(News Bulletin 247) – The two technology groups that are members of Gafam published their quarterly results on Tuesday evening, with a mixed reception from the market. Microsoft saw Azure’s growth accelerate and exceed expectations when Google Cloud, on the contrary, did less well than expected.

The Gafam results season (Google therefore Alphabet, Amazon, Facebook therefore Meta and Apple) started with a bang on Wednesday evening, since both Microsoft and Alphabet delivered their quarterly accounts.

And the reactions of investors surrounding the two tech giants are currently diametrically opposed. In post-market trading Wednesday evening, Microsoft shares rose 3.9%, adding between $90 billion and $100 billion in market capitalization, while Google shares fell 6.1%, losing more than $100 billion. dollars of capitalization.

The publications of the accounts of these large groups remain very dense. But for several years, the performance of the cloud computing services divisions of Microsoft, Alphabet and to a lesser extent Meta has focused investors’ attention.

However, “the growth of Microsoft’s “cloud computing” segment, Azure, accelerated, while Alphabet’s Google Cloud recorded revenues lower than forecasts,” summarizes Tina Teng of CMC Markets in one sentence.

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AI benefits Microsoft…

Microsoft was particularly expected at the turn, the Seattle group concentrating on the stock market the hopes of the market around generative artificial intelligence (AI) among Gafam. Microsoft has also deployed technologies from OpenAI, creator of ChatGPT, in several of its services such as the Bing search engine and, of course, Azure via Azure OpenAI.

There was no room for error and Microsoft delivered a solid copy. The group’s revenues increased by 13% from July to the end of September, the period which corresponds to the first quarter of the group’s 2023-2024 financial year, to 56.5 billion dollars, while the operating margin stood at 47 .6%. Earnings per share stood at $2.99, up 27% year-on-year. According to a Refintiv consensus cited by CNBC, analysts expected $54.5 billion for revenue and $2.65 for earnings per share.

Microsoft’s entire cloud division posted growth of 19% and, above all, Azure accelerated its momentum. Azure’s revenue growth thus reached 29% over the quarter, compared to 26% over the same period of the previous year. This growth is also significantly higher than the consensus of 26% compiled by CNBC. Overall, all cloud services (including Azure) generated $24.3 billion in revenue in the quarter.

The icing on the cake: this better-than-expected growth is partly explained by demand for Microsoft’s AI services. The company’s financial director, Amy Hood, indicated that AI had added three points of growth to Azure’s dynamic, while the group initially expected only two points. It may be a detail for the average person but for the market it means a lot.

The financial director also indicated that Azure should record growth of 26% to 27% in the second quarter of Microsoft’s fiscal year, “with an increasing contribution” from AI services.

More broadly, the executive declared that Microsoft’s revenues would be between $60.4 billion and $61.4 billion in the current quarter, reflecting growth of 15%.

The boss of Microsoft, Satya Nadella, also indicated that now 18,000 customers had adopted Azure OpenAI, a clear progression, since there were still only 11,000 in July.

…But not at Alphabet

These comments and these good results therefore contrast with Alphabet’s much less flashy publication. In the third quarter, Google’s parent company generated revenues of $76.7 billion, up 11% year-on-year and earnings per share of $1.55. Certainly, the Mountain View group exceeded expectations on these two indicators, the consensus being at $1.45 in earnings per share and at $76 billion for revenues.

But once again the important thing is the cloud. However, Google Cloud has published revenues up 22% over one year, to “only” 8.41 billion dollars (i.e. 2.9 times less than Microsoft’s cloud division), when analysts were counting on 8.64 billion. , according to CNBC. Furthermore, profitability disappoints: this division recorded an operating profit of $266 million, when the market expected a figure of $434 million, notes Bloomberg.

“Cloud computing is a much more difficult business than advertising, and Google faces fierce competition,” Max Willens, an analyst at Insider Intelligence, told the news agency. “While the traction it puts on AI startups may pay off in the long term, it doesn’t help Google Cloud enough to satisfy investors,” he adds.

Alphabet’s chief financial officer, Ruth Portat, said Google Cloud’s business had been hurt by cost-cutting measures by its customers.