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Tech in Trouble? Microsoft and Alphabet Miss In Early Tech Earnings

Tech in Trouble_ Microsoft and Alphabet Miss In Early Tech Earnings

Microsoft and Alphabet led America’s largest tech companies out of the gate this week for Q3 2022 earnings.

Analysts were hoping for better. Both stocks fell by more than -7% on Wednesday.

It’s a tale of two earnings reports, though. Microsoft beat estimates, but Alphabet’s earnings missed.

Let’s start with Microsoft:

  • Revenue was up 11% YoY to $50.1 billion (analysts expected $49.7 billion)
  • Gross margin was 69%, down 1% YoY
  • The company’s cloud division, Azure, grew 35% YoY

And let’s compare-contrast with Alphabet:

  • Revenue was up 6% YoY to $69.1 billion (analysts expected $70.6 billion.)
  • Advertising revenue was $54.5 billion, only a +2.5% YoY increase.
  • YouTube ad revenue, one of the company’s all-star metrics, actually fell by 2% to $7.07 billion
  • The Google Cloud division grew 37%, but the division’s loss grew by 45% — so they paid to lose money
  • That side-by-side tells a story of duality — one of business as usual, and another of tech in trouble.

The misses are hard to oversee for investors, who prepare to digest earnings reports from Meta (which reported after the bell today), Amazon, and Apple to cap the week off. All three have fallen given anxiety about the markets.

However, the beats — no matter how minuscule — are fuel for investors who insist that some of America’s biggest value centers are holding up in spite of recession fears.

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