Alphabet witnessed its most significant one-year drop in share value on Wednesday as its Google Cloud unit’s revenue fell short of analyst expectations.
During midday trading, the company’s stock plunged by nearly 9% to $126.51. This marked its most significant decline since a 9.1% drop on October 26, 2022, following an earnings disappointment.
Interestingly, despite surpassing Wall Street’s revenue and earnings per share forecasts, Alphabet’s stock took a hit. The disappointment stemmed from Google’s cloud division, in stark contrast to Microsoft’s results, which showcased impressive growth in its Intelligent Cloud business. Google reported cloud revenue of $8.41 billion, falling short of Street Account’s estimates of $8.64 billion.
Microsoft emerged as the victor by revealing stronger-than-anticipated growth in its Azure business, attributed to the success of its AI solutions. Conversely, Google reported slower-than-expected growth in its cloud business, even though it had invested heavily in its AI endeavors.
Google’s cloud division currently occupies the third position, trailing behind industry leaders Amazon and Microsoft. The integration of AI is considered a way to accelerate the segment’s growth. However, at least for this quarter, it didn’t satisfy Wall Street’s expectations.
In its first quarter, Microsoft disclosed a 29% growth in its Azure segment, marking a significant re-acceleration. This outpaced Wall Street’s projections of 27% and contrasted with the earlier quarters, where sequential growth had declined.
Despite the contrast in cloud performance, Google is not facing dire consequences. Some analysts were swift to emphasize that Google’s cloud revenue takes a back seat compared to its advertising business, which remains the primary focus.
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