Alphabet, aka Google, and Microsoft yesterday announced their quarterly results and despite both making healthy profits the numbers show the online world is a tough place to make money.
Microsoft’s stockholders took a five percent hit to their wallets after the company announced weaker than expected results for the last quarter.
Notable in the results were the stunning sales growth of its cloud services with Azure boasting a 120% year on year on year increase.
Yet Microsoft’s Intelligent Cloud division which includes Azure saw its profits fall nearly 13%, showing the company’s products may be making inroads against Amazon Web Services but making profits in that market is very tough indeed.
Similarly Alphabet’s results still show the company is sill totally dependent upon the advertising river of gold for its profits.
Particularly concerning for Alphabet is its ‘other bets’ division doubled its sales but saw losses increase by 20%. Overall Google’s advertising revenues made up 89% of Alphabet’s total revenues this quarter compared to 90% last year.
While both companies have very healthy profits – about five billion dollars this quarter for each – Alphabet’s continued dependence on Google advertising and Microsoft’s declining profitability should be a worrying sign for shareholders in both companies.
Both companies show that despite the apparent riches of the technology sector, making profits is getting tougher. Shareholders of both companies should be watching carefully for any disruption to either business.