Google and Microsoft punished after profits disappoint

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Tech giants Google and Microsoft were punished by investors last night after both fell short of expectations with quarterly results.

Shares in Google parent Alphabet plunged 6% in after-hours trading as investors reacted to the news that an increased spend on boosting traffic for mobile advertising services and the strong dollar dented sales and profits in its first quarter.

Alphabet reported revenue of $20.26 billion (£14.14 billion) for the three months to the end of March, a 17% rise year-on-year but below forecasts for $20.37 billion, while earnings per share excluding one-off items hit $7.50 instead of the expected $7.97.

Its chief financial officer Ruth Porat said so-called traffic acquisition costs, or TAC, were likely to carry on rising as it shifts further to mobile.

Mobile advertising and programmatic advertising, in which ads are bought, sold and displayed by automated systems, are becoming increasingly important, but may bring the company’s traditionally robust margins on its advertising business under pressure.

Microsoft meanwhile saw a 5% drop in its shares after its third-quarter figures revealed that its cloud division wasn’t yet plugging the gap left by the slowing PC market.

It narrowly missed expectations for adjusted revenue of $22.09 billion, with $22.08 billion, while net income fell to $3.76 billion from $4.99 billion a year earlier.

Additional reporting by Reuters

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April 22, 2016 |
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