US software giant Microsoft is betting cost pressures will push more companies into its arms amid recession worries. The group has released an optimistic forecast for the fiscal year that has just begun and expects sales and operating profit growth in the double-digit range. The surprised investors allowed the share to rise by about four percent in pre-market trading on Wednesday.
CEO Satya Nadella predicts that companies will increasingly rely on technology to prepare for the economic situation. Especially in times of uncertainty, cloud services with computing power, software and storage from the internet are good for keeping costs under control, he says. Microsoft is well positioned with its offerings to take advantage of this.
In the fourth quarter, Microsoft underperformed in the market than expected, despite strong revenue growth. Corona lockdowns in China, burdens from the war in Ukraine and the recently weaker PC market made doing business difficult. In its fourth quarter of business that ended in June, Microsoft earned $16.7 billion, two percent more than in the same period last year. Revenue rose 12 percent to $51.9 billion. Despite the strong growth of the business, analysts had expected better numbers.
Strong dollar hurts foreign profits
Last quarter’s balance sheet also suffered significantly from the strong dollar, which negatively impacted overseas profits when converted to US currencies. Without this exchange rate effect, the company’s sales increase would have been 16 percent. Microsoft does a significant portion of its business outside of the US home market and had already tempered expectations for quarterly results in June. At the same time, CFO Amy Hood predicted that the strong dollar, with stable exchange rates, would reduce revenue growth for the new fiscal year by only four percentage points. This was also well received by the market.
In the Xbox game console gaming business, Microsoft recorded a seven percent decline in sales in the quarter after strong growth at the start of the pandemic. The general decline in PC sales and the corona lockdowns in China have reduced sales in the Windows operating system business by $300 million, it said. Microsoft assumes that the PC business will remain weak for the foreseeable future.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
