The outcomes were satisfactory yet insufficient.

Wall Street responded in this way on Tuesday to Alphabet and Microsoft’s quarterly earnings. Despite the fact that both companies’ revenue and earnings beat projections, the stocks fell during prolonged trading.

The equities were priced for perfection, as investors would say. Alphabet’s stock has gained 56% so far this year, and last week it reached a new high that surpassed the previous record set in late 2021, during the height of the tech boom. Microsoft has increased its value by 70% in the last 12 months, just hitting a new high, and now surpasses Apple as the most valuable publicly traded firm.

In addition to riding the artificial intelligence wave to great success last year, the corporations received high marks from shareholders for their drastic cost-cutting measures, which included the elimination of thousands of positions.

Investors were buying as if they were expecting favourable surprises in the weeks before their earnings announcements. They were left feeling let down and fussing over the figures.

Tuesday saw Alphabet announce revenue growth of 13%, the highest since early 2022. LSEG, previously Refinitiv, reported that sales of $86.31 billion above the average forecast of $85.33 billion. $1.64 in earnings per share above projections by five cents.

Microsoft’s revenue climbed by 18% to $62.02 billion, exceeding the average analyst forecast of $61.12 billion. The $2.93 EPS was 15 cents higher than expected.

Both businesses exceeded projections in their cloud operations, with Microsoft’s bigger Azure and other cloud services growing by 30% and Google Cloud reporting growth of 25%.

The one area where Alphabet fell short of analysts’ expectations was in Google’s ad division, which generated revenue of $65.52 billion but fell short of $65.94 billion, as reported by StreetAccount. YouTube fell just short of expectations in terms of commercials.

In a quick-take analysis on Tuesday, Stifel analysts, who advise purchasing the company, stated that Alphabet generated “healthy advertising results, but not enough.”

Given Google’s scale and prominence, media and advertising consultant Madison and Wall analyst Brian Wieser said the market has irrational expectations for the company.

“In my general conversations with public market investors and sell-side analysts, few have a correct view of the advertising market,” Weiser said. “Many think that growth can continue at double-digit levels for the fastest-growing companies for much longer a period of time than is realistic to expect.”

Almost 6% of Alphabet’s stock fell on the report. Microsoft’s decline was not as dramatic. After dropping more than 2% at first, the stock started to recover some of its losses.

The earnings and revenue beat was somewhat overshadowed by Microsoft’s somewhat bleak forecast. Analysts surveyed by LSEG predicted $60.93 billion in sales for the company’s fiscal third quarter, while the company projected between $60 billion and $61 billion.

Even while sales and earnings matched predictions and above expectations, AMD’s shares continued to decline. Following the news, the stock, which had surged 137% over the previous year because of optimism surrounding its AI chips, dropped by about 6%.

Now, focus shifts to Thursday, when quarterly earnings from Apple, Amazon, and Meta are released. Similar to Microsoft and Alphabet, Meta’s stock has surged to an all-time high this month. In December, Apple reached its highest point ever, while Amazon is still roughly 6% below its record set in 2022.

(Adapted from CNBC.com)

Categories: Economy & Finance, Strategy, Uncategorized