Hybrid work drives surge for cloud services at Microsoft and Google

Microsoft beat Wall Street expectations for quarterly revenue on Tuesday, as demand soared for the software giant's cloud-based services from businesses adopting hybrid work models.

Google owner Alphabet on Tuesday also beat expectations in a sign that its advertising business is overcoming new limits on tracking mobile users, while another tech giant, Twitter, missed Wall Street expectations for user growth

Orders for cloud services provided by Microsoft, Amazon's AWS and Alphabet-owned Google Cloud have surged since last year when the Covid-19 pandemic shut offices and schools, pushing more activity online.

Microsoft said revenue from its intelligent cloud segment rose 31 per cent to $17 billion. Analysts had expected a figure of $16.58 billion.

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Revenue growth for Azure, the company's flagship cloud-computing business, came in at 48 per cent, also ahead of analysts' estimates.

Overall, revenue rose to $45.32 billion in the first quarter to September 30th, from $37.15 billion a year earlier, beating expectations of about $43.97 billion. Net income rose to $20.51 billion, or $2.71 per share, from $13.89 billion, or $1.82 per share, a year earlier.

Google

Google shares rose on signs its advertising business is overcoming new limits on tracking mobile users.

Through its search engine, YouTube video service and partnerships, Google sells more internet ads than any other company. Demand for its services surged in the past year as the pandemic forced people to spend more time online, and their new habits are not tapering off.

Google advertising revenue rose to $53.1 billion during the third quarter.

Alphabet’s overall sales jumped to $65.1 billion, above the average estimate of $63.336 billion among analysts tracked by Refinitiv. Quarterly profit was $27.99 per share, beating expectations of $24.08 per share.

Consumer anxiety over how Google and other companies use their browsing behaviour to profile them and then pick which ads to show has become widespread. Google may have been less affected because its search engine collects data on user interests that is valuable to advertisers and unmatched in the industry.

User growth

Meanwhile, Twitter missed Wall Street expectations for user growth as it faced competition from rival apps like TikTok for people’s time, while it reported quarterly revenue in line with estimates.

Advertising revenue was $1.14 billion during the quarter to September 30th, in line with consensus estimates.

Twitter said monetisable daily active users – its term for users who are served ads – was 211 million during the third quarter, missing analyst estimates of 212.6 million.

While Twitter increased its number of users outside the United States by five million from the previous quarter, its US base remained flat.

The company said it saw a "modest" impact to ad revenue from Apple's privacy changes. Investors had expected Twitter would be relatively shielded from being hurt by the changes, because most of its advertisers do not rely on highly targeted ads.

Total revenue, which also includes money that Twitter earns from data licensing, was $1.28 billion, also in line with Wall Street targets. – Reuters