Episode summary
Alphabet Disappoints, Microsoft's Cloud Sales Grow: Earnings Live from Schwab IMPACT | Bloomberg...
Bloomberg Businessweek Daily
· · Hosts: Carol Massar, Tim Stenovec · Guests: Ed Ludlow, Anurag Rana, Omar Aguilar, Lisa Salvi
Summary
Microsoft and Alphabet delivered a split verdict on big-tech AI spending. Microsoft’s results were described as a broad beat, with adjusted EPS, revenue, Azure growth and cloud revenue all ahead of estimates, and the stock rose sharply after hours. The analysts argued that Microsoft’s cloud and enterprise businesses are benefiting from AI investment while still throwing off strong free cash flow, which makes the name easier for investors to own.
Alphabet, by contrast, disappointed on search and advertising. Google search and other revenue, Google services revenue, and total revenue excluding traffic acquisition costs all came in slightly below expectations, while capex remained elevated. The stock fell as much as 7.9% after hours, as the host and a guest said the market is increasingly focused on whether Alphabet’s AI spending is producing enough return and whether AI is changing search monetization.
The conversation widened into a broader debate about AI capex, free cash flow, and whether the spending boom is becoming more selective. At Schwab IMPACT in Boston, Omar Aguilar argued that the AI cycle is moving from broad capital spending to tougher scrutiny on profitability, while Lisa Salvi said advisory firms are adopting AI for operations and marketing but still value human judgment and relationship skills.
Key takeaways
- Microsoft’s cloud strength and lower-than-feared capex helped make the quarter look like a clear beat, according to the analysts.
- Alphabet’s search and advertising miss, not its cloud business, drove the selloff, the host and a guest said.
- Ed Ludlow said investors are increasingly judging hyperscalers by free cash flow, and Microsoft’s $19 billion versus Alphabet’s negative $9.1 billion mattered.
- Anurag Rana said Microsoft’s remaining performance obligation excluding OpenAI is still growing about 25%, highlighting durable enterprise demand.
- Omar Aguilar said AI capex is becoming more selective and investors should expect more volatility and possible credit stress outside the biggest balance sheets.
Notable quotes
“Microsoft revenue was pretty impressive frankly on the cloud side even the M365 revenue was really good and on top of that capex is lower”
“search continues to be whatever the AI story becomes for Google, the main profit engine”
“Microsoft still remains really critical in this ecosystem because they still have distribution of those models”
“we think of that as a much more stable revenue stream for Microsoft”
“we saw a significant boom of capex that got us to where we are today and a lot of that has come primarily from these hyperscalers”
How the episode opens
Bloomberg Audio Studios, podcasts, radio, news. — This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Business Week Daily podcast with Carol Masser and Tim Stenbec.
We got to talk about Microsoft because the earnings coming out, stocks up about 2.5% here in the aftermarket.
First quarter adjusted earnings per share coming in above estimates at $489. First quarter revenue coming in above estimates at 92.28 billion. First quarter Azure revenue excluding FX up 48% that beats estimates of 44.8.
8%. First quarter revenue coming in at $92.28 billion. As I mentioned, another redhead crossing the Bloomberg terminal.
We're also seeing first quarter earnings per share, first quarter revenue, cloud revenue rather, coming in above estimates at $63.9 billion. At this point, Carol, it's looking like a beat across the board except for when it comes to capex, which came in lower, but I will go ahead and call that a beat.
All right, I'm going to go to Alphabet because it's also crossing third quarter. Uh, Google search and other revenue. Uh, that is coming in a little light.
63.35 billion. The street estimate was 64.85 billion. Google search uh Google services revenue that came in light 96.3 versus 98.4 the estimate on the street.
Third quarter cap X 51.36 billion. That's below the street estimate of 55 uh.78 billion. I'm taking a look at Google shares.
Yeah, they are falling in the aftermarket. I don't know if you pulled it up here. Um but I just uh looks like it's taking quite a dive here.
Um they're down about 6% in the after hours.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- alphabet earnings
- microsoft cloud
- ai spending
- big tech earnings
- investor concerns
Companies and tickers mentioned
- GOOGL
- GOOG
- MS
- SCHW
- Alphabet
- Microsoft
- Charles Schwab
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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