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What’s happening: Shares of Alphabet fell in after-hours trading on Tuesday, following the release of the company’s third-quarter results.
What happened: The Google-parent company reported upbeat sales and earnings for the latest quarter.
However, Alphabet’s cloud business growing at the slowest pace in eleven quarters exerted pressure on the stock.
How were the results: The Mountain View, California-based company reported low double-digit growth in revenues for the quarter ended September 30.
Why it matters: Companies have widely been curtailing their overall spend on cloud-related services, including AI products, amid concerns around a slowdown in the global economy.
Due to this, the revenue growth at Google’s cloud unit slowed to 22.5% in the third quarter, compared to 28% growth in the previous quarter. The latest figure marked the slowest pace of growth since at least the first quarter of 2021. The cloud unit’s revenues of $8.41 billion also missed market expectations of $8.62 billion for the quarter.
Operating income at the cloud unit came in at $266 million, versus a year-ago operating loss of $440 million.
Google has been facing stiff competition from companies like Amazon, Microsoft and other tech majors in the cloud computing market. The latest results from Microsoft showed revenues from its Intelligent Cloud unit climbed to $24.3 billion, topping estimates of $23.49 billion.
The company’s ad revenues were also impacted by some pullback in corporate budgets. Although ad revenues rose to $59.65 billion in the third quarter, from $54.48 billion in the year-ago period, the figure came in lower than market estimates of $59.12 billion.
Revenues from YouTube ads rose to $7.95 billion. from $7.07 billion in the year-earlier quarter. The company recorded $44 billion in search advertising, higher than market estimates of $43.2 billion.
Alphabet laid off around 6% of its global workforce earlier in the year and recorded $2.1 billion in severance and related charges during the first nine months of 2023.
How shares responded: Alphabet’s shares fell 6.1% to close at $130.38 in the extended trading session on Tuesday, following the release of quarterly results. The stock has added around 56% year to date.
What to watch: Investors will continue monitoring the performance of the company’s cloud division and competition from Amazon and Microsoft in that segment. Markets will also watch global data releases, as economic growth would drive Alphabet’s results.
Context: The CAD/USD forex pair fell to around a three-week low on Tuesday, following upbeat economic data from the US.
Details: US data released on Tuesday showed business output accelerating in October, with the expansion of both manufacturing and services activities. This lent support to the US dollar and exerted pressure on the CAD/USD forex pair.
The S&P Global US composite PMI climbed to 51.0 in October, from 50.2 in September, signalling the fastest expansion since July. The US dollar index, which measures the greenback’s performance versus a basket of major peers, closed at 106.27 on Tuesday.
Data from Statistics Canada showed new home prices in the country declining by 0.2% in September, after a 0.1% increase in August. The figure came in below market estimates of 0.1% growth.
Weakness in the price of crude oil, one of Canada’s major exports, also exerted pressure on the loonie. WTI crude oil futures declined by $1.75 to close at $83.74 per barrel on Tuesday.
The CAD/USD forex pair fell around 0.4% to 1.3743 on Tuesday, after declining to its lowest level since October 5 of 1.3754 earlier in the session. The Canadian 10-year yield rose to 4.038%, while the S&P/TSX Composite index fell 0.32% to settle at 18,986.49 on Tuesday.
What to watch: Investors await Bank of Canada’s interest rate decision today. The BoC had kept the target for its overnight rate unchanged at 5% during its September meeting and is widely expected to do the same at today’s meeting.
Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.62%, 0.73% and 0.97%, respectively.
Ukraine’s Prime Minister Denys Shmyhal said the country sees Germany providing another €1.4 billion to strengthen its air defences. The news sent the safe-haven US dollar index slightly higher this morning.
Australia’s inflation rate eased to 5.4% year-over-year in the third quarter, from 6.0% in the prior period. Although the figure was higher than market estimates of 5.3%, the deceleration lent support to the AUD/USD forex pair.
South Korea’s Composite Consumer Sentiment Index fell to 98.1 points in September, from 99.7 a month ago, sending the KRW/USD pair lower in forex trading this morning.
Argentina’s economic activity estimator grew by 0.3% year-over-year in August, compared to a 1.3% decline in the prior month, which lent support to the ARS/USD forex pair.
The American Petroleum Institute said that US crude oil stockpiles declined by 2.668 million barrels in the week ended October 20, after a contraction of 4.383 million barrels in the prior week. Despite this, WTI crude oil futures declined this morning.
Saudi Arabia’s balance of trade, Spain’s producer prices change, Turkey’s manufacturing confidence index and capacity utilization, Eurozone’s loans to non-financial corporations, household credit growth and money supply M3, Germany’s Ifo business climate indicator, Ifo current conditions indicator and Ifo expectations indicator, France’s initial jobless claims and unemployed persons, Brazil’s FGV-IBRE consumer confidence index, US MBA mortgage applications, new home sales, crude oil inventories, gasoline stocks change, distillate stocks and building permits, Russia’s industrial production, as well as Argentina’s retail sales.
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