Tech boom appears to be slowing: Google and Microsoft shares fall after reporting slower growth

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Google’s parent company posted its weakest quarterly revenue growth since 2020 on Tuesday, the latest sign that the huge gains tech companies have enjoyed during the pandemic are fading in the rearview mirror. Microsoft also reported slowing growth.

Both stocks lost ground in after-hours trading.

For most companies, the numbers reported by Alphabet Inc. would be cause for celebration. But tech companies come in a different size, with investors typically measuring them by how much growth they achieve each quarter compared to the previous year.

Alphabet started this year with drastically declining growth trends. This has already contributed to a 20% drop in its share price since peaking at around $3,030 in early February before a widespread sell-off in tech stocks. Shares fell another 4% in extended trading on Tuesday after the latest quarterly figures were released.

While Microsoft beat Street’s estimates, financials weren’t as strong as recently reported.

CNBC Notes:

“Microsoft posted the smallest revenue since 2018, beating consensus by less than 1%. Sales and marketing expenses totaled $5.6 billion, 10% more than there is a year and the fastest growth in over three years.

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But the leaders remain confident.

“Going forward, digital technology will be the key element that powers global economic output,” said Satya Nadella, Microsoft Chairman and CEO, in a report. “Across the technology stack, we are expanding our opportunities and taking part as we help customers differentiate themselves, build resilience and do more with less.”

Amy Hood, Executive Vice President and Chief Financial Officer of Microsoft, added, “Continued customer commitment to our cloud platform and strong sales execution resulted in better-than-expected commercial bookings growth of 28% and a Microsoft Cloud revenue of $23.4 billion, up 32% year over year. .”

Worries about slowing growth have become an even bigger concern amid rising interest rates aimed at mitigating the highest inflation rates in more than 40 years. Higher borrowing costs, coupled with the economic upheaval caused by the war between Russia and Ukraine, are more likely to chill the US economy and further dampen growth.

Alphabet’s revenue in the January-March period totaled $68 billion, a 23% increase over the same period last year. It was the first time since 2020 that the company had seen a year-over-year revenue gain of less than 30%. The figure fell to about $40 million below the average estimate among analysts polled by set of facts To research.

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First-quarter profit fell 8% from a year ago to $16.4 billion, or $24.62 per share. It was also below the analysts’ average projection of $25.47 per share, according to set of facts.

As usual, advertising has flowed through Google’s dominant search engine and a vast network that winds through much of the digital economy. Google’s ad sales totaled $54.7 billion in the first quarter, a 22% increase over the same period last year.

Last year’s comparisons were bound to be tough for Google and a wide range of other tech companies. Their digital services and gadgets were in high demand during a pandemic that forced most people to spend much more time at home, often alone, amid government blockages and other restrictions.

Initially, Google was hit by economic jitters that led to its first-ever year-over-year decline in quarterly revenue during the early months of the pandemic. But the Mountain View, Calif.-based company rebounded strongly as the rise of e-commerce spurred a flood of publicity.

But now that rise appears to be over, facing Alphabet for a tougher year ahead. With its shares now in the doldrums, the company has announced plans to buy back up to $70 billion of its stock when it sees fit.

“Alphabet faces the same headwinds as other major digital platforms – with the war in Ukraine and rising inflation added to the comparison with quarters of hyper growth during covid blockagesand these results are testament to that,” said Tom Johnson, chief digital officer at WPP Sharing of spirita global media agency.

Ruth Porat, Alphabet’s chief financial officer, appeared to be bracing for another quarter of sluggish growth in the current April-June period by reminding analysts on a conference call Tuesday night that the company posted a gain of 62 % Last year. That, she says, will make for a “difficult” comparison that will be made worse by Google suspending operations in Russia in protest at its invasion of Ukraine.

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