The software giant Microsoft is betting that the cost pressure amid recession worries will drive more companies into its arms.
The group issued an optimistic forecast for the fiscal year that has just begun and expects growth in sales and operating profit in the double-digit percentage range. The surprised investors let the stock rise by around four percent in premarket trading on Wednesday.
Uncertain times as an opportunity?
CEO Satya Nadella predicts that companies will increasingly rely on technology to prepare for the economic situation. Above all, cloud services with computing power, software and storage from the Internet are good, especially in times of uncertainty, to keep costs under control, he argued. Microsoft is well positioned with its offers to benefit from it.
In the past quarter, Microsoft performed worse than expected on the market, despite significant sales growth. Corona lockdowns in China, burdens from the Ukraine war and the recently weaker PC market made business difficult. Microsoft earned $16.7 billion in the fourth fiscal quarter that ended in June, two percent more than in the same period last year. Revenue increased 12 percent to $51.9 billion. Despite the significant growth in business, analysts had expected better numbers.
Strong dollar impacts foreign earnings
The balance sheet for the past quarter also suffered significantly from the strong dollar, which weighs on overseas earnings when translated into US currency. According to the company, without this exchange rate effect, the increase in sales would have been 16 percent. Microsoft does a significant part of its business outside of the US home market and had already dampened expectations for the quarterly figures in June. At the same time, CFO Amy Hood predicted that the strong dollar, with stable exchange rates, would only reduce sales growth by four percentage points for the new fiscal year. That was also well received in the market.
In the gaming business for the Xbox game console, Microsoft posted a seven percent decline in sales in the past quarter after the steep growth at the beginning 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 is assuming that the PC business will continue to be weak in the near future.
Rachel Maga is a technology journalist currently working at Globe Live Media agency. She has been in the Technology Journalism field for over 5 years now. Her life’s biggest milestone is the inside tour of Tesla Industries, which was gifted to her by the legend Elon Musk himself.