Google and Microsoft both reported after the bell. One is popping, while the other is dropping. So let’s find out which is which! 👇
First up is Microsoft, which reported $2.99 in earnings per share on revenues of $56.52 billion. That exceeded consensus estimates of $2.65 and $54.50 billion.
Total revenues grew 13% YoY. However, Azure revenues jumped 29% YoY, faster than the 26% analysts expected. Microsoft Cloud continues to help its customers drive operating leverage, with its Azure OpenAI Service seeing strong momentum. The generative AI-focused platform now has 18,000 customers, up from 11,000 during its July earnings release. ⛅
Additionally, the company saw its commercial “office” products accelerate despite continued weakness in its consumer segments. Meanwhile, net income rose 27% YoY, primarily due to management cutting costs. Operating expenses increased 1.3% YoY, the slowest since 2016. ✂️
The AI-specific tailwinds continue to support the stock, with $MSFT shares up 5% after the bell. 📉
Next is Alphabet (AKA Google), whose cloud revenue came in worse-than-anticipated and overshadowed its overall positive results. 🌩️
Earnings per share of $1.55 on revenues of $76.69 billion beat estimates of $1.45 and $75.97.
Its 11% YoY total revenue growth broke its year-long streak of single-digit growth. However, where things went south is its segmented revenue:
- YouTube advertising revenue: $7.95 billion vs. $7.81 billion expected
- Google Cloud revenue: $8.41 billion vs. $8.64 billion expected
- Traffic acquisition costs: $12.64 billion vs. $12.63 billion expected
Alphabet’s cloud unit doubled overall revenue growth by jumping 22% YoY and turned an operating profit vs. a loss last year. However, the slightly slower expansion rate concerns investors who fear the company is falling behind Amazon Web Services and Microsoft Azure. 😟
As generative artificial intelligence (AI) becomes more mainstream, companies are turning to the cloud to run their heavy workloads. It presents a significant opportunity for Alphabet and its peers, but it’s a highly competitive market, so investors heavily scrutinize numbers in the space.
Some analysts even went as far as to say that Alphabet’s service is a “third-rate” cloud platform. As for the company, CFO Ruth Porat told investors that cloud growth remains strong, but customers are pulling back their spending in the area. 🔻
Overall, big tech continues to “live and die” by the cloud. $GOOGL shares shed 6% after the bell as investors digested the news. 📉
