Google shares fall as cloud computing growth misses third quarter

The parent of Google Alphabet ( GOOGL ) reported third-quarter earnings that topped consensus estimates while revenue topped views. GOOGL shares fell on Wednesday as cloud computing sales growth in the third quarter was missed due to an apparent loss of market share. Microsoft (MSFT) in the middle of the battle in artificial intelligence.

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After the market closed on Tuesday, Google’s earnings for the quarter ended Sept. 30 rose 46 percent to $1.55 a share.

In the third quarter, Google’s gross revenue increased 11% to $76.69 billion.

The tech giant reports Google’s earnings based on generally accepted accounting principles, also known as GAAP. Analysts had expected EPS of $1.46 on revenue of $76 billion.

Google Stock: Cloud Growth Misses

Google said cloud computing revenue rose 22 percent to $8.41 billion, missing estimates of $8.64 billion. Google’s cloud computing business grew 28 percent in the June quarter.

“Google Cloud appears to be ceding market share to Microsoft Azure,” KeyBanc Capital Markets analyst Justin Peterson said in a report.

Microsoft’s cloud computing revenue rose 24 percent to $31.8 billion in the September quarter.

Microsoft is the largest investor in artificial intelligence startup OpenAI. Microsoft cloud customers develop applications using OpenAI base models.

“While Google’s cloud absence raises concerns about AI positioning, Google suggested consolidation this quarter, with cloud accounting for just 2 percent of total profit,” Bank of America analyst Justin Post said in a report.

Amazon Web Services, part of Amazon.com (AMZN) is the largest provider of cloud computing services. Amazon reports third-quarter earnings on Thursday.

In the stock market today, GOOGL shares fell 6.2% to 130.18 in early trading.

Also, Google’s advertising revenue rose 9% to $59.6 billion in the third quarter, compared to estimates of $59.1 billion.

GOOGL Stock: YouTube Rebounds

Meanwhile, YouTube ad revenue rose 12 percent to $7.95 billion. Analysts had estimated YouTube’s advertising revenue at $7.82 billion.

At market research firm Insider Intelligence, analyst Max Willens said in a report: “Cloud computing is a much heavier business than advertising, and Google faces tough competition. While its traction among AI startups may pay off in the long term sit down., right now it’s not helping Google Cloud enough to satisfy investors.”

“Google had a modest top-line loss driven primarily by search and to some extent YouTube, partially offset by a slight absence from cloud and networks,” RBC Capital analyst Brad Erickson said in a report.

Google share buyback

At Evercore ISI, analyst Mark Mahaney said in a report: “Our best explanation is that, as a secondary cloud for many customers, Google Cloud will likely start and finish cost optimization later than Amazon Web Services.”

In the third quarter, capital spending came in at $8.1 billion, below consensus estimates of $9.1 billion. Also, Google repurchased $15.78 billion in shares, roughly the same as in the June quarter.

Google’s third-quarter traffic acquisition costs increased by 7% to $12.64 billion. Google search related payments to Apple (AAPL) is a key issue in the Justice Department’s antitrust lawsuit against Alphabet.

Going by Google’s earnings report, Alphabet’s stock is up 55% in 2023.

Also, according to IBD Stock Review, GOOGL stock has a relative strength rating of 95 out of a possible 99.

Follow Reinhardt Krause on X, formerly Twitter.@reinhardtk_techFor updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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