Unfavorable foreign exchange rates and sluggish PC sales are to blame for Microsoft’s (MSFT) disappointing fourth-quarter results. On the heels of Microsoft’s positive forecast for the upcoming fiscal year, MSFT shares ended the day higher.
Redmond, Washington-based Microsoft made $2.23 per share on $51.9 billion in sales in the three months ending June 30. Microsoft was anticipated to earn $2.29 a share on revenues of $52.4 billion by FactSet’s analysts. Microsoft’s profits increased by 3% while sales increased by 12% year over year.
Microsoft’s earnings grew by 8% in constant currency, while sales rose by 16%.
According to Microsoft’s predictions for the June quarter, revenue and earnings would be lower than expected. A lack of consumer spending was also expected to hurt Microsoft during this time period, according to analysts.
Shares of Microsoft Corp. (MSFT) have been fluctuating lately.
MSFT shares fluctuated between slight gains and losses in after-hours trading on the stock market today, ahead of the company’s conference call with analysts. Microsoft’s shares rose when the company issued forecasts for the current quarter and the entire year on the call. The MSFT stock price just increased by 4.9 percent to 264.30 dollars.
Microsoft plans to make $49.75 billion in sales in the current quarter, an increase of 10 percent from the same period last year. In other words, that’s the halfway of their recommendations. For the first quarter of Microsoft’s fiscal 2023, analysts expected sales of $51.4 billion.
According to Microsoft’s Chief Financial Officer Amy Hood, demand for PCs and advertising spending have been flat so far this quarter.
The outlook for the full fiscal year of 2023 is brighter, however. MSFT stockholders appeared to be pleased with the news.
The company’s revenue and operating profits are expected to expand by double digits in both constant currency and US dollars, according to Hood. There will be “continuing momentum in our commercial business” and “a focus on gaining market throughout the portfolio” to achieve revenue growth in fiscal 2019.
A Long List of Excuses for the Missing June Quarter
Microsoft reported a $595 million drop in revenue and a 4 cent drop in earnings per share in the quarter due to unfavorable foreign currency rates.
In addition, Covid-related production shutdowns in China and a declining PC market reduced the company’s Windows software revenue by about $300 million from its objective.
According to Microsoft, a $100 million drop in advertising spending has harmed Microsoft’s LinkedIn, search, and news advertising revenue.
As a result of Russia’s ongoing conflict with Ukraine, Microsoft was forced to reduce its operations in the country.
Cloud computing is a bright spot for Microsoft.
Hood said in a statement that Microsoft’s cloud computing businesses fueled revenue growth in the June quarter.
This is what she had to say: “In a dynamic market we observed significant demand, gained share, and enhanced client loyalty to our cloud platform.” There were 25 percent more commercial reservations, and Microsoft Cloud revenue was $25 billion in 2013, up 28 percent over 2012.”
In the June quarter, Microsoft’s Intelligent Cloud business sector outperformed the other two. The segment’s revenue grew by 20% year-over-year to $20.9 billion in revenue. Cloud services like Azure infrastructure are included in the item.
Sales of Microsoft’s Productivity and Business Processes division increased by 13% to $16.6 billion in the last quarter. Dynamics and LinkedIn are also part of the division. Office productivity software is included.
It also reported a 2 percent rise in sales to $14.4 billion in the third quarter of fiscal year 2013. Internet search and advertising, as well as Windows and Xbox video games and laptops are all part of the package.