- Google parent company Alphabet and Microsoft both reported profits on Tuesday
- Alphabet shares fell as the company’s cloud revenue exceeded expectations
- However, Microsoft’s report caused shares to rise and exceed expectations
Shares of Google parent company Alphabet tumbled after the company reported disappointing cloud revenues, while shares of rival Microsoft rose as they beat expectations.
Shares of Alphabet fell 6 percent in extended trading after the company reported results after the bell on Tuesday, while shares of Microsoft rose as much as 5 percent.
Google’s parent company reported total revenue of $76.69 billion, up 11 percent and back into double digits for the first time in a year, but the results were overshadowed by cloud revenue growth that fell short of analyst expectations.
Microsoft’s revenue rose 13 percent to $56.5 billion in the quarter ended September 30, led by the strength of its cloud computing and PC businesses.
Revenue from Microsoft’s Intelligent Cloud unit, which houses the Azure cloud computing platform, grew to $24.3 billion, surpassing analyst estimates of $23.49 billion, LSEG data showed.
Shares of Google parent company Alphabet are plummeting after the company reported disappointing cloud revenues
Shares of Alphabet fell 6 percent in extended trading after the company reported results after the bell on Tuesday
Azure revenue rose 29 percent, higher than the 26.2 percent growth estimate from market research firm Visible Alpha.
The company does not provide absolute revenue figures for Azure, the part of Microsoft’s business best positioned to benefit from growing interest in artificial intelligence.
Wall Street is exploring how generative AI cloud services could benefit Microsoft, which secured an early lead with investments in startup OpenAI, owner of the popular ChatGPT service.
Many of these AI services are not yet generally available. Brett Iversen, Microsoft’s vice president of investor relations, said much of the revenue growth reported Tuesday came from customers reviving their use of Microsoft’s cloud in anticipation of using those services.
“What AI does … is open new conversations or expand existing conversations, or reconnect us with customers that we might not have done as much with,” Iverson told Reuters.
Microsoft’s revenue rose 13 percent to $56.5 billion in the quarter ended September 30, led by the strength of its cloud computing and PC businesses
Microsoft shares rose as much as 5 percent after hours
By comparison, Google parent Alphabet’s cloud division missed third-quarter revenue estimates on Tuesday as an uncertain economy and high interest rates led its customers to tighten their budgets.
Microsoft said Tuesday that its fiscal first-quarter profit was $2.99 per share, above analysts’ estimates of $2.65 per share, according to LSEG data.
“There are some weaker areas; For example, search advertising revenues are growing slower than most segments,” said Jeremy Goldman of research firm Insider Intelligence.
Microsoft is weaving AI into its own products, such as the $30-per-month “Copilot” for its Microsoft 365 service, which can condense a day’s worth of emails into a quick update.
While the tool will only be shown to a small number of pilot customers until it becomes available next month, companies will need to make some upgrades to their Microsoft-based systems to use Copilot.
Analysts say this could generate revenue for the Redmond, Washington-based company ahead of Copilot’s wide release.