Opinion: Google and Microsoft revenue shows the bar has been lowered for Big Tech

Alphabet Inc. and Microsoft Corp. both reported results that fell short of Wall Street expectations on Tuesday, but not only did investors not crumble, but they both saw their stocks rise after hours trading.

Amid troubling economic signs, tech stocks have been battered so far this year, and fears of a downturn among big tech names have pushed Wall Street over the edge this week. But reactions to Tuesday afternoon’s missed results show that fears and declines so far this year have seen the bar lower for even the biggest of the big names in tech.

MicrosoftMSFT,
-2.68%
missed both revenue and earnings expectations, and expects its cloud business, Azure, to grow about 43% in the September quarter amid fears of slowing cloud growth. While the four percentage point deceleration from the previous quarter’s growth rate may have led to steep declines in the past, Microsoft stock jumped as soon as the guidance was provided.

Parent alphabet of Google GOOGL,
-2.32%

GOOG,
-2.56%
reported lower earnings for a second consecutive quarter and told analysts on its conference call that a slowdown in ad buyers had impacted its second quarter. Still, Alphabet shares rose nearly 5% in after-hours trading.

“Amid the weakening macro backdrop, Alphabet’s second quarter results were decent, with revenue close to line across all key business segments,” wrote Baird Equity analyst Colin Sebastian. Research, in a note to clients, summarizing the general on Wall Street that things weren’t yet as bad as feared.

Much like the relief rally seen by Meta Platforms Inc. META,
-4.50%
shares three months ago, however, these are numbers that, while good enough to avoid dragging their stocks down, still shouldn’t be considered “good.” Both companies warned about the macro economy, and it’s clear that each company has business that is slowing sharply right now.

In the case of Alphabet, recent star YouTube revenue grew only 3% in the second quarter, compared to 14.3% growth in the first quarter, due to an overall decline in advertiser spending. and increased competition from TikTok. Microsoft has seen its PC business soften, as the big pandemic PC boom is over. The advertising slowdown is also affecting its LinkedIn business, while Xbox business is rapidly slowing as the pandemic-fueled surge in video games wanes.

But those actions don’t face the ire reserved for some smaller competitors. Last week, social media company Snap Inc. SNAP,
-3.22%
sparked more fear among investors over internet ad spending, and its stock plunged as the overall economy struggled with inflation, changing consumer habits and rising interest rates.

Microsoft and Google were able to avoid the same fate, although it may take longer for the downturn to actually affect companies this large and with dominant positions in important industries. But make no mistake, there’s a downturn, and it’s affecting Big Tech, but maybe not to the point that it’ll result in large chunks being taken off their gargantuan market caps – yet..

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