Microsoft Vs. Alphabet Post-Earnings Showdown: Cloud, AI to Shape H2 Performance
Last night, both Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) delivered the solid earnings numbers bulls were counting on. While the Bill Gates-founded giant topped analysts’ EPS expectations by 5.5%, the Google parent company did it by a slightly wider margin of 7.3%.
However, despite the seemingly favorable outlook for both companies, the market’s response to each of the reports was starkly divergent.
Alphabet popped roughly 6% in after-hours trading as Microsoft slumped by 4%. Given the sizes of the companies, the results led the overall indexes to trade on a negative note ahead of the Fed’s big announcement later today.
Obviously, one of the reasons for the market’s reaction is sheer price performance this year. Amid H1’s AI buzz, the Google parent company’s stock experienced slower growth expectations from investors, setting it apart from other major tech giants, trading further away from its all-time high than the competition.
However, as we delve deeper into both earnings reports from last night, the question that pops into our minds is, “Is the market’s reaction just a spur-of-the-moment thing, or has the market mispriced these companies?”
A closer look into the reports can help us answer that question.
Contrary to what many analysts were predicting, the main topic of the night wasn’t exactly AI — but rather the impressive growth of Alphabet’s cloud division at the expense of Microsoft’s Azure.
Google’s cloud unit, encompassing infrastructure and productivity apps, witnessed a notable 28% growth in revenue. This division, which achieved profitability in the first quarter on an operating basis, reported a significant operating income of $395 million in the second period, marking a
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