Jamie Spencer
The strengthening U.S. dollar is creating challenges for major tech companies, which rely heavily on international revenue. As foreign currencies weaken, overseas earnings become less valuable when converted into dollars.
Amazon Faces Currency Headwinds
Amazon is expected to be less affected than its peers due to its strong U.S. sales. However, the company still warned that foreign exchange fluctuations are a major factor behind its weak first-quarter forecast.
- Projected revenue: $151 billion to $155.5 billion (growth of 5%-9%)
- Amazon’s slowest quarter previously was Q2 2022, with 7.2% growth
- $2.1 billion foreign exchange impact expected in Q1
“This guidance anticipates an unusually large, unfavorable impact from foreign exchange rates,” Amazon said in its earnings release.
During its earnings call, Amazon noted an unexpected $700 million foreign exchange headwind in Q4. The company’s international revenue totaled $43.4 billion, making up 23% of overall sales.
Tech Companies Most Exposed to Dollar Strength
Amazon is not alone in facing currency challenges. Several tech giants rely on foreign sales for more than half of their revenue:
- Apple: 58% of revenue from overseas
- Meta: 55%
- Alphabet: 52%
- Microsoft: Just under 50%
- Tesla: Just over 50%
Dollar Strength and Uncertainty Ahead
The U.S. dollar index hit its highest level in more than two years last month ahead of President Donald Trump’s inauguration. While it has pulled back slightly, the dollar remains a key concern due to:
- Trump’s tariff policies and potential trade conflicts
- Uncertainty around U.S. foreign policy
- Speculation over Federal Reserve rate decisions
Tech CFOs Weigh In on Foreign Exchange Risks
Several tech CFOs addressed currency headwinds in recent earnings calls:
- Microsoft CFO Amy Hood: FX was “roughly in line with expectations” but will drag revenue down by “more than 1 point” in the current quarter.
- Meta CFO Susan Li: Expects a three-point currency headwind in Q1.
- Alphabet CFO Anat Ashkenazi: Warned of a larger foreign exchange impact in Q1 versus Q4 2024.
- Apple CFO Kevan Parekh: Expects FX to reduce revenue by 2.5 percentage points year-over-year.
Economic Data and Nvidia Earnings on Watch
Investors are closely watching Friday’s jobs report for signs of economic strength:
- January nonfarm payrolls: Expected at 169,000 (down from 256,000 in December)
- Unemployment rate: Projected to remain at 4.1%
Next, the market will look to Nvidia, which reports earnings later this month. With 58% of its revenue from outside the U.S., the AI chip giant’s outlook on foreign exchange will be key.
Conclusion
The strong dollar is pressuring tech earnings and creating volatility in revenue forecasts. As companies navigate tariff risks and currency fluctuations, investors will be watching upcoming economic data and earnings reports to assess the full impact.
