Despite billions in profits, US tech giants Google and Microsoft are not immune to high inflation and economic concerns. Google clearly felt the frugality of advertisers in the past quarter. At Microsoft, growth in key cloud businesses has weakened — and the group disappointed investors with the outlook for the current quarter.
Shares started weak in US trading on Wednesday: the Microsoft newspaper lost about eight percent and the Alphabet price fell by almost nine percent. At Google’s parent company, Alphabet, revenue grew just six percent year-over-year to a good $69 billion (nearly €70 billion). Basically, profits fell from $18.94 to about $13.9 billion.
YouTube ad revenue has fallen
Notable was the decline in advertising revenues on the video platform YouTube, which fell from 7.2 to 7 billion dollars on an annual basis. In recent years, YouTube has been one of the driving forces behind Google’s growth — and it was the first decline since the company released it. The withdrawal of advertisers was already evident in the second quarter, the trend has accelerated in the past quarter, said Google manager Philipp Schindler in a conference call with analysts. Advertisements for insurance, loans and cryptocurrencies were particularly affected.
Meanwhile, the operating income of Google services as a whole fell from nearly $24 billion to $19.8 billion. They still make up virtually all of Alphabet’s activities. The umbrella company’s other projects — such as robot car company Waymo or drone delivery service Wing — contributed $209 million to group revenue. That was an increase of about 12 percent. Meanwhile, operating loss rose from $1.3 billion to $1.6 billion. Among other things, Alphabet is preparing for the launch of Waymo robot taxis in Los Angeles.
Strong US dollar weighs on Microsoft profit
Microsoft managed to increase sales significantly in the summer. In the three months to the end of September, sales rose 11 percent to $50.1 billion compared to the same period last year. Microsoft slightly exceeded market expectations in the first fiscal quarter of its fiscal year. However, the group is suffering from the strong dollar, which is reducing foreign earnings in US currencies.
Microsoft’s operating profit rose 6 percent to $21.5 billion. Due to sharply higher costs, the net result fell by 14 percent to 17.6 billion dollars.
Revenues in the cloud business with applications and storage space on the Internet increased by 24 percent in total. Microsoft’s Azure platform – the flagship of the cloud division – posted a growth of 35 percent. In the previous quarter, it was still 40 percent. That was a warning sign for investors.
In addition, with a sales forecast of $52.35 to 53.35 billion for the current quarter, Microsoft clearly missed the expectations of investors, who had previously expected $56 billion. Among other things, Microsoft is preparing for a further decline in PC sales – and therefore also in its company with new installations of the Windows operating system.
Google’s cloud business grew from nearly $5 billion to approximately $6.9 billion. However, the division’s operating loss also increased from $644 to $699 million. Google is number three in cloud services, behind Amazon and Microsoft, but is trying to catch up.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
