Microsoft and Alphabet’s quarterly results disappointed analysts’ expectations. The stock market sanction is avoided, however, as these results revive the market’s hopes about the ability of the tech giants to weather the coming economic downturn.
The copy delivered by the two tech giants is far from brilliant. That didn’t stop Wall Street from heaving a “sigh of relief.” And for good reason: their results rekindle investor confidence in the ability of tech giants to ride out a recession.
“The market has rebounded and is now looking for leadership from some big tech names,” said Burt White, chief strategy officer at Carson Group. Thereby, Alphabet
, the parent company of Google and YouTube, was climbing nearly 4% in early trading. On his side, Microsoft
, does even better. The stock jumped almost 5%.
As a reminder, these “mega caps” fueled US markets over the past decade. However, central bank interest rate hikes to combat soaring inflation, as well as the strength of the dollar, hurt stocks of big tech companies.
Investors were also particularly worried since the release of disappointing results from Snap and Twitter last week. The two platforms pointed in particular to “headwinds” in the digital advertising sector.
Despite results overall below estimates, Alphabet has precisely published advertising revenue above market expectations for search engine Google, allaying concerns about the impact of the economic downturn on its core business.
In addition, its revenue for the second quarter increased to $69.69 billion, certainly missing the analysts’ estimate, but by little. They expected, on average, a figure of 69.88 billion dollars.
Its diluted earnings per share was $1.21, versus an average analyst estimate of $1.29 per share.
Microsoft boosted by its prospects
“The forecast was pretty good and it helped the market know that the landscape is definitely slowing down, but ultimately the right companies are going to navigate it well.”
Like Alphabet, Microsoft’s quarterly revenue and profit missed Wall Street estimates. For good reason: the Redmond, Washington-based company was penalized by the rising dollar, slowing PC sales and falling ad spend. Note that nearly half of the company’s revenue comes from outside the United Stateswhich explains why the rise in the greenback is weighing on its results.
the turnover of the company thus increased to 51.87 billion dollars in the fourth quarter of its lagged fiscal year, against 46.15 billion dollars a year earlier. Analysts had, on average, expected a figure of $52.44 billion, according to IBES data from Refinitiv. Its net profit reached $16.74 billion, or $2.23 per share, in the quarter ended June 30. Analysts were expecting $2.29 per share.
The IT giant outlook however, seem to have reassured investors. The company expects double-digit revenue growth for the current year, driven by demand for cloud computing services.
“The forecast was pretty good and it helped the market know that the landscape is definitely slowing down, but ultimately the good companies are going to navigate it well,” Burt White said.