Alphabet’s Earnings Plummet, Microsoft Surges as AI Investment Questions Arise
On October 26, 2023, Alphabet Inc. (GOOGL) shares fell approximately 12%, marking its worst day since March 2020, following disappointing earnings that showcased a negative free cash flow of $9.1 billion. In contrast, Microsoft Corp. (MSFT) reported a 19% revenue increase to $92.3 billion, with a notable 48% growth in its Azure cloud platform, bolstering its contracted backlog to $677 billion. Investors reacted strongly, with an 11-point gap between the stocks indicating a significant difference in outlook from Wall Street.
The quarterly report highlighted that Google’s search revenue fell short of estimates at $63.4 billion due to AI mode searches earning less per query compared to traditional ads. Meanwhile, the overall economy showed signs of growth, with third-quarter GDP rising at a 3.4% annualized rate, largely driven by a 19.4% surge in business investment linked to AI infrastructure.
Amidst these developments, the chance of a Federal Reserve interest rate hike in December now stands at 80%, driven by rising inflation, which saw a monthly increase of 0.5% in September, leading to an annual rate of 3.6%. As the market closely watches these trends, Amazon.com Inc. (AMZN) is set to report its earnings later today.
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