Even as the world’s tech companies are facing difficulties, quarterly updates from Microsoft and Google are indicating growing pressure on digital ad spending to corporate IT budgets and chips for industrial machinery. The companies said they their headcount additions will be minimal during the current December 2022 quarter.
Alphabet has posted disappointing results across portfolios. Its search and other related businesses, the company’s financial engine, generated third-quarter sales of $39.54 billion, compared with analyst estimates of $40.87 billion. Google Chief Business Officer Philipp Schindler said some advertisers are cutting spending.
Microsoft’s sales in the first quarter ended September 30 rose 11 per cent to $50.1 billion. Its net income was $17.6 billion, or $2.35 a share. On average, analysts had estimated fiscal first-quarter sales of $49.6 billion and profit of $2.29 a share, according to a Bloomberg survey. Microsoft Chief Financial Officer Amy Hood said demand remained strong for cloud services, with Office 365 sales to businesses performing slightly better than expected, and the majority of large customers that signed up for Microsoft 365 licenses opting for the higher-end version.
Microsoft, however, gave lackluster forecast for sales growth in its Azure cloud-computing services business, a closely watched measure of corporate demand, sending the shares reeling in late trading. Earlier, Microsoft posted its weakest quarterly sales growth in five years, throttled by the surging US dollar, slumping PC demand and faltering advertising revenue. As the global economy teeters on the brink of a recession, sales of Windows software to PC makers swooned 15 per cent in the recent period.
Google Chief Financial Officer Ruth Porat said she expects headcount additions to fall by more than half in the fourth quarter compared with the previous period, while Microsoft Chief Financial Officer Amy Hood said headcount increases will be minimal during the current quarter.
According to recent media reports, Microsoft has laid off nearly 1,000 employees across multiple divisions of the company. The move was yet another example of large tech companies cutting jobs after earlier moving to slow or freeze hiring as the broader economy cools.
“Like all companies, we evaluate our business priorities on a regular basis, and make structural adjustments accordingly. We will continue to invest in our business and hire in key growth areas in the year ahead,” Microsoft has said, as per reports.
Google CEO Sundar Pichai has earlier also said, while explaining cost-cutting, that the company is being “a bit more responsible through one of the toughest macroeconomic conditions underway in the past decade”. He added that the company needs to take a long-term view through conditions like this.
He said this while addressing questions of employees at an all-hands meeting this week. Pichai faced tough questions from employees on issues including cutting on travel and entertainment budgets, managing productivity and potential layoffs.
(With Inputs From Agencies)
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