Microsoft (MSFT) and Google-parent Alphabet (GOOG, GOOGL) beat earnings expectations on Tuesday, but both saw their shares drop on Wednesday. Despite Microsoft’s positive results, including a boost from artificial intelligence contributing to its Azure cloud business, Wall Street seemed unimpressed, leading to a more than 1% dip and a market cap below $3 trillion. For Alphabet, a miss in advertising revenue expectations resulted in a 6% share decline, though its cloud business showed growth.
These results suggest that Wall Street desires increased revenue from Microsoft’s investments in generative AI, while Alphabet needs to balance ad revenue growth with its push into the cloud market.
Alphabet CEO Sundar Pichai revealed that subscription services, such as YouTube TV and Google One, have become a $15 billion annual business, a fivefold increase since 2019. Microsoft was surprised with the disclosure that its gaming division, now including Activision Blizzard, is its third-largest business, earning $7.1 billion, surpassing Windows’ $5.2 billion.
Looking ahead, Apple (AAPL) and Meta (META) are set to report earnings on Thursday. Apple’s Q1 results are highly anticipated, providing insight into iPhone 15 sales and facing concerns over potential declines in iPhone shipments in China. Meta seeks to demonstrate a rebound in its advertising business and discuss monetization strategies for its significant generative AI investments.
Apple is also adapting to the EU’s Digital Markets Act, revising its App Store in Europe, allowing third-party app stores and cloud gaming services. The company is gearing up to launch its Vision Pro AR/VR headset on Feb. 2, a pivotal product with a hefty $3,499 price tag.
Meta’s recent stock performance outshines tech giants like Microsoft, Apple, Google, and Amazon, with a 33% increase in the last three months and a remarkable 164% surge over the past year. Despite a rebound in its advertising business, Meta still faces losses from its Reality Labs division, responsible for metaverse work and Quest headsets. The company hopes the upcoming launch of Apple’s headset could impact Quest headset sales positively.
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