Microsoft Cuts Earnings and Revenue Guidance, Citing a Stronger U.S. Dollar

Earnings are expected to be between $2.24 a share and $2.32 a share, down from prior guidance of $2.28 a share to $2.35 a share.

Microsoft shares fell 2.6% in early trading to $265.31. They are down around 21% year to date.

Economic weakness in other parts of the world has helped propel the U.S. dollar to multidecade highs against its trading partners, which comes as U.S. inflation is at or near its highest level in nearly 40 years. The U.S. Dollar Index, which tracks the currency against a basket of others, is up more than 6% so far this year and hit its highest level since 2002 last month. The greenback’s climb has sent the euro, British pound and Japanese yen tumbling.

A strong dollar allows Americans to buy goods from other countries at lower prices. But it can also hurt U.S. manufacturers by making products more expensive for foreigners, and it means U.S. businesses receive fewer dollars for their exports.

The dollar has benefited from its status as a haven for investors during tumultuous financial markets and from the Federal Reserve’s promise to quell inflation by raising rates. Money managers typically buy currencies linked to countries where central banks are raising interest rates to rein in a hot economy.

Asset managers have also been scooping up the dollar, boosting its value, as a bet on the resilience of the U.S. economy compared with Europe and the U.K., where economic data has pointed to low growth. The British pound and the euro both have dropped over 6% so far this year.

Microsoft said in its April earnings report that a stronger dollar reduced the software company’s revenue and earnings by $302 million and 3 cents a share, respectively.

Microsoft is the latest multinational company to warn of the stronger dollar’s impact on financials.

Salesforce Inc.

CRM 7.00%

earlier this week cited the stronger dollar in lowering its sales outlook for the year. The business-software company doubled the impact that it expects this year from the stronger dollar to $600 million from its $300 million forecast in March.

“I think the dollar might have even had a stronger quarter than we did,” Salesforce Co-Chief Executive

Marc Benioff

said on the company’s conference call Tuesday.

Microsoft has already sounded a note of caution because of the current economic environment. Last month, the Redmond, Wash., company said it would slow down the pace of hiring employees for its software group because of growing uncertainties, joining other tech companies such as

Meta Platforms Inc.,

FB 5.42%

Twitter Inc.

TWTR 1.55%

and

Uber Technologies Inc.

UBER 7.85%

in scaling back hiring plans.

On Thursday, Microsoft also lowered its gross-margin guidance to a range of $35.45 billion to $36.05 billion, down from between $35.80 billion and $36.40 billion. Operating income is now expected to be between $20.60 billion and $21.30 billion, down from a range of $20.90 billion to $21.60 billion.

—Julia-Ambra Verlaine contributed to this article.

Write to Will Feuer at [email protected]

Earnings are expected to be between $2.24 a share and $2.32 a share, down from prior guidance of $2.28 a share to $2.35 a share.

Microsoft shares fell 2.6% in early trading to $265.31. They are down around 21% year to date.

Economic weakness in other parts of the world has helped propel the U.S. dollar to multidecade highs against its trading partners, which comes as U.S. inflation is at or near its highest level in nearly 40 years. The U.S. Dollar Index, which tracks the currency against a basket of others, is up more than 6% so far this year and hit its highest level since 2002 last month. The greenback’s climb has sent the euro, British pound and Japanese yen tumbling.

A strong dollar allows Americans to buy goods from other countries at lower prices. But it can also hurt U.S. manufacturers by making products more expensive for foreigners, and it means U.S. businesses receive fewer dollars for their exports.

The dollar has benefited from its status as a haven for investors during tumultuous financial markets and from the Federal Reserve’s promise to quell inflation by raising rates. Money managers typically buy currencies linked to countries where central banks are raising interest rates to rein in a hot economy.

Asset managers have also been scooping up the dollar, boosting its value, as a bet on the resilience of the U.S. economy compared with Europe and the U.K., where economic data has pointed to low growth. The British pound and the euro both have dropped over 6% so far this year.

Microsoft said in its April earnings report that a stronger dollar reduced the software company’s revenue and earnings by $302 million and 3 cents a share, respectively.

Microsoft is the latest multinational company to warn of the stronger dollar’s impact on financials.

Salesforce Inc.

CRM 7.00%

earlier this week cited the stronger dollar in lowering its sales outlook for the year. The business-software company doubled the impact that it expects this year from the stronger dollar to $600 million from its $300 million forecast in March.

“I think the dollar might have even had a stronger quarter than we did,” Salesforce Co-Chief Executive

Marc Benioff

said on the company’s conference call Tuesday.

Microsoft has already sounded a note of caution because of the current economic environment. Last month, the Redmond, Wash., company said it would slow down the pace of hiring employees for its software group because of growing uncertainties, joining other tech companies such as

Meta Platforms Inc.,

FB 5.42%

Twitter Inc.

TWTR 1.55%

and

Uber Technologies Inc.

UBER 7.85%

in scaling back hiring plans.

On Thursday, Microsoft also lowered its gross-margin guidance to a range of $35.45 billion to $36.05 billion, down from between $35.80 billion and $36.40 billion. Operating income is now expected to be between $20.60 billion and $21.30 billion, down from a range of $20.90 billion to $21.60 billion.

—Julia-Ambra Verlaine contributed to this article.

Write to Will Feuer at [email protected]