OPINION: The reactions to earnings misses Tuesday by Alphabet and Microsoft show that this year's tech declines have resulted in a lowered bar for even the biggest of the Big Tech names, writes columnist tpoletti.
Alphabet Inc. and Microsoft Corp. both reported results that missed Wall Street’s expectations Tuesday, but not only did investors not melt down, both actually saw their stocks rise in after-hours trading.
Microsoft MSFT, -2.68% missed on both revenue and profit expectations, and forecast that its cloud business, Azure, will grow about 43% in the September quarter, amid fears of slowing cloud growth. While the four-percentage-point deceleration from the previous quarter’s growth rate may have led to sharp declines in the past, Microsoft stock jumped as soon as the forecast was provided.
“In context of the weakening macro backdrop, Alphabet’s Q2 results were decent, with close to in-line revenues across all key business segments,” wrote Colin Sebastian, an analyst with Baird Equity Research, in a note to clients, summing up the general view on Wall Street that things were not yet as bad as feared.
In Alphabet’s case, revenue at YouTube, a recent star, grew a scant 3% in the second quarter, compared with 14.3% growth in the first quarter, due to overall advertiser pullbacks in spending and more competition from TikTok. Microsoft saw its PC business soften, as the big PC boom of the pandemic is over. The advertising slowdown is also affecting its LinkedIn business, while the Xbox business is slowing rapidly as the pandemic-fueled surge in videogames wears off.
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