Alphabet stock plunges after rare earnings miss

The news shaping the markets today

A series of blasts was heard in the Russian city of Belgorod, close to Ukraine’s border. Rising geopolitical tensions sent WTI crude oil prices higher this morning.

DJI Technology announced plans to temporarily halt its operations in Russia and Ukraine, making it the first big Chinese company to make such a move in response to the invasion. The RUB/USD forex pair traded lower on the news.

Australia’s annual inflation rate accelerated to 5.1% in the first quarter, from 3.5% in the previous quarter. Despite this being the highest reading since Q2 2001, the AUD/USD pair rose in forex trading this morning.

China’s industrial profits grew 8.5% year-over-year to 19.56 trillion yuan in the January to March period. However, the CNY/USD forex pair remained under pressure after the data release.

Taiwan’s consumer confidence index fell to a 10-month low of 71.77 in March, from 72.24 in the previous month, sending the TWD/USD pair lower in forex trading this morning.

What’s happening: Shares of Alphabet fell in after-hours trading on Tuesday, after the company reported downbeat earnings for its first quarter.

What happened: Although Google parent’s managed to meet the revenue expectations for the quarter, it missed the earnings estimates.

Investors were particularly disappointed because the company missed estimates after exceeding market views for seven consecutive quarters.

How were the results: The Mountain View, California-based company reported strong revenue growth for the first quarter, but earnings failed to meet market views.

• Revenues grew 23% year-over-year to $68.01 billion, versus Street expectations of $68.04 billion.
• Net income came in at $16.4 billion, or $24.62 per share, short of the consensus estimate of $26.11 per share.

Why it matters: Alphabet reported strong result over the past couple of years, driven by people spending more time online amid the pandemic. However, market expectations have skyrocketed, and it is becoming increasingly difficult for the search giant to meet them.

The search giant’s first quarter results were adversely impacted by the ongoing war between Russia and Ukraine, which affected YouTube ad sales. Google generated around 1% of its overall sales from Russia in 2021.

Revenue from Google search and other segments climbed 24.3% year-over-year to $39.62 billion. Although YouTube ads brought $6.87 billion in sales, up 14.4% from a year ago, the figure missed market views of $7.5 billion. Google Cloud recorded $5.8 billion in revenue, up a whopping 43.8% year-over-year.

Google’s traffic acquisition costs surged 23.5% from a year earlier to $1.99 billion, while the employee headcount rose by 20,000 to 163,906.

Alphabet announced the authorisation of a $70.0 billion stock repurchase program, representing around 4% of its market value. The company has bought back more than $81 billion in shares over the past two years.

Alphabet ended the quarter with cash and equivalents of $133.97 billion, compared to $139.65 billion last in the previous quarter. The company also recorded operating cash flows of $25.11 billion.

How shares responded: Alphabet’s shares fell 3.2% in extended trading on Tuesday. This may have been led by profit taking, with the stock having gained around 90% over the past two years.

What to watch: Investors will keep an eye on the pandemic and war in Ukraine. Stiffening competition from Amazon and ByteDance’s TikTok will also be in focus.

The markets today

European stocks will be in focus today, after closing lower on Tuesday

Context: European stocks settled lower on Tuesday, after remaining in the positive zone for most of the session.

Details: Investors continued to monitor several risks, including surging inflation, the ongoing Russia-Ukraine war and the prospects of major central banks hiking interest rates in the near term.

Several larger companies also released earnings on Tuesday. UBS Group’s stock closed broadly flat despite the Swiss bank reporting better-than-expected earnings. Shares of HSBC Holdings plummeted around 6% after the company reported a 27% contraction in its quarterly profit amid a slowdown in growth in Hong Kong.

European stock markets had settled sharply lower on Monday, amid concerns around the resurgence of covid-19 infections in China. US stocks also closed lower on Tuesday, with growing concerns around a slowdown in the pace of recovery of the global economy.

The pan-European Stoxx 600 index fell 0.9% to close at 441.10 on Tuesday, after remaining in positive territory through most of the session. Banking and tech stocks were among the worst performers.

Germany’s DAX 40 and France’s CAC 40 lost 1.20% and 0.54%, respectively. However, London’s FTSE 100 bucked the trend, closing slightly higher by 0.08% at 7,386.19.

What to watch: Markets will keep an eye on rising covid-19 cases in China and other regions of the world. Inflation data releases by EU and the US will also remain in focus. Markets will continue to monitor the Russia-Ukraine situation.

Other Markets: US indices closed lower on Tuesday, with the Dow Jones, S&P 500 and Nasdaq 100 down by 2.38%, 2.81% and 3.87%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s GfK consumer climate indicator, France’s consumer confidence, UK’s CBI distributive trades survey’s retail sales balance, Mexico’s balance of trade, US MBA mortgage applications, wholesale inventories, goods trade balance, retail inventories, pending home sales, gasoline inventories, crude oil inventories, distillate stockpiles, Cushing crude oil stocks, gasoline production and heating oil stocks, Brazil’s IPCA-15 consumer price index, IBC-Br index of economic activity and value of loans, as well as Russia’s unemployment rate, retail sales, real wages, business sentiment indicator, industrial production, corporate profits and GDP.