined about 2.3% Thursday morning in New York.
Microsoft issued the new guidance in a securities filing, “to help investors understand the impact of unfavorable foreign exchange rate movement in the fourth quarter of fiscal 2022 since the forward-looking guidance provided on April 26.” The Redmond, Washington-based company got about half of the $168 billion in revenue generated in fiscal 2021 from abroad.
The speed of US interest rate increases relative to other developed economies and the war in Ukraine have fed a surge in demand for the dollar, which has increased more than 7% since the start of the year before paring some of those gains. Treasury Secretary Janet Yellen said in a recent press briefing that the administration is committed to a market-determined exchange rate. The dollar’s appreciation is an aid to US policy makers as they try to rein in surging inflation, and Federal Reserve Chair Jerome Powell has separately endorsed a tightening in US financial conditions — of which a strengthening dollar is a part.
Microsoft’s revised outlook “will be a recurring theme across many large software companies, as most generate over one-third of their sales outside the US,” said Anurag Rana, an analyst at Bloomberg Intelligence.
In its most recent earnings report, issued in April, Microsoft reported quarterly sales and earnings that topped analysts’ projections, fueled by robust growth in cloud-services demand.
(Updates with analyst comment. A previous version of the story was corrected to show the reason for the revision was due to exchange rate fluctuations.)
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