Google-parent Alphabet's cloud division misses revenue estimates
By Max A. Cherney and Akash Sriram
(Reuters) -Google-parent Alphabet (NASDAQ:GOOGL)'s cloud division missed estimates for third-quarter revenue on Tuesday as an uncertain economy and high interest rates forced companies to trim their budgets.
Shares of the Mountain View, California-based company fell roughly 5% in extended trading.
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 AI, and show the cloud business remains competitive against a more powerful Azure from Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN).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.
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. Microsoft shares rose 5% after hours.
«Despite Alphabet topping quarterly earnings and revenue estimates, investors were disappointed by the relatively weak performance at its Google cloud platform, which is at risk of falling further
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