U.S. big tech stocks plunged after earnings on Tuesday local time, following Google’s disappointing third-quarter results, which turned out to be way below the market expectation, sparking fears of a recession.
Google-parent Alphabet’s third-quarter revenue was 69 billion U.S. dollars, which was way below the market expectation of 71 billion dollars. Shares of Alphabet dropped by 6.9 percent in after-hours trading. Alphabet’s six percent revenue growth is its lowest since 2013, except in the early days of the COVID-19 pandemic.
YouTube advertising revenue dropped by 2 percent year-on-year, missing the Wall Street expectations of a 3-percent increase. Google Chief Business Officer Philipp Schindler said online advertising revenue declined in insurance, loans and mortgage, and crypto industries. The slowdown in online advertising spending by financial institutions is attributable to the Fed’s interest rate hike.
Shares of Microsoft fell by 6.7 percent in extended trading on the same day. Microsoft managed to keep its earnings in line with the guidance, but its net revenue dropped 14 percent year-on-year, and sales growth recorded the lowest in the past five years. Weak guidance of its fourth-quarter results has also affected the drop in the share price. Texas Instruments also saw its shares drop by 8.21 percent in extended trading, following a downward adjustment of its fourth-quarter results. Amazon and Meta, awaiting earnings, have also dropped by 4.4 percent and 4 percent, respectively.
Bloomberg reported that the disappointing results of Google and Microsoft that fell short of expectations underscore “growing pressure on everything from corporate IT budgets to digital ad spending.” CNN also reported that Google’s earnings are a “bad omen” for the digital ad industry.
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