Alphabet, Microsoft Stocks Dip Despite Strong Earnings Reports

Despite reporting strong earnings growth for the fourth quarter of 2023, Alphabet and Microsoft saw their share prices fall on Wednesday, as investors were not satisfied with some aspects of their performance.

Alphabet, the parent company of Google, reported a 13% increase in revenue to $86.31 billion, beating analysts’ expectations of $85.33 billion. Earnings per share were $1.64, slightly above the consensus estimate of $1.59. The company’s cloud business grew 25%, while its YouTube unit saw a 21% rise in revenue.

However, Alphabet’s core advertising business, which accounts for about 76% of its total revenue, missed Wall Street’s projections. Google’s ad revenue was $65.52 billion, below the expected $65.94 billion. YouTube’s ad revenue was also slightly lower than anticipated, at $8.91 billion versus $8.95 billion.

Investors were disappointed by the slowdown in Alphabet’s ad growth, which had been accelerating in previous quarters. The company faced tough comparisons with the same period in 2022, when online advertising rebounded sharply from the pandemic-induced slump. Alphabet also faced increased competition from other digital platforms, such as Meta, Amazon, and TikTok.

Alphabet’s shares fell 3.2% to $1,487.46 in early trading on Wednesday, after closing at a record high of $1,536.51 on Tuesday.

Microsoft, the world’s most valuable public company, also delivered better-than-expected results for the fourth quarter of 2023, but failed to impress investors with its outlook.

The software giant reported a 18% increase in revenue to $62.02 billion, surpassing analysts’ expectations of $61.12 billion. Earnings per share were $2.93, well above the consensus estimate of $2.78. The company’s cloud business, which includes its Azure platform and other services, grew 30%, while its personal computing segment, which includes Windows, Xbox, and Surface, increased 16%.

However, Microsoft’s guidance for the current quarter was below Wall Street’s forecasts. The company expects revenue of $58.5 billion to $59.5 billion, while analysts were looking for $60.1 billion. Microsoft also warned that its cloud growth could slow down in the coming quarters, as it faces tougher comparisons and supply chain challenges.

Microsoft’s shares dropped 2.7% to $397.23 in early trading on Wednesday, after closing at a record high of $408.59 on Tuesday.

Both Alphabet and Microsoft have been among the best-performing stocks in the past year, as they benefited from the increased demand for online services and cloud computing amid the pandemic. However, as the economy reopens and consumers shift their spending to other areas, the companies may face more headwinds and higher expectations from the market.