Microsoft's and Google’s earnings tell a tale of two clouds – Yahoo Finance

Microsoft (MSFT) and Google parent Alphabet (GOOG, GOOGL) reported their earnings after the bell Tuesday for what investors hoped would be an explosion of artificial intelligence power from both tech giants.
And while the two beat Wall Street’s expectations on both their top and bottom lines, Microsoft came away the winner after reporting better-than-expected growth in its Azure business thanks to the strength of its AI offerings. Google, on the flip side, reported slower-than-anticipated growth in its cloud business, despite pumping cash into its AI efforts.
It was a tale of two clouds for the rivals. While Microsoft outpaced analysts’ predictions, Google fell short, and investors reacted in turn, driving shares of Microsoft higher some 4% in early trading Wednesday, while Google shares sank more than 8%.
“I think what this is telling us is, Microsoft is absolutely in a league of its own when it comes to enterprise software, when it comes to tech,” RBC Capital Markets equity analyst Rishi Jaluria told Yahoo Finance Live on Wednesday.
“It’s an unparalleled year for Microsoft. Who would have thought if we were … having this conversation a year ago and I were to tell you, ‘Hey Microsoft is the leader in Big Tech AI, not Google,’ you probably would have laughed at me and told me to get off of your show,” Jaluria added.
Microsoft reported Azure growth of 29% in its first quarter, a marked reacceleration for the segment, which saw sequential growth fall in prior quarters, and above Wall Street’s estimates of 27%.
During Microsoft’s earnings call, CEO Satya Nadella rattled off a litany of ways the company’s customers are using its AI capabilities, including its AI copilot platforms, across its various offerings. That includes 18,000 organizations that use the company’s Azure OpenAI Service, 37,000 organizations that now subscribe to Copilot for Business, and 126,000 organizations that have used the company’s Copilot in Power Platform to date.
“Despite a difficult environment, we remain confident [Microsoft's] growth opportunities over the medium term and beyond are greater than many realize, and this includes significant generative AI monetization,” Mizuho analyst Gregg Moskowitz wrote in an investor note after the call.
Microsoft has been pouring money into its AI efforts, including a multibillion-dollar investment in ChatGPT developer OpenAI. And with AI permeating seemingly every aspect of Microsoft’s enterprise and, increasingly, consumer offerings, those investments are beginning to bear fruit.
While Microsoft was taking a victory lap, shares of Alphabet were taking a beating. Despite its all-important ad business beating expectations, taking in $59.7 billion versus an anticipated $58.9 billion, its Google Cloud business fell short of Wall Street’s expectations. The segment brought in $8.41 billion in the quarter, while analysts were looking for $8.6 billion.
The company’s stock fell off more than 8.5% in early trading Wednesday.
CEO Sundar Pichai talked up a slew of AI efforts underway at the company, but didn’t provide nearly as many concrete numbers as Nadella. Google’s cloud business sits in third place behind market leaders Amazon and Microsoft, and AI is seen as a means of helping the segment grow at a faster clip. But, at least this quarter, that wasn’t enough to keep Wall Street happy.
Despite the dichotomy in cloud performance, Google isn’t exactly hurting. And some analysts were quick to point out that Google’s cloud revenue is something of an afterthought compared to its ad business.
“Owning Alphabet for its Cloud business is like rooting for Michael Jordan to play baseball,” Wedbush analyst Scott Devitt wrote in an investor note following the earnings announcement. “We think the reaction in shares after-market is overdone and believe investors are placing too much relative value on the company's Cloud segment which accounts for just ~11%.”
Google is also, importantly, working on building out its Search Generative Experience (SGE), which is a form of Google Search that uses generative AI capabilities to provide answers to users’ queries. More specifically, Pichai explained, Google is ensuring it has the right ad experience for the product.
“[Ads] will continue to play an important role in this new Search experience. People are finding ads helpful here as they provide useful options to take action and connect with businesses,” he said during the earnings call.
“We'll experiment with new formats native to SGE that use generative AI to create relevant, high-quality ads customized to every step of the Search journey.”
So while Google’s AI cloud efforts might not be paying off as well as Microsoft’s, it’s still making strong moves in its most important business segment: advertising.
Of course, the current AI boom is still young — it hasn’t even been a year since ChatGPT was released to the public — and anything can still change for both Microsoft and Google. But for now, it looks as though, at least as far as the cloud goes, Microsoft is dominating.
Daniel Howley is the tech editor at Yahoo Finance. He's been covering the tech industry since 2011. You can follow him on Twitter @DanielHowley.
For the latest earnings reports and analysis, earnings whispers and expectations, and company earnings news, click here
Read the latest financial and business news from Yahoo Finance
Microsoft stock rose after the tech giant's quarterly earnings beat on the top and bottom lines.
States sue Meta alleging harm to youth, General Motors withdraws full-year guidance, and other news to start your day.
Google parent Alphabet reported its Q3 earnings after the bell on Tuesday.
Three of tech’s biggest names reported earnings Tuesday evening and the sector fell hard on Wednesday. While Microsoft surprised to the upside, Google’s cloud revenue came in below Wall Street estimates, sending that stock more than 9% lower by Wednesday afternoon. Chipmaker Texas Instruments’ latest outlook was bleak.
(Bloomberg) — European stocks pared a decline after the European Central Bank left interest rates unchanged for the first time in more than a year, and data showed the US economy grew at the fastest pace in nearly two years.Most Read from BloombergControversial Chip in Huawei Phone Produced on ASML MachineApple Plans AirPods Overhaul With New Low- and High-End Models, USB-C HeadphonesIsrael Is Losing Support as Fury Grows Over Its Strikes on GazaTrump Ally Mike Johnson Elected House Speaker, Sh
Alphabet stock fell 9.5% Wednesday despite stronger-than-expected quarterly earnings from the Google parent. Earnings per share were $1.55, nine cents ahead of the consensus at $1.46 a share. Ad revenue was $59.6 billion, above the Wall Street consensus forecast of $59.6 billion.
For the quarter ended Sept. 30, the parent of Facebook, Instagram, WhatsApp, and Threads reported revenue of $34.2 billion, up 23% and above the Wall Street consensus forecast at $33.5 billion. Meta shares have rallied 149% this year, driven largely by the company’s “year of efficiency” push to reduce costs and boost margins.
Netflix, Honeywell, RTX, Medtronic and Eaton are included in this Analyst Blog.
Microsoft stock gained on a cloud revenue boost, Google's fell after a cloud miss. What are the expectations for AMZN stock?
Investors will look for signs that U.S. fast-food chains, already contending with inflation-stung consumers preferring to dine at home, will also have to grapple with the explosive popularity of weight-loss drugs. Chipotle Mexican Grill will kick off the earnings season on Thursday and its commentary will be scrutinized by investors worried that appetite-suppressing drugs like Olympic and Wegovy will spark a fundamental change in food consumption patterns and hurt demand for burgers and fried chicken. The likes of McDonald's and KFC-parent Yum Brands are already dealing with slowing traffic as high inflation saps consumers' buying power, though Chipotle and Starbucks have some protection from their relatively more affluent customer base.
I am approaching the time when I'll take required minimum distributions (RMDs) from my individual retirement account (IRA). I am in a quandary about what I can do with this anticipated largesse of cash. I do not necessarily need the … Continue reading → The post Ask an Advisor: I Don't Need Them ‘Dumped Into My Checking Account.' What Can I Do With RMDs? appeared first on SmartAsset Blog.
There is a specific price companies pay for government red tape, according to a trade group that represents manufacturers. In 2022, that amount was $30,000 per employee.
(Bloomberg) — Visa Inc. and Mastercard Inc. are facing a new round of regulatory challenges, with the Federal Reserve proposing lower caps on the fees banks and payment companies can charge merchants when consumers swipe their debit cards at checkout.Most Read from BloombergControversial Chip in Huawei Phone Produced on ASML MachineApple Plans AirPods Overhaul With New Low- and High-End Models, USB-C HeadphonesIsrael Is Losing Support as Fury Grows Over Its Strikes on GazaTrump Ally Mike Johnso
Ford nears UAW deal, Meta revenue jumps on ad rebound, new House Speaker elected, and other news to start your day.
Of the 127 S&P 500 companies that have reported third-quarter earnings so far, 80% are beating profit estimates by a median of 7%.
IT software and consultancy services provider IBM reported third-quarter revenue and profit above Wall Street targets on Wednesday, buoyed by stable demand for its software solutions. While peers like Accenture flagged deepening weakness in consulting deals, IBM's finance chief James Kavanaugh told Reuters the company had grabbed market share in that segment. Kavanaugh also said IBM had "low hundreds of millions of dollars" under generative artificial intelligence (AI) sales or bookings in the third quarter, with clients including accounting firm Ernst & Young and Truist Bank.
Treasury yields pushed higher, putting more pressure on already strained tech stocks.
Annaly (NLY) delivered earnings and revenue surprises of 1.54% and 113.74%, respectively, for the quarter ended September 2023. Do the numbers hold clues to what lies ahead for the stock?
For most of this year, investor sentiment was high, and the markets were on an upward tear. But that sputtered to a halt at the end of the summer, and this fall has seen a pullback in the main indexes. We’re still up for the year-to-date, but not by as much as we were in July. At this writing, the S&P 500’s year-to-date gain is 9%, and the NASDAQ’s is 22%. It is most accurate to say that current conditions are volatile and unsettled. Both the bulls and bears can find plenty of evidence and prece
Armour Residential REIT (ARR) delivered earnings and revenue surprises of -6.09% and 20.22%, respectively, for the quarter ended September 2023. Do the numbers hold clues to what lies ahead for the stock?