Alphabet Inc. and Microsoft Corp. both reported results that missed Wall Street’s expectations Tuesday, but not only did investors not melt down, both actually saw their stocks rise in after-hours trading.
Amid troubling economic signs, tech stocks have been battered so far this year, and fears about a slowdown among Big Tech names had Wall Street on edge heading into this week. But the reactions to earnings misses Tuesday afternoon show that the fears and declines so far this year have resulted in a lowered bar for even the biggest of the Big Tech names.
Microsoft MSFT,
Google parent Alphabet GOOGL,
“In context of the weakening macro backdrop, Alphabet’s Q2 results were decent, with close to in-line revenues across all key business segments,” wrote Colin Sebastian, an analyst with Baird Equity Research, in a note to clients, summing up the general view on Wall Street that things were not yet as bad as feared.
Much like the relief rally seen by Meta Platforms Inc. META,
In Alphabet’s case, revenue at YouTube, a recent star, grew a scant 3% in the second quarter, compared with 14.3% growth in the first quarter, due to overall advertiser pullbacks in spending and more competition from TikTok. Microsoft saw its PC business soften, as the big PC boom of the pandemic is over. The advertising slowdown is also affecting its LinkedIn business, while the Xbox business is slowing rapidly as the pandemic-fueled surge in videogames wears off.
But those stocks are not facing the wrath reserved for some smaller competitors. Last week, social-media company Snap Inc. SNAP,
Microsoft and Google were able to avoid the same fate, though it’s possible that it will just take longer for the slowdown to actually affect companies so large, and with dominant positions in important industries. But make no mistake, there is a slowdown, and it is affecting Big Tech, just maybe not to the degree that it will result in big chunks taken out of their gargantuan market caps — yet.
