Google CEO Sundar Pichai speaks at a panel at the CEO Summit of the Americas hosted by the U.S. Chamber of Commerce on June 09, 2022 in Los Angeles, California.
Anna Moneymaker | Getty Images
Results were good, but not good enough.
That’s Wall Street’s reaction to quarterly results on Tuesday from Alphabet and Microsoft. Both companies reported revenue and earnings that exceeded estimates, yet the stocks sold off in extended trading.
In investor speak, the stocks were priced for perfection. Alphabet shares are up 56% for the year and climbed to a fresh high last week, exceeding the prior record from late 2021, the peak of the tech boom. Microsoft is up 70% over the past 12 months, also reaching a fresh high recently and surpassing Apple as the most valuable publicly traded company.
The companies generated excitement last year by riding the artificial intelligence wave, and were also lauded by shareholders for their dramatic cost-cutting efforts, which included eliminating thousands of jobs.
In the weeks heading into their earnings reports, investors were buying as if they expected positive surprises. They were left disappointed and nitpicking the numbers.
Alphabet on Tuesday reported 13% revenue growth, the fastest rate of expansion since early 2022. Sales of $86.31 billion topped the average estimate of $85.33 billion, according to LSEG, formerly Refinitiv. Earnings per share of $1.64 beat estimates by 5 cents.
Revenue at Microsoft increased 18% to $62.02 billion, topping the $61.12 billion average analyst estimate. EPS of $2.93 was 15 cents above consensus.
Both companies also beat expectations in their cloud businesses, with Google Cloud reporting 25% growth and Microsoft’s larger Azure and other cloud services expanding by 30%.
The one disappointment from Alphabet was in Google’s ad business, which delivered revenue of $65.52 billion, trailing analysts’ estimates of $65.94 billion, according to StreetAccount. Within ads, YouTube came in just shy of expectations.
Stifel…
Read the full article here
