Google-parent Alphabet experienced a slump in its stock as disappointing cloud revenue fell short of expectations. In contrast, Microsoft’s stock soared due to its strong cloud performance, surpassing analyst expectations.
After reporting its results on Tuesday, Alphabet’s stock dropped 6 percent in extended trading. The company reported overall revenue of $76.69 billion, showing an 11 percent increase and returning to double digits for the first time in a year. However, the growth was overshadowed by underwhelming cloud revenue, which failed to meet analyst predictions.
On the other hand, Microsoft’s revenue rose by 13 percent to $56.5 billion in the quarter ending on September 30. This growth was primarily driven by the success of its cloud computing and PC businesses. Microsoft’s Intelligent Cloud unit, including its Azure cloud-computing platform, saw revenue rise to $24.3 billion, surpassing analyst estimates of $23.49 billion.
Azure revenue specifically experienced a 29 percent increase, exceeding the 26.2 percent growth estimation from market research firm Visible Alpha. Although Microsoft does not disclose the exact revenue figure for Azure, it remains a significant part of the company’s business and is well-positioned to benefit from the growing interest in artificial intelligence.
Microsoft’s early investments in startup OpenAI, which is the owner of the popular ChatGPT service, have contributed to its advantage in the emerging field of generative AI services. While many of these services are not widely available yet, Microsoft’s customers have shown a renewed interest in the company’s cloud offerings in anticipation of utilizing these AI services. Microsoft’s vice president for investor relations, Brett Iversen, explained that AI is creating new conversations and reviving relationships with customers.
In contrast, Google-parent Alphabet’s cloud division reported lower-than-expected revenue for the third quarter due to an uncertain economy and high interest rates, causing customers to trim their budgets.
While there are weaker areas within Microsoft, such as slower growth in search advertising revenues, the company maintains a strong focus on integrating AI into its own products. For example, Microsoft has developed Copilot, a service that can summarize a day’s worth of emails into a brief update for its Microsoft 365 users. Though currently available to a limited number of pilot customers, Copilot requires businesses to upgrade their Microsoft-based systems to utilize the service fully.
Many analysts suggest that this strategy could generate sales for Microsoft before Copilot’s wider release.
By adhering to these guidelines, providing objective reporting, and optimizing for search visibility, this article seeks to present a comprehensive overview of the performance of Alphabet and Microsoft, highlighting the contrasting results in their cloud revenue and the factors driving their stock performance.
