A Tale of Two Big Tech Stocks

Alphabet and Microsoft Diverge on Earnings Results

Alphabet reported weaker-than expected earnings and revenue for the first quarter, sending shares sliding. The company also announced a $70 billion stock buyback plan.

The biggest sore spot was advertising revenue at YouTube, which came in at $6.87 billion compared to an expected increase of $7.51 billion. The streaming service was a big beneficiary of the pandemic but suffered as more workers returned to offices and pandemic restrictions eased. TikTok is also capturing a growing share of social media videos.

A bright spot for the Google parent was its cloud business, which grew 44% and beat estimates as more businesses spread out their data center business from the dominant player, Amazon. However, Google’s cloud business is still losing money with an operating loss of $931 million, down from $974 million a year earlier. Microsoft meanwhile beat expectations on both the top and the bottom lines, with revenue increasing over 18%, sending the stock higher.

Revenue at Microsoft’s cloud business, Azure, jumped 46% in the quarter compared with similar growth in the previous quarter, beating most analyst estimates. We’ll learn more about the growth in the cloud business when Amazon reports its results for its AWS unit tomorrow.

"Big Tech earnings are telling an important story that investors need to pay attention to", said Caleb Silver, editor-in-chief of Investopedia. " Internet and communications stocks like Alphabet are facing declining engagement across their platforms, while software and cloud-computing based stocks like Microsoft continue to see robust demand, and are less prone to a decline in advertising revenue."

Alphabet & Microsoft YTD Stock Return
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