Technology
Wednesday, October 25th, 2023 2:14 pm EDT
Key Points
- Alphabet’s Stock Decline: Shares of Alphabet, Google’s parent company, experienced an 8% decline following the release of its third-quarter earnings. The primary reason for this decline was a miss on revenue from Google Cloud, which fell short of analyst estimates despite the company beating expectations for overall revenue and earnings per share.
- Contrast with Microsoft: The disappointment in Google Cloud’s performance stood in stark contrast to Microsoft’s earnings, which showed accelerated growth in its Intelligent Cloud business. Google’s cloud revenue amounted to $8.41 billion, failing to meet Street Account estimates of $8.64 billion.
- Concerns and Analyst Reactions: Analysts expressed concerns about Google Cloud’s ability to compete in the cloud market and the impact of “customer optimization efforts,” which refer to clients reducing their spending. This disappointment led to UBS analysts pointing out that investors were hoping to see more positive momentum in the cloud business. KeyBanc analysts worried that Google may have lost market share to Microsoft Azure, which experienced a growth rate of 28% year-over-year. Jefferies analysts noted that Google Cloud’s growth rate slowed to 22% compared to the 28% growth achieved in the previous quarter and attributed it to challenges in scaling AI infrastructure. They anticipated a stronger impact from artificial intelligence in 2024
Alphabet, the parent company of Google, saw an approximately 8% decline in its shares following the release of its third-quarter earnings, which fell short of analyst estimates, particularly in terms of Google Cloud revenue. While the company exceeded Wall Street’s expectations for overall revenue and earnings per share, it reported cloud revenue of $8.41 billion, missing Street Account estimates of $8.64 billion.
Google’s cloud revenue disappointment was particularly evident when compared to Microsoft’s earnings, which demonstrated robust growth in its Intelligent Cloud business. This discrepancy in performance raised concerns among analysts.
Alphabet’s CFO, Ruth Porat, noted that cloud growth remained strong across various segments, but the expansion rate was affected by customer optimization efforts, a reference to clients curbing their spending. This statement prompted concerns among analysts, who were hoping for a more positive outlook.
KeyBanc analysts expressed concern that Google Cloud may have lost market share to Microsoft Azure, which saw accelerated growth of 28% year-over-year on a foreign exchange-neutral basis.
Jefferies analysts observed that Google Cloud’s growth rate slowed to 22%, down from the 28% growth it achieved in the second quarter. They suggested that the challenges in ramping up AI infrastructure might be a factor in the deceleration and anticipated a stronger impact from artificial intelligence in 2024.
In summary, Alphabet’s shares declined due to disappointing results in Google Cloud revenue, particularly when compared to Microsoft’s strong performance in the cloud business. Analysts expressed concerns about the company’s ability to compete in the cloud market and the impact of customer optimization efforts on its growth rate.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/10/25/alphabet-stock-down-8percent-on-cloud-miss-as-investors-praise-microsoft.html
