Microsoft And Alphabet Saw A Break In The Clouds

Microsoft And Alphabet Saw A Break In The Clouds
Theodora Lee Joseph, CFA

about 2 months ago2 mins

What’s going on here?

Microsoft and Alphabet both announced expectation-beating quarterly revenue on Tuesday, even though the firms’ cloud divisions broke away from each other.

What does this mean?

Microsoft flew past Wall Street’s projections when it reported results late on Tuesday, announcing that revenue came in just above $56 billion last quarter, 13% higher than the same time last year. That was mainly down to strong showings in the tech titan’s Azure cloud computing division and office software businesses. Alphabet will be envious of that, mind you. The cloud sector over at Google’s parent company fell short of estimates, mustering up a roughly 22% uptick over the quarter versus 28% the one before.

Microsoft cloud earnings
Source: Microsoft

Why should I care?

For markets: Big Tech, bigger expectations.

Investors expect a lot from Big Tech, which means major companies are measured against lofty targets. Microsoft’s banking on artificial intelligence (AI) to smarten up business in the long term, which explains why the firm’s poured cash into ChatGPT’s creator OpenAI and got to work on its own chatbot. Looks like that’s already paying off: those AI-assisted quarterly results will have comforted investors’ worries that the cloud business – Microsoft’s biggest moneymaker – might be running out of steam, and given them more reason to trust the tech firm’s master plan.

The bigger picture: It’s nice for some.

Alphabet may have had issues with its cloud business, but the company can comfort itself with promising digital advertising results. That’ll bode well for rivals like Meta, Amazon, and Pinterest too, suggesting that companies are still willing and able to splash out on ads on social media sites. So far, so good for Big Tech, then: while plenty of businesses have been all but wiped out by market conditions and high interest rates, major tech companies have managed to hold relatively steady. And sure, they may come under fire if their AI endeavors still aren’t bearing fruit next year, but if you believe that stock-squashing interest rates have topped out, then there’s no reason to doubt Big Tech’s power going forward.

Alphabet stock
Source: Google Finance


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