June 4, 2023

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Opinion: Google and Microsoft earnings show that the bar has been lowered for Big Tech

Opinion: Google and Microsoft earnings show that the bar has been lowered for Big Tech

Both Alphabet Inc and Microsoft Corp reported results that missed Wall Street expectations on Tuesday, but not only did investors not melt, they both saw their shares rise in after-hours trading.

Amid worrying economic signs, tech stocks have taken a hit so far this year, and fears of a slowdown among the names of major tech companies have pushed Wall Street on edge this week. But reactions to the profit loss on Tuesday afternoon show that fears and dips so far this year have dragged down even the biggest big tech names.

Microsoft MSFT,
Missed revenue and profit forecast, predicted that the cloud businessAzure, will grow about 43% in the September quarter, Amid fears of slowing cloud growth. While a slowdown of four percentage points from the previous quarter’s growth rate has led to sharp declines in the past, Microsoft stock jumped as soon as forecasts were made.

Google Alphabet The Google Alphabet,

reported a decline in profits for the second consecutive quarter, told analysts on his conference call that the slowdown in ad buyers affected the second quarter. However, Alphabet shares are up nearly 5% in post-close trading.

Colin Sebastian, an analyst at Baird Equity Research, wrote in a note to clients, summarizing the year’s opinion on Wall Street that things were not yet as bad as feared.

Much like the relief rally Meta Platforms Inc. META,
Stocks three months ago, however, this is a case of numbers, although they are good enough to avoid a drop in their stock, they shouldn’t actually be considered “good”. Both companies have warned about the macro economy, and it is clear that every company with business is slowing sharply at the moment.

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In the case of Alphabet, revenue on YouTube, a recent star, grew a meager 3% in the second quarter, compared to 14.3% growth in the first quarter, due to advertisers’ overall decline in spending and more competition from TikTok. Microsoft has seen a downturn in its PC business, with the pandemic’s big PC boom coming to an end. The advertising slowdown is also affecting its LinkedIn business, while the Xbox business is slowing quickly as the pandemic-fuelled boom in video games fades.

But those stocks don’t face the anger allotted to some smaller competitors. Last week, Snap Inc. SNAP for social media,
Starch More concerns among investors about online advertising spendingAnd the And its stock fell The macroeconomy struggles with inflation, changing consumer patterns and rising interest rates.

Microsoft and Google have managed to avoid the same fate, although the slowdown will likely take longer to actually affect very large companies, which have dominant positions in important industries. But make no mistake, there is a slowdown, and it is affecting the big tech companies, perhaps not so much that it will result in significant portions of their huge market caps being taken out — until now..