On June 2, 2022, Microsoft announced a downward revision of its Q4 sales guidance, citing the effects of foreign exchange rates.
The software giant initially projected sales of $52.4 billion to $53.2 billion for the fiscal fourth quarter, which ends on June 30. However, it has now revised this estimate to a range of $51.94 billion to $52.74 billion.
According to a securities filing, Microsoft's shares declined by 2.6% in early trading, reaching $265.31. This represents a year-to-date decline of approximately 21%. The company's earnings are expected to be between $2.24 and $2.32 per share, down from the previously forecasted range of $2.28 to $2.35 per share.
The strong US dollar has been a significant factor in Microsoft's revised guidance. The US Dollar Index has risen by over 6% this year, hitting its highest level since 2002 in May. This has led to a decline in the value of the euro, British pound, and Japanese yen, according to the Wall Street Journal.
Microsoft is not the only multinational company to be affected by the strong dollar. Salesforce Inc. also cited the stronger dollar as a reason for lowering its sales outlook for the year, estimating a $600 million impact, up from its initial forecast of $300 million in March.
Microsoft's revised gross-margin guidance also reflects the impact of the strong dollar. The company stated that a strong dollar allows Americans to purchase goods from other countries at lower prices but can also hurt US manufacturers by making their products more expensive for foreigners.
As the dollar continues to rise, investors are seeking safe-haven assets, contributing to its value. Asset managers have been buying the dollar as a bet on the resilience of the US economy compared to Europe and the UK, where economic data has pointed to low growth.
