Google-parent Alphabet’s cloud division misses revenue estimates, as Microsoft鈥檚 cloud booms
Google–辫补谤别苍迟听Alphabet’s听肠濒辞耻诲听business crawled to its slowest in at least 11 quarters, sending the company’s stock down 5.7% after hours, even as sales at rival Microsoft’s听肠濒辞耻诲听unit boomed.
The drop in听骋辞辞驳濒别鈥檚 share price despite beating Wall Street听别蝉迟颈尘补迟别蝉听for profit and sales, shows how much investors want the company to deliver gains in artificial intelligence, and show the听肠濒辞耻诲听business remains competitive against a more powerful Azure from Microsoft and Amazon.com鈥檚 AWS.
Fears of a slowing global economy have prompted companies to curb spending on听肠濒辞耻诲-related services, including expensive AI tools, which has slowed听谤别惫别苍耻别听growth at听骋辞辞驳濒别‘s听肠濒辞耻诲听unit to 22.5% in the third quarter, from 28% in the prior three-month period.
骋辞辞驳濒别听颁濒辞耻诲听third-quarter听谤别惫别苍耻别听rose 22.5% to $8.41 billion, the slowest growth since at least the first quarter of 2021. The听肠濒辞耻诲听unit reported a operating income of $266 million, compared with an operating loss of $440 million a year ago. Wall Street expected听肠濒辞耻诲听computing听谤别惫别苍耻别听of $8.62 billion.
Finance chief Ruth Porat said in a conference call Tuesday that the third-quarter听肠濒辞耻诲听growth is due to “customer optimization efforts,” without elaborating.
By contrast,聽, which houses the Azure听肠濒辞耻诲听computing platform, grew to $24.3 billion, compared with analysts’ estimate of $23.49 billion, LSEG data showed. Azure听谤别惫别苍耻别听rose 29%, higher than a 26.2% growth estimate from market research firm Visible Alpha. Microsoft shares rose 5% after hours.
“Despite Alphabet topping quarterly earnings and听谤别惫别苍耻别听estimates, investors were disappointed by the relatively weak performance at its听骋辞辞驳濒别聽肠濒辞耻诲听platform, which is at risk of falling further behind Azure and AWS,” Investing.com senior analyst Jesse Cohen.
While advertising spending has been strong in some sectors such as retail and travel, industry executives and analysts have noted a pullback in budgets in some areas, affecting听础濒辫丑补产别迟’蝉听major source of听谤别惫别苍耻别.
The company recorded ad听谤别惫别苍耻别听of $59.65 billion in the third quarter, compared with $54.48 billion a year earlier. Analysts on average had expected $59.12 billion in听谤别惫别苍耻别听from its advertising business. Within the company’s advertising segment, YouTube ads reported听谤别惫别苍耻别听of $7.95 billion compared with $7.07 billion last year.
Alphabet reported a net profit of $19.69 billion for the July-Sept. period, compared with $13.91 billion a year earlier.
搁别惫别苍耻别听for the quarter ended Sept. 30 stood at $76.69 billion, compared with听别蝉迟颈尘补迟别蝉听of $75.97 billion, according to LSEG data.
骋辞辞驳濒别听said it spent $8.06 billion on capital expenses in the third quarter that was 鈥渙verwhelmingly鈥 the result of investments in its technical infrastructure. Servers were the largest component, followed by data centers due to a significant increase in AI computing investments, Porat said.
Alphabet laid off roughly than 12,000 employees earlier this year, or about 6% of its global workforce, in an effort to cut staff amid a “different economic reality.” The company also laid off employees from its global recruiting team in September.
The company disclosed that it recorded severance and related charges of $2.1 billion for the first nine months of the year. – Reuters
