Results from two of the world’s major megatechs – Microsoft and Alphabet – have again underlined who the big winners continue to be in the business world from the past 16 months of pandemic, lockdowns and radical changes to corporate and personal behaviour.
Alphabet shares popped more than 4% in after-hours trading in the wake of an impressive set of numbers for the three months to March that confirmed with the worst of the pandemic in America now in the past, the world’s search engine goes from strength to strength.
Total sales for the giant including Google Cloud reached $US55.3 billion for the quarter, up 34% from $US41.7 billion in the first quarter of 2020.
Ad revenues jumped 32% to $US44.7 billion from $US33.7 billion.
Ad revenues on YouTube were up 48% to $US6.01 billion in the quarter as well from $US5.70 billion.
That saw Alphabet’s net profit more than doubled to $US17.93 billion in the first quarter from $US6.8 billion a year earlier.
Google Cloud infrastructure and analytics is Alphabet’s other major business but much smaller than services (which is not broken out).
It’s third in the Cloud behind Microsoft’s Azure and Amazon Web Services. It posted revenue of $US4 billion up from $US2.77 billion in the opening quarter of last year.
Alphabet’s results were helped by more cost cutting.
The company’s sales and marketing costs remained flat even though revenue grew by $US14 billion, and it cut general spending from a year earlier.
The lower costs also took place while Google was continuing to hire new staff.
Alphabet increased its employee count by nearly 17,000 people to roughly 140,000 employees globally.
A handy change in accounting policies for depreciation provided a small boost in the quarter.
“In January 2021, we completed an assessment of the useful lives of our servers and network equipment an adjusted the estimated useful life of our servers from three years to four years and the estimated useful life of certain network equipment from three years to five years,” Google explained.
“This change in accounting estimate was effective beginning in fiscal year 2021 and the effect for the three months ended March 31, 2021, was a reduction in depreciation expense of $835 million and an increase in net income of $650 million.”
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In contrast, shares in Microsoft fell in early after hours trading despite record revenues in the March quarter.
The shares ended down 2.5% despite clear signs from the result that like Alphabet, the company continues to prosper in the wake of the pandemic.
Third-quarter earnings were stronger than analysts had expected but investors focused on a small dip in profit margin caused by rapid growth at its Azure cloud computing business at lower margins.
Revenue rose to $US41.7 billion for the quarter, up 19% from the first quarter of 2020r. That was the biggest quarterly increase since 2018.
Profits jumped 44% to $15.5 billion. The results surpassed both the company’s and market expectations, and again emphasised how Microsoft and other big tech firms continue to be big winners in the time of Covid and lockdowns.
Helping drive the rise in revenues were the rise in personal computer sales to normal growth which in turn lifted demand for Windows.
“Over a year into the pandemic, digital adoption curves aren’t slowing down,” Satya Nadella, Microsoft’s chief executive, said in a statement with the earnings release. “They’re accelerating.”
The company said sales of commercial cloud products totalled $US17.7 billion in revenue, up 33% from a year earlier. Revenue from Azure, Microsoft’s flagship cloud product, leapt 50%, while commercial Office 365 products saw a 22% as corporate customers embraced running their computing and other tools on the cloud.
Sales of personal computing products rose 19% to $13 billion in the quarter, as people bought more computers and opted for new devices with larger screens during the pandemic to learn and work from home.
Gaming revenue s surged 50% thanks to a rush of orders for the new Xbox gaming console, which was launched late last year, as well as fresh Xbox content and services.
