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United States

Alphabet-Google and Microsoft turn in sterling quarterly results as shares of both tech giants pop

PUBLISHED : Friday, 27 October, 2017, 7:58am
UPDATED : Friday, 27 October, 2017, 7:58am

Alphabet on Thursday reported stronger-than-expected advertising sales and higher operating margins, driving shares up in after-hours trading as investors brushed off concerns about higher costs for acquiring mobile customers.

This was matched by Microsoft, which also reported better-than-expected quarterly profit on Thursday as demand for its cloud computing services for companies rose and its personal computer software business stabilised.

Shares of Alphabet, the parent company of Google, were up nearly 3 per cent at US$1,020 after the bell. They have gained 25 per cent this year.

Shares of Microsoft, the world’s largest software company, rose 3.1 per cent to US$81.20 in trading after the bell.

Third-quarter revenue for Alphabet jumped 24 per cent to US$27.8 billion, above the average analysts’ estimate of US$27.2 billion. Profit of US$6.7 billion, or US$9.57 per share, was well ahead of Wall Street estimates.

Revenue from Microsoft’s intelligent cloud business rose nearly 14 per cent to US$6.92 billion in Microsoft’s fiscal first quarter which ended September 30. Analysts on average had expected US$6.70 billion, according to financial data and analytics firm FactSet.

Revenue from Azure, which competes with Amazon Web Services and offerings from Google, IBM and Oracle Corp, grew 90 per cent compared to a 97 per cent growth rate in the preceding quarter.

The third quarter was the 15th in a row in which the company has shown double-digit, year-over-year sales growth. Advertising sales at Google, Alphabet’s main operating unit, account for the vast majority of the company’s revenue.

“We had a terrific quarter, with revenues up 24 per cent year on year, reflecting strength across Google and Other Bets,” Chief Financial Officer Ruth Porat said in the statement.

“Microsoft is set for an acceleration of growth and bookings with margin concerns that were overblown heading into 2018,” said Daniel Ives at research firm GBH Insights. “A slowly improving PC environment is also a modest tailwind for Microsoft with cloud remaining the Trojan horse growth driver for Redmond over the coming years.”