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Microsoft Stock Leaps After Robust 2023 Outlook Offsets Q4 Earnings Miss

“As we begin a new fiscal year, we remain committed to balancing operational discipline with continued investments in key strategic areas to drive future growth," said CFO Amy Hood.

Updated at 12:03 pm EST

Microsoft  (MSFT)  posted weaker-than-expected fourth quarter earnings late Tuesday as a surging U.S. dollar blunted the impact of overseas demand for its flagship cloud computing division.  

Microsoft said revenues for Azure, its flagship cloud division, rose 40% from last year, slowing notably from its prior quarter gains in the mid to high 40-percent range as companies pulled back on digital infrastructure spending and the dollar continued its 2022 climb. 

Overall group revenues rose 12.4% to $51.87 billion for the three months ending in June, Microsoft's fiscal fourth quarter, missing analysts' estimates of a $52.45 billion tally and the company's owned lowered guidance of between $51.94 billion to $54.74 billion. 

Microsoft's bottom line rose 2% to $16.7 billion, as adjusted earnings rose 2.7% from last year to $2.23 per share, well shy of the the Street consensus forecast of $2.29 per share. Microsoft had forecast a range of between $2.24 and $2.32 per share in early June.

Looking into the coming fiscal year, Microsoft said it sees revenues growing by a double-digit percentage from 2022 levels, with a four-point impact from foreign currency headwinds, as well as double-digit growth in operating income. The FX hit for the first quarter will be around 5 points, Microsoft said.

Intelligent Cloud revenues were forecast between $20.3 billion and $20.6 billion for the first quarter, with continued margin improvements expected for Azure, which will see a growth slowdown of around three percentage points.

“We see 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 deliver on their digital imperative – so they can do more with less.”

Microsoft shares were marked 5% higher in early afternoon trading Wednesday to change hands at $264.35 each.

Microsoft earned just over half of its $168.1 billion in 2021 revenues from overseas markets, according to the group's latest annual report, with international growth outpacing domestic by around 300 basis points.

The U.S. dollar index, which tracks the greenback against a basket of six global currency peers, hit a 20-year high of 108.54 earlier this month and is up more than 17.2% from the same period last year. 

In terms of reporting segments, Productivity and business processes division revenues rose 13% to $16.6 billion, Microsoft said, while Intelligent Cloud revenues were up 20% to $20.9 billion. 

More Personal Computing revenues rose only 2% to $14.4 billion amid what the group described as "extended production shutdowns in China that continued through May and a deteriorating PC market in June", both of which "contributed to a negative impact on Windows OEM revenue of over $300 million."