What's going on?

Microsoft and Google-parent Alphabet reported better-than-expected quarterly earnings late on Tuesday, even if they�d like to request permission to make a few tweaks.

What does this mean?

Microsoft went into this update having beaten analysts� expectations for the previous 10 quarters, and the company�s hot streak continued last quarter. That was partly down to its cloud computing business, which is still benefiting from the working-from-home trend and whose revenue climbed by 36% versus the same time last year. Its productivity segment � which includes workplace staples Office 365 and LinkedIn � likewise stepped up to post a 22% uptick in revenue.

Not one to be left behind, Alphabet reported that its cloud and advertising business revenues were up by a better-than-expected 45% and 43% respectively. The latter is especially encouraging: it proves that advertisers are still willing to spend money on winning new customers � surprising at a time when shortages are making increased demand hard to meet.

Why should I care?

For markets: Don�t get too comfy.�

Investors practically see it as a given that tech companies like Microsoft and Alphabet will beat analysts� estimates these days. They�re so hard to please, in fact, that 85% of tech companies that have beaten analysts� profit forecasts this earnings season have seen their stocks drop by an average of 2.4% the day after their updates, according to Bloomberg. So the fact that Alphabet�s stock initially fell and Microsoft�s stayed flat might not bode well for them either�


Zooming out: FAANGs are getting bitten.

Investors are starting to worry that the aforementioned supply chain issues could impact Big Tech�s growth � and, by extension, their valuations � in the longer term, as could workforce shortages. Hedge funds are among the skeptics: new data shows that they now have less money invested in the �FAANGs� � Facebook, Apple, Amazon, Netflix, and Alphabet � than they have done at any point in the last two years.