Why Microsoft is lonely
Microsoft cuts profit and revenue forecasts due to strengthening dollar. All the details
Microsoft lowered its earnings and revenue forecasts for the fourth quarter of the year on Thursday. It has to do with the strengthening of the dollar, due in turn to the tightening of the policies of the Federal Reserve (the central bank of the United States) on the increase in interest rates and the geopolitical tensions connected to the Russian invasion of Ukraine. Microsoft is not the only large American company to have cut its estimates on future profits: Coca-Cola and Procter & Gamble, for example, have also done the same.
THE PROBLEMS OF THE STRONG DOLLAR
Over the past year, the dollar has gained 14 percent against a basket of currencies. A stronger dollar, however – as Reuters explains – affects the profits of large companies that have an international projection and convert foreign currencies into dollars.
Steve Koenig of financial services firm SMBC Nikko Securities told Reuters that "software companies, including Microsoft, have significant operations outside the United States and I believe Microsoft is acting cautiously to anticipate [the market's expectations. ] and be transparent on currency impacts ". In fact, roughly half of Microsoft's revenue comes from countries outside the United States.
THE NEW FORECASTS FROM MICROSOFT
The company lowered its earnings forecasts for all three of its business segments: Windows products, cloud computing services, and computer services.
Microsoft says it expects revenue between $ 51.9 and $ 52.7 billion for the fourth quarter, up from an estimated $ 52.4-53.2 billion previously. It also reduced its profit forecast to $ 2.24-2.32 per share, from $ 2.28-2.35 previously.
According to Refinitiv data, a turnover of 52.8 billion would result in an earnings per share of 2.33 dollars.
THE REQUEST FOR “OFFICE” AND CLOUD SOFTWARE
Last April, Microsoft said it expected a double-digit growth rate for the next fiscal year, thanks to the increase in demand – driven by the "hybrid" work model, split between office and home – for its personal productivity software. ( office automation ) and its cloud services.
HOW ARE THE STOCKS GOING (NOT ONLY MICROSOFT)
Following the announcement, Microsoft shares fell 2.3 percent to $ 266.1.
Since the beginning of 2022, Microsoft's stock has seen its value drop by around 20 percent, in line with the loss (-23 percent) of the Nasdaq index.
Today Apple fell 0.4 percent and Amazon 0.2 percent. Alphabet (Google's parent company) gained 0.8 percent while Meta (the tech company formerly known as Facebook) gained 2 percent.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/microsoft-previsioni-quarto-trimestre-2022/ on Fri, 03 Jun 2022 12:15:58 +0000.