Microsoft pares outlook after warning about hit from strong dollar           

Microsoft's EMEA Operations Centre, Dublin.  The company sees a $460m impact on fourth-quarter revenue from currency fluctuations.

Microsoft pared its outlook for fiscal fourth-quarter earnings and revenue, citing the impact from a surging dollar, sending the shares tumbling.

The company sees a $460m impact on fourth-quarter revenue from currency fluctuations, knocking revenue to $51.9bn (€48.3bn) to $52.7bn. The shares declined by over 2%.

Microsoft issued the new guidance in a securities filing, “to help investors understand the impact of unfavourable foreign exchange rate movement in the fourth quarter of fiscal 2022 since the forward-looking guidance provided on April 26”.

The software giant got about half of the $168bn 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. 

The dollar’s appreciation is an aid to US policy makers as they try to rein in surging inflation. 

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.