Wall Street did not impressively respond with a lukewarm reception to the quarterly results from Alphabet and Microsoft on Tuesday, despite both companies reporting revenue and earnings that surpassed expectations. While the results were good, they were not enough to satisfy investors, leading to a sell-off in extended trading.
Alphabet, the parent company of Google, reported a 13% revenue growth, the fastest expansion rate since early 2022, with sales reaching $86.31 billion, slightly topping analysts’ estimates. Earnings per share came in at $1.64, beating estimates by 5 cents. However, Google’s ad business fell short of expectations, with revenue trailing estimates by $420 million, primarily due to underperformance in YouTube ad sales.
Microsoft’s revenue increased by 18% to $62.02 billion, surpassing analysts’ average estimate of $61.12 billion. Earnings per share of $2.93 were 15 cents above consensus.
Both companies exceeded expectations in their cloud businesses, with Google Cloud reporting 25% growth and Microsoft’s Azure and other cloud services expanding by 30%.
Despite the positive results, investors seemed disappointed, perhaps due to high expectations fueled by the stocks’ impressive year-over-year gains. Alphabet shares, up 56% for the year, dropped nearly 6% after the report, while Microsoft’s stock initially fell over 2% before paring some losses.
Chipmaker AMD also experienced a post-earnings drop despite reporting better-than-expected revenue and meeting profit estimates. The stock, up 137% in the past year, fell almost 6% after the announcement, reflecting investor concerns despite excitement surrounding its artificial intelligence processors.
Attention now turns to Thursday, when tech giants Amazon, Apple, and Meta are set to report quarterly results. Like Alphabet and Microsoft, Meta shares have recently reached record highs, while Apple hit its all-time high in December, and Amazon remains slightly below its 2022 record. Market watchers are eager to see if these companies can meet or exceed expectations in a similarly challenging market environment.
