This week’s earnings reports from Alphabet, Microsoft and Meta Platforms reveal a mixed outlook with high spending on AI creating some uncertainty.
Google’s parent company Alphabet reported strong Q3 earnings with a 34% profit increase attributed mostly to its Google Cloud and search ad businesses. However, Alphabet’s stock dropped as investors reacted to its substantial AI investments and increased capital expenditures. Alphabet CEO Sundar Pichai emphasized the necessity of AI spending for future competitiveness, but higher expenses raised concerns about short-term profitability.
Microsoft’s Q3 earnings met expectations due to growth in its Azure cloud and software services. CEO Satya Nadella also highlighted the impact of AI on revenue, particularly in enterprise tools like Copilot for Office 365. Yet, Microsoft’s slowing Azure growth rate signalled market saturation in cloud computing.
Meta Platforms which owns Facebook outperformed revenue forecasts with a strong performance in digital advertising, posting a year-over-year revenue increase. With CEO Mark Zuckerberg’s continued focus on AI initiatives and the metaverse, rising operating expenses are expected to continue weighing on short-term profitability.
Alphabet is trading at $172 a share, up 23% year-to-date. Meta is trading at $565 a share, up 60% year-to-date. Microsoft is trading at $408 a share, up 9% year-to-date.