Microsoft Corp (MSFT.O) forecast Tuesday that revenue will grow double-digit this fiscal year, driven by demand for cloud computing services and sending shares up 5%.
The strong outlook suggests Microsoft benefits from the pandemic-led shift to the hybrid work model and comes at a time when investors are gearing up for an economic slowdown, with inflation roaring and consumer spending cuts.
Bob O’Donnell, an analyst at Technalysis Research, said Microsoft’s forecast shows that despite negative economic trends, companies continue to do more business and work online.
“I don’t think it’s unique to Microsoft,” he said about the outlook. “Microsoft is extraordinarily well positioned because of the range of businesses it has and the critical role their software and computing services play for organizations.”
Despite the optimistic forecast for the fiscal year starting July 1, Microsoft results for the fourth quarter amounted to a slight miss, hurt by a stronger dollar, slowing sales of PCs and lower advertiser spending.
Still, Microsoft had its best quarter for its cloud business with record bookings for its cloud service called Azure, said Brett Iversen, Microsoft’s general manager of investor relations.
Microsoft faces pressure from a strong greenback as it gets nearly half its revenue from outside the United States. This led the company to lower its fourth-quarter profit and revenue forecast in June. Shares of Washington-based company Redmond have fallen nearly 25 per cent this year.
The US dollar index rose more than 2% in the quarter ended June and nearly 12% this year, compared to a 1% decline a year ago in the same period.
Without the strong dollar, the company’s 12% year-over-year revenue growth would have been four per cent higher, Iverson told Reuters. Three main factors reduced fourth-quarter revenue by approximately $1 billion.
Foreign exchange negatively impacted revenue by approximately $600 million. The downturn in the PC market impacted Windows OEM revenue by more than $300 million. And the slowdown in ad spending hit LinkedIn and search and news ad revenue by more than $100 million.