AI focus as Microsoft and Alphabet's Google report latest quarterly earnings

Separately, Apple shares slipped after an influential technology analyst warned that the company is expecting lower demand for iPhones this year

Tue, 30 Jan, 2024 - 10:45

Eamon Quinn

Microsoft posted quarterly earnings on Tuesday night that beat expectations for revenue, while Alphabet-owner Google missed some estimates for ad revenue, sending its shares 4% lower in after-hours trading.

Alphabet and Microsoft are among the Big Tech giants to report earnings this week and are under intense scrutiny following a winning streak that continues to propel US stock markets higher. However, many watchers worry over growing risks as the so-called "Magnificent 7" group of tech giants continue to tap investors buying into potential hype surrounding artificial intelligence, or AI, products. Apple, which is part of the Magnificent 7, is due to post its latest earnings on Thursday night.

Earnings at Microsoft, which employs 3,500 people in Ireland, beat expectations for second-quarter revenue, as new AI features helped attract customers to its cloud and Windows services.

Revenue grew 18% to $62bn (€57bn) in the three months to the end of December. Revenue at Microsoft's Intelligent Cloud unit, which houses the Azure cloud computing platform, grew 20% to $25.9bn, with sales of Azure itself growing by 30%. Investors are watching Microsoft's Azure and Office revenues closely to see what kind of sales flow come from the huge amounts the company plans to pour into data centres this year to deliver generative AI. Shares in Microsoft fell slightly in after-hours trading.

Meanwhile, the Google parent, which employs over 4,800 people across Ireland, reported fourth-quarter advertising revenue below expectations, as high interest rates pressure marketing budgets, and Alphabet shares fell 4% in extended trading. The company recorded ad revenue of $65.52bn, compared with $59bn a year earlier. Google's customers have worked to streamline their cloud spending, impacting revenue growth. Revenue for the quarter stood at $86.31bn, compared with estimates of $85.33bn.

Separately, Apple shares slipped almost 2% after the influential technology analyst Ming-Chi Kuo warned that the company is expecting lower demand for iPhones in 2024. The tech giant lowered its 2024 iPhone shipments of key semiconductor components to about 200m units, the analyst wrote in a research report, citing his latest supply chain survey. That suggests shipments of the iPhone 15 and upcoming iPhone 16 will decline by 10% to 15%, he said. China is a particular area of concern. Investors are looking for signs in Apple's earnings on Thursday night that demand over Christmas was holding up — especially for the iPhone, Apple’s biggest moneymaker.

All eyes will be on the last of the Magnificent 7 to report earnings later this week, said Axel Rudolph at online broker IG, in a busy week that includes the US Federal Reserve's interest rate decision and outlook on Wednesday, and earnings from Apple, Amazon, and Meta on Thursday.

There was also evidence the global tech industry layoffs - a feature of 2023 - was far from being at an end. PayPal, which employs more than 2,500 people in Ireland, will reduce its global workforce by about 9% this year, according to a letter from chief executive Alex Chriss to staff on Tuesday. Affected staff will be notified by the end of the week, according to the letter, which was seen by Bloomberg News.