Alphabet
Today, Alphabet’s stock is likely to feel more pain as the company failed to impress investors in its quarterly earnings. The stock fell over 3% yesterday in the after-market hours because the company reported weaker than expected earnings. Its revenue number also came short of expectations.
Key Numbers
Google’s revenue was $68.01 billion, a 23 per cent increase over the same period the previous year. That’s down from 34% growth in the first quarter of 2021 when the economy reopened after the epidemic. In Europe, which includes the Middle East and Africa, revenue growth dropped to 19 per cent in the first quarter from 33 per cent the previous year.
The Corporation recorded $54.66 billion in advertising revenue for the quarter, up from $44.68 billion the previous year.
In the third quarter, Google’s cloud business stood out, expanding 44 per cent and above expectations as more large corporations transferred workloads away from their own data centres. However, the cloud segment continues to lose money, reporting an operating loss of $931 million compared to $974 million the previous year.
Russia Impact
Due to the invasion of Ukraine, Google paused many of its Russian operations throughout the quarter. It is still unclear how the company is going o tackle those geopolitical tensions. Russia is undoubtedly an important market for Google, and having a complete exit from that country will have a much more profound influence on its bottom line.
Competition Catching up
TikTok continues to gain a larger part of the social media and video industry. There is no doubt that TikTok is not like Snapchat, which is mainly geared toward Gen Z. TikTok’s user base is much broader and consists of all ages. TikTok has much more engaging content, influencing Google’s YouTube ad revenue. However, YouTube isn’t sitting quietly and watching the competition taking all the additional revenue. Its YouTube product called Shorts has gotten 30 billion daily views, double the number of views as the previous quarter.
Microsoft
Microsoft once again came up with blowout numbers, and its stock price surged over 6% in after-market trading hours. The software giant produced a stellar quarterly earnings result that was much stronger than expectations, and it also produced a much more optimistic outlook for the current outlook. This is something that not many companies can do under the current climate.
Earnings Numbers
According to a statement, Microsoft’s revenue climbed by 18 per cent year over year in the fiscal quarter that concluded on March 31, compared to 20 per cent in the previous quarter. Microsoft delivered its weakest revenue beat since 2018, outperforming the estimate by less than 1%. Sales and marketing spending was $5.6 billion, a 10% increase over the previous quarter and the most significant growth in more than three years.
The Intelligent Cloud division of the Corporation earned $19.05 billion in sales, including Microsoft’s Azure public cloud for application hosting and SQL Server, Windows Server, and corporate services. This is a 26 per cent increase over the $18.90 billion estimates. Revenue from Azure and other cloud services increased by 46 per cent in the quarter, compared to a 46 per cent increase the previous quarter. In the third quarter, Azure transactions worth at least $100 million more than doubled.
Microsoft’s Productivity and Business Processes business, including Office productivity software, LinkedIn, and Dynamics, reported $15.79 billion in sales in the third quarter, up approximately 17% from the previous quarter.
Inflation
Another method Microsoft increases its Office cloud business is to increase the amount of money paid by each Office subscription.
During the quarter, Microsoft hiked the pricing of select Office 365 productivity software subscriptions. During the quarter, the price increase that occurred was the first price increase in nearly a decade.