Alphabet stock declines after poor cloud performance

Compared to Microsoft’s impressive cloud performance, Google’s parent Alphabet has seen its share price drop after an underwhelming performance in its cloud revenue.

Despite an 11% growth of revenue year over year, the results meant Alphabet stock price fell 8% after missing estimates made by analysts.

However this is the first double-digit growth experienced by the company since before this time last year.

Google Cloud falls short of expectations

Total revenue came in at $76.69 billion versus the expected estimate of $75.97 billion with cloud services revenue for the Google parent company expected to reach $8.43 billion, but came in $20 million shy of the target.

Despite a significant amount of investment put into Alphabet’s cloud section, consumers have long seen Alphabet as a little late to the party when compared to the cloud capabilities of its competitors such as Amazon and Microsoft.

Outlook from Alphabet officials has been more upbeat however, with CEO Sundar Pichai saying, “I’m pleased with our financial results and our product momentum this quarter, with AI driven innovations across Search, YouTube, Cloud, our Pixel devices and more. We’re continuing to focus on making AI more helpful for everyone; there’s exciting progress and lots more to come.”

Google Cloud reported an operating income of $226 million showing significant year on year growth from its operating loss of $440 million from 2022.

“The fundamental strength of our business was apparent again in Q3, with $77 billion in revenue, up 11% year over year, driven by meaningful growth in Search and YouTube, and momentum in Cloud. We continue to focus on judicious capital allocation to deliver sustainable financial value,” said Ruth Porat, president and chief investment officer; CFO.

After experiencing a deceleration in growth compared to its historical year on year growth over the past few years, Alphabet announced in January 2023 that it was reducing its workforce and as a result recorded employee severance and related charges at $2.1 billion for the nine months ended September 30th.