Alphabet shares tank 6% as cloud division misses revenue estimates; Microsoft's cloud booms
Alphabet's cloud business crawled to its slowest in at least 11 quarters, sending the company's stock down 5.7% after hours, even as sales at rival Microsoft's cloud unit boomed.
The drop in Google's share price despite beating Wall Street estimates for profit and sales, shows how much investors want the company to deliver gains in artificial intelligence, and show the cloud business remains competitive against a more powerful Azure from Microsoft and Amazon.com's AWS.
Fears of a slowing global economy have prompted companies to curb spending on cloud-related services, including expensive AI tools, which has slowed revenue growth at Google's cloud unit to 22.5% in the third quarter, from 28% in the prior three-month period.
Google Cloud third-quarter revenue rose 22.5% to $8.41 billion, the slowest growth since at least the first quarter of 2021. The cloud unit reported a operating income of $266 million, compared with an operating loss of $440 million a year ago.
Wall Street expected cloud computing revenue of $8.62 billion.
Finance chief Ruth Porat said in a conference call Tuesday that the third-quarter cloud growth is due to «customer optimization efforts,» without elaborating.
By contrast, revenue from Microsoft's Intelligent Cloud unit, which houses the Azure cloud computing platform, grew to $24.3 billion, compared with analysts' estimate of $23.49 billion, LSEG data showed. Azure revenue rose 29%, higher than a 26.2% growth estimate from market research firm Visible Alpha.
