Google parent Alphabet reported first-quarter results that exceeded analysts’ estimates, as its dominant search business weathered the economic downturn and the cloud unit turned a profit for the first time.
Shares rose on news that Alphabet’s sales, excluding partner payouts, were $58.07 billion in the quarter, beating analysts’ average estimate of $56.98 billion. Search advertising performed well even as Google faces heightened competitive threats from Microsoft and OpenAI, which are challenging the search giant through conversational chatbots using artificial intelligence.
The company’s cloud unit, which is much smaller than competitive offerings from Microsoft and Amazon.com, reported profit of $191 million. As its core search advertising business matures, Google sees cloud as growth area. Alphabet said in a note to investors ahead of the results that it had shifted the reporting of some costs from Google Cloud to Google Services.
Net income was $15 billion, or $1.17 per share, compared with Wall Street’s $1.09-per-share estimate. The company also authorised share buybacks of up to $70 billion. Alphabet shares rose 5.9 per cent after closing at $103.85.
Microsoft also beat Wall Street’s estimates for quarterly revenue and profit, driven by growth in its cloud computing and Office productivity software businesses, and the company said artificial intelligence products were stimulating sales. Shares gained 8.3 per cent in after-market trading following a report by Redmond, Microsoft that profits were $2.45 per share in the fiscal third quarter, beating Street estimates of $2.23, according to data from Refinitiv.
Microsoft said growth at its cloud business Azure was 27 per cent in the latest reported quarter, beating analyst expectations for 26.6 per cent growth.
Also Read
Alphabet’s cloud business reported strong results, lifting its shares 2.4 per cent. Microsoft revenue rose 7 per cent to $52.9 billion in the quarter ended March, inching past analyst estimates of $51.02 billion, according to Refinitiv.
Shares of Big Tech peers Amazon.com and Meta Platforms rose.
Meanwhile, Google and Microsoft, which are becoming rivals in the competition for the future of search, offered up starkly different assessments of just how much disruption is in store for the market. Google executives encouraged investors to trust in the company’s long track record as the world’s leading search engine, and framed AI as just another shift in its constantly evolving business.
Microsoft suggested that something much more dramatic is underway.
