Software giant Microsoft is betting that cost pressures amid recession worries will drive more companies into its arms. The company has issued an optimistic forecast for its new financial year and is expecting double-digit percentage growth in sales and operating profit. The surprised investors caused the share price to rise by around 4% in after-hours trading on Tuesday.

Companies will increasingly rely on technology to prepare for the economic situation, predicts CEO Satya Nadella. He argued that cloud services with computing power, software and storage from the internet are particularly good for keeping costs under control in times of uncertainty. With its offerings, Microsoft is well positioned to benefit from this.

Microsoft misses expectations for profit and revenue

In the past quarter, Microsoft underperformed the market despite significant sales growth. Corona lockdowns in China, the impact of the war in Ukraine and the recent weaker PC market hampered business. In the fourth quarter ended June, Microsoft earned 16.7 billion dollars, two percent more than in the same period of the previous year. Revenues increased by 12% to 51.9 billion dollars. Despite the significant growth in business, analysts had expected better figures.

The balance sheet in the past quarter also suffered considerably from the strong dollar, which reduces foreign income after conversion into US currency. Without this exchange rate effect, sales growth would have been 16% according to the company. Microsoft does a significant proportion of its business outside its US home market and had already lowered its expectations for the quarterly figures in June. At the same time, CFO Amy Hood announced for the new financial year that the strong dollar would only reduce sales growth by four percentage points at stable exchange rates. This was also well received by the market.

In the gaming business around the Xbox games console, Microsoft recorded a seven percent drop in sales in the past quarter after the steep growth at the beginning of the pandemic. The general decline in PC sales and the coronavirus lockdowns in China had depressed sales in the Windows operating system business by 300 million dollars, it was reported. Microsoft expects the PC business to remain weak in the near future.