Updated at 6:11 PM EST
Microsoft (MSFT) – Get Microsoft Corporation Report posted weaker-than-expected fourth-quarter earnings on Tuesday as a stronger U.S. dollar dampened the impact of overseas demand for its flagship cloud computing division.
Microsoft said revenue from Azure, its flagship cloud division, rose 40 percent from a year ago, sharply down from the previous quarter’s mid-to-high 40 percent gain as companies reduce spending on digital infrastructure and the dollar continued its 2022 rise.
Global group revenue rose 12.4% to $51.87 billion in the three months ended June, Microsoft’s fiscal fourth quarter, missing analysts’ estimates of $52.45 billion and lowered guidance of the company between 51.94 billion and 54.74 billion dollars.
Microsoft’s results rose 2% to $16.7 billion as adjusted earnings rose 2.7% from a year earlier to $2.23 a share, well short of the Street consensus forecast of $2.29 per share. Microsoft had forecast a range of $2.24 to $2.32 per share in early June.
Looking ahead to the next fiscal year, Microsoft said it sees revenue rising by a double-digit percentage from 2022 levels, with a four-point impact from foreign currency headwinds, as well as growth of two digits in operating income. The first-quarter FX impact will be about 5 basis points, Microsoft said.
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Intelligent Cloud revenue is forecast at $20.3 billion to $20.6 billion for the first quarter, with continued margin improvements expected for Azure, which will see growth decelerate by about three percentage points.
“We see a real opportunity to help every customer in every industry use digital technology to overcome today’s challenges and emerge stronger,” said CEO Satya Nadella. “No company is better positioned than Microsoft to help organizations meet their digital imperative, so they can do more with less.”
Microsoft shares traded 6.3% higher in extended trading hours immediately after the earnings release to indicate a Wednesday opening bell price of $267.72 each.
Microsoft earned just over half of its $168.1 billion in 2021 revenue from overseas markets, according to the group’s latest annual report, with international growth outpacing domestic growth by about 300 basis points.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, hit a 20-year high of 108.54 earlier this month and is up more than 17, 2% compared to the same period last year.
In terms of reporting segments, revenue from the Productivity and Business Process division rose 13 percent to $16.6 billion, Microsoft said, while Intelligent Cloud revenue rose 20 percent to to 20.9 billion dollars.
Further personal computing revenue rose just 2% to $14.4 billion amid what the group described as “extended production shutdowns in China that continued into May and a PC market in deterioration in June,” both of which “contributed to a negative impact on Windows OEM Windows revenue.” over $300 million.”