Alphabet and Microsoft beat earnings expectations

Alphabet and Microsoft have beaten expectations in their latest financial statements, giving investors a much-needed sliver of hope amidst a gloomy economic outlook.

The quarterly results showed revenues and earnings per share that were higher than analysts expected.

For Microsoft, its Intelligent Cloud Business segment, which includes the Azure public cloud, Enterprise Services, SQL Server and Windows Server, posted a 16 per cent increase in revenue, while its Productivity and Business Process segment, which contains Dynamics, LinkedIn and Office, was up by about 11 per cent.

Microsoft said growth in revenue per user helped the company achieve 14 per cent more revenue from commercial Office 365 productivity software subscriptions.

On the other hand, the More Personal Computing segment, including Bing, Windows, Surface and Xbox, was down nine per cent, while sales of Windows operating-system licenses to device makers declined some 28 per cent.

Microsoft chief financial officer Amy Hood addressed the company’s big investments in AI, especially in OpenAI, the creator of ChatGPT, saying: “As with any significant platform shift, it starts with innovation, and we’re excited about the early feedback and demand signals from the AI capabilities we’ve announced to date.

“We will continue to invest in our cloud infrastructure, particularly AI-related spend, as we scale to the growing demand driven by customer transformation. And we expect the resulting revenue to grow over time.”

As for Alphabet, the parent company of Google, revenue rose three per cent, which is low in view of its historic growth. This has been largely attributed to the uncertain economic outlook and low advertising spend.

In fact, ad revenue was down from a year prior, including on YouTube.

However, it is finally generating a profit in its cloud-computing business ($191 million vs $706 million loss a year ago), where it competes with Amazon and Microsoft.

Alphabet’s chief financial officer, Ruth Porat, said that future outlook “remains uncertain”.