A Tale of Two Reports

The tech selloff today came ahead of a busy few days of Big Tech earnings, with Microsoft and Google-parent Alphabet posting results this evening.

Microsoft was the stronger of the two reports, beating Wall Street expectations on both the top and bottom lines. Revenue of $49.4 billion was up 18% from a year ago, while net income of $16.7 billion increased 8%.

There was a lot to like from the report, as the software giant managed to buck the recent trend of decelerating growth among Big Tech companies. Its cloud computing segment revenues rose 46%, continuing last quarter’s pace of growth. Microsoft’s business services segment, which includes LinkedIn, Teams, and Office, grew more than expected, helped by price increases. So did the Windows and Xbox businesses.

Microsoft stock was up slightly in after-hours trading after losing 3.7% during Tuesday's session. Eric Savitz has the full report here.

For Alphabet, the highlight was news that the company's board of directors authorized a $70 billion share-buyback program. It’s an increase from buyback authorizations of $50 billion last year and $25 billion in 2019. 

Actual results for the first quarter were less impressive, though. Revenue of $68.0 billion was about in line with analysts' expectations, while net income of $16.4 billion missed badly and was down 8% from the same quarter last year. Sales growth slowed to 23% year over year, versus 34% in the same period of 2021.

The biggest shortfall in the quarter came from YouTube, where advertising sales growth slowed significantly. That's from a mix of people getting back out there after the pandemic and spending less time watching online videos, and also from greater competition from TikTok—a thorn in Meta's side as well. Google's cloud-computing revenues continued to grow at a fast clip, but that segment is still losing money.

Alphabet shares dropped almost 5% in after-hours trading Tuesday, following a 3.6% loss earlier in the day. Read more on the results from Connor Smith here.

Next up for Big Tech: Meta Platforms reports on Wednesday, followed by Amazon and Apple on Thursday.