Light and shadow in the cloud
Microsoft delights investors, Alphabet disappoints
October 25, 2023, 12:15 a.m
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Google’s advertising business is booming, but the parent company is lagging behind expectations in the cloud division. Investors are letting the stock fall. Microsoft’s quarterly results look much more positive. The group is also making money with its AI products.
The important cloud divisions of Microsoft and Alphabet are as opposite as sunshine and rain. While the Windows group exceeded experts’ expectations for the past quarter thanks to strong business in the cloud, the Google parent fell short of forecasts in this area. After the business figures were presented after the stock market closed, Microsoft shares initially rose five percent, while Alphabet fell five percent.
“Although Alphabet beat estimates for quarterly earnings and revenue, investors were disappointed by the relatively weak performance of Google’s cloud platform,” said Jesse Cohen, senior analyst at Investing.com. “It risks falling further behind Azure and AWS.”
Microsoft exceeded analyst forecasts across all divisions in the first quarter, LSEG data showed. As with almost all technology companies, experts are also paying particular attention to how the new enthusiasm for artificial intelligence affects the business. “The results show that AI products are driving sales and are already contributing to sales and profit growth,” said Cohen about the situation at Microsoft. The company has a stake in OpenAI, the maker of ChatGPT.
Google, on the other hand, is competing with “Bard,” which is not yet considered as powerful. In general, competition is growing: numerous corporations are pumping billions into the new technology. The hype around AI is in turn driving demand for cloud services, as such applications require specialized high-performance computers. According to a study by real estate agent Jones Lang LaSalle, the installed computing power of all operators at European hubs alone doubled to 114 megawatts in the second quarter – a record.
Antitrust watchdogs are keeping an eye on Google
Microsoft sales rose overall by 13 percent to $56.5 billion. Experts had expected 54.5 billion. Sales in the Intelligent Cloud division – which also includes Microsoft’s Azure cloud offering – increased to $24.3 billion. 23.5 billion were predicted here. Net income was $22.3 billion, up 27 percent. Microsoft recently received the final green light for the 69 billion euro takeover of the video game provider Activision Blizzard.
At Alphabet, group sales climbed eleven percent to $76.7 billion in the quarter. Group profits rose by more than 40 percent to $19.7 billion. Advertising revenue increased by nine percent to $59.65 billion. Thanks to its strong position as a search engine operator, Google can collect 28 percent of all revenue from online advertising worldwide. Last year, these revenues totaled $224.5 billion. However, the group’s position as market leader in online advertising repeatedly gets into trouble with antitrust authorities. At the end of the current proceedings in the USA and Europe there could be a break-up. According to the media, Google wants to defend itself against this with all possible means.