Tech giants Microsoft and Alphabet kicked off a week packed with earnings reports, and the early results are… not great.
Driving the news: Results from Microsoft and Alphabet showed how the impacts of inflation on consumer spending, ongoing supply-chain challenges and a strong US dollar are creating serious challenges for big tech companies heavily dependent on cloud services and digital advertising.
Microsoft’s total revenue came in above estimates (up 11% from last year), but shares fell 2% in after-hours trading because its cloud business—seen as an important part of the company’s future—underperformed expectations.
Alphabet fared worse, dragged down by a US$420 million revenue miss from YouTube. Overall revenue for the business came in below forecasts, and shares fell 5% after-hours.
- The company saw modest growth in its cloud revenue (but still trails Amazon and Microsoft in terms of market share).
Why it matters: These reports mark an ominous start to Big Tech earnings, especially in the digital ads space. Last week, Snap also issued disappointing results and said it was unable to provide a forecast given the volatility in spending and concerns about the economy.
What’s next: Meta will release its earnings later today, shedding more light on just how much advertisers are pulling back spending. Analysts are expecting a second straight quarter of declining revenue, and the company has been under heavy criticism for shovelling cash into the metaverse while its core business is threatened by TikTok.