Microsoft Beats Estimates on 48% Azure Growth as Alphabet Misses Despite Cloud Revenue Doubling
Microsoft reported $92.3 billion in quarterly revenue and Azure growth of 48%, beating estimates and lifting its shares in extended trading. Alphabet reported $127.6 billion in revenue, but earnings of $2.12 a share fell short of expectations even as Google Cloud revenue more than doubled.
Microsoft and Alphabet reported sharply different results after the market closed on Wednesday, with Microsoft beating estimates on the strength of its cloud business while Alphabet missed earnings expectations even as its cloud revenue more than doubled.
Microsoft reported revenue of $92.3 billion for its fiscal first quarter, up 19% from a year earlier, according to Reuters. Adjusted earnings came in at $4.89 a share, above the $4.72 consensus cited by TheStreet. Revenue at its Azure cloud unit rose 48% to $33.17 billion, above the $32.84 billion estimate from Visible Alpha cited by Reuters, and total Microsoft Cloud revenue rose 30% to $63.9 billion. Operating income reached $45.9 billion and net income was $36.6 billion, according to Market Flux. Microsoft shares rose about 4% in extended trading, Reuters reported.
Microsoft cloud growth tops estimates
Microsoft said capital spending for the quarter was $45.2 billion, up from $34.9 billion a year earlier but below its own projection of $50 billion, Reuters reported. Jonathan Neilson, Microsoft’s vice president of investor relations, attributed the lower figure to delays in deliveries of third-party capacity rather than a change in spending plans. Free cash flow was $18.6 billion, above the $8.54 billion analysts expected, according to Visible Alpha figures cited by Reuters.
Chief Executive Satya Nadella said in a statement that the company was turning its work on artificial intelligence into growing adoption by helping organizations build and own their own systems. Reuters reported that the results eased concern on Wall Street that corporate demand for AI would weaken Microsoft’s software business or leave it too exposed to OpenAI.
Alphabet cloud doubles but earnings miss
Alphabet, the parent of Google, reported third-quarter revenue of $127.6 billion, up 25% from a year earlier, Reuters reported. Earnings were $2.12 a share, well below the $3.01 consensus cited by TheStreet. Google Cloud revenue more than doubled, rising 103% to $30.7 billion, and cloud operating income rose to $11.1 billion from $3.6 billion a year earlier, according to Market Flux. Search revenue was $63.4 billion and YouTube advertising revenue was $11.2 billion, both below estimates, Market Flux reported.
Alphabet’s earnings were hurt by an $8.7 billion loss on equity securities, which pushed other income to a negative $8.2 billion from a positive $12.8 billion a year earlier, according to Market Flux. Free cash flow was negative $9.1 billion. The company issued $28.7 billion in senior notes and sold $12.4 billion in stock during the quarter, and it suspended share buybacks after spending $11.5 billion on repurchases a year earlier. Alphabet shares fell in extended trading, according to TheStreet.
The two reports land in the middle of an earnings season in which investors have paid close attention to how much tech companies spend on data centers and AI equipment. Amazon reports its third-quarter results on Thursday, according to TheStreet, giving investors another reading on cloud demand before the week ends.
Reporting based on coverage by Reuters, TheStreet and Market Flux.
