Microsoft Sales Growth Slows on Tepid Demand, Strong Dollar

The company's sales and profit fell short of expectations due to the stronger dollar and weaker demand for cloud-computing services, personal- computer software and advertising on its online properties.

The software maker said in a statement that revenue in the fourth quarter was $51.9 billion. Net income increased to $16.7 billion. Sales were estimated at $52.4 billion and earnings at $2.29 a share by analysts. Revenue growth in the cloud computing service slowed to 40%, which missed predictions.

The surging US dollar hurt Microsoft's revenue and profit in the first quarter. The company has slowed hiring in divisions that make productivity software. The broader personal- computer market is on track for an annual decline, with overall sales rising the least since September 2020. Customers delayed purchases in anticipation of a possible global recession as demand slowed in the last few weeks of Microsoft's quarter.

Wood said that things started getting slower after Memorial Day. Currency-exchange rates have gotten less favorable since Microsoft cut projections last month, and that may affect the company's forecast even more.

The analysts predicted that revenue would go up. The division grew in the third quarter.

Microsoft shares were little changed in after-hours trading, after declining 2.5% to $251.90 in New York. The stock has fallen 25% so far this year as a result of the large technology stock sell off.

Excluding the impact of currency, growth was 1% lower than forecast. She said the company signed a record number of contracts for more than one billion dollars.

Commercial bookings, a measure of future sales to corporate customers, were significantly better than the company expected, indicating corporate demand for Microsoft software remained strong in the quarter. Hood said that the June quarter was a record for them and better than they had anticipated.

Microsoft reduced its sales and profit forecast in June due to the stronger US dollar. Currency impacts were worse than expected, the software giant said. The company had to downsize in Russia due to the war in Ukraine. Sales of the Windows operating system software to computer makers were hurt by the hardware production shutdowns in China.

In the recent period, Microsoft made $113 million in payouts. Microsoft said it cut less than 1% of its 180,000-person workforce, affecting groups such as consulting and customer solutions, but that it planned to finish the current fiscal year with more employees. Many open jobs have been eliminated and the company has slowed hiring. The company said last week that these hiring constraints would continue for a long time.

The company said in slides on its website that its revenue from cloud products rose to $25 billion.

As have Apple and Amazon.com, both of which reported earnings Tuesday, Alphabet has sounded a caution on hiring. Last week, social media companies reported disappointing sales.

The decline in global PC shipments was more than 15%, but they are still above pre-pandemic levels. Microsoft has been able to increase revenue by shipping more versions of higher priced corporate versions.