Microsoft reports 2% jump in quarterly profit despite unfavourable foreign exchange rate

US technology company earned a net profit of $16.7bn in three months to June 30

Microsoft's revenue during the fourth quarter jumped 12 per cent to almost $51.9 billion. AP

Microsoft reported a 2 per cent jump in its fourth quarter net profit despite the company missing analysts’ sales forecast for the April-June period.

Net profit jumped to $16.7 billion in the three months to the end of June, while full-year net profit for fiscal year 2022 increased 19 per cent annually to $72.7bn.

Revenue during the fourth quarter leapt 12 per cent to almost $51.9bn, missing analysts' expectations of $52.4bn. It increased 18 per cent annually to $198.3bn for the full fiscal year.

The April-June period marked the Redmond, Washington-based company’s 20th straight quarter of double-digit revenue growth.

The company’s last quarter’s diluted earnings rose 3 per cent $2.23 per share, compared to the $2.29 per share expected by analysts, Refinitiv reported.

Microsoft said an “unfavourable foreign exchange rate” movement was one of the major challenges in the fourth quarter. The US dollar has increased about 10 per cent this year and the dollar index, which measures the greenback against six major currencies, hit a 20-year high earlier this month.

The currency environment negatively affected Microsoft's revenue by $595 million and earnings per share by 4 cents, the company said. Last month, Microsoft lowered its quarterly income and sales guidance because of exchange rate fluctuations.

Satya Nadella, chairman and chief executive of Microsoft. EPA

“We see real opportunity to help every customer in every industry use digital technology to overcome today’s challenges and emerge stronger,” chairman and chief executive of Microsoft Satya Nadella said.

The company’s stock surged nearly 5.4 per cent to $265.5 a share in after-hours trading on Tuesday. The share price has dropped more than 24.7 per cent since the start of the year.

Its operating income grew 8 per cent to $20.5bn in the fourth quarter from the prior year period.

The company’s productivity and business processes division, which includes both its Microsoft Office business and revenue from LinkedIn, increased 13 per cent annually to $16.6bn in the June quarter.

LinkedIn revenue grew nearly 26 per cent annually. Microsoft did not give a dollar figure for LinkedIn revenue and did not disclose the number of users.

It said the reductions in advertising spend contributed to a negative impact on LinkedIn as well as search and news advertising revenue by more than $100m.

Search and news advertising revenue increased $390m, or 15 per cent on an annual basis, in the last quarter.

Meanwhile, gaming revenue decreased $259m, or 7 per cent, driven by a decrease in Xbox content and services. The company’s Surface business revenue increased $136m, or 10 per cent yearly, driven by commercial sales.

Microsoft 365 Consumer subscribers increased to 59.7 million at the end of the quarter, the company said.

LinkedIn revenue grew nearly 26 per cent annually in the fourth quarter. Reuters

Revenue in the company’s intelligent cloud business increased 20 per cent year-on-year to $20.9bn in the fourth quarter and its server products and cloud services revenue increased 22 per cent.

“In a dynamic environment, we saw strong demand, took share and increased customer commitment to our cloud platform,” said Amy Hood, executive vice president and chief financial officer of the company.

“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.”

The company returned $12.4bn to shareholders in the form of share repurchases and dividends in the fourth quarter, a yearly increase of 19 per cent compared to the prior year period.

Microsoft said extended production shutdowns in China and a deteriorating personal computer market contributed to a negative impact on Windows OEM (original equipment manufacturer) revenue by more than $300m.

With the ongoing war in Ukraine, Microsoft has scaled down its operations in Russia, which resulted in an operating expense of $126m in the last quarter related to bad debt expense, asset impairments and severance.

As part of a strategic realignment of its business groups, the company also recorded employee severance expenses of $113m, excluding Russia

Research and development expenses increased almost 20 per cent yearly to $6.8bn in the fourth quarter, boosted by the company's investments in cloud engineering and LinkedIn.