Microsoft’s growth was boosted by its continual increase in cloud services sales, while Google missed revenue and earnings targets for the third consecutive time.
Microsoft and Google’s parent company, Alphabet, had their profits decrease this quarter. Spotify’s profit was taken away by sluggish ad growth.
Microsoft’s total revenue in the first quarter of their fiscal year was $50.1 billion, up 11% from last year. Meanwhile net income decreased by 14% to $17.6 billion
The software giant looks strong this quarter, as its cloud business grew by 24% to $25.7 billion. That includes $20.3 billion from its Intelligent Cloud division, which grew by 20%. Azure and other cloud services saw revenue growth of 35%.
Healthy demand across the Microsoft commercial businesses was again seen in its latest quarter, with solid bookings.
Microsoft CEO and chair Satya Nadella also expressed an optimistic outlook for the future. “In a challenging world, digital technology is the ultimate tailwind,” he said.
“In this ever-changing environment, we’re focused on helping our customers do more with less, while investing in long-term growth opportunities and managing our cost structure prudently.”
But Microsoft is not immune to the problems that face the global economy. In an interview with Bloomberg, Hood said Microsoft pays more for delivery of cloud computing services to customers in Europe as increasing energy costs impact profitability. He added that the company expected to pay $800 million in extra energy costs this fiscal year.
Xbox also benefited from the boost in cloud services. On this earnings call, Nadella said that more than 20 million people have streamed games using Xbox Cloud Gaming. That’s double what Microsoft shared in April. Revenues for Xbox hardware were also 13% higher than last quarter.
LinkedIn revenue increased by 17% last year, while Microsoft search and news advertising revenue grew by 16% excluding traffic acquisition costs.
Microsoft has chosen to work with Netflix in order to offer a cheaper subscription option for people who are willing to watch ads.
The third quarter for Alphabet
Meanwhile, Google’s parent company – Alphabet – fell short of expectations and its stock price plummeted.
Alphabet’s revenue was $69.09 billion for the third quarter, which is higher than the $65.1 billion reported in the third quarter of last year but lower than the $70.58 billion estimated by Refinitiv.
Net income decreased by a sharp amount this quarter, with the company earning $13.9bn. That’s compared to $18.9bn last year. Earnings per share for this quarter were also lower than anticipated at $1.06 instead of the projected $1.25
Revenue and earnings per share are not where they had been projected. This marks the third quarter in a row that the company has missed expectations.
The tech giant’s advertising earnings were just short of estimates, raking in just under $54.5bn, a bit below last year’s $53.1bn.
Even though YouTube’s revenue dropped by 1.9 percent, analysts are still expecting it to increase by 3 percent. This is mainly due to product placements and live content on YouTube.
YouTube’s ad revenue has seen a decline for the first time since Alphabet began disclosing results, according to an Associated Press report.
Spotify has experienced a reduction in its advertising revenue. The company reported that this drop was due to “slower-than-forecasted growth given the challenging macro environment.”
Google Cloud made $6.9 billion this quarter, but their losses are at $699 million, and more than last year’s $644 million.
Alphabet and Google CEO Sundar Pichai said the company is focusing their attention on a narrower set of product and business priorities.
“Product announcements we’ve made just this month have shown this quite clearly, including significant improvements to both Search and Cloud, powered by AI, and new ways to monetize YouTube Shorts,” said Pichai.
We believe that long-term thinking and short-term action go hand in hand. We’re focused on both sustainable investing and paying close attention to the economic environment.
Google’s headcount from this quarter is 186,779, up from 150,028 in the same period last year. However, Pichai said on the company’s earnings call that headcount growth will be “significantly lower” this quarter.
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