Alphabet, Microsoft Q1 results: Is the worst finally behind us
The first quarter results of Alphabet and Microsoft have surprised everyone. The tech giants, both of which have been struggling due to the post-COVID tech meltdown, have outperformed Wall Street's expectations with their performance in Q1 FY23. Their better-than-estimated results have offered a ray of hope for the tech industry, with many wondering if the worst is behind us.
Alphabet's revenue exceeded market expectations by nearly a billion dollars
In the quarter that ended on March 31, Alphabet recorded a revenue of $69.79 billion, up by 2.6% from $68.01 billion reported a year ago. The market estimated Alphabet's revenue to land at $68.95 billion. This is the first time the company has beat consensus expectations in five quarters. The tech titan's earnings per share of $1.17 also topped market estimates of $1.07.
Microsoft also beat expectations in revenue and EPS
Similarly, Microsoft also pleased investors with its numbers in the first three months of this year. The company's revenue rose 7% year-over-year to $52.9 billion, moving past the analyst estimate of $51.09 billion. The firm's net income increased by 9% to $18.3 billion. Microsoft's earnings per share of $2.45 beat $2.23 as expected by analysts.
Layoffs have become common in the tech sector
It is interesting to note Alphabet's better-than-expected performance came in the same quarter it laid off 12,000 employees. Microsoft also announced its decision to let go of 10,000 staffers last quarter. Layoffs have become a common occurrence in the tech sector plagued by macroeconomic constraints, a fall in ad revenue, and a general slowdown in economic growth.
Cost reduction helped Alphabet and Microsoft
Alphabet, the parent of Google, was considered infallible until very recently. The company's struggles clearly show the state of the tech industry. Like many other tech firms, Alphabet and Microsoft have been on a cost-reduction path. This quarter's results suggest their efforts haven't been in vain. Maybe, this signals a nearing end to the ongoing issues of the tech industry.
Meta also benefitted from cost-cutting
Meta, another tech giant, also reaped the benefits of cost-cutting in the last quarter of 2022. The struggling company surprised everyone with better-than-expected results in Q4 FY22. The firm's performance in Q1 2023 will give us a better idea of how it fared.
The AI frenzy has been a big boost to Microsoft
It isn't just austerity that helped Alphabet and Microsoft. As you can imagine, the AI frenzy has helped the two regain some lost ground. Microsoft has been the biggest beneficiary of the AI revolution. The company's partnership with OpenAI has made it a legitimate challenger to Google's dominance in search. That can be reflected in its quarterly numbers too.
Should we get too excited about their numbers?
Now, let's answer a question: Should we get too excited about Alphabet and Microsoft's performances? It is true they beat analysts' expectations, but those estimates were low, to begin with. Their top-line numbers are still not indicative of their rich valuations. Of course, we should give them the benefit of the doubt, considering the tough economy. However, it is early to make any presumptions.
