Microsoft Falls After Paring Forecast on Currency Drag

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.