Microsoft and the Google parent company Alphabet announced extensive job cuts at the beginning of the year. Business at both companies recovered in the same quarter that employees were laid off. Microsoft and Alphabet reported better-than-expected earnings on Tuesday after markets closed, although both companies have weaknesses.
The stock market reacted positively. Alphabet’s share price rose by almost 4 percent in after-hours trading at times, and Microsoft shares gained almost 5 percent in value. Overall, the numbers were an encouraging signal for the tech earnings season. In the coming days, other large corporations such as Meta, Amazon and Apple will also publish their results.
In the past few quarters, there have been a number of disappointing figures from the industry. After years of rapid growth, business has slowed down significantly for many companies. Except for Apple, all tech giants have announced layoffs on a large scale. Microsoft cut 10,000 jobs, Alphabet 12,000. Meta and Amazon even faced two rounds of layoffs each.
At least in the case of Alphabet, the austerity program is not yet reflected in the published employee figures. According to its own statements, the company had almost 191,000 employees at the end of the quarter, which was even slightly more than three months earlier. Alphabet said most of the workforce reductions will be reflected in its second-quarter headcount.
For the first quarter, Alphabet reported revenue growth of 3 percent to $69.8 billion, up 6 percent in constant currency. Analysts had expected an average of $ 69.0 billion. Net income fell 8 percent to $15.1 billion and earnings per share were higher than expected.
Youtube weakens
The YouTube video site once again showed weaknesses. Their advertising sales fell by 3 percent this time. There was a change in leadership at YouTube in the first quarter, with long-standing CEO Susan Wojcicki resigning from her post.
In the general advertising business, which includes ads next to the results of the Google search engine, Alphabet managed to increase sales again in the last three months in contrast to the last quarter of 2022. Activities in cloud computing remain a growth driver, with sales increasing by 28 percent this time. Google also reported an operating profit for its cloud business for the first time in its history. It was $ 191 million, in the final quarter of 2022 there was a loss of $ 480 million.
Microsoft was able to increase its sales in the past quarter by 7 percent to 52.9 billion dollars, currency-adjusted there would have been a growth of 10 percent. Analysts had expected an average of $51.0 billion. Unlike Alphabet, Microsoft was able to increase its net profit, growing by 9 percent to $18.3 billion. Earnings per share also beat expectations.
The business with Azure, Microsoft’s platform for cloud computing, which was observed particularly closely by analysts, achieved sales growth of 27 percent this time. Although that was within the scope of expectations, it meant a further weakening, in the previous quarters Microsoft had reported growth rates of more than 30 percent. Microsoft once again reported a significant drop in sales in the business with the Windows operating system for personal computers. The PC market has slowed significantly after rapid growth amid the pandemic.
Both Microsoft and Alphabet prominently referred to their activities related to artificial intelligence in their announcements. Microsoft CEO Satya Nadella spoke of a “new era”. There’s a race for AI technologies in the industry right now, with both Microsoft and Alphabet’s core division, Google, playing a big role. Microsoft has invested billions in Open AI, the maker of the ChatGPT language model. Google is working on competing AI systems.
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