Microsoft and Alphabet are making less money than they thought

Heythe tech industry continues to deliver bad news. Software provider Microsoft and the Alphabet holding company around Internet group Google posted slightly worse-than-expected business results on Tuesday after the stock market closed. The stock market’s reaction was initially limited, probably because it feared the worst. Microsoft’s share price fell slightly in after-hours trading, and Alphabet shares even gained more than 2 percent in value.

Microsoft reported a 12% rise in revenue to $51.9 billion for the final quarter of its 2021/2022 fiscal year, which ended June 30. Analysts on average had expected $52.4 billion. Net income was $16.7 billion, up 2%, and earnings per share of $2.23 were 6 cents below expectations.

The software group had already lowered the bar a bit in early June and revised its forecast slightly downwards due to negative currency effects. In addition, the company now faced a number of other charges in its quarterly report: For example, advertising sales achieved by Microsoft with its career platform Linkedin and its search engine Bing were $100 million lower than expected. Production shutdowns in China due to the coronavirus restrictions would have cost the Windows operating systems business more than $300 million in sales. In addition, the layoffs would result in severance charges of more than $100 million. Microsoft recently confirmed that it had cut a “small number” of jobs.According to media reports, less than one percent of its approximately 180,000 employees are affected.

Cloud computing is growing strongly at Microsoft

In the cloud computing industry, which is particularly closely watched by analysts, there was again rapid growth, but this was somewhat lower than expected. Here, the Azure platform is one of Microsoft’s most important products, and its sales grew by 40 percent. Alphabet grew revenue 13% to $69.7 billion last quarter, slightly below expectations. Net income fell 14 percent to $16.0 billion, and earnings per share of $1.21 were 7 cents below expectations.

Google’s parent company had already disappointed with its first quarter figures. It also complains about negative currency effects. The biggest weakness has been video site YouTube, which depends on advertising revenue. In the second quarter, their growth slowed further, this time sales only increased 5 percent to $7.3 billion. Like Microsoft, Alphabet’s cloud computing business continues to be a growth driver, with sales up 36 percent this time to $6.3 billion.

Alphabet is also paying more attention to its costs right now. CEO Sundar Pichai wrote to his employees a few weeks ago that the group wanted to slow the pace of hiring for the rest of the year. “We are not immune to economic headwinds.” Last week, the short messaging service Twitter and Snap, the parent company of the social network Snapchat, presented disappointing quarterly figures. Both companies do their business mainly with online advertising. Twitter reported a surprise drop in revenue, attributing it to the difficult environment in the advertising industry and uncertainty surrounding the agreed sale of the company to Elon Musk. Snap posted its lowest revenue growth since its IPO five years ago. Snap’s stock price is down nearly 80 percent year-to-date.

In the coming days, Facebook parent company Meta, online retailer and electronics group Apple will also report quarterly results.

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