Alphabet Inc. and Microsoft Corp. reported results on Tuesday that fell short of Wall Street’s expectations, but not only did investors not melt, they saw their shares rise in after-hours trading.
Amid troubling economic signs, tech stocks have been battered so far this year, and fears of a slowdown among Big Tech names had Wall Street on edge this week. But reactions to Tuesday afternoon’s earnings misses show that fears and falls this year have resulted in a lowered bar for even the biggest of Big Tech names.
Microsoft MSFT, -2.68% missed revenue and profit expectations, forecasting its cloud business, Azure, to grow about 43% in the September quarter, amid fears of slowing growth in cloud While the four percentage point slowdown in the previous quarter’s growth rate may have led to steep declines in the past, Microsoft shares jumped as soon as the forecast was provided.
Google parent Alphabet GOOGL, -2.32% GOOG, -2.56% reported a second straight quarter of earnings declines and told analysts on a conference call that a slowdown in buyers of ‘announcements affected the second quarter. However, Alphabet shares rose nearly 5% in after-hours trading.
“Against the backdrop of a weakening macro backdrop, Alphabet’s second quarter results were decent, with revenues close to all key business segments,” Baird Equity Research analyst Colin Sebastian wrote in a note to customers, summarizing the general situation. opinion on Wall Street that things were not yet as bad as feared.
Just like the relief rally seen by Meta Platforms Inc. META, -4.50% shares three months ago, however, this is a case of numbers that, while good enough to keep its stock from piling up, should not be considered yet” good”. “. Both companies warned about the macro economy, and it’s clear that each company has businesses that are slowing down sharply at the moment.
In Alphabet’s case, revenue from YouTube, a recent star, grew a meager 3% in the second quarter, compared with 14.3% growth in the first quarter, due to the overall reduction in advertiser spend and TikTok’s competition. Microsoft saw its PC business soften as the big boom in the PC pandemic is over. The advertising slowdown is also affecting its LinkedIn business, while Xbox business is slowing rapidly as the pandemic-fueled surge in video games fades.
But these stocks don’t face the wrath reserved for some smaller competitors. Last week, social media company Snap Inc. SNAP, -3.22% raised more fears among investors about Internet ad spending, and its shares fell as the global economy struggled with inflation, changes in consumption patterns and higher interest rates.
Microsoft and Google were able to avoid the same fate, although it may take longer for the slowdown to really affect such large companies with dominant positions in important industries. But make no mistake, there is a slowdown, and it’s affecting Big Tech, but maybe not to the point where it translates into huge amounts of their market cap, yet.