Revenue up at Microsoft and Alphabet but ‘disappointment’ over Google cloud

Both Microsoft and Google’s parent company, Alphabet, have both reported higher than expected revenue in their latest quarterly results.

Microsoft recorded revenue in the three months to the end of September of $56.5bn (£46.4bn), a 13% rise on the same period last year and better than the $54.5bn (£44.8bn) predicted by analysts.

It credited the strength of its cloud computing and PC businesses for the rise.

Meanwhile, Alphabet’s revenue for the same three-month period was $76.7bn (£63bn), an 11% year-on-year rise and also surpassing estimates that the figure would be $75.97bn (£62.5bn).

However, its performance was still dubbed “disappointing” after its cloud computing division reported revenue of $8.4bn (£6.9bn) – $20m (£16.4m) less than expected. The figure also represents quarterly growth of 22.5%, down from 28% in the previous three-month period.

Both companies reported their results at the close of the US stock markets on Tuesday afternoon.

In immediate after-hours trading, shares in Microsoft were up 5% – while Alphabet’s stock went in the opposite direction, falling almost 5%.

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It comes as tech firms race to harness artificial intelligence (AI), in an effort to boost profits and increase their range of services offered to customers.

The results revealed that revenue from Microsoft’s Intelligent Cloud unit, which houses its Azure cloud-computing platform, grew to $24.3bn (£20bn) – also better than expected.

While Microsoft is still developing many of its AI services, commentators expect Azure will play a key role.

The company has also secured an early march on its rivals by investing in startup OpenAI, owner of the popular ChatGPT chatbot service.

Jesse Cohen, a senior analyst at Investing.com, said the firm’s results “indicated that artificial intelligence products are stimulating sales and already contributing to top and bottom-line growth.”

But Mr Cohen said investors had, in contrast, been “disappointed by the relatively weak performance” of Google’s cloud platform, which he said was at risk of falling behind its rivals.

Tech giants have also been hit by the sluggish global economy. Earlier this year both firms announced plans to slash thousands of jobs globally, with Alphabet axing 12,000 roles and Microsoft cutting 10,000 positions.

Microsoft will be hoping its fortunes can be boosted further in the coming years by its £56bn ($69bn) acquisition of gaming company Activision Blizzard, which cleared its final regulatory hurdle earlier this month.

The company first announced its bid to buy the developer, known for making hit franchises such as Call of Duty, in early 2022, but faced resistance from regulator the Competition and Markets Authority.

Fellow tech giant Meta, parent company of Facebook, is due to announce its latest results on Wednesday, with Amazon scheduled to do the same on Thursday.