Mixed Fortunes for Google and MS... Smiling in Cloud, Struggling in Online Ads (Comprehensive)

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Google’s parent company Alphabet and Microsoft (MS) received contrasting results for the first quarter of this year. MS, which expanded its cloud business in the post-COVID-19 era, smiled, while Alphabet, hit by a decline in online advertising, wore a frown.

According to CNBC and others on the 26th (local time), Alphabet announced its first-quarter earnings, reporting revenue of $68.011 billion (approximately 85.7 trillion KRW), a 23% increase compared to the same period last year. This slightly missed the market forecast of $68.11 billion, and the growth rate was somewhat lower than the 34% recorded in the first quarter of last year. Net profit decreased by 8%, from $17.9 billion in Q1 last year to $16.4 billion this year.

The weak performance of Alphabet was influenced by a reduction in advertising revenue. Alphabet’s advertising revenue in Q1 was $54.66 billion, up 22.3% year-over-year. YouTube advertising revenue was $6.87 billion, significantly below the market forecast of $7.51 billion. As global daily life resumed actively after COVID-19, YouTube usage slightly declined, leading to reduced advertising income, and the growth of competitor TikTok also had an impact.

CNBC reported, "While expectations were that YouTube’s advertising revenue would increase by 25%, the actual increase was only 14%, showing that YouTube’s failure indicates a significant hit to the digital media advertising market."

[Image source=Reuters Yonhap News]

On the other hand, MS announced on the same day that it posted better-than-Wall Street-expected strong results. MS reported Q3 (January to March) revenue of $49.36 billion, an 18% increase year-over-year, exceeding the market forecast of $49.05 billion. Net profit rose 8% to $16.7 billion compared to the same period last year.

This strong performance was driven by sustained high demand for cloud services and enterprise collaboration software, which had significantly increased during the COVID-19 period. The Intelligent Cloud segment, which includes SQL Server, Windows Server, and Azure cloud services, recorded revenue of $19.05 billion, a 26% increase year-over-year. In particular, Azure and other cloud services saw a 46% surge in revenue compared to a year ago. The Personal Computing segment, responsible for PC and gaming businesses, posted $14.5 billion in revenue, up 11% year-over-year.

With such divergent earnings, the stock prices of Alphabet and MS are moving in opposite directions. Alphabet’s stock price fell about 5% in after-hours trading due to disappointment over advertising revenue. Although Alphabet announced a $70 billion share buyback on the same day, it could not prevent the stock price decline. The scale of Alphabet’s share buybacks has significantly increased from $25 billion in 2019 and $50 billion last year. MS’s stock price fell 3.74% during the day due to Nasdaq declines but rose up to 6% in after-hours trading following the earnings announcement.

This content was produced with the assistance of AI translation services.