Google parent Alphabet and Microsoft kicked off Big Tech earnings yesterday… and things actually went pretty well?
What happened: In the face of economic headwinds that continue to batter the tech ecosystem, both Alphabet and Microsoft managed to beat analyst expectations on several key metrics, bringing in US$69.7 billion and US$52.9 billion in revenue, respectively.
- Alphabet’s advertising business (including YouTube) beat expectations but fell from the previous year and faces fierce competition from TikTok in short-form videos.
- News on their respective cloud businesses were split: Growth for Microsoft’s Azure unit slowed while Google Cloud (which trails far behind) finally became profitable.
Bottom line: Alphabet and Microsoft have benefitted from their starring role in the AI hype cycle, but investors these days also want to see cost-cutting (read: layoffs, a pullback on corporate travel, and no more free massages) to boost profits in the short-term.
- In January, Alphabet and Microsoft announced plans to cut 12,000 and 10,000 jobs in 2023, respectively—in line with recent announcements from Amazon and Meta.
- Those efforts appear to have paid off: Both companies beat Wall Street's earnings expectations.
What’s next: Alphabet and Microsoft are racing to incorporate AI capabilities into search (Microsoft has already launched a new Bing search powered by Open AI), which they see as the next big engine for revenue growth.—SB