Tech, Tech, Kaboom

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What's going on?

Microsoft and Google-parent Alphabet posted disappointing quarterly results late on Tuesday.

What does this mean?

Microsoft had gone into this update having beaten analyst expectations for 14 quarters straight, but that run has finally come to an end. The company’s cloud computing business and productivity segment – which includes Office 365 and LinkedIn – saw revenue climb, sure, but by a weaker-than-expected 20% and 13% respectively. Consider too that the sales Microsoft made abroad were worth less – $600 million less, to be precise – when converted back to a strong dollar, and it stands to reason that its overall revenue was a letdown.

Alphabet couldn’t maintain its form either, with revenue from its cloud business and ad business – on platforms like Google and YouTube – climbing by 36% and 12%. That’s not the sort of growth investors have come to expect from the tech giant, but it’s also not the disaster that rival tech company Snap experienced last week. That’ll do: investors initially sent its shares up 3% after the news.

Why should I care?

The bigger picture: Growth starts with people.
After years of building out their businesses, Microsoft and Alphabet have both said they’re hitting the brakes on hiring – indefinitely and for the rest of the year respectively – as they brace for the all-but-inevitable economic slowdown. And with fewer people putting their heads together to get things done, these drop-offs we’re seeing could become even more pronounced.

For markets: When Big Tech falls, everything falls.
Microsoft, Alphabet, Meta, Apple, and Amazon account for nearly a quarter of the key US stock market index’s overall value between them. And while the other members of the group are yet to reveal how they performed last quarter, Microsoft and Alphabet’s lackluster updates don’t exactly bode well for the index. Still, some analysts are staying optimistic: they argue that the index bottomed last month, and that the worst of the bear market has already passed.

Originally posted as part of the Finimize daily email.

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