{"id":5784,"date":"2023-10-27T02:41:45","date_gmt":"2023-10-27T02:41:45","guid":{"rendered":"https:\/\/infundpros.com\/markets\/alphabet-stock-sinks-despite-lofty-earnings\/"},"modified":"2023-10-27T02:41:46","modified_gmt":"2023-10-27T02:41:46","slug":"alphabet-stock-sinks-despite-lofty-earnings","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=5784","title":{"rendered":"Alphabet Stock Sinks Despite Lofty Earnings"},"content":{"rendered":"<div>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">Key takeaways<\/h2>\n<ul>\n<li>Alphabet\u2019s Q3 earnings were better-than-expected than most revenue and profits forecasts<\/li>\n<li>But cloud computing let the Big Tech giant down, with Microsoft pulling ahead<\/li>\n<li>Google\u2019s share price fell 9.5% as a result<\/li>\n<\/ul>\n<p>Thought Alphabet stock might be soaring after a solid earnings report? Think again. All that it took was Google\u2019s cloud computing revenue to fall slightly short of expectations to send the stock price cratering.<\/p>\n<p>From an investor perspective, it\u2019s justified: Microsoft won in cloud computing for the third quarter, which invites questions over whether Google is managing to keep up in artificial intelligence development &#8211; and if it can outpace its long-time rival.<\/p>\n<p>Let\u2019s get into the details of what the Alphabet earnings report looked like, just how badly Google is losing market share to Microsoft and what the stock price reaction was.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">What happened with Alphabet earnings?<\/h2>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<p>On the face of it, Alphabet\u2019s earnings should have been a beat. For the third quarter, Google saw its revenue grow 11% from the same period last year to $76.69 billion, ahead of the analysts\u2019 estimate of $76 billion.<\/p>\n<p>Earnings per share arrived at $1.55, ahead of analyst predictions, which came in at $1.46. Ad revenue performed well at $59.6 billion, the same as Wall Street predictions, with YouTube ad revenue coming in at $8 billion, slightly higher than analysts&#8217; anticipated $7.8 billion.<\/p>\n<p>\u201cI\u2019m pleased with our financial results and our product momentum this quarter, with AI-driven innovations across Search, YouTube, Cloud, our Pixel devices and more,\u201d CEO Sundar Pichai said in the company\u2019s earnings statement.<\/p>\n<p>The company repurchased $15.8 billion of common stock in the third quarter and for the fourth quarter, consensus estimates are coming in at $84.9 billion with a profit of $1.63 a share for the Big Tech conglomerate.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">Google loses market share to Microsoft<\/h2>\n<p>But there was one major fly in the ointment: cloud computing. Google Cloud pulled in $8.4 billion worth of revenue for the third quarter, but this fell short of Wall Street\u2019s expectations for $8.6 billion.<\/p>\n<p>Google was clearly prepared for questions on the topic. CFO Ruth Porat stated on the investors&#8217; call that while cloud growth \u201cremained strong across geographies, industries and products,\u201d Google Cloud\u2019s revenue result reflected \u201cthe impact of customer optimization efforts.\u201d That\u2019s corporate talk for \u201cour clients are spending less\u201d.<\/p>\n<p>That explanation looks a little \u2018meh\u2019 when you look at Microsoft in comparison, who also published their earnings results yesterday. Microsoft\u2019s Azure cloud computing business grew 28% on a constant currency basis for Q3, with revenue rising by 24% to $31.8 billion. That\u2019s well above industry estimates and Microsoft\u2019s own guidance.<\/p>\n<p>Microsoft also disclosed how much artificial intelligence has contributed to its cloud computing division, stating AI accounted for three percentage points of Azure\u2019s overall 28% growth from the same time last year. On the other hand, Google didn\u2019t do the same &#8211; and with only 22% growth in comparison, it\u2019s left traders concerned Microsoft is taking away market share in the cloud computing sector.<\/p>\n<p>Google really doesn\u2019t need Microsoft eating into its market share, given the latter\u2019s business is already thriving compared to the former. The biggest player in the cloud computing market is AWS, with around 32% of the market share, with Microsoft in second place at 22%. Google Cloud trails behind in third place with 11%. Both have taken bites from AWS\u2019 dominance &#8211; Amazon\u2019s market share was at 34% last year &#8211; but Microsoft pulling ahead puts Google in a vulnerable position.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">What was the stock market reaction?<\/h2>\n<p>It\u2019s fair to say that Google stock tanked due to the earnings report. The Big Tech titan\u2019s share price dropped by 9.5% on Wednesday, in a clear sign that Wall Street demanded more from the company\u2019s cloud computing efforts going forward. It was the worst day the stock has suffered since the start of the pandemic in March 2020.<\/p>\n<p>In contrast, Microsoft\u2019s share price rose by as much as 3.9% during Wednesday trading in response to the better-than-anticipated cloud computing revenue, with the stock eventually closing over 3% higher.<\/p>\n<p>Google stock has risen by 37% since the start of the year, while Microsoft has seen a 39% lift to its share price.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">The bottom line<\/h2>\n<p>Even though Google\u2019s earnings report surpassed expectations on the face of it, the cloud computing growth was a serious sore point for Wall Street. It didn\u2019t help Google that there was such an easy comparison for investors to make with Microsoft\u2019s earnings report, released on the same day.<\/p>\n<p>The contrast between the two also shows the investment each company is making in AI and how well they\u2019re utilizing the buzzy new tech. While Microsoft is storming ahead and can tangibly demonstrate how AI is adding value to the business, Google has lagged behind &#8211; again. Investors will want to see a marked improvement going forward, and Google will likely learn from this moment.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/qai\/2023\/10\/26\/alphabet-stock-sinks-despite-lofty-earningsexpectations-leaves-wall-street-disappointed\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key takeaways Alphabet\u2019s Q3 earnings were better-than-expected than most revenue and profits forecasts But cloud computing let the Big Tech giant down,&#8230;<\/p>\n","protected":false},"author":1,"featured_media":5785,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[],"class_list":{"0":"post-5784","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.3 - 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