Gloomy results by Alphabet, Microsoft stoke fears of a global downturn

Alphabet leads Big Tech sell-off after reporting slowdown in ad growth, Microsoft's cloud revenue softer than expected

Gloomy results from Alphabet and Microsoft stoked fears of a global economic downturn and derailed an earnings-led surge in stock markets on Wednesday, while setting the tone for results from other megacap technology giants.
 

Alphabet shares were down more than 8 per cent shortly after Wall Street’s opening bell on Wednesday after the largest seller of digital advertising in the US reported on Tuesday evening that third-quarter revenues grew 6 per cent to $69.1billion.

Except for a brief contraction at the start of the pandemic, it was the slowest rate of growth since 2013 and fell short of analysts’ expectations for an increase of 9 per cent, according to Refinitiv.
 

The Nasdaq tumbled nearly 2 per cent as the results underscored the fallout of strong dollar and weak demand on the tech sector against the backdrop of high inflation and rising borrowing costs.
 

Shares of the Google-parent and Microsoft fell about 8 per cent in early trading. Meta Platforms, which will report after markets close, was down 4 per cent, while Amazon.com lost 4 per cent and Apple 1 per cent in the run-up to their results on Thursday.

Heavyweights Netflix, Meta, Amazon, Microsoft, Alphabet and Apple have already lost a combined market value of more than $2.5 trillion so far this year and were set to shed another $330 billion on Wednesday.
 

Microsoft reported softer cloud revenue than expected in its fiscal first quarter and gave weak quarterly guidance.
 

Net income fell by 14 per cent to $17.56 billion. Microsoft had a $3.3 billion tax benefit in the year-ago quarter.
 

With respect to guidance, Microsoft sees $52.35 billion to $53.35 billion in revenue for the fiscal second quarter, which implies 2 per cent growth at the middle of the range. 

Analysts polled by Refinitiv had been looking for revenue of $56.05 billion. Microsoft’s implied operating margin for the fiscal second quarter was about 40 per cent , narrower than the 42 per cent  consensus among analysts polled by StreetAccount.