It’s earnings season again, which means companies big and small are required to release their results for the first three months of the year.
Microsoft and Alphabet report on the same day, giving us a really interesting contrast between two of the tech giants.
Overall, the results of both companies are very strong, with growing revenues, strong profits and expansions in almost all major product areas. But they clearly diverge in one clear way: Alphabet is feeling the pressure on its earnings, in part because of changes Apple has made to how third-party ads work on iOS.
Alphabet posted strong first-quarter results overall, with revenue hitting $68 billion. At the same time, its traffic acquisition costs (TACs) — essentially a measure of how much Google pays to acquire users — rose 23% and net profit fell from $17.9 billion to 16, $4 billion.
Microsoft, on the other hand, announced positive results across the board for the third quarter. Revenue increased 18% year-over-year to $49.4 billion, net income increased 8% year-over-year to $6.7 billion, all its main business segments (desktop software, cloud, etc.) grew strongly.
Battle of the Clouds
The most interesting comparison was between Google Cloud and Azure, the two services that can challenge Amazon’s dominance in the cloud market. Google Cloud and Azure both had a good three months, according to the results.
Microsoft said cloud revenue grew 32% year-over-year to $23.4 billion in the third quarter. Azure, which unfortunately does not have its own revenue, was up 46% year over year.
Meanwhile, Google Cloud posted revenue of $5.82 billion in the first quarter, compared to around $4 billion in the same quarter of 2021. Cloud’s operating loss fell slightly to $931 million. of dollars.
The results offer an interesting insight into how Azure and Cloud are looking to compete against AWS, which posted $17.8 billion in revenue in the fourth quarter.
Perhaps the biggest black spot was YouTube, which reported revenue of $6.87 billion, well below estimates as Apple’s privacy changes affect its ability to target ads.